Document:

exhibit 10.45

 Exhibit 10.45

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR HEALTH SCIENCES GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HEALTH SCIENCES GROUP, INC. THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

HEALTH SCIENCES GROUP, INC.

Expires March 15, 2010

No.: W-05-__

Number of Shares: ___________

Date of Issuance: March 15, 2005

FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the undersigned, Health Sciences Group, Inc., a Colorado corporation (together with its successors and assigns, the "Issuer"), hereby certifies that _______________________________ or its registered assigns is entitled to subscribe for and purchase, during the Term (as hereinafter defined), up to ____________________________________ (_____________) shares (subject to adjustment as hereinafter provided) of the duly authorized, validly issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth.  Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective meanings specified in Section 8 hereof.

1.

Term.  The term of this Warrant shall commence on March 15, 2005 and shall expire at 5:00 p.m., eastern time, on March 15, 2010 (such period being the "Term").

2.

Method of Exercise Payment; Issuance of New Warrant; Transfer and Exchange.

(a)

Time of Exercise.  The purchase rights represented by this Warrant may be exercised in whole or in part during the Term. 

(b)

Method of Exercise.  The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise multiplied 

by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder's election (i) by certified or official bank check or by wire transfer to an account designated by the Issuer, (ii) by "cashless exercise" in accordance with the provisions of subsection (c) of this Section 2, but only when a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect, or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant.

(c)

Cashless Exercise.  Notwithstanding any provisions herein to the contrary, if (i) the Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date of calculation as set forth below) and (ii) a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect by the date such registration statement is required to be effective pursuant to the Registration Rights Agreement (as defined in the Purchase Agreement), in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to an amount (as determined below) by surrender of this Warrant at the principal office of the Issuer together with the properly endorsed Notice of Exercise in which event the Issuer shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X = Y - (A)(Y)

      

      B

Where

X =

the number of shares of Common Stock to be issued to the Holder.

Y =

the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. 

A =

the Warrant Price. 

B =

the Per Share Market Value of one share of Common Stock.  

(d)

Issuance of Stock Certificates.  In the event of any exercise of the rights represented by this Warrant in accordance with and subject to the terms and conditions hereof, (i) certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise or, at the request of the Holder (provided that a registration statement under the Securities Act providing for the resale of the Warrant Stock is then in effect), issued and delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such exercise and (ii) unless this Warrant has expired, a new Warrant representing the number of shares of Warrant Stock, if any, with respect to which this Warrant shall not then have been exercised (less any amount thereof which shall have been canceled in payment or partial payment of the Warrant Price as hereinabove provided) shall also be issued to the Holder hereof at the Issuer's expense within such time.

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(e)

Transferability of Warrant.  Subject to Section 2(g), this Warrant may be transferred by a Holder without the consent of the Issuer.  If transferred pursuant to this paragraph and subject to the provisions of subsection (g) of this Section 2, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by duly authorized attorney, upon surrender of this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer.  This Warrant is exchangeable at the principal office of the Issuer for Warrants for the purchase of the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange.  All Warrants issued on transfers or exchanges shall be dated the Original Issue Date and shall be identical with this Warrant except as to the number of shares of Warrant Stock issuable pursuant thereto.

(f)

Continuing Rights of Holder.  The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder.

(g)

Compliance with Securities Laws.

(i)

The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant or the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws.

(ii)

Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR HEALTH SCIENCES GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HEALTH SCIENCES GROUP, INC. THAT REGISTRATION 

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OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

(iii)

The Issuer agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer and removal as the Issuer may reasonably request.  Such proposed transfer and removal will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the Securities and Exchange Commission and has become effective under the Securities Act, (iii) the Issuer has received other evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the Holder provides the Issuer with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under the securities or "blue sky" laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or "blue sky" laws has been effected or a valid exemption exists with respect thereto.  The Issuer will respond to any such notice from a holder within five (5) business days.  In the case of any proposed transfer under this Section 2(g), the Issuer will use reasonable efforts to comply with any such applicable state securities or "blue sky" laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Issuer.  The restrictions on transfer contained in this Section 2(g) shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant.  Whenever a certificate representing the Warrant Stock is required to be issued to a the Holder without a legend, in lieu of delivering physical certificates representing the Warrant Stock, provided the Issuer’s transfer agent is participating in the DTC Fast Automated Securities Transfer program, the Issuer shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Stock to the Holder by crediting the account of the Holder's Prime Broker with DTC through its DWAC system (to the extent not inconsistent with any provisions of this Warrant or the Purchase Agreement).  

(h)

In no event may the Holder exercise this Warrant in whole or in part unless the Holder is an “accredited investor” as defined in Regulation D under the Securities Act.

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3.

Stock Fully Paid; Reservation and Listing of Shares; Covenants.

(a)

Stock Fully Paid.  The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by or through the Issuer.  The Issuer further covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of the issue upon exercise of this Warrant a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.

(b)

Reservation.  If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any governmental authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its reasonable best efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified.  If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, maintain and increase when necessary such listing, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such Warrant Stock has been registered pursuant to a registration statement under the Securities Act then in effect), and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock shall be so listed.  The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed on such securities exchange or market by the Issuer.

(c)

Covenants.  The Issuer shall not by any action including, without limitation, amending the Articles of Incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, 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 actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment.  Without limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the Articles of Incorporation or by-laws of the Issuer in any manner that would adversely affect the rights of the Holders of the Warrants in their capacity as Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (iv) use its reasonable best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant.

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(d)

Loss, Theft, Destruction of Warrants.  Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock.

4.

Adjustment of Warrant Price.  The price at which shares of Warrant Stock may be purchased upon exercise of this Warrant shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4 in accordance with Section 5. 

(a)

Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale.

  

(i)  In case the Issuer after the Original Issue Date shall do any of the following (each, a "Triggering Event"): (a) consolidate or merge with or into another corporation where the holders of outstanding Voting Stock prior to such merger or consolidation do not own over 50% of the outstanding Voting Stock of the merged or consolidated entity immediately after such merger or consolidation, or (b) sell all or substantially all of its properties or assets to any other Person, or (c) change the Common Stock to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 4(b) or Section 4(c)), or (d) effect a capital reorganization (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 4(b) or Section 4(c)), then, and in the case of each such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Warrant is not exercised prior to such Triggering Event, to receive at the Warrant Price in effect at the time immediately prior to the consummation of such Triggering Event in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4.

(ii)

Notwithstanding anything contained in this Warrant to the contrary, a Triggering Event shall not be deemed to have occurred if, prior to the consummation thereof, each Person (other than the Issuer) which may be required to deliver any securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under 

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this Warrant) and (B) the obligation to deliver to such Holder such shares of securities, cash or property as, in accordance with the foregoing provisions of this subsection (a), such Holder shall be entitled to receive, and such Person shall have similarly delivered to such Holder a written acknowledgement executed by the President or Chief Financial Officer of the Company, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this subsection (a)) shall be applicable to the securities, cash or property which such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto. 

(b)

Stock Dividends, Subdivisions and Combinations.  If at any time the Issuer shall:

 

(i)

make or issue or set a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, 

 

(ii) 

subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

 

(iii) 

combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock,

then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.

Notwithstanding the foregoing, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Warrant Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

(c)

Certain Other Distributions.  If at any time the Issuer shall make or issue or set a record date for the determination of the holders of its Common Stock for the purpose of entitling them to receive any divi­dend or other distribution of:

(i)

cash (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer),

(ii)

any evidences of its indebtedness, any shares of stock of any class 

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or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), or

(iii)

any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), 

then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Per Share Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Issuer and supported by an opinion from an investment banking firm of recognized national standing acceptable to (but not affiliated with) the Holder) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.  A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b).

Notwithstanding the foregoing, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Warrant Price shall be adjusted pursuant to this Section 4(c) as of the time of actual payment of such dividends or distributions.

(d)

Issuance of Additional Shares of Common Stock.  

(i)

In the event the Issuer shall at any time within one (1) year following the Original Issue Date issue any Additional Shares of Common Stock (otherwise than as provided in the foregoing subsections (a) through (c) of this Section 4), at a price per share less than the Warrant Price then in effect or without consideration, then the Warrant Price upon each such issuance shall be adjusted to that price determined by multiplying the Warrant Price then in effect by a fraction:

(A)

the numerator of which shall be equal to the sum of (x) the number of shares of Outstanding Common Stock immediately prior to the issuance of such Additional Shares of Common Stock plus (y) the number of shares of 

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Common Stock (rounded to the nearest whole share) which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase at a price per share equal to the Warrant Price then in effect, and

(B)

the denominator of which shall be equal to the number of shares of Outstanding Common Stock immediately after the issuance of such Additional Shares of Common Stock.

(ii)

No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of Section 4(d) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any Common Stock Equivalents, if any such adjustment shall previously have been made upon the issuance of such Common Stock Equivalents (or upon the issuance of any warrant or other rights therefor) pursuant to Section 4(e).

(e)

  Issuance of Common Stock Equivalents.  If at any time within one (1) year of the Original Issue Date the Issuer shall issue or sell any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the aggregate price per share for which Common Stock is issuable upon such conversion or exchange plus the consideration received by the Issuer for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the “Aggregate Per Common Share Price”) shall be less than the Warrant Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Common Share Price be less than the Warrant Price in effect at the time of such amendment or adjustment, then the Warrant Price upon each such issuance or amendment shall be adjusted as provided in Section 4(d).  No further adjustment of the Warrant Price then in effect shall be made under this Section 4(e) upon the issuance of any Common Stock Equivalents which are issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights pursuant to this Section 4(e).  No further adjustments of the Warrant Price then in effect shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Common Stock Equivalents.

(f)

Superseding Adjustment.  If, at any time after any adjustment of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall have been made pursuant to Section 4(e) as the result of any issuance of Common Stock Equivalents, and (i) such Common Stock Equivalents, or the right of conversion or exchange in such Common Stock Equivalents, shall expire, and all or a portion of such or the right of conversion or exchange with respect to all or a portion of such Common Stock Equivalents, as the case may be, shall not have been exercised, or (ii) the consideration per share for which shares of Common Stock are issuable pursuant to such Common Stock Equivalents shall be increased, then such previous adjustment shall be rescinded and annulled and the Additional Shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation.  Upon the occurrence of an event 

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set forth in this Section 4(g) above, there shall be a recomputation made of the effect of such Common Stock Equivalents on the basis of: (i) treating the number of Additional Shares of Common Stock theretofore actually issued or issuable pursuant to the previous exercise of Common Stock Equivalents or any such right of conversion or exchange, as having been issued on the date or dates of any such exercise and for the consideration actually received and receivable therefor, and (ii) treating any such Common Stock Equivalents which then remain outstanding as having been granted or issued immediately after the time of such increase of the consideration per share for which Additional Shares of Common Stock are issuable under such Common Stock Equivalents; whereupon a new ad­justment of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled.

(h)

Purchase of Common Stock by the Issuer.  If the Issuer at any time within one (1) year of the Original Issue Date shall, directly or indirectly through a Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of Common Stock at a price per share greater than the Per Share Market Value, then the Warrant Price upon each such purchase, redemption or acquisition shall be adjusted to that price determined by multiplying such Warrant Price by a fraction (i) the numerator of which shall be the number of shares of Outstanding Common Stock immediately prior to such purchase, redemption or acquisition minus the number of shares of Common Stock which the aggregate consideration for the total number of such shares of Common Stock so purchased, redeemed or acquired would purchase at the Per Share Market Value; and (ii) the denominator of which shall be the number of shares of Outstanding Common Stock immediately after such purchase, redemption or acquisition.  For the purposes of this subsection (h), the date as of which the Per Share Market Price shall be computed shall be the earlier of (x) the date on which the Issuer shall enter into a firm contract for the purchase, redemption or acquisition of such Common Stock, or (y) the date of actual purchase, redemption or acquisition of such Common Stock.  For the purposes of this subsection (h), a purchase, redemption or acquisition of a Common Stock Equivalent shall be deemed to be a purchase of the underlying Common Stock, and the computation herein required shall be made on the basis of the full exercise, conversion or exchange of such Common Stock Equivalent on the date as of which such computation is required hereby to be made, whether or not such Common Stock Equivalent is actually exercisable, convertible or exchangeable on such date.

(i)

Other Provisions applicable to Adjustments under this Section.  The following provisions shall be ap­plicable to the making of adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect provided for in this Section 4:

(i)

Computation of Consideration.  To the extent that any Additional Shares of Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer therefor, or, if such Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any compensation, discounts or expenses 

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paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof).  In connection with any merger or consolidation in which the Issuer is the surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Issuer shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration therefore shall be, deemed to be the fair value, as determined reasonably and in good faith by the Board, of such portion of the assets and business of the nonsurviving corporation as the Board may determine to be attributable to such shares of Common Stock or Common Stock Equivalents, as the case may be.  The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Issuer for issuing such warrants or other rights plus the additional con­sideration payable to the Issuer upon exercise of such warrants or other rights.  The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration received by the Issuer for issuing war­rants or other rights to subscribe for or purchase such Common Stock Equivalents, plus the consideration paid or payable to the Issuer in respect of the subscription for or purchase of such Common Stock Equivalents, plus the additional consideration, if any, payable to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock Equivalents.  In the event of any consolidation or merger of the Issuer in which the Issuer is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Issuer shall be changed into or exchanged for the stock or other securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Issuer for stock or other securities of any corporation, the Issuer shall be deemed to have issued a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or securities or other property of the other corporation.  In the event any consideration received by the Issuer for any securities consists of property other than cash, the fair market value thereof at the time of issuance or as otherwise applicable shall be as determined in good faith by the Board.  In the event Common Stock is issued with other shares or securities or other assets of the Issuer for consideration which covers both, the consideration computed as provided in this Section 4(i)(i) shall be allocated among such securities and assets as determined in good faith by the Board.

(ii)

When Adjustments to Be Made.  The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which this Warrant is exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than one percent (1%) of the shares of Common Stock for which this Warrant is exercisable immediately prior to the making of such adjustment.  Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

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(iii)

Fractional Interests.  In computing ad­justments under this Section 4, fractional interests in Common Stock shall be taken into account to the near­est one one-hundredth (1/100th) of a share.

(iv)

When Adjustment Not Required.  If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

(j)

Form of Warrant after Adjustments.  The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant.

(k)

Escrow of Warrant Stock.  If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and the Holder exer­cises this Warrant, any shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the last shares of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for the Holder by the Issuer to be issued to the Holder upon and to the extent that the event actually takes place, upon payment of the current Warrant Price.  Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be cancelled by the Issuer and escrowed property returned.

5.

Notice of Adjustments.  Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share Number after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder of this Warrant promptly after each adjustment.  Any dispute between the Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may at the option of the Holder of this Warrant be submitted to the Issuer’s independent, outside accountant.  The Issuer shall use its best efforts to cause the accountant to perform the calculations and notify the Issuer and the Holder of the results no later than five (5) business days from the time it receives the disputed calculation.  Such accountant's calculation shall be binding upon all parties absent manifest error.  The reasonable expenses of such accountant in making such determination shall be paid by the Issuer, in the event the Holder's calculation was correct, or by the Holder, in the event the Issuer’s calculation was correct, or equally by the Issuer and the Holder in the event that neither the Issuer's or the Holder's calculation was correct.    

12

6.

Fractional Shares.  No fractional shares of Warrant Stock will be issued in connection with any exercise hereof, but in lieu of such fractional shares, the Issuer shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by the Per Share Market Value then in effect.

7.

Ownership Cap and Certain Exercise Restrictions.  (a)  Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of shares of Common Stock to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder owning more than 4.9% of all of the Common Stock outstanding at such time; provided, however, that upon a holder of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to Section 12 hereof) (the "Waiver Notice") that such Holder would like to waive this Section 7(a) with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7(a) will be of no force or effect with regard to all or a portion of the Warrant referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant.

(b)

The Holder may not exercise the Warrant hereunder to the extent such exercise would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.9% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of the Warrant held by the Holder after application of this Section; provided, however, that upon a holder of this Warrant providing the Company with a Waiver Notice that such holder would like to waive this Section 7(b) with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7(b) shall be of no force or effect with regard to those shares of Warrant Stock referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant.

8.

Definitions.  For the purposes of this Warrant, the following terms have the following meanings:

"Additional Shares of Common Stock" means all shares of Common Stock issued by the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by the Issuer after the Original Issue Date, except: (i) securities issued pursuant to a bona fide firm underwritten public offering of the Issuer’s securities, (ii) securities issued pursuant to the conversion or exercise of convertible or excercisable securities issued or outstanding on or prior to the date hereof or issued pursuant to the Purchase Agreement, (iii) the Warrant Stock and the shares of Common Stock issuable upon exercise of any other warrants issued pursuant to the Purchase Agreement, (iv) securities issued in connection with strategic license agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital, (v) Common Stock issued or options to purchase Common Stock granted or issued pursuant to the Issuer’s stock option plans and employee stock purchase plans as they now exist, (vi) the issuance or grants of options to purchase Common Stock as may be approved by the Board (other 

13

than issuances pursuant to subclause (v) above) so long as such issuances in the aggregate do not exceed ten percent (10%) of the Issuer’s issued and outstanding shares of Common Stock as of the Original Issue Date, (vii) securities issued (other than for cash) in connection with a merger, acquisition or consolidation, (viii) any warrants issued to the placement agent for the transactions contemplated by the Purchase Agreement, (ix) the payment of any dividend in shares of Common Stock on any outstanding shares of preferred stock of the Issuer or the Series C Convertible Preferred Stock of the Issuer issued pursuant to the Purchase Agreement, and (x) any warrants issued in connection with equipment leases and warrants or shares of Common Stock issued to institutional lenders so long as such warrants or shares of Common Stock do not exceed an aggregate of 200,000 shares of Common Stock.  

"Articles of Incorporation" means the Articles of Incorporation of the Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and thereof and pursuant to applicable law.

"Board" shall mean the Board of Directors of the Issuer.

"Capital Stock" means and includes (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type.

"Common Stock" means the Common Stock, par value $.001 per share, of the Issuer and any other Capital Stock into which such stock may hereafter be changed.

"Common Stock Equivalent" means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.

"Convertible Securities" means evidences of Indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock.  The term "Convertible Security" means one of the Convertible Securities.

"Governmental Authority" means any governmental, regulatory or self-regulatory entity, department, body, official, authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign.

"Holders" mean the Persons who shall from time to time own any Warrant.  The term "Holder" means one of the Holders.

"Independent Appraiser" means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of 

14

recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant.

"Issuer" means Health Sciences Group, Inc., a Colorado corporation, and its successors. 

"Majority Holders" means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding.

"Original Issue Date" means March 15, 2005.

"OTC Bulletin Board" means the over-the-counter electronic bulletin board.

"Other Common" means any other Capital Stock of the Issuer of any class which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to amount.

“Outstanding Common Stock” means, at any given time, the aggregate amount of outstanding shares of Common Stock, assuming full exercise, conversion or exchange (as applicable) of all options, warrants and other Securities which are convertible into or exercisable or exchangeable for, and any right to subscribe for, shares of Common Stock that are outstanding at such time.

"Person" means an individual, corporation, limited liability company, partnership, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature.

"Per Share Market Value" means on any particular date (a) the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (b) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the relevant determination period, as determined in good faith by the holder, or (c) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by the Board in good faith; provided, however, that the Majority Holders, after receipt of the determination by the Board, shall have the right to select, jointly with the Issuer, an Independent Appraiser, in which case, the fair market value shall be the determination by such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period.  The determination of fair market value shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and 

15

taking into account all relevant factors determinative of value, and shall be final and binding on all parties.  In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

"Purchase Agreement" means the Series C Convertible Preferred Stock Purchase Agreement dated as of March 15, 2005, among the Issuer and the investors a party thereto.

"Securities" means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument convertible into or exchangeable for Securities or a Security, and any option, warrant or other right to purchase or acquire any Security.  "Security" means one of the Securities.

"Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute then in effect.

"Subsidiary" means any corporation at least 50% of whose outstanding Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

"Term" has the meaning specified in Section 1 hereof.

"Trading Day" means (a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

"Voting Stock" means, as applied to the Capital Stock of any corporation, Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board of Directors (or other governing body) of such corporation, other than Capital Stock having such power only by reason of the happening of a contingency.

"Warrants" means the Warrants issued and sold pursuant to the Purchase Agreement, including, without limitation, this Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(d), 2(e) or 2(f) hereof or of any of such other Warrants. 

16

"Warrant Price" initially means U.S. $1.60, as such Warrant Price may be adjusted from time to time as shall result from the adjustments specified in this Warrant, including Section 4 hereto.

"Warrant Share Number" means at any time the aggregate number of shares of Warrant Stock which may at such time be purchased upon exercise of this Warrant, after giving effect to all prior adjustments and increases to such number made or required to be made under the terms hereof.

"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.

9.

Other Notices.  In case at any time:

(A)

the Issuer shall make any distributions to the holders of Common Stock; or

(B)

the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or other rights; or

(C)

there shall be any reclassification of the Capital Stock of the Issuer; or

(D)

there shall be any capital reorganization by the Issuer; or

(E)

there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer's property, assets or business (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or

(F)

there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place.  Such notice also shall specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such 

17

reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be.  Such notice shall be given at least twenty (20) days prior to the record date or effective date for the event specified in such notice.

10.

Amendment and Waiver.  Any term, covenant, agreement or condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the Majority Holders; provided, however, that no such amendment or waiver shall reduce the Warrant Share Number, increase the Warrant Price, shorten the period during which this Warrant may be exercised or modify any provision of this Section 10 without the consent of the Holder of this Warrant.

11.

Governing Law.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY OF ITS CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION.

12.

Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii) the Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the date of mailing, if sent by overnight delivery by nationally recognized overnight courier service or (iv) actual receipt by the party to whom such notice is required to be given.  The addresses for such communications shall be with respect to the Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at its last known address or facsimile number appearing on the books of the Issuer maintained for such purposes, or with respect to the Issuer, addressed to:

Health Sciences Group, Inc.  

Howard Hughes Center

6080 Center Drive, 6th Floor

Los Angeles, California 90045

Attention: Fred Tannous

Tel. No.: (310) 242-6700

Fax No.:  (310) 312-8607

18

Copies of notices to the Issuer shall be sent to Kirkpatrick & Lockhart Nicholson Graham LLP, 10100 Santa Monica Boulevard, 7th Floor, Los Angeles, California 90067, Attention: Leib Orlanski, Tel. No.: (310) 552-5044, Fax No.: (310) 552-5001.  Copies of notices to the Holder shall be sent to Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York 10022, Attention: Christopher S. Auguste, Tel. No.: (212) 715-9100, Fax No.: (212) 715-9121.  Any party hereto may from time to time change its address for notices by giving at least ten (10) days written notice of such changed address to the other party hereto.

13.

Warrant Agent.  The Issuer may, by written notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for the purpose of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

14.

Remedies.  The Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

15.

Successors and Assigns.  This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock.

16.

Modification and Severability.  If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency.  If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein.

17.

Headings.  The headings of the Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

19

IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year first above written.

HEALTH SCIENCES GROUP, INC.

By:_____________________________

      Name:

      Title:

20

WARRANT EXERCISE FORM

HEALTH SCIENCES GROUP, INC. 

The undersigned _______________, pursuant to the provisions of the within Warrant, hereby elects to purchase _____ shares of Common Stock of Health Sciences Group, Inc. covered by the within Warrant.

Dated: _________________

Signature

___________________________

Address

_____________________

_____________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of Exercise: _________________________

ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _____________, attorney, to transfer the said Warrant on the books of the within named corporation.

Dated: _________________

Signature

___________________________

Address

_____________________

_____________________

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the right to purchase _________ shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation.

Dated: _________________

Signature

___________________________

Address

_____________________

_____________________

FOR USE BY THE ISSUER ONLY:

This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of ___________, _____, shares of Common Stock issued therefor in the name of _______________, Warrant No. W-_____ issued for ____ shares of Common Stock in the name of _______________.EXHIBIT 10.1

                               OIL AND GAS LEASE

 STATE    OF    TEXAS                 ss.
                                      ss.
 COUNTY    OP    CALHOUN              ss.

         THIS OIL AND GAS LEASE is made this 24th day of October,  2001, between
Nolie Tiedt, whose address is 406 W. Market Street,  Fayetteville,  Texas 78940,
hereinafter  "Lessor," and James T. Roche,  whose address is 5901 Highland Hills
Trail, Austin, Texas 78731, hereinafter "Lessee."

                                  WITNESSETH

         1. That  Lessor,  in  consideration  of Ten Dollars  ($10.00) and other
valuable consideration,  the receipt of which is hereby acknowledged, and of the
covenants and agreements of Lessee hereinafter contained, do hereby grant, lease
and let unto  Lessee  the  land  covered  hereby  for the  purposes  hereinafter
described  and with the  exclusive  right of  exploring,  drilling,  mining  and
operating for, producing and owning oil, gas and sulphur, together with right to
make surveys on said land, lay pipe lines,  establish and utilize facilities for
surface or subsurface disposal of salt water, construct roads and bridges, build
tanks, power stations,  telephone lines, employee houses and other structures on
said land,  necessary or useful in Lessee's  operations in  exploring,  drilling
for, producing,  treating,  storing and transporting  minerals produced from the
land covered  hereby or adjacent  thereto.  The land  covered  hereby and herein
referred  to as the "land" or "said  land" is located in the County of  Calhoun,
State of Texas, and is described as follows:

         TRACT ONE: Being all of the ISAAC W. BOONE SURVEY No. 15,  Abstract No.
         56, Calhoun County, Texas, containing  approximately 801.26 acres, more
         or less,  and being a part of that  certain  land  described  in a Deed
         dated July 15, 1949,  Edwin Hawes,  Jr., et al to George Rust Hawes, as
         recorded in Volume 70, Page 209, Deed Records of Calhoun County, Texas.

         TRACT TWO: Being all of the ISAAC W. BOONE SURVEY No. 16,  Abstract No.
         57, Calhoun County, Texas, containing  approximately 770.24 acres, more
         or less,  and being the same land  described in that certain Deed dated
         July 15,  1949,  Edwin  Hawes,  Jr.,  et al to George  Rust  Hawes,  as
         recorded in Volume 70, Page 211, Deed Records of Calhoun County, Texas.

                OIL AND GAS LEASE, PAGE -1- OF 10 PAGES

<PAGE>

         For the purposes of determining  the amount of any bonus,  delay rental
 or other payment hereunder, said land shall be deemed to contain 1,571.5 acres,
 whether  actually  containing more or less, and the above recital of acreage in
 any tract shall be deemed to be the true acreage  thereof.  Lessor  accepts the
 bonus and agrees to accept the delay rentals as lump sum consideration for this
 lease and all rights and options hereunder.

         2.  Unless  sooner  terminated  or  longer  kept in force  under  other
provision hereof, this lease shall remain in force for a term of three (3) years
from the effective date hereof,  hereinafter  called "primary term", and as long
thereafter  as oil, gas and/or  sulphur is produced  from the land or other land
pooled therewith in commercial quantities or operations, as hereinafter defined,
are  conducted  upon said  land with no  cessation  for more  than  ninety  (90)
consecutive days.

         3. As royalty, Lessee covenants and agrees:

            (a) To deliver  to the  credit of Lessor,  in the pipe line to which
            Lessee  may  connect  its  wells,  the equal  l/5th  part of all oil
            produced  and saved by Lessee from said land,  or from time to time,
            at the option of Lessee,  to pay Lessor the  average  posted  market
            price of such  l/5th  part of such oil at the wells as of the day it
            is run to the pipe line or  storage  tanks,  Lessor's  interest,  in
            either case,  to bear l/5th of the cost of treating oil to render it
            marketable pipe line-oil;

            (b) To pay Lessor on gas and  casinghead gas produced from said land
            (1) when sold by  Lessee,  l/5th of the amount  realized  by Lessee,
            computed  at the mouth of the well,  of (2) when used by Lessee  off
            said land or in the manufacture of gasoline or other  products,  the
            market  value,  at the mouth of the  well,  of l/5th of such gas and
            casinghead gas;

            (c) To pay  Lessor  on all  other  minerals  mined  or  marketed  or
            utilized by Lessee from said land, one-tenth either in kind or value
            at the well or mine at  Lessee's  election,  except  that on sulphur
            mined and  marketed  the royalty  shall be $2.50 per long ton. If at
            the  expiration  of  the  primary  term  or at  any  time  or  times
            thereafter,  there is any well on said land or on lands  with  which
            said  land or any  portion  thereof  has  been  pooled,  capable  of
            producing  oil and gas, and all such wells are  shut-in,  this lease
            shall,  nevertheless,  continue in force as though  operations  were
            being  conducted on said land for so long as said wells are shut-in,
            and thereafter this lease may be continued in force as if no shut-in
            had  occurred.   Lessee  covenants  and  agrees  to  use  reasonable
            diligence to produce, utilize, or market the minerals capable of

                OIL AND GAS LEASE, PAGE -2- OF 10 PAGES

<PAGE>

            being  produced  from  said  wells,  but in  the  exercise  OF  such
            diligence,  Lessee  shall not be  obligated  to  install  or furnish
            facilities  other than well facilities and ordinary lease facilities
            of flow lines, separator,  and lease tank, and shall not be required
            to settle labor trouble or to market gas upon terms  unacceptable to
            Lessee.  If at any time or times after the expiration of the primary
            term, all such wells are shut-in for a period of ninety  consecutive
            days,  and during  such time there are no  operations  on said land,
            then at or before the  expiration of said ninety day period,  Lessee
            shall pay or tender by check or draft of Lessee,  as royalty,  a sum
            equal to the  amount of annual  delay  rental  provided  for in this
            lease.  Upon making said payment,  it will be  considered  that each
            such well is producing gas in paying  quantities  within the meaning
            of this lease for a period of one (1) year after the  expiration  of
            said ninety (90) day  period.  In like manner and upon like  payment
            being  made  annually  on or  before  the  expiration  of  the  last
            preceding  year for which such  payment or tender has been made,  it
            will be  considered  that said well or wells  are  producing  gas in
            commercial  quantities for successive  periods of one (1) year each.
            Each such  payment or tender shall be made to the parties who at the
            time of payment  would be entitled to receive  the  royalties  which
            would be paid under this lease if the wells were producing,  and may
            be  deposited in the  depository  bank  provided for below.  Nothing
            herein  shall  impair  Lessee's  right to  release  as  provided  in
            paragraph 4 hereof. In event of assignment of this lease in whole or
            in part,  liability for payment  hereunder shall rest exclusively on
            the then  owner or owners of this  lease,  severally  as to  acreage
            owned by each.

         4. If operations  are not conducted on said land on or before the first
anniversary of the effective date of this lease, then this lease shall terminate
as to both parties,  unless Lessee on or before said date shall,  subject to the
further provisions hereof, pay or tender to Lessor or to Lessor's credit the sum
of  $7,857.50,  which shall  operate as delay rental and cover the  privilege of
deferring  operations  for one year from said date.  The portion of delay rental
due to Lessor shall be sent to Lessor's  address as shown above.  In like manner
and upon like payments or tenders, operations may be further deferred for a like
period of one year during the primary  term.  If at any time that Lessee pays or
tenders delay rental,  royalties,  or other moneys,  two or more parties are, or
claim to be,  entitled to receive same,  Lessee may, in lieu of any other method
of payment  herein  provided,  pay or tender such  rental,  royalties,  or other
moneys,  in the manner  herein  specified,  either  jointly  to such  parties or
separately to each in accordance with their  respective  ownership  thereof,  as
Lessee may elect. Any payment  hereunder may be made by check or draft of Lessee
deposited  in the mail or  delivered  to  Lessor or to a  depository  bank on or
before the last date for payment. Said

                 OIL AND GAS LEASE, PAGE -3- OF 10 PAGES

<PAGE>

delay rental shall be apportion  able as to said land on an acreage  basis,  and
failure to make  proper  payment or tender of delay  rental as to any portion of
said land or as to any  interest  therein  shall not affect this lease as to any
portion of said land or as to any interest therein as to which proper payment or
tender is made. Lessee may at any time and from time to time execute and deliver
to Lessor or file for record a release or  releases of this lease as to any part
or all of said land or of any  mineral  or  horizon  hereunder,  and  thereby be
relieved of all  obligations  as to the released  acreage or  interest.  If this
lease is so released as to all  minerals  and  horizons  under a portion of said
land, the delay rental and other payments computed in accordance therewith shall
thereupon be reduced HA the  proportion  that the acreage  released bears to the
acreage which was covered by this lease immediately prior to such release.

          5. If at any time or times  during the primary  terra  operations  are
conducted on said land and if all operations are discontinued,  this lease shall
thereafter  terminate on its  anniversary  date next following the ninetieth day
after such  discontinuance  unless on or before  such  anniversary  date  Lessee
either (1) conducts operations or (2) commences or resumes the payment or tender
of delay rental;  provided,  however,  if such anniversary date is at the end of
the  primary  term,  or if there is no further  anniversary  date of the primary
term, this lease shall terminate at the end of such term or on the ninetieth day
after  discontinuance of all operations,  whichever is the later date, unless on
such later date either (1) Lessee is  conducting  operations  or (2) the shut-in
well provisions of paragraph 3 or the provisions of paragraph 11 are applicable.
Whenever used in this lease the word "operations"  shall mean operations for and
any of the following:  drilling, testing, completing,  reworking,  recompleting,
deepening,  plugging back or repairing of a well in search for or in an endeavor
to  obtain  production  of  oil,  gas or  sulphur,  whether  or  not  in  paying
quantities.

         6. Lessee shall have the use, free from royalty,  of water,  other than
from  Lessor's  water  wells and of oil and gas  produced  from said land in all
operations  hereunder.  Lessee  shall  have the right at any time to remove  all
machinery  and  fixtures  placed on said land,  including  the right to draw and
remove  casing.  No well shall be drilled  nearer  than 200 feet to the house or
barn now on said land  without the consent of the Lessor.  Lessee  shall pay for
damages  caused by its  operations  to growing crops and timber on said land. 7.
The rights and estate of any party  hereto may be assigned  from time to time in
whole  or in part  and as to any  minerals  or  horizon.  All of the  covenants,
obligations,  and  considerations  of this lease shall  extend to and be binding
upon the parties  hereto,  their  heirs,  successors,  assigns,  and  successive
assigns. No change or division in the ownership of said land,  royalties,  delay
rentals,  or  other  moneys,  or any part  thereof,  howsoever  effected,  shall
increase the  obligations or diminish the rights of Lessee,  including,  but not
limited to, the location and drilling of wells and the

                 OIL AND GAS LEASE, PAGE -4- OF 10 PAGES

<PAGE>

measurement of  production.  Notwithstanding  any other- actual or  constructive
knowledge or notice hereof or to Lessee, its successors or assigns, no change or
division in the ownership of said lands of the royalties, delay rental, or other
moneys, or the right to receive the same,  howsoever effected,  shall be binding
upon the then record  owner of this lease until thirty (30) days after there has
been furnished to such record owner at his or its principal place of business by
Lessor or  Lessor's  heirs,  successors,  or  assigns,  notice of such change or
division,  supported  by  either  originals  or  duly  certified  copies  of the
instruments  which have been properly  filed for record and which  evidence such
change or division, and of such court records and proceedings,  transcripts,  or
other  documents  as shall be  necessary  in the opinion of such record owner to
establish  the  validity  of such  change  or  division.  If any such  change in
ownership occurs by reason of death of the owner, Lessee may nevertheless pay or
tender such royalties,  delay rental, or other moneys,  or part thereof,  to the
credit of the decedent in a depository  bank provided for above. In the event of
assignment of this lease as to any part  (whether  divided or undivided) of said
land the delay rental payable  hereunder shall be  apportionable  as between the
several leaseholder  owners,  ratably according to the surface area or undivided
interests of each,  and default in delay rental  payment by one shall not effect
the right of other leasehold owners hereunder.

         8. In the event Lessor  considers that Lessee has not complied with all
its obligations hereunder,  both express and implied, Lessor shall notify Lessee
in writing,  setting out  specifically in what respects Lessee has breached this
contract.  Lessee  shall then have  sixty  (60) days  after the  receipt of said
notice  within which to meet or commence to meet all or any part of the breaches
alleged by Lessor. The service of said notice shall be precedent to the bringing
of any action by Lessor on said lease for any cause, and no such action shall be
brought  until the lapse of sixty  (60) days  after  service  of such  notice on
Lessee.  Neither  the service of said notice nor the doing of any acts by Lessee
aimed to meet all or any of the alleged breaches shall be deemed an admission or
presumption that Lessee has failed to perform all its obligations hereunder.  If
this lease is cancelled for any cause, it shall nevertheless remain in force and
effect as to (1)  sufficient  acreage  around  each  well as to which  there are
operations to constitute a drilling or maximum  allowable unit under  applicable
governmental regulations,  (but in no event less than forty acres), such acreage
to be  designated  by Lessee as  nearly as  practicable  in the form of a square
centered at the well, or in such shape as then existing  spacing rules  require;
and (2) any part of said  land  included  in a pooled  unit on which  there  are
operations.  Lessee shall also have such easements on said land as are necessary
to operations on the acreage so retained.

         9.  Lessor  hereby  warrants  and  agrees to defend  title to said land
against  the claims of all  persons  whosoever.  Lessor's  rights and  interests
hereunder shall be charged primarily with any mortgages, taxes or other liens,

                 OIL AND GAS LEASE, PAGE -5- OF 10 PAGES

<PAGE>

or interest and other charges on said land,  but Lessor agrees that Lessee shall
have the right at any time to pay or reduce same for Lessor,  either before,  or
after  maturity,  and be subrogated  to the rights of the holder  thereof and to
deduct  amounts so paid from  royalties or other  payments  payable or which may
become payable to Lessor and/or assigns under this lease. If this lease covers a
less  interest in the oil,  gas and sulphur in all or any part of said land than
the entire and undivided fee simple estate (whether  Lessor's interest is herein
specified or not), or no interest therein, then the royalties, delay rental, and
other moneys accruing from any part as to which this lease covers less than such
full interest,  shall be paid only in the proportion which the interest therein,
if any,  covered  by this  lease,  bears to the whole and  undivided  fee simple
estate therein. All royalty interest covered by this lease (whether or not owned
by Lessor) shall be paid out of the royalty herein provided. This lease shall be
binding upon each party who executes it without regard to whether it is executed
by all those named herein as Lessor.

         10. If, while this lease is in force,  at, or after the  expiration  of
the  primary  term  hereof,  it is not  being  continued  in force by  reason of
production or the shut-in well  provisions of paragraph 3 hereof,  and Lessee is
not conducting  operations on said land by reason of (1) any law, order, rule or
regulation,  (whether or not  subsequently  determined to be invalid) or (2) any
other  cause,  whether  similar or  dissimilar,  (except  financial)  beyond the
reasonable  control of Lessee,  the primary term and the delay rental provisions
hereof shall be extended until the first  anniversary  date hereof occurring one
hundred and eighty (180) days following the removal of such delaying cause,  and
this lease may be extended  thereafter  by  operations  as if such delay had not
occurred.

         11.  Notwithstanding  anything  hereinabove  to the contrary,  there is
expected  herefrom  and reserved to the Lessor  herein all uranium,  fissionable
materials and all bentonite, fullers earth and other clay like substances, it is
specifically  understood  and  agreed  that this  lease  covers  only oil,  gas,
sulphur,  and associated  liquid or liquefiable  hydrocarbons or the constituent
elements of any of the elements named,  but this lease does not cover or include
any other  minerals with all other such  minerals,  being reserved to the Lessor
herein.  Accordingly,  the words "oil,  gas" when used herein,  shall mean, oil,
gas,  sulphur  and  associated  liquid  or  liquefiable  hydrocarbons  and their
constituent  elements and the words "all other  minerals",  whenever used herein
shall be stricken from this lease, so that such "all other minerals", as defined
herein are reserved to the Lessor.

         12. Lessee's  employees and others entitled to admission upon said land
shall confine themselves to their business and duties in the performance of this
lease, and no hunting,  fishing or other trespassing shall be permitted by them;
and Lessee shall not permit its  employees or any other person to bring any guns
of any kind upon the lease premises.

                 OIL AND GAS LEASE, PAGE -6~ OF 10 PAGES

<PAGE>

         13. In the event production be established,  Lessee agrees to construct
roads  sufficient to carry Lessee's  equipment and vehicles to all drillsites on
said premises, and such roads shall be maintained by Lessee in good condition so
long as this  lease  remains  in  force  on the land on  which  said  roads  are
situated.

         14. Lessee binds Lessee to hold Lessor harmless  against and to protect
Lessor from any and all claims of  whatsoever  kind or character  growing out of
the use,  occupation and operation of the herein leased premises by Lessee,  its
successors or assigns.

         15. Upon the  completion  or  abandonment  of any well drilled upon the
leased  premises by Lessee,  the surface of the ground  appurtenant to such well
shall be smoothed,  all excavations and slush pits shall be forthwith filled in,
and the surface of the land restored to  substantially  the same condition as it
was before the  commencement  of  operations  by  Lessee,  all cost and  expense
thereof  to be borne by the  Lessee,  and the  surface  rights  of Lessor in the
leased  premises  shall be impaired as little as reasonably  possible.  Promptly
after  the  completion  of  drilling  operations  of any well or  wells  drilled
hereunder.  Lessee shall erect a fence around the pits and excavations caused by
Lessee in such  operations,  until such time as the ground is in condition  that
the pits may be satisfactorily covered (not to exceed in any event 90 days after
the completion of such  operations),  at which time Lessee shall remove from the
land of Lessor all dumps  made by Lessee in such  operations,  and shall  remove
from the land of Lessor all foundations and construction  work and debris placed
by Lessee on the leased  premises,  and shall restore the surface of the land to
substantially  the same  condition  as it was  before the  commencement  of such
operations.

         16.  Lessee shall have the right to pool and combine the lands  covered
by this lease, or a portion  thereof,  with other lands,  lease or leases in the
immediate vicinity thereof so as to form a unit or units for the development and
production of oil, gas and gas distillate, provided that no such unit for gas or
gas distillate  shall exceed three hundred twenty (320) surface acres plus a ten
percent  (10%)  tolerance,  and for oil, and shall not exceed forty (40) surface
acres plus a ten per cent (10%) tolerance. If Lessee creates any such unit, then
all of the lands  constituting the block shall be included in such unit.  Lessee
shall execute in writing an instrument  identifying  and  describing  the pooled
acreage and each unit thereof,  and same shall be filed for record in the County
Clerk's Records in the County in which said land is located. Drilling operations
and  production  from any part of the pooled acreage shall be treated as if such
drilling  operations  were upon or such production was from the part of the land
covered by this lease  which is within  such pool or unit,  whether  the well or
wells be located on land covered by this lease or not. In lieu of the  royalties
on oil, gas and gas distillate elsewhere herein specified.  Lessor shall receive
on such production from a

                 OIL AND GAS LEASE, PAGE -7- OF 10 PAGES

<PAGE>

unit pooled only such portion of the royalty  stipulated herein as the amount of
the acreage placed in the unit or their royalty  interest  therein on an acreage
basis  bears to the total  acreage so pooled in the  particular  unit  involved,
provided,  however,  that this  proportionate  reduction of the Lessor's royalty
shall not apply to shut-in royalty.

         17.  Notwithstanding  anything in paragraph  numbers three (3) and four
(4) contained to the  contrary,  this lease shall not be kept in force by paying
of shut-in gas royalties as provided in paragraph Nos. 3 and 4 of this lease for
a period of more than three (3) years beyond the  expiration of the primary term
of this lease.

         18. In the event a portion or  portions of the land  described  in this
lease are pooled or unitized  with other  land,  lease or leases so as to form a
pooled unit or units, operations for drilling, drilling, or reworking operations
on such unit or units,  or production of oil or gas from such unit or units,  or
payment  of shut-in  gas  royalties  on a well or wells  drilled on such unit or
units shall  maintain this lease in effect only as to the portion or portions of
the land described in this lease which is included in such unit or units.  As to
any portion or portions of the land not included in a pooled unit or units, this
lease may be maintained in force and effect in any manner elsewhere  provided in
this lease  including,  but not limited to, the payment of delay rentals  during
the primary term.

         19.  In the  event of  termination  of this  lease as to a  portion  or
portions hereof, Lessee shall promptly execute and file for record in the Office
of the County Clerk of said county,  a written release and surrender of all such
portion or portions of this lease as shall have terminated  under the provisions
hereof and shall at said time mail to Lessor an executed copy of such release.

         20. Unless Lessee,  in its discretion,  elects to rework or reenter oil
or gas well in existence on the effective date of this lease,  Lessee shall have
no  obligation  to plug and abandon or conduct  clean up  operations on any such
well(s) so as to comply with any governmental regulations or requirements.

         21. If during the  primary  term of this  lease  Lessee  commences  the
actual  drilling of a well in search of oil or gas on the lease  premises,  then
said drilling  operations shall be prosecuted with reasonable  diligence and the
well completed as a producing well or plugged and abandoned as a dry hole within
one hundred  and twenty  (120) days after  spudding.  Thereafter,  Lessee  shall
continue  drilling  operations  on the lease  premises  with not more than three
hundred and sixty-five (365) days elapsing  between  completion or plugging of a
well and spudding of the next well;  completion date shall be deemed the date of
filing the initial potential test with the Railroad  Commission of Texas, but in
any event not more than thirty (30) days after reaching total depth in such

                 OIL AND GAS LEASE, PAGE -8- OF 10 PAGES

<PAGE>

well and plugging date shall be the date of actual  plugging or thirty (30) days
after reaching total depth, whichever first occurs. If in the drilling of any of
said wells, Lessee encounters mechanical difficulties rendering further drilling
impractical  in the good faith  judgment of Lessee,  Lessee may plug and abandon
said well and commence  another well within sixty (60) days after such  plugging
and abandoning and thereafter  drill said well in the same manner and within the
same time as provided for the well having mechanical difficulties. In such event
such  well  shall be  considered  a  substitute  well and  shall  be  deemed  in
compliance with the terms hereof.

         Upon cessation of such continuous development program, this lease shall
ipso facto  terminate and all lands covered by this lease shall revert to Lessor
free of any lease or burden of whatsoever nature, save and except each producing
well and the tract upon which it is  situated as  specified  and  designated  by
Lessee.  If production of oil or gas from the lease  premises  should cease from
any cause, this lease shall nevertheless continue in force as long as additional
drilling  operation or reworking  operations are conducted on this lease with no
cessation of more than ninety (90) days between the abandonment of operations on
one well and the actual  spudding of another well and if production is obtained,
this lease shall  thereafter  continue as long as oil and gas are produced  from
said land.

         22. Lessee may by written  assignment  assign this Lease and its rights
and interests arising hereunder either in whole or in part. In the event of such
assignment,  Lessee shall notify Lessor of such  assignment  and provide  Lessor
with the  identity  and address of the party in whose favor the  assignment  has
been made.

         23. In the event of any conflict  between the terms and  provisions  of
this Lease and division  orders that may be issued in connection with production
from the lease  premises,  the  terms  and  provisions  of this  Lease  shall be
controlling.

         IN WITNESS WHEREOF, this instrument is executed on the date first above
written.  If  this  lease  is  executed  in  counterparts,  then  each  is to be
considered an original.

LESSOR:

/s/ NOLIE TIEDT
-------------------
    Nolie Tiedt

                OIL AND GAS LEASE, PAGE -9- OF 10 PAGES

<PAGE>

STATE OF TEXAS      ss.
                    ss.
COUNTY OF FAYETTE   ss.

         This  instrument  was  acknowledge  before me this 24TH day of October,
2001, by Nolie Tiedt.

[NOTARY SEAL GOES HERE]         /s/ SHIRLEY SODEK
                                --------------------------------
                                Notary Public, State of Texas

                                My Commission Expires:  August 19, 2005

After recording return to:

James T. Roche
5901 Highland Hills Trail
Austin, Texas 78731

                    OIL AND GAS LEASE, PAGE -10- OP 10 PAGES

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