Document:

Exhibit
10.3

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE
REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE ACT AND ANY OTHER
APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

PHASE III MEDICAL, INC.

WARRANT TO PURCHASE _______ SHARES

(SUBJECT TO ADJUSTMENT)

OF

COMMON STOCK, PAR VALUE $0.001 PER SHARE

	
  Date __________, 2006

  	
  Warrant No. ___

  

For value received, Phase III Medical, Inc., a Delaware corporation (the “Company”), hereby certifies that
_____________, or its registered
transferees, successors or assigns (each person or entity holding all or part
of this Warrant being referred to as a “Holder”),
is the registered holder of warrants (the “Warrants”)
to subscribe for and purchase _____________
(________) shares (as adjusted pursuant to Section 3 hereof,
the “Warrant Shares”) of
the fully paid and nonassessable common stock, par value $0.001 per share (the “Common Stock”), of the Company, at a
purchase price per share initially equal to EIGHT CENTS
($0.08) (the “Warrant Price”)
on or before, 5:00 P.M., Eastern Time, on __________,
2011 (the “Expiration Date”), subject to the provisions and upon the
terms and conditions hereinafter set forth. 
As used in this Warrant, the term “Business
Day” means any day other
than a Saturday or Sunday on which commercial banks located in New York, New
York are open for the general transaction of business.  This Warrant has been issued in connection
with the holder’s investment in the Company’s Common Stock financing of even date herewith.

This Warrant was issued pursuant to a Securities Purchase Agreement by
and between the  Company and the Holder
(the “Purchase Agreement”), pursuant to
an offering by the Company of shares of the Company’s Common Stock and
Warrants, as described in the Purchase Agreement.

1.             Exercise.

(a)           Method of Exercise;
Payment; Issuance of New Warrant.

(i)            Subject to the provisions hereof,
the Holder may exercise this Warrant, in whole or in part and from time to
time, by the surrender of this Warrant (with the Notice of Exercise attached
hereto as Appendix
A duly executed) at the
principal office of the Company, or such other office or agency of the Company
as it may reasonably designate by written notice to the Holder, during normal
business hours on any Business Day, and the payment by the Holder by cash,
certified check payable to the Company or wire transfer of immediately
available funds to an account designated to the exercising Holder by the
Company of an amount equal to the then applicable Warrant Price multiplied by
the number of Warrant Shares then being purchased, or in the event of a
cashless exercise pursuant to Section 1(b) below, with the Net Issue
Election

 

 

 

Notice attached hereto as Appendix B duly executed and completed.  On the date on which the Holder shall have
satisfied in full the Holder’s obligations set forth herein regarding an
exercise of this Warrant (provided such date is prior to the Expiration Date),
the Holder (or such other person or persons as directed by the Holder, subject
to compliance with applicable securities laws) shall be treated for all
purposes as the holder of record of such Warrant Shares as of the close of
business on such date.

(ii)           In the event of any exercise of the
rights represented by this Warrant, certificates for the whole number of shares
of Common Stock so purchased shall be delivered to the Holder (or such other
person or persons as directed by the Holder, subject to compliance with applicable
securities laws) as promptly as is reasonably practicable (but not later than
three (3) Business Days) after such exercise at the Company’s expense, and,
unless this Warrant has been fully exercised, a new Warrant representing the
whole number of Warrant Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the Holder as soon
as reasonably practicable thereafter (but not later than three (3) Business
Days) after such exercise.

(b)           Cashless Right to
Convert Warrant into Common Stock. 
Notwithstanding any provision herein to the contrary, if as of the date
of exercise of all or a part of this Warrant, the Fair Market Value (as defined
below) for one share of Common Stock is greater than the Warrant Price, then in
lieu of exercising this Warrant for cash, the Holder may elect to receive,
without the payment by the Holder of the Warrant Price, Warrant Shares equal to
the value of this Warrant or any portion hereof by the surrender of this
Warrant (or such portion of this Warrant being so exercised) together with the
Net Issue Election Notice annexed hereto as Appendix B duly
executed and completed, at the office of the Company, or such other office or
agency of the Company as it may reasonably designate by written notice to the
Holder, during normal business hours on any Business Day.  Thereupon, the Company shall issue to the
Holder such number of fully paid, validly issued and nonassessable Warrant
Shares, as is computed using the following formula:

X=
Y(A-B)

A

where

X =  the number of shares of
Common Stock to be issued to the Holder (or such other person or persons as
directed by the Holder, subject to compliance with all applicable laws) upon
such exercise of the rights under this Section 1(b)

Y =  the total number of shares of
Common Stock covered by this Warrant which the Holder has surrendered for
cashless exercise

A = the “Fair Market Value” of one
share of Common Stock on the date that the Holder delivers the Net Issue
Election Notice to the Company as provided herein

B =  the Warrant Price in effect
under this Warrant on the date that the Holder delivers the Net Issue Election
Notice to the Company as provided herein

The
“Fair Market Value” of a
share of Common Stock as of a particular date (the “Valuation Date”) shall mean the
following:

 

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(i)            if the Common Stock is then listed
on a national securities exchange, the average closing sale price of one share
of Common Stock on such exchange over the ten (10) trading days ending on
the last trading day prior to the Valuation Date; provided that if such stock
has not traded in the ten (10) consecutive trading days prior to the
Valuation Date, the Fair Market Value shall be the average closing price of one
share of Common Stock in the most recent ten (10) trading days during
which the Common Stock has traded prior to the Valuation Date;

(ii)           if the Common Stock is then included
in The Nasdaq Stock Market, Inc. (“Nasdaq”),
the average closing sale price of one share of Common Stock on Nasdaq over the
ten (10) trading days ending on the last trading day prior to the
Valuation Date or, if no closing sale price is available for any of such
ten (10) trading days, the closing sale price for such day shall be
determined as the average of the high bid and the low ask price quoted on
Nasdaq as of the end of such trading day; provided that if the Common Stock has
not traded in the ten (10) consecutive trading days prior to the Valuation
Date, the Fair Market Value shall be the average closing price of one share of
Common Stock in the most recent ten (10) trading days during which the
Common Stock has traded prior to the Valuation Date;

(iii)          if the Common Stock is then included
in the Over-the-Counter Bulletin Board, the average closing sale price of one
share of Common Stock on the Over-the-Counter Bulletin Board over the
ten (10) trading days ending on the last trading day prior to the
Valuation Date or, if no closing sale price is available for any of such
ten (10) trading days, the closing sale price for such day shall be
determined as the average of the high bid and the low ask price quoted on the
Over-the-Counter Bulletin Board as of the end of such trading day; provided
that if the Common Stock has not traded in the ten (10) consecutive
trading days prior to the Valuation Date, the Fair Market Value shall be the
average closing price of one share of Common Stock in the most recent
ten (10) trading days during which the Common Stock has traded prior to
the Valuation Date;

(iv)          if the Common Stock is then included in
the “pink sheets”, the average closing sale price of one share of Common Stock
on the “pink sheets” over the ten (10) trading days ending on the last
trading day prior to the Valuation Date or, if no closing sale price is
available for any of such ten (10) trading days, the closing sale price
for such day shall be determined as the average of the high bid and the low ask
price quoted on the “pink sheets” as of the end of such trading day; provided
that if the Common Stock has not traded in the ten (10) consecutive
trading days prior to the Valuation Date, the Fair Market Value shall be the
average closing price of one share of Common Stock in the most recent
ten (10) trading days during which the Common Stock has traded prior to
the Valuation Date; or

(v)           if the Common Stock is not then
listed on a national securities exchange or quoted on Nasdaq or the
Over-the-Counter Bulletin Board or the “pink sheets”, the Fair Market Value of
one share of Common Stock as of the Valuation Date shall be determined in good
faith by the Board of Directors of the Company (the “Board”).

2.             Reservation of Shares; Stock Fully Paid;
Listing.  The Company shall keep reserved a sufficient
number of shares of the authorized and unissued shares of Common Stock to
provide for the exercise of the rights of purchase represented by this Warrant
in compliance with its terms.  All
Warrant Shares issued upon exercise of this Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares upon payment in full of
the Warrant Price therefor in accordance with the terms of this Warrant (or
proper exercise of the cashless exercise rights contained in Section 1(b)
hereof), duly authorized, validly issued, fully paid and non-assessable shares
of Common Stock of the Company.  The
Company shall during all times prior to the Expiration Date when the shares of
Common Stock issuable

 

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upon the exercise of this Warrant are authorized for listing or
quotation on any national securities exchange, Nasdaq (or the Over-the-Counter
Bulletin Board or the “pink sheets”, as the case may be), keep the shares of
Common Stock issuable upon the exercise of this Warrant authorized for listing
or quotation on such national securities exchange, Nasdaq (or the
Over-the-Counter Bulletin Board or the “pink sheets”, as the case may be).

3.             Adjustments.

3.1           With
respect to any rights that Holder has to exercise this Warrant and convert into
shares of Common Stock, Holder shall be entitled to the following adjustments:

(a)           Merger
or Consolidation.  If at any time
there shall be a merger or a consolidation of the Company with or into, or if
the Company shall enter into an agreement providing for the transfer or sale of
all or substantially all of its assets to, another entity (the “Surviving
Entity”) when the Company is not the surviving corporation, then, as part of
such merger or consolidation or transfer of assets lawful provision shall be
made so that the holder hereof shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified herein and upon payment
of the aggregate Exercise Price then in effect, the number of shares of stock
or other securities or property (including cash) of the Surviving Entity
resulting from such merger, consolidation or transfer of assets, to which the
holder hereof as the holder of the stock deliverable upon exercise of this
Warrant would have been entitled in such merger, consolidation or transfer of
assets, if this Warrant had been exercised immediately before such transaction.  In any such case, appropriate adjustment
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the holder hereof as the holder of this Warrant
after the merger, consolidation, or transfer of assets.  Under no circumstances may the Company into
any agreement or instrument providing for the merger, consolidation or transfer
of its assets or similar transaction without first assuring Warrant is fully
enforceable and exercisable with respect to the Surviving Entity as
contemplated by this Warrant.

(b)           Reclassification,
Recapitalization, etc.  If the
Company at any time shall, by subdivision, combination or reclassification of
securities, recapitalization, automatic conversion, or other similar event
affecting the number or character of outstanding shares of Common Stock, or
otherwise, change any of the securities as to which purchase rights under this
Warrant exist into the same or a different number of securities of any other
class or classes, this Warrant shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as the result of
such change with respect to the securities that were subject to the purchase
rights under this Warrant immediately prior to such subdivision, combination,
reclassification or other change.

(c)           Split
or Combination of Common Stock and Stock Dividend.  In case the Company shall at any time
subdivide, redivide, recapitalize, split (forward or reverse) or change its
outstanding shares of Common Stock into a greater number of shares or declare a
dividend upon its Common Stock payable solely in shares of Common Stock, the
Exercise Price shall be proportionately reduced and the number of Warrant
Shares proportionately increased. 
Conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Exercise Price
shall be proportionately increased and the number of Warrant Shares
proportionately reduced.

(d)           Consideration
Other than Cash.  For purposes of
this Warrant, if a part or all of the consideration received by the Company in
connection with the issuance of shares of Common Stock or the issuance of any
of the securities described in this Warrant consists of property other than
cash, such consideration shall be deemed to have a fair market value as is
reasonably determined in good faith by the Board.

 

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(e)           No
Increased Warrant Price.  Notwithstanding any other provisions of this Section
3, no adjustment of the Warrant Price pursuant to this Section 3
shall have the effect of increasing the Warrant Price above the Warrant Price
in effect immediately prior to such adjustment.

3.2           Certificate
as to Adjustments; Notice by Company. 
In each case of an adjustment or readjustment of the Warrant Price, the
Company at its expense will furnish the Holder with a certificate prepared by
the Treasurer or Chief Financial Officer of the Company, showing such
adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.

3.3           Further
Adjustments.  In the event that, as a
result of an adjustment made pursuant to this Section 3, the Holder
shall become entitled to receive any shares of capital stock of the Company
other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject thereafter to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
this Warrant.

3.4           Adjustment of
Number of Shares.  Upon each
adjustment in the Warrant Price pursuant to this Section 3, the number of
Warrant Shares purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Warrant Shares
purchasable immediately prior to such adjustment by a fraction, (i) the
numerator of which shall be the Warrant Price immediately prior to such
adjustment, and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.

4.             Redemption of
Warrants.  This Warrant is subject to
redemption by the Company as provided in this Section 4.

4.1.          This Warrant may be redeemed, at the
option of the Company, in whole and not in part, at a redemption price of
$.0001 per Warrant (the “Redemption Price”),
provided (i) the average closing price of the Common Stock as quoted by
Bloomberg, LP., on the Principal Trading Market (as defined below) on which the
Common Stock is included for quotation or trading, shall equal or exceed $.36
per share (taking into account all adjustments) for the twenty (20) consecutive
trading days ending on the second trading day prior to the date of Redemption
Notice (as defined below) is sent to the Holder (the “Target Price”); (ii) the Common Stock
is either quoted on the NASD Bulletin Board, traded on a national securities
exchange or quoted on the NNM or NCSM (the “Principal
Trading Market”); (iii) the registration statement covering the
resale of the Warrant Shares under the Securities Act has been declared
effective by the Securities and Exchange Commission and remains effective on
the Redemption Date (as defined below) so that the Warrant Shares may be sold
without limitation; (iv) the dollar value of the trading volume of the Common
Stock for each of the twenty (20) consecutive trading days prior to the
Redemption Date equals or exceeds $100,000; and (v) the Holder of this Warrant
is not subject to any lock-up provisions with respect to this Warrant or the
Warrant Shares.

4.2.          If the conditions set forth in Section 4.1 are met, and the
Company desires to exercise its right to redeem this Warrant, it shall mail a
notice (the “Redemption Notice”) to the
registered holder of this Warrant by first class mail, postage prepaid, at
least ten (10) Business Days prior to the date fixed by the Company for
redemption of the Warrants (the “Redemption Date”).

4.3.          The Redemption Notice shall specify
(i) the Redemption Price, (ii) the Redemption Date, (iii) the place where the
Warrant certificates shall be delivered and the redemption price paid, and (iv)
that the right to exercise this Warrant shall terminate at 5:00 p.m. (New
York time) on the business day immediately preceding the Redemption Date. No
failure to mail such notice nor any

 

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defect therein or in the
mailing thereof shall affect the validity of the proceedings for such
redemption except as to a holder (a) to whom notice was not mailed, or
(b) whose notice was defective. An affidavit of the Secretary or an
Assistant Secretary of the Company that the Redemption Notice has been mailed
shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.

4.4.          Any right to exercise a Warrant shall
terminate at 5:00 p.m. (New York time) on the business day immediately
preceding the Redemption Date. On and after the Redemption Date, the holder of
this Warrant shall have no further rights except to receive, upon surrender of
this Warrant, the Redemption Price.

4.5.          From and after the Redemption Date,
the Company shall, at the place specified in the Redemption Notice, upon
presentation and surrender to the Company by or on behalf of the holder thereof
the warrant certificates evidencing this Warrant being redeemed, deliver, or
cause to be delivered to or upon the written order of such holder, a sum in
cash equal to the Redemption Price of this Warrant. From and after the
Redemption Date, this Warrant shall expire and become void and all rights
hereunder and under the warrant certificates, except the right to receive
payment of the Redemption Price, shall cease. 
If the shares of Common Stock are subdivided or combined into a greater
or smaller number of shares of Common Stock, the Target Price shall be
proportionately adjusted by the ratio which the total number of shares of
Common Stock outstanding immediately prior to such event bears to the total
number of shares of Common Stock to be outstanding immediately after such
event.

5.             Transfer Taxes.  The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder of this
Warrant in respect of which such shares are issued, and in such case, the
Company shall not be required to issue or deliver any certificate for Warrant
Shares or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company’s reasonable
satisfaction that such tax has been paid.

6.             Mutilated or
Missing Warrants.  In case this
Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue
in exchange and substitution of and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction of the Warrant, and with respect to a lost,
stolen or destroyed Warrant, reasonable and customary indemnity or bond with
respect thereto, if requested by the Company.

7.             Fractional
Shares.  No fractional shares of
Common Stock shall be issued in connection with any exercise or cashless
exercise hereunder, and in lieu of any such fractional shares the Company shall
make a cash payment therefor to the Holder (or such other person or persons as
directed by the Holder, subject to compliance with all applicable laws) based
on the Fair Market Value of a share of Common Stock on the date of exercise or
cashless exercise of this Warrant.

8.             Compliance with
Securities Act and Legends.  The Holder, by acceptance hereof, agrees that
it will not offer, sell or otherwise dispose of this Warrant, or any shares of
Common Stock to be issued upon exercise hereof except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder, as amended (the

 

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“1933 Act”), or any state’s securities
laws.  All shares of Common Stock issued
upon exercise of this Warrant (unless registered under the 1933 Act) shall be
stamped or imprinted with a legend as follows:

THIS SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT COVERING THESE SECURITIES  UNDER THE ACT AND ANY OTHER APPLICABLE
SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

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

10.           Modification and
Waiver.  This Warrant and any
provision hereof shall not be changed, waived, discharged or terminated except
by an instrument in writing signed by the Company and the then current Holder,
and such change, waiver, discharge or termination shall be binding on any
future Holder.

11.           Notices.  Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in accordance with the
terms of the Purchase Agreement.

12.           Securities
Purchase Agreement and Registration Rights Agreement. This Warrant has been
issued pursuant to the Purchase Agreement, and the transferability of this
Warrant and the Common Stock issuable upon the exercise hereof are subject to
the Purchase Agreement. In addition, the Holder of this Warrant and the Common
Stock issuable upon the exercise hereof is entitled to have such shares of
Common Stock registered under the Securities Act in accordance with the
Registration Rights Agreement referred to in the Purchase Agreement and to such
remedies for breaches of, or defaults under, such Registration Rights  Agreement.

13.           Descriptive
Headings.  The descriptive headings
contained in this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

14.           Governing Law.  This Warrant shall be governed exclusively by
and construed in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties hereto
hereby irrevocably agree that any suit or proceeding arising directly and/or
indirectly pursuant to or under this Warrant, shall be brought solely in a
federal or state court located in the City, County and State of New York. By
its execution hereof, the parties hereby covenant and irrevocably submit to the
in personam jurisdiction of the federal and state courts
located in the City, County and State of New York and agree that any process in
any such action may be served upon any of them personally, or by certified mail
or registered mail upon them or their agent, return receipt requested, with the
same full force and effect as if personally served upon them in New York City.
The parties hereto waive any claim that any such jurisdiction is not a
convenient forum for any such suit or

 

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proceeding
and any defense or lack of in  personam jurisdiction with respect
thereto. In the event of any such action or proceeding, the party prevailing
therein shall be entitled to payment from the other party hereto of its
reasonable counsel fees and disbursements in an amount judicially determined.
Acceptance, receipt and execution of this Warrant by the Holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.

15.           Identity of
Transfer Agent.  The Transfer Agent
for the Common Stock is Continental Stock Transfer and Trust Company.  Upon the appointment of any subsequent
transfer agent for the Common Stock or other shares of the Company’s capital
stock issuable upon the exercise of the rights of purchase represented by this
Warrant, the Company will mail to the Holder a statement setting forth the name
and address of such transfer agent.

16.           No Impairment of
Rights.  The Company will not, by
amendment of its Certificate of Incorporation or through any other voluntary
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 action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against material impairment.

17.           Assignment.  Subject to the terms hereof and compliance
with applicable federal and state securities laws, this Warrant may be
transferred by the Holder with respect to any or all of the Warrant Shares then
purchasable hereunder.  Upon surrender of
this Warrant to the Company, together with a properly endorsed notice of
transfer (an “Assignment Form”),
for transfer of this Warrant in its entirety by the Holder, the Company shall
issue a new warrant of the same denomination to the designated transferee.  Upon surrender of this Warrant to the
Company, together with a properly endorsed Assignment Form, by the Holder for
transfer with respect to a portion of the Warrant Shares then purchasable
hereunder, the Company shall issue a new warrant to the designated transferee,
in such denomination as shall be requested by the Holder hereof, and shall
issue to such Holder a new warrant covering the number of Warrant Shares in
respect of which this Warrant shall not have been transferred.  In addition to, and not in limitation of, the
foregoing, a Holder that is a corporation, a partnership or a limited liability
company, may distribute any portion of this Warrant to its respective
shareholders, partners or members. 
Unless and until the provisions for assignment set forth herein have
been fully complied with, the Company may treat the last registered Holder as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.

18.           Limitation
on Exercise.  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares
of Common Stock then beneficially owned by such Holder and its affiliates and
any other persons whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act,
does not exceed 9.99% of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise).  For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder.  Each delivery of an Exercise Notice hereunder
will constitute a representation by the Holder that it has evaluated the
limitation set forth in this paragraph and determined that issuance of the full
number of Warrant Shares requested in such Exercise Notice is permitted under
this paragraph. This provision shall not restrict the number of shares of
Common Stock which a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a merger or other business combination or
reclassification involving the Company as contemplated in Section 3 of this
Warrant. By written notice to the Company,

 

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the Holder may waive the provisions of this Section but any
such waiver will not be effective until the 61st day after such notice is
delivered to the Company.

IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be executed on their behalf by one of their officers thereunto duly
authorized.

	
  

  	
  Phase III Medical, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Title:

  

 

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APPENDIX A

NOTICE OF EXERCISE

To:          [Company]

1.             The undersigned hereby irrevocably
elects to purchase [_____] shares of Common Stock of [Company] pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full, by [cash, certified check/wire transfer, or
surrender of the originally executed Warrant]
[select the applicable method of payment].

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

 

	
   

  	
   

  
	
   

  	
   

  
	
  (Name)

  	
   

  
	
   

  
	
   

  	
   

  
	
  (Address)

  	
   

  
	
   

  
	
   

  	
   

  
	
  (Signature)

  
	
   

  	
   

  
	
  (Date)

  

3.             Please issue a new Warrant of equivalent form and tenor
for the unexercised portion of the attached Warrant in the name of the
undersigned or in such other name as is specified below:

 

	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  
	
  (Warrantholder)

  	
   

  	
   

  
	
   

  
	
  Name: (Print)

  	
   

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
						

 

 

 

APPENDIX B

Net Issue Election Notice

To:
[Company]

Date:[_________________________]

The undersigned hereby elects under Section 1(c) of this Warrant
to surrender the right to purchase [____________] shares of Common Stock
pursuant to this Warrant and hereby requests the issuance of [_____________]
shares of Common Stock.  The
certificate(s) for the shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below.

	
  

  	
   

  
	
  Signature

  
	
   

  
	
   

  	
   

  
	
  Name for Registration

  
	
   

  
	
   

  	
   

  
	
  Mailing AddressExhibit
10.4

AGREEMENT

This
Agreement is entered into as of the __th day of _____ 2006 by and between the
undersigned Investor and Phase III Medical, Inc. (the “Company”) a Delaware
corporation with offices at 420 Lexington Avenue, Suite 450, New York, New
York  10107.

WHEREAS,
pursuant to the terms of a subscription agreement, the Investor purchased from
the Company pursuant to the terms of a private placement under Regulation D
promulgated under Section 4(2) and Rule 506 of the Securities Act of 1933, as
amended (the “Act”) Units of the Company consisting of (a) a promissory note
(the “Note”), convertible into shares (the “Conversion Shares”) of the Company’s common stock, par value
$.001 (“Common Stock”) at the rate of $.06 per Conversion Share, subject to
adjustment and (b) a detachable warrant (the “Unit Warrant”)
for the purchase of an equivalent number of shares of Common Stock at an
exercise price of $.12 per share, subject to adjustment (the “Unit Warrant Shares”);

WHEREAS,
the Note is scheduled to mature nine months from the date of issuance;

WHEREAS,
pursuant to the terms of the subscription agreement, the Investor has certain
rights relating to the registration with the Securities and Exchange Commission
pursuant to the filing with them of a registration statement under the
Securities Act of 1933;

WHEREAS,
the Company wishes to induce the Investor to either currently convert Investor’s
Note or extend the Term of the Note and to amend certain of its rights to the
filing of a registration statement.

Capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
the subscription agreement, the Note or the Unit Warrant, as the case may be.

NOW,
THEREFORE, the parties hereto hereby agree as follows:

1.  Capitalized Terms.  Capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the subscription agreement,
the Note or the Unit Warrant, as the case may be.

2.  Amendment of Note and Unit Warrant.

Investor
hereby agrees to amend the Note and the Unit Warrant in the manner set forth
opposite one of the checked boxes below (please choose):

Option 1

o Extend the
term of the Note for an additional four months from the Maturity Date in
consideration for which:

(i)
the Company shall issue to Investor for each $25,000 in principal amount of the
Note 56,818 shares of unregistered Common Stock; and

(ii)
the exercise price per Unit Warrant shall be reduced from $.12 to $.08.

Option 2

o Convert
the Note upon execution of this Agreement into shares of the Company’s Common
Stock in consideration for which:

(i)  the conversion price per Conversion Share
shall be reduced to $.044;

(ii)
the Company shall issue to Investor for each $25,000 in principal amount of the
Note, 113,636 shares of Common Stock;

(iii)
the exercise price per Unit Warrant shall be reduced from $.12 to $.08; and

 

(iv)
a new warrant shall be issued substantially on the same terms as the original
Unit Warrant to purchase an additional 416,666 shares of Common Stock for each
$25,000 in principal amount of the Note at an exercise price of $.08 per share.

3.  Amendment of Registration Rights.   

Investor
further agrees that (i) there shall not be a Registration Default under the
terms of Section 5(f) of the subscription agreement, and (ii) the delay of the
filing of the Registration Statement shall be considered an Allowed Delay under
Section 5(g) of the subscription agreement so long as the Registration
Statement is declared effective by the Commission by February 28, 2007.

4.  Waiver of Penalties.

Investor
hereby waives any and all penalties and liquidated damages accumulated as of
the date of this Letter.

5.  No Other Changes.  Except as provided in this Agreement the
terms of the Note, Unit Warrant and Subscription Agreement shall remain
unchanged.

IN
WITNESS WHEREOF, the parties have executed this Agreement.

PHASE
III MEDICAL, INC.

By:_______________________

Name:_____________________

Title:______________________

INVESTOR

By:  __________________

Name:________________

Title:__________________

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