Document:

EXHIBIT
      10.56

    AMARILLO
      BIOSCIENCES, INC. 

    

    CERTIFICATE
      OF DESIGNATION OF PREFERENCES, 

    RIGHTS
      AND LIMITATIONS

    OF

    SERIES
      A 10% CONVERTIBLE PREFERRED STOCK

    

    

    The
      undersigned, Joseph M. Cummins, does hereby certify that:

    

    1.
      He is
      Chief Executive Officer of Amarillo Biosciences, Inc, a Texas corporation (the
      “Corporation”).

    

    2.
      The
      Corporation is authorized to issue 10,000,000 shares of preferred stock, none
      of
      which have been issued.

    

    3.
      The
      following resolutions were duly adopted by the board of directors of the
      Corporation (the “Board
      of Directors”):

    

    WHEREAS,
      the certificate of incorporation of the Corporation provides for a class of
      its
      authorized stock known as preferred stock, comprised of 10,000,000 shares,
      $.01
      par value per share, issuable from time to time in one or more
      series;

    

    WHEREAS,
      the Board of Directors is authorized to fix the dividend rights, dividend rate,
      voting rights, conversion rights, rights and terms of redemption and liquidation
      preferences of any wholly unissued series of preferred stock and the number
      of
      shares constituting any Series and the designation thereof, of any of them;
      and

    

    WHEREAS,
      it is the desire of the Board of Directors, pursuant to its authority as
      aforesaid, to fix the rights, preferences, restrictions and other matters
      relating to a series of the preferred stock, which shall consist of, except
      as
      otherwise set forth in the Purchase Agreement, up to 2,500 shares of the
      preferred stock which the Corporation has the authority to issue, as
      follows:

    

    NOW,
      THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide
      for
      the issuance of a series of preferred stock for cash or exchange of other
      securities, rights or property and does hereby fix and determine the rights,
      preferences, restrictions and other matters relating to such series of preferred
      stock as follows:

    
      
        
        

      

      
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    TERMS
      OF PREFERRED STOCK

    

    Section
      1.
       Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement shall have the meanings given such terms in the Purchase
      Agreement. For the purposes hereof, the following terms shall have the following
      meanings:

     

    “Alternate
      Consideration”
shall
      have the meaning set forth in Section 7(e).

     

    “Bankruptcy
      Event”
means
      any of the following events: (a) the Corporation or any Significant Subsidiary
      (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences
      a
      case or other proceeding under any bankruptcy, reorganization, arrangement,
      adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
      or
      similar law of any jurisdiction relating to the Corporation or any Significant
      Subsidiary thereof; (b) there is commenced against the Corporation or any
      Significant Subsidiary thereof any such case or proceeding that is not dismissed
      within 60 days after commencement; (c) the Corporation or any Significant
      Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
      or other order approving any such case or proceeding is entered; (d) the
      Corporation or any Significant Subsidiary thereof suffers any appointment of
      any
      custodian or the like for it or any substantial part of its property that is
      not
      discharged or stayed within 60 calendar days after such appointment; (e) the
      Corporation or any Significant Subsidiary thereof makes a general assignment
      for
      the benefit of creditors; (f) the Corporation or any Significant Subsidiary
      thereof calls a meeting of its creditors with a view to arranging a composition,
      adjustment or restructuring of its debts; or (g) the Corporation or any
      Significant Subsidiary thereof, by any act or failure to act, expressly
      indicates its consent to, approval of or acquiescence in any of the foregoing
      or
      takes any corporate or other action for the purpose of effecting any of the
      foregoing.

    

    “Base
      Conversion Price”
shall
      have the meaning set forth in Section 7(b).

    

    “Business
      Day”
means
      any day except Saturday, Sunday, any day which shall be a federal legal holiday
      in the United States or any day on which banking institutions in the State
      of
      New York are authorized or required by law or other governmental action to
      close.

    

    “Buy-In”
shall
      have the meaning set forth in Section 6(e)(iii).

    

    “Change
      of Control Transaction”
means
      the occurrence after the date hereof of any of (i) an acquisition after the
      date
      hereof by an individual, legal entity or “group” (as described in Rule
      13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
      through legal or beneficial ownership of capital stock of the Corporation,
      by
      contract or otherwise) of in excess of 33% of the voting securities of the
      Corporation (other than by means of conversion or exercise of Preferred Stock
      and the Securities issued together with the Preferred Stock), or (ii) the
      Corporation merges into or 

    
      
        
        

      

      
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    consolidates
      with any other Person, or any Person merges into or consolidates with the
      Corporation and, after giving effect to such transaction, the stockholders
      of
      the Corporation immediately prior to such transaction own less than 66% of
      the
      aggregate voting power of the Corporation or the successor entity of such
      transaction, or (iii) the Corporation sells or transfers all or substantially
      all of its assets to another Person and the stockholders of the Corporation
      immediately prior to such transaction own less than 66% of the aggregate voting
      power of the acquiring entity immediately after the transaction, or (iv) a
      replacement at one time or within a one year period of more than one-half of
      the
      members of the Corporation’s board of directors which is not approved by a
      majority of those individuals who are members of the board of directors on
      the
      date hereof (or by those individuals who are serving as members of the board
      of
      directors on any date whose nomination to the board of directors was approved
      by
      a majority of the members of the board of directors who are members on the
      date
      hereof), or (v) the execution by the Corporation of an agreement to which the
      Corporation is a party or by which it is bound, providing for any of the events
      set forth in clauses (i) through (iv) above.

    

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto and all conditions precedent to
      (i)
      each Holder’s obligations to pay the Subscription Amount and (ii) the
      Corporation’s obligations to deliver the Securities have been satisfied or
      waived.

    

    “Commission”
means
      the Securities and Exchange Commission.

    

    “Common
      Stock”
means
      the Corporation’s common stock, par value $.01 per share, and stock of any other
      class of securities into which such securities may hereafter be reclassified
      or
      changed into.

    

    “Common
      Stock Equivalents”
means
      any securities of the Corporation or the Subsidiaries which would entitle the
      holder thereof to acquire at any time Common Stock, including, without
      limitation, any debt, preferred stock, rights, options, warrants or other
      instrument that is at any time convertible into or exchangeable for, or
      otherwise entitles the holder thereof to receive, Common Stock.

    

    “Conversion
      Amount”
means
      the sum of the Stated Value at issue.

    

    “Conversion
      Date”
shall
      have the meaning set forth in Section 6(a).

    

    “Conversion
      Price”
shall
      have the meaning set forth in Section 6(b). 

    

    “Conversion
      Shares”
means,
      collectively, the shares of Common Stock issuable upon conversion of the shares
      of Preferred Stock in accordance with the terms hereof.

    

    “Conversion
      Shares Registration Statement”
means
      a
      registration statement that registers the resale of all Conversion Shares of
      the
      Holders, who shall be named as a 

    
      
        
        

      

      
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    “selling
      stockholder” therein and meets the requirements of the Registration Rights
      Agreement.

    

    “Dilutive
      Issuance”
shall
      have the meaning set forth in Section 7(b).

    

    “Dilutive
      Issuance Notice”
shall
      have the meaning set forth in Section 7(b).

    

    “Dividend
      Payment Date”
shall
      have the meaning set forth in Section 3(a).

     

    “Dividend
      Share Amount”
shall
      have the meaning set forth in Section 3(a).

    

    “Effective
      Date”
means
      the date that the Conversion Shares Registration Statement is declared effective
      by the Commission.

    

    “Equity
      Conditions”
means,
      during the period in question, (i)
      the
      Corporation shall have duly honored all conversions scheduled to occur or
      occurring by virtue of one or more Notices of Conversion of the applicable
      Holder on or prior to the dates so requested or required, if any, (ii) the
      Corporation shall have paid all liquidated damages and other amounts owing
      to
      the applicable Holder in respect of the Preferred Stock, (iii)
      there is an effective Conversion Shares Registration Statement pursuant to
      which
      the Holders are permitted to utilize the prospectus thereunder to resell all
      of
      the shares of Common Stock issuable pursuant to the Transaction Documents (and
      the Corporation believes, in good faith, that such effectiveness will continue
      uninterrupted for the foreseeable future), (iv) the Common Stock is trading
      on a
      Trading Market and all of the shares issuable pursuant to the Transaction
      Documents are listed for trading on such Trading Market (and the Corporation
      believes, in good faith, that trading of the Common Stock on a Trading Market
      will continue uninterrupted for the foreseeable future), (v) there is a
      sufficient number of authorized, but unissued and otherwise unreserved, shares
      of Common Stock for the issuance of all of the shares of Common Stock issuable
      pursuant to the Transaction Documents, (vi) there is no existing Triggering
      Event or no existing event which, with the passage of time or the giving of
      notice, would constitute a Triggering Event, (vii) the issuance of the shares
      in
      question to the applicable Holder would not violate the limitations set forth
      in
      Section 6(c) herein, (viii)
      there has been no public announcement of a pending or proposed Fundamental
      Transaction or Change of Control Transaction that has not been consummated,
      (ix)
      the applicable Holder is in possession of any information that constitutes,
      or
      may constitute, material non-public information, and (x) for a period of 20
      consecutive Trading Days prior to the applicable date in question, the daily
      trading volume for the Common Stock on the principal Trading Market exceeds
      25,000 shares per Trading Day (subject to adjustment for forward and reverse
      stock splits and the like).

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    

    “Fundamental
      Transaction”
shall
      have the meaning set forth in Section 7(e).

    
      
        
        

      

      
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    “Holder”
shall
      have the meaning given such term in Section 2.

    

    “Junior
      Securities”
means
      the Common Stock and all other Common Stock Equivalents of the Corporation
      other
      than those securities which are explicitly senior or pari passu
      to the
      Preferred Stock in dividend rights or liquidation preference.

    

    “Liquidation”
shall
      have the meaning set forth in Section 5.

    

    “New
      York Courts”
shall
      have the meaning set forth in Section 11(d).

    

    “Notice
      of Conversion”
shall
      have the meaning set forth in Section 6(a).

    

    “Original
      Issue Date”
means
      the date of the first issuance of any shares of the Preferred Stock regardless
      of the number of transfers of any particular shares of Preferred Stock and
      regardless of the number of certificates which may be issued to evidence such
      Preferred Stock.

    

    “Permitted
      Indebtedness”
means
      (a) the Indebtedness existing on the Original Issue Date and set forth on
Schedule
      3.1(gg)
      attached
      to the Purchase Agreement and (b) lease obligations and purchase money
      indebtedness of up to $500,000, in the aggregate, incurred in connection with
      the acquisition of capital assets and lease obligations with respect to newly
      acquired or leased assets.

    

    “Permitted
      Lien”
means
      the individual and collective reference to the following: (a) Liens for taxes,
      assessments and other governmental charges or levies not yet due or Liens for
      taxes, assessments and other governmental charges or levies being contested
      in
      good faith and by appropriate proceedings for which adequate reserves (in the
      good faith judgment of the management of the Corporation) have been established
      in accordance with GAAP; (b) Liens imposed by law which were incurred in the
      ordinary course of the Corporation’s business, such as carriers’, warehousemen’s
      and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens
      arising in the ordinary course of the Corporation’s business, and which (x) do
      not individually or in the aggregate materially detract from the value of such
      property or assets or materially impair the use thereof in the operation of
      the
      business of the Corporation and its consolidated Subsidiaries or (y) which
      are
      being contested in good faith by appropriate proceedings, which proceedings
      have
      the effect of preventing for the foreseeable future the forfeiture or sale
      of
      the property or asset subject to such Lien; and (c) Liens incurred in connection
      with Permitted Indebtedness under clause (b) thereunder, provided that such
      Liens are not secured by assets of the Corporation or its Subsidiaries other
      than the assets so acquired or leased.

     

    “Preferred
      Stock”
shall
      have the meaning set forth in Section 2.

    
      
        
        

      

      
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    “Purchase
      Agreement”
means
      the Securities Purchase Agreement, dated as of January 8, 2008, to which the
      Corporation and the original Holders are parties, as amended, modified or
      supplemented from time to time in accordance with its terms.

    

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated as of the date of the Purchase
      Agreement, to which the Corporation and the original Holder are parties, as
      amended, modified or supplemented from time to time in accordance with its
      terms.

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

    

    “Share
      Delivery Date”
shall
      have the meaning set forth in Section 6(e).

    

    “Stated
      Value”
shall
      have the meaning set forth in Section 2, as the same may be increased pursuant
      to Section 3.

    

    “Subscription
      Amount”
means,
      as to each Purchaser, the amount in United States Dollars and in immediately
      available funds to be paid for the Preferred Stock purchased pursuant to the
      Purchase Agreement as specified below such Purchaser’s name on the signature
      page of the Purchase Agreement and next to the heading “Subscription
      Amount.”

    

    “Subsidiary”
shall
      have the meaning set forth in the Purchase Agreement.

    

    “Trading
      Day”
means
      a
      day on which the principal Trading Market is open for business.

    

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange or the OTC Bulletin Board.

    

    “Transaction
      Documents”
shall
      have the meaning set forth in the Purchase Agreement.

    

    “Triggering
      Event”
shall
      have the meaning set forth in Section 9(a).

    

    “Triggering
      Redemption Amount”
means,
      for each share of Preferred Stock, the sum of (i) 100% of the Stated Value,
      (ii)
      all accrued but unpaid dividends thereon and (iii) all liquidated damages and
      other costs, expenses or amounts due in respect of the Preferred
      Stock.

    

    “Triggering
      Redemption Payment Date”
shall
      have the meaning set forth in Section 9(b).

    
      
        
        

      

      
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    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted for trading as reported by Bloomberg Financial L.P. (based
      on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York
      City
      time)); (b) if the OTC Bulletin Board is not a Trading Market, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
      quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
      are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
      similar organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the Common Stock so reported; or (d)
      in
      all other cases, the fair market value of a share of Common Stock as determined
      by an independent appraiser selected in good faith by the Holders and reasonably
      acceptable to the Corporation, the fees and expenses of which shall be paid
      by
      the Corporation. 

    

    Section
      2.
       Designation,
      Amount and Par Value.
      The
      series of preferred stock shall be designated as its Series A 10% Convertible
      Preferred Stock (the “Preferred
      Stock”)
      and
      the number of shares so designated shall be up to 2,500 (which shall not be
      subject to increase without the written consent of all of the holders of the
      Preferred Stock (each, a “Holder”
and
      collectively, the “Holders”)).
      Each
      share of Preferred Stock shall have a par value of $0.01 per share and a stated
      value equal to $1,000, subject to increase set forth in Section 3(a) below
      (the
“Stated
      Value”).

     

    Section
      3.
       Dividends.

    

    a)  Dividends
      in Cash or in Kind.
      Holders
      shall be entitled to receive, and the Corporation shall pay, cumulative
      dividends at the rate per share (as a percentage of the Stated Value per share)
      of 10% per annum (subject to increase pursuant to Section 9(b)),
      payable
      quarterly on January 1, April 1, July 1 and October 1, beginning on the first
      such date after the Original Issue Date and on each Conversion Date (with
      respect only to Preferred Stock being converted) (each such date, a
“Dividend
      Payment Date”)
      (if
      any Dividend Payment Date is not a Trading Day, the applicable payment shall
      be
      due on the next succeeding Trading Day) in cash or duly authorized, validly
      issued, fully paid and non-assessable shares of Common Stock as set forth in
      this Section 3(a), or a combination thereof (the amount to be paid in shares
      of
      Common Stock, the “Dividend
      Share Amount”).
      The
      form of dividend payments to each Holder shall be in the sole discretion of
      the
      company, in cash (provided funds are legally available for the payment of
      dividends) or shares of freely tradable Common Stock which shall be valued
      solely for such purpose at 90% of the average of the two lowest VWAPs for the
      5
      consecutive Trading Days ending on the Trading Day that is immediately prior
      to
      the Dividend Payment Date. The Holders shall have the same rights and remedies
      with respect to the delivery of any such shares as if such shares were being
      issued pursuant to Section 6. On the Closing Date the Corporation shall have
      notified the Holders whether or not it may 

     

    
      
        
        

      

      
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    legally
      pay cash dividends as of the Closing Date. If at any time the Corporation has
      the right to pay dividends in cash or Common Stock, the Corporation must provide
      the Holders with at least ten Trading Days’ notice of its election to pay a
      regularly scheduled dividend in Common Stock (the Corporation may indicate
      in
      such notice that the election contained in such notice shall continue for later
      periods until revised by a subsequent notice). Dividends on the Preferred Stock
      shall be calculated on the basis of a 360-day year, consisting of twelve 30
      calendar day periods, shall accrue daily commencing on the Original Issue Date,
      and shall be deemed to accrue from such date whether or not earned or declared
      and whether or not there are profits, surplus or other funds of the Corporation
      legally available for the payment of dividends. Except as otherwise provided
      herein, if at any time the Corporation pays dividends partially in cash and
      partially in shares, then such payment shall be distributed ratably among the
      Holders based upon the number of shares of Preferred Stock held by each Holder
      on such Dividend Payment Date. Any dividends, whether paid in cash or shares
      of
      Common Stock, that are not paid within three Trading Days following a Dividend
      Payment Date shall continue to accrue and shall entail a late fee, which must
      be
      paid in cash, at the rate of 18% per annum or the lesser rate permitted by
      applicable law (such fees to accrue daily, from the Dividend Payment Date
      through and including the date of payment). If at any time the Corporation
      delivers a notice to the Holders of its election to pay the dividends in shares
      of Common Stock, the Corporation shall timely file a prospectus supplement
      pursuant to Rule 424 disclosing such election.

     

    b)  So
      long
      as any Preferred Stock shall remain outstanding, neither the Corporation nor
      any
      Subsidiary thereof shall redeem, purchase or otherwise acquire directly or
      indirectly any Junior Securities except as expressly permitted by Section
      9(a)(viii). So long as any Preferred Stock shall remain outstanding, neither
      the
      Corporation nor any Subsidiary thereof shall directly or indirectly pay or
      declare any dividend or make any distribution upon (other than a dividend or
      distribution described in Section 7 or dividends due and paid in the ordinary
      course on preferred stock of the Corporation at such times when the Corporation
      is in compliance with its payment and other obligations hereunder), nor shall
      any distribution be made in respect of, any Junior Securities as long as any
      dividends due on the Preferred Stock remain unpaid, nor shall any monies be
      set
      aside for or applied to the purchase or redemption (through a sinking fund
      or
      otherwise) of any Junior Securities or shares pari passu
      with the
      Preferred Stock.

    

    c)  The
      Corporation acknowledges and agrees that the capital of the Corporation in
      respect of the Preferred Stock and any future issuances of the Corporation’s
      capital stock shall be equal to the aggregate par value of such Preferred Stock
      or capital stock, as the case may be, and that, on or after the date of the
      Purchase Agreement, it shall not increase the capital of the Corporation with
      respect to any shares of the Corporation’s capital stock issued and outstanding
      on such date. The Corporation also acknowledges and agrees that it shall not
      create any special reserves without the prior written consent of each
      Holder.

    
      
        
        

      

      
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    Section
      4.
       Voting
      Rights.
      Except
      as otherwise provided herein or as otherwise required by law, the Preferred
      Stock shall have no voting rights. However, as long as any shares of Preferred
      Stock are outstanding, the Corporation shall not, without the affirmative vote
      of the Holders of a majority of the then outstanding shares of the Preferred
      Stock, (a) alter or change adversely the powers, preferences or rights given
      to
      the Preferred Stock or alter or amend this Certificate of Designation, (b)
      authorize or create any class of stock ranking as to dividends, redemption
      or
      distribution of assets upon a Liquidation (as defined in Section 5) senior
      to or
      otherwise pari passu
      with the
      Preferred Stock, (c) amend its certificate of incorporation or other charter
      documents in any manner that adversely affects any rights of the Holders, (d)
      increase the authorized number of shares of Preferred Stock, or (e) enter into
      any agreement with respect to any of the foregoing.

     

    Section
      5.
       Liquidation.
      Upon
      any liquidation, dissolution or winding-up of the Corporation, whether voluntary
      or involuntary (a “Liquidation”),
      the
      Holders shall be entitled to receive out of the assets, whether capital or
      surplus, of the Corporation an amount equal to the Stated Value, plus any
      accrued and unpaid dividends thereon and any other fees or liquidated damages
      owing thereon, for each share of Preferred Stock before any distribution or
      payment shall be made to the holders of any Junior Securities, and if the assets
      of the Corporation shall be insufficient to pay in full such amounts, then
      the
      entire assets to be distributed to the Holders shall be ratably distributed
      among the Holders in accordance with the respective amounts that would be
      payable on such shares if all amounts payable thereon were paid in full. A
      Fundamental Transaction or Change of Control Transaction shall not be deemed
      a
      Liquidation. The Corporation shall mail written notice of any such Liquidation,
      not less than 45 days prior to the payment date stated therein, to each
      Holder.

    

    Section
      6.
       Conversion.

    

    a)  Conversions
      at Option of Holder.
      Each
      share of Preferred Stock shall be convertible at the option of the Holder
      thereof, at any time and from time to time from and after the Original Issue
      Date into that number of shares of Common Stock (subject to the limitations
      set
      forth in Section 6(c) )determined by dividing the Stated Value of such share
      of
      Preferred Stock by the Conversion Price. Holders shall effect conversions by
      providing the Corporation with the form of conversion notice attached hereto
      as
Annex
      A
      (a
“Notice
      of Conversion”).
      Each
      Notice of Conversion shall specify the number of shares of Preferred Stock
      to be
      converted, the number of shares of Preferred Stock owned prior to the conversion
      at issue, the number of shares of Preferred Stock owned subsequent to the
      conversion at issue and the date on which such conversion is to be effected,
      which date may not be prior to the date the applicable Holder delivers by
      facsimile such Notice of Conversion to the Corporation (such date, the
“Conversion
      Date”).
      If no
      Conversion Date is specified in a Notice of Conversion, the Conversion Date
      shall be the date that such Notice of Conversion to the Corporation is deemed
      delivered hereunder. The calculations and entries set forth in the Notice of
      Conversion shall control in the absence of manifest or mathematical error.
      To
      effect conversions of shares of Preferred Stock, a Holder shall not be required
      to surrender the certificate(s) 

     

    
      
        
        

      

      
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    representing
      such shares of Preferred Stock to the Corporation unless all of the shares
      of
      Preferred Stock represented thereby are so converted, in which case such Holder
      shall deliver the certificate representing such shares of Preferred Stock
      promptly following the Conversion Date at issue. Shares of Preferred Stock
      converted into Common Stock or redeemed in accordance with the terms hereof
      shall be canceled and shall not be reissued.

    

    b)  Conversion
      Price.
      The
      conversion price for the Preferred Stock shall equal $0.25,
      subject
      to adjustment herein (the “Conversion
      Price”).

    

    c)  Beneficial
      Ownership Limitation. The
      Corporation shall not effect any conversion of the Preferred Stock, and a Holder
      shall not have the right to convert any portion of the Preferred Stock, to
      the
      extent that, after giving effect to the conversion set forth on the applicable
      Notice of Conversion, such Holder (together with such Holder’s Affiliates, and
      any other person or entity acting as a group together with such Holder or any
      of
      such Holder’s Affiliates) would beneficially own in excess of the Beneficial
      Ownership Limitation (as defined below).  For purposes of the foregoing
      sentence, the number of shares of Common Stock beneficially owned by such Holder
      and its Affiliates shall include the number of shares of Common Stock issuable
      upon conversion of the Preferred Stock with respect to which such determination
      is being made, but shall exclude the number of shares of Common Stock which
      are
      issuable upon (A) conversion of the remaining, unconverted Stated Value of
      Preferred Stock beneficially owned by such Holder or any of its Affiliates
      and
      (B) exercise or conversion of the unexercised or unconverted portion of any
      other securities of the Corporation subject to a limitation on conversion or
      exercise analogous to the limitation contained herein (including the Warrants)
      beneficially owned by such Holder or any of its Affiliates.  Except as set
      forth in the preceding sentence, for purposes of this Section 6(c), beneficial
      ownership shall be calculated in accordance with Section 13(d) of the Exchange
      Act and the rules and regulations promulgated thereunder. To the extent that
      the
      limitation contained in this Section 6(c) applies, the determination of whether
      the Preferred Stock is convertible (in relation to other securities owned by
      such Holder together with any Affiliates) and of how many shares of Preferred
      Stock are convertible shall be in the sole discretion of such Holder, and the
      submission of a Notice of Conversion shall be deemed to be such Holder’s
      determination of whether the shares of Preferred Stock may be converted (in
      relation to other securities owned by such Holder together with any Affiliates)
      and how many shares of the Preferred Stock are convertible, in each case subject
      to such aggregate percentage limitations. To ensure compliance with this
      restriction, each Holder will be deemed to represent to the Corporation each
      time it delivers a Notice of Conversion that such Notice of Conversion has
      not
      violated the restrictions set forth in this paragraph and the Corporation shall
      have no obligation to verify or confirm the accuracy of such determination.
      In
      addition, a determination as to any group status as contemplated above shall
      be
      determined in accordance with Section 13(d) of the Exchange Act and
      the
      rules and regulations promulgated thereunder.
      For
      purposes of this Section 6(c), in determining the number of outstanding shares
      of Common Stock, a Holder may rely on the number of outstanding shares of Common
      Stock as stated in the most recent of the 

     

    
      
        
        

      

      
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    following:
      (A) the Corporation’s most recent Form 10-QSB or Form 10-KSB, as the case may
      be, (B) a more recent public announcement by the Corporation or (C) a more
      recent notice by the Corporation or the Corporation’s transfer agent setting
      forth the number of shares of Common Stock outstanding.  Upon the written
      or oral request of a Holder, the Corporation shall within two Trading Days
      confirm orally and in writing to such Holder the number of shares of Common
      Stock then outstanding.  In any case, the number of outstanding shares of
      Common Stock shall be determined after giving effect to the conversion or
      exercise of securities of the Corporation, including the Preferred Stock, by
      such Holder or its Affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The “Beneficial Ownership
      Limitation” shall be 4.99% of the number of shares of the Common Stock
      outstanding immediately after giving effect to the issuance of shares of Common
      Stock issuable upon conversion of Preferred Stock held by the applicable Holder.
      The Beneficial Ownership Limitation provisions of this Section 6(c) may be
      waived by such Holder, at the election of such Holder, upon not less than 61
      days’ prior notice to the Corporation, to change the Beneficial Ownership
      Limitation to 9.99% of the number of shares of the Common Stock outstanding
      immediately after giving effect to the issuance of shares of Common Stock upon
      conversion of Preferred Stock held by the applicable Holder and the provisions
      of this Section 6(c) shall continue to apply. Upon such a change by a Holder
      of
      the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
      limitation, the Beneficial Ownership Limitation shall not be further waived
      by
      such Holder. The provisions of this paragraph shall be construed and implemented
      in a manner otherwise than in strict conformity with the terms of this Section
      6(c) to correct this paragraph (or any portion hereof) which may be defective
      or
      inconsistent with the intended Beneficial Ownership Limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation. The
      limitations contained in this paragraph shall apply to a successor holder of
      Preferred Stock.

    

    d)  [RESERVED].

    

    e)  Mechanics
      of Conversion

    

    i.  Delivery
      of Certificate Upon Conversion.
      Not
      later than three Trading Days after each Conversion Date (the “Share
      Delivery Date”),
      the
      Corporation shall deliver, or cause to be delivered, to the converting Holder
      (A) a certificate or certificates which, on or after the Effective Date, shall
      be free of restrictive legends and trading restrictions (other than those which
      may then be required by the Purchase Agreement) representing the number of
      shares of Common Stock being acquired upon the conversion of shares of Preferred
      Stock, and (B) a bank check in the amount of accrued and unpaid dividends (if
      the Corporation has elected or is required to pay accrued dividends in cash).
      On
      or after the Effective Date, the Corporation shall, upon request of such Holder,
      use its best efforts to deliver any certificate or certificates required to
      be
      delivered by the Corporation under this Section 6 electronically through the
      Depository Trust Company or another established clearing corporation performing
      similar 

     

    
      
        
        

      

      
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    functions.
      If in the case of any Notice of Conversion such certificate or certificates
      are
      not delivered to or as directed by the applicable Holder by the third Trading
      Day after the Conversion Date, the applicable Holder shall be entitled to elect
      by written notice to the Corporation at any time on or before its receipt of
      such certificate or certificates, to rescind such Conversion Notice by written
      notice to the Corporation, in which event the Corporation shall promptly return
      to such Holder any original Preferred Stock certificate delivered to the
      Corporation and such Holder shall promptly return any Common Stock certificates
      representing the shares of Preferred Stock tendered for conversion to the
      Corporation.

     

    ii.  Obligation
      Absolute; Partial Liquidated Damages.
      The
      Corporation’s obligation to issue and deliver the Conversion Shares upon
      conversion of Preferred Stock in accordance with the terms hereof are absolute
      and unconditional, irrespective of any action or inaction by a Holder to enforce
      the same, any waiver or consent with respect to any provision hereof, the
      recovery of any judgment against any Person or any action to enforce the same,
      or any setoff, counterclaim, recoupment, limitation or termination, or any
      breach or alleged breach by such Holder or any other Person of any obligation
      to
      the Corporation or any violation or alleged violation of law by such Holder
      or
      any other person, and irrespective of any other circumstance which might
      otherwise limit such obligation of the Corporation to such Holder in connection
      with the issuance of such Conversion Shares; provided,
      however,
      that
      such delivery shall not operate as a waiver by the Corporation of any such
      action that the Corporation may have against such Holder. In the event a Holder
      shall elect to convert any or all of the Stated Value of its Preferred Stock,
      the Corporation may not refuse conversion based on any claim that such Holder
      or
      any one associated or affiliated with such Holder has been engaged in any
      violation of law, agreement or for any other reason, unless an injunction from
      a
      court, on notice to Holder, restraining and/or enjoining conversion of all
      or
      part of the Preferred Stock of such Holder shall have been sought and obtained,
      and the Corporation posts a surety bond for the benefit of such Holder in the
      amount of 150% of the Stated Value of Preferred Stock which is subject to the
      injunction, which bond shall remain in effect until the completion of
      arbitration/litigation of the underlying dispute and the proceeds of which
      shall
      be payable to such Holder to the extent it obtains judgment. In the absence
      of
      such injunction, the Corporation shall issue Conversion Shares and, if
      applicable, cash, upon a properly noticed conversion. If the Corporation fails
      to deliver to a Holder such certificate or certificates pursuant to Section
      6(e)(i) on the second Trading Day after the Share Delivery Date applicable
      to
      such conversion, the Corporation shall pay to such Holder, in cash, as
      liquidated damages and not as a penalty, for each $5,000 of Stated Value of
      Preferred Stock being converted, $50 per Trading Day (increasing to $100 per
      Trading Day on the third Trading Day and increasing to $200 per Trading Day
      on
      the sixth Trading Day after such damages begin to accrue) for each Trading
      Day
      after such second Trading Day after the Share Delivery Date until such
      certificates are delivered. 

     

    
      
        
        

      

      
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    Nothing
      herein shall limit a Holder’s right to pursue actual damages or declare a
      Triggering Event pursuant to Section 9 for the Corporation’s failure to deliver
      Conversion Shares within the period specified herein and such Holder shall
      have
      the right to pursue all remedies available to it hereunder, at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief. The Exercise of any such rights shall not prohibit a Holder
      from seeking to enforce damages pursuant to any other Section hereof or under
      applicable law.

     

    iii.  Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Conversion.
      If the
      Corporation fails to deliver to a Holder the applicable certificate or
      certificates by the Share Delivery Date pursuant to Section 6(e)(i), and if
      after such Share Delivery Date such Holder is required by its brokerage firm
      to
      purchase (in an open market transaction or otherwise), or the Holder’s brokerage
      firm purchases, shares of Common Stock to deliver in satisfaction of a sale
      by
      such Holder of the Conversion Shares which such Holder was entitled to receive
      upon the conversion relating to such Share Delivery Date (a “Buy-In”),
      then
      the Corporation shall (A) pay in cash to such Holder (in addition to any other
      remedies available to or elected by such Holder) the amount by which (x) such
      Holder’s total purchase price (including any brokerage commissions) for the
      shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate
      number of shares of Common Stock that such Holder was entitled to receive from
      the conversion at issue multiplied by (2) the actual sale price at which the
      sell order giving rise to such purchase obligation was executed (including
      any
      brokerage commissions) and (B) at the option of such Holder, either reissue
      (if
      surrendered) the shares of Preferred Stock equal to the number of shares of
      Preferred Stock submitted for conversion or deliver to such Holder the number
      of
      shares of Common Stock that would have been issued if the Corporation had timely
      complied with its delivery requirements under Section 6(e)(i). For example,
      if a
      Holder purchases shares of Common Stock having a total purchase price of $11,000
      to cover a Buy-In with respect to an attempted conversion of shares of Preferred
      Stock with respect to which the actual sale price (including any brokerage
      commissions) giving rise to such purchase obligation was a total of $10,000
      under clause (A) of the immediately preceding sentence, the Corporation shall
      be
      required to pay such Holder $1,000. The Holder shall provide the Corporation
      written notice indicating the amounts payable to such Holder in respect of
      the
      Buy-In and, upon request of the Corporation, evidence of the amount of such
      loss. Nothing herein shall limit a Holder’s right to pursue any other remedies
      available to it hereunder, at law or in equity including, without limitation,
      a
      decree of specific performance and/or injunctive relief with respect to the
      Corporation’s failure to timely deliver certificates representing shares of
      Common Stock upon conversion of the shares of Preferred Stock as required
      pursuant to the terms hereof.

     

    
      
        
        

      

      
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    iv.  Reservation
      of Shares Issuable Upon Conversion.
      The
      Corporation covenants that it will at all times reserve and keep available
      out
      of its authorized and unissued shares of Common Stock for the sole purpose
      of
      issuance upon conversion of the Preferred Stock and payment of dividends on
      the
      Preferred Stock, each as herein provided, free from preemptive rights or any
      other actual contingent purchase rights of Persons other than the Holders of
      the
      Preferred Stock, not less than such aggregate number of shares of the Common
      Stock as shall (subject to the terms and conditions in the Purchase Agreement)
      be issuable (taking into account the adjustments and restrictions of Section
      7)
      upon the conversion of all outstanding shares of Preferred Stock and payment
      of
      dividends hereunder. The Corporation covenants that all shares of Common Stock
      that shall be so issuable shall, upon issue, be duly authorized, validly issued,
      fully paid and nonassessable and, if the Conversion Shares Registration
      Statement is then effective under the Securities Act, shall be registered for
      public sale in accordance with such Conversion Shares Registration
      Statement.

    

    v.  Fractional
      Shares.
      Upon a
      conversion hereunder, the Corporation shall not be required to issue stock
      certificates representing fractions of shares of Common Stock, but may if
      otherwise permitted, make a cash payment in respect of any final fraction of
      a
      share based on the VWAP at such time. If the Corporation elects not, or is
      unable, to make such a cash payment, the Holders shall be entitled to receive,
      in lieu of the final fraction of a share, one whole share of Common
      Stock.

    

    vi.  Transfer
      Taxes.
      The
      issuance of certificates for shares of the Common Stock on conversion of this
      Preferred Stock shall be made without charge to any Holder for any documentary
      stamp or similar taxes that may be payable in respect of the issue or delivery
      of such certificates, provided that the Corporation shall not be required to
      pay
      any tax that may be payable in respect of any transfer involved in the issuance
      and delivery of any such certificate upon conversion in a name other than that
      of the Holders of such shares of Preferred Stock so converted and the
      Corporation shall not be required to issue or deliver such certificates unless
      or until the Person or Persons requesting the issuance thereof shall have paid
      to the Corporation the amount of such tax or shall have established to the
      satisfaction of the Corporation that such tax has been paid.

    

    Section
      7.
       Certain
      Adjustments.

    

    a)  Stock
      Dividends and Stock Splits.
      If the
      Corporation, at any time while this Preferred Stock is outstanding: (A) pays
      a
      stock dividend or otherwise makes a distribution or distributions payable in
      shares of Common Stock on shares of Common Stock or any other Common Stock
      Equivalents (which, for avoidance of doubt, shall not include any shares of
      Common Stock issued by the Corporation upon conversion of, or payment of a
      dividend on, this Preferred Stock); (B) subdivides outstanding shares of

     

    
      
        
        

      

      
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    Common
      Stock into a larger number of shares; (C) combines (including by way of a
      reverse stock split) outstanding shares of Common Stock into a smaller number
      of
      shares; or (D) issues, in the event of a reclassification of shares of the
      Common Stock, any shares of capital stock of the Corporation, then the
      Conversion Price shall be multiplied by a fraction of which the numerator shall
      be the number of shares of Common Stock (excluding any treasury shares of the
      Corporation) outstanding immediately before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding
      immediately after such event. Any adjustment made pursuant to this Section
      7(a)
      shall become effective immediately after the record date for the determination
      of stockholders entitled to receive such dividend or distribution and shall
      become effective immediately after the effective date in the case of a
      subdivision, combination or reclassification.

     

    b)  Subsequent
      Equity Sales.
      If, at
      any time while this Preferred Stock is outstanding, the Corporation or any
      Subsidiary, as applicable, sells or grants any option to purchase or sells
      or
      grants any right to reprice its securities, or otherwise disposes of or issues
      (or announces any sale, grant or any option to purchase or other disposition)
      any Common Stock or Common Stock Equivalents entitling any Person to acquire
      shares of Common Stock at an effective price per share that is lower than the
      then Conversion Price (such lower price, the “Base
      Conversion Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share that is lower than the Conversion Price, such issuance shall be deemed
      to have occurred for less than the Conversion Price on such date of the Dilutive
      Issuance), then the Conversion Price shall be reduced to equal the Base
      Conversion Price. Notwithstanding
      the foregoing, no adjustment will be made under this Section 7(b) in respect
      of
      an Exempt Issuance.
      The
      Corporation shall notify the Holders in writing, no later than the third
      Business Day following the issuance of any Common Stock or Common Stock
      Equivalents subject to this Section 7(b), indicating therein the applicable
      issuance price, or applicable reset price, exchange price, conversion price
      and
      other pricing terms (such notice, the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Corporation provides a Dilutive
      Issuance Notice pursuant to this Section 7(b), upon the occurrence of any
      Dilutive Issuance, the Holders are entitled to receive a number of Conversion
      Shares based upon the Base Conversion Price on or after the date of such
      Dilutive Issuance, regardless of whether a Holder accurately refers to the
      Base
      Conversion Price in the Notice of Conversion. 

     

    c)  Subsequent
      Rights Offerings.
      If the
      Corporation, at any time while this Preferred Stock is outstanding, shall issue
      rights, options or warrants to all holders of Common Stock (and not to Holders)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share that is lower than the VWAP on the record date referenced below,
      then
      the Conversion Price shall be multiplied by a fraction of which 

     

    
      
        
        

      

      
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    the
      denominator shall be the number of shares of the Common Stock outstanding on
      the
      date of issuance of such rights or warrants plus the number of additional shares
      of Common Stock offered for subscription or purchase, and of which the numerator
      shall be the number of shares of the Common Stock outstanding on the date of
      issuance of such rights or warrants plus the number of shares which the
      aggregate offering price of the total number of shares so offered (assuming
      delivery to the Corporation in full of all consideration payable upon exercise
      of such rights, options or warrants) would purchase at such VWAP. Such
      adjustment shall be made whenever such rights or warrants are issued, and shall
      become effective immediately after the record date for the determination of
      stockholders entitled to receive such rights, options or warrants.

     

    d)  Pro
      Rata Distributions.
      If the
      Corporation, at any time while this Preferred Stock is outstanding, distributes
      to all holders of Common Stock (and not to Holders) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security (other than Common Stock, which shall
      be subject to Section 7(b)), then in each such case the Conversion Price shall
      be adjusted by multiplying such Conversion Price in effect immediately prior
      to
      the record date fixed for determination of stockholders entitled to receive
      such
      distribution by a fraction of which the denominator shall be the VWAP determined
      as of the record date mentioned above, and of which the numerator shall be
      such
      VWAP on such record date less the then fair market value at such record date
      of
      the portion of such assets, evidence of indebtedness or rights or warrants
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors of the Corporation in good faith. In either
      case the adjustments shall be described in a statement delivered to the Holders
      describing the portion of assets or evidences of indebtedness so distributed
      or
      such subscription rights applicable to one share of Common Stock. Such
      adjustment shall be made whenever any such distribution is made and shall become
      effective immediately after the record date mentioned above.

    

    e)  Fundamental
      Transaction.
      If, at
      any time while this Preferred Stock is outstanding, (A) the Corporation effects
      any merger or consolidation of the Corporation with or into another Person,
      (B)
      the Corporation effects any sale of all or substantially all of its assets
      in
      one transaction or a series of related transactions, (C) any tender offer or
      exchange offer (whether by the Corporation or another Person) is completed
      pursuant to which holders of Common Stock are permitted to tender or exchange
      their shares for other securities, cash or property, or (D) the Corporation
      effects any reclassification of the Common Stock or any compulsory share
      exchange pursuant to which the Common Stock is effectively converted into or
      exchanged for other securities, cash or property (in any such case, a
“Fundamental
      Transaction”),
      then,
      upon any subsequent conversion of this Preferred Stock, the Holders shall have
      the right to receive, for each Conversion Share that would have been issuable
      upon such conversion immediately prior to the occurrence of such Fundamental
      Transaction, the same kind and amount of securities, cash or property as it
      would have been entitled to receive upon the occurrence of such Fundamental
      Transaction if it had been, immediately prior to such Fundamental Transaction,
      the holder of one share of Common Stock (the “Alternate
      Consideration”). 
      

     

    
      
        
        

      

      
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    For
      purposes of any such conversion, the determination of the Conversion Price
      shall
      be appropriately adjusted to apply to such Alternate Consideration based on
      the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Corporation shall apportion
      the
      Conversion Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holders shall be given the same choice as to the Alternate Consideration
      it
      receives upon any conversion of this Preferred Stock following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Corporation or surviving entity in such Fundamental Transaction
      shall file a new Certificate of Designation with the same terms and conditions
      and issue to the Holders new preferred stock consistent with the foregoing
      provisions and evidencing the Holders’ right to convert such preferred stock
      into Alternate Consideration. The terms of any agreement pursuant to which
      a
      Fundamental Transaction is effected shall include terms requiring any such
      successor or surviving entity to comply with the provisions of this Section
      7(e)
      and insuring that this Preferred Stock (or any such replacement security) will
      be similarly adjusted upon any subsequent transaction analogous to a Fundamental
      Transaction.

     

    f)  Calculations.
      All
      calculations under this Section 7 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      7,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      any treasury shares of the Corporation) issued and outstanding.

    

    g)  Notice
      to the Holders.

    

    i.  Adjustment
      to Conversion Price.
      Whenever the Conversion Price is adjusted pursuant to any provision of this
      Section 7, the Corporation shall promptly mail to each Holder a notice setting
      forth the Conversion Price after such adjustment and setting forth a brief
      statement of the facts requiring such adjustment. If the Corporation issues
      a
      variable rate security, despite the prohibition thereon in the Purchase
      Agreement, the Corporation shall be deemed to have issued Common Stock or Common
      Stock Equivalents at the lowest possible conversion or exercise price at which
      such securities may be converted or exercised in the case of a Variable Rate
      Transaction (as defined in the Purchase Agreement).

     

    ii.  Notice
      to Allow Conversion by Holder.
      If (A)
      the Corporation shall declare a dividend (or any other distribution in whatever
      form) on the Common Stock, (B) the Corporation shall declare a special
      nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
      Corporation shall authorize the granting to all holders of the Common Stock
      of
      rights or warrants to subscribe for or purchase any shares of capital stock
      of
      any class or of any rights, 

     

    
      
        
        

      

      
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    (D)
      the
      approval of any stockholders of the Corporation shall be required in connection
      with any reclassification of the Common Stock, any consolidation or merger
      to
      which the Corporation is a party, any sale or transfer of all or substantially
      all of the assets of the Corporation, of any compulsory share exchange whereby
      the Common Stock is converted into other securities, cash or property or (E)
      the
      Corporation shall authorize the voluntary or involuntary dissolution,
      liquidation or winding up of the affairs of the Corporation, then, in each
      case,
      the Corporation shall cause to be filed at each office or agency maintained
      for
      the purpose of conversion of this Preferred Stock, and shall cause to be
delivered
      to each Holder at its last address as it shall appear upon the stock
      books of
      the
      Corporation, at least 20 calendar days prior to the applicable record or
      effective date hereinafter specified, a notice stating (x)
      the
      date on which a record is to be taken for the purpose of such dividend,
      distribution, redemption, rights or warrants, or if a record is not to be taken,
      the date as of which the holders of the Common Stock of record to be entitled
      to
      such dividend, distributions, redemption, rights or warrants are to be
      determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange, provided that the
      failure to deliver such notice or any defect therein or in the delivery thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to convert the Conversion Amount of
      this
      Preferred Stock (or any part hereof) during the 20-day period commencing on
      the
      date of such notice through the effective date of the event triggering such
      notice. 

     

    Section
      8.
       Force
      Conversion.
      The
      Corporation shall have the following rights to force a conversion of the
      Preferred Stock if after the Effective Date, each of the closing bid price
      for
      any 20 consecutive Trading Days (such 20 day period commencing only after the
      later of the Effective Date, such period the “Threshold
      Period”))
      exceeds $1.25 (as appropriately adjusted for stock splits and combinations),
      the
      Corporation may, within 1 Trading Day of the end of any such Threshold Period,
      deliver a notice to the Holder (a “Forced
      Conversion Notice”
and
      the
      date such notice is received by the Holder, the “Forced
      Conversion Notice Date”)
      to
      cause the Holder to immediately convert all or part of the then outstanding
      Stated Value amount of Preferred Stocks. The Corporation may only effect a
      Forced Conversion Notice if all of the Equity Conditions are met through the
      applicable Threshold Period until the date of the applicable Forced Conversion
      and through and including the date such shares of Common Stock are issued to
      the
      Holder. Any Forced Conversion shall be applied ratably to all Holders based
      on
      their initial purchases of Preferred Stocks pursuant to the Purchase Agreement.
      For purposes of clarification, a Forced Conversion shall be subject to all
      of
      the provisions of Section 5, including, without limitation, the provision
      requiring payment of liquidated damages and limitations on conversions.

    
      
        
        

      

      
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    Section
      9.
       Redemption
      Upon Triggering Events.

     

    a)  “Triggering
      Event”
means
      any one or more of the following events (whatever the reason and whether it
      shall be voluntary or involuntary or effected by operation of law or pursuant
      to
      any judgment, decree or order of any court, or any order, rule or regulation
      of
      any administrative or governmental body):

    

    i.  RESERVED;

     

    ii.  RESERVED;
      

    

    iii.  the
      Corporation shall fail to deliver certificates representing Conversion Shares
      issuable upon a conversion hereunder that comply with the provisions hereof
      prior to the fifth Trading Day after such shares are required to be delivered
      hereunder, or the Corporation shall provide written notice to any Holder,
      including by way of public announcement, at any time, of its intention not
      to
      comply with requests for conversion of any shares of Preferred Stock in
      accordance with the terms hereof;

    

    iv.  RESERVED;

    

    v.  the
      Corporation shall fail for any reason to pay in full the amount of cash due
      pursuant to a Buy-In within five calendar days after notice therefor is
      delivered hereunder or shall fail to pay all amounts owed on account of any
      Event (as defined in the Registration Rights Agreement) within five days of
      the
      date due;

    

    vi.  the
      Corporation shall fail to have available a sufficient number of authorized
      and
      unreserved shares of Common Stock to issue to such Holder upon a conversion
      hereunder;

    

    vii.  unless
      specifically addressed elsewhere in this Certificate of Designation as a
      Triggering Event, the Corporation shall fail to observe or perform any other
      covenant, agreement or warranty contained in, or otherwise commit any breach
      of
      the Transaction Documents, and such failure or breach shall not, if subject
      to
      the possibility of a cure by the Corporation, have been cured within 30 calendar
      days after the date on which written notice of such failure or breach shall
      have
      been delivered;

    

    viii.  the
      Corporation shall redeem more than a de minimis
      number
      of Junior Securities other than as to repurchases of Common Stock or Common
      Stock Equivalents from departing officers and directors of the Corporation,
      provided that, while any of the Preferred Stock remains outstanding,
      such

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    repurchases
      shall not exceed an aggregate of $200,000 from all officers and
      directors;

    

    ix.  the
      Corporation shall be party to a Change of Control Transaction; 

    

    x.  there
      shall have occurred a Bankruptcy Event; 

    

    xi.  the
      Common Stock shall fail to be listed or quoted for trading on a Trading Market
      for more than five Trading Days, which need not be consecutive Trading Days;
      or

    

    xii.  any
      monetary judgment, writ or similar final process shall be entered or filed
      against the Corporation, any Subsidiary or any of their respective property
      or
      other assets for greater than $200,000, and such judgment, writ or similar
      final
      process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
      days.

    

    b)  Upon
      the
      occurrence of a Triggering Event, each Holder shall (in addition to all other
      rights it may have hereunder or under applicable law) have the right,
      exercisable at the sole option of such Holder, to require the Corporation to,
      (A) with respect to the Triggering Events set forth in Sections 9(a)(iii),
      (v),
      (vi), (vii), (viii), (ix), (ix) (as to Changes of Control approved by the Board
      of Directors of the Corporation) and (x) (as to voluntary filings only), redeem
      all of the Preferred Stock then held by such Holder for a redemption price,
      in
      cash, equal to the Triggering Redemption Amount or (B) at the option of each
      Holder and with respect to the Triggering Events set forth in Sections 9(a)(i),
      (ii), (iv), (ix) (as to Changes of Control not approved by the Board of
      Directors of the Corporation), (x) (as to involuntary filings only) and (xii),
      either (a) redeem all of the Preferred Stock then held by such Holder for a
      redemption price, in shares of Common Stock, equal to a number of shares of
      Common Stock equal to the Triggering Redemption Amount divided by 90% of the
      average of the 10 VWAPs immediately prior to the date of election hereunder
      or
      (b) increase the dividend rate on all of the outstanding Preferred Stock held
      by
      such Holder to 18% per annum thereafter. The Triggering Redemption Amount,
      in
      cash or in shares, shall be due and payable or issuable, as the case may be,
      within five Trading Days of the date on which the notice for the payment
      therefor is provided by a Holder (the “Triggering
      Redemption Payment Date”).
      If
      the Corporation fails to pay in full the Triggering Redemption Amount hereunder
      on the date such amount is due in accordance with this Section (whether in
      cash
      or shares of Common Stock), the Corporation will pay interest thereon at a
      rate
      equal to the lesser of 18% per annum or the maximum rate permitted by applicable
      law, accruing daily from such date until the Triggering Redemption Amount,
      plus
      all such interest thereon, is paid in full. For purposes of this Section, a
      share of Preferred Stock is outstanding until such date as the applicable Holder
      shall have received Conversion Shares upon a conversion (or attempted
      conversion) thereof that meets the requirements hereof or has been paid the
      Triggering Redemption Amount in cash.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    Section
      10.
       Negative
      Covenants.
      So long
      as any shares of Preferred Stock are outstanding, the Corporation shall not,
      and
      shall not permit any of its Subsidiaries to, directly or
      indirectly:

    

    a)  other
      than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
      suffer to exist any indebtedness for borrowed money of any kind, including
      but
      not limited to, a guarantee, on or with respect to any of its property or assets
      now owned or hereafter acquired or any interest therein or any income or profits
      therefrom;

     

    b)  other
      than Permitted Liens, enter into, create, incur, assume or suffer to exist
      any
      Liens of any kind, on or with respect to any of its property or assets now
      owned
      or hereafter acquired or any interest therein or any income or profits
      therefrom;

    

    c)  amend
      its
      certificate of incorporation, bylaws or other charter documents so as to
      materially and adversely affect any rights of any Holder;

    

    d)  repay,
      repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis
      number
      of shares of its Common Stock, Common Stock Equivalents or Junior Securities,
      except for the Conversion Shares to the extent permitted or required under
      the
      Transaction Documents or as otherwise permitted by the Transaction Documents;
      

    

    e)  enter
      into any agreement or understanding with respect to any of the
      foregoing;
      or

    

    f)  pay
      cash
      dividends or distributions on Junior Securities of the Corporation.

    

    Section
      11. Miscellaneous.
      

    

    a)  Notices.
      Any and
      all notices or other communications or deliveries to be provided by the Holders
      hereunder including, without limitation, any Notice of Conversion, shall be
      in
      writing and delivered personally, by facsimile, or sent by a nationally
      recognized overnight courier service, addressed to the Corporation, at the
      address set forth above, facsimile number (806) 376-9301,
      Attn: Joseph M. Cummins, Chief Executive Officer or
      such
      other facsimile number or address as the Corporation may specify for such
      purposes by notice to the Holders delivered in accordance with this Section
      11.
      Any and all notices or other communications or deliveries to be provided by
      the
      Corporation hereunder shall be in writing and delivered personally, by
      facsimile, or sent by a nationally recognized overnight courier service
      addressed to each Holder at the facsimile number or address of such Holder
      appearing on the books of the Corporation, or if no such facsimile number or
      address appears on the books of the Corporation, at the principal place of
      business of the Holders. Any notice or other communication or deliveries
      hereunder shall be deemed given and effective on the earliest of (i) the date
      of

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    transmission,
      if such notice or communication is delivered via facsimile at the facsimile
      number specified in this Section 11 prior to 5:30 p.m. (New York City time)
      on
      any date, (ii) the date immediately following the date of transmission, if
      such
      notice or communication is delivered via facsimile at the facsimile number
      specified in this Section 11 between 5:30 p.m. and 11:59 p.m. (New York City
      time) on any date, (iii) the second Business Day following the date of mailing,
      if sent by nationally recognized overnight courier service, or (iv) upon actual
      receipt by the party to whom such notice is required to be given.

     

    b)  Absolute
      Obligation.
      Except
      as expressly provided herein, no provision of this Certificate of Designation
      shall alter or impair the obligation of the Corporation, which is absolute
      and
      unconditional, to pay liquidated damages, accrued dividends and accrued
      interest, as applicable, on the shares of Preferred Stock at the time, place,
      and rate, and in the coin or currency, herein prescribed. 

     

    c)  Lost
      or Mutilated Preferred Stock Certificate.
      If a
      Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or
      destroyed, the Corporation shall execute and deliver, in exchange and
      substitution for and upon cancellation of a mutilated certificate, or in lieu
      of
      or in substitution for a lost, stolen or destroyed certificate, a new
      certificate for the shares of Preferred Stock so mutilated, lost, stolen or
      destroyed, but only upon receipt of evidence of such loss, theft or destruction
      of such certificate, and of the ownership hereof reasonably satisfactory to
      the
      Corporation.

    

    d)  Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Certificate of Designation shall be governed by and construed and
      enforced in accordance with the internal laws of the State of [name of state
      of
      incorporation], without regard to the principles of conflict of laws thereof.
      Each party agrees that all legal proceedings concerning the interpretation,
      enforcement and defense of the transactions contemplated by any of the
      Transaction Documents (whether brought against a party hereto or its respective
      Affiliates, directors, officers, shareholders, employees or agents) shall be
      commenced in the state and federal courts sitting in the City of New York,
      Borough of Manhattan (the “New
      York Courts”).
      Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      New
      York Courts for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein
      (including with respect to the enforcement of any of the Transaction Documents),
      and hereby irrevocably waives, and agrees not to assert in any suit, action
      or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      such New York Courts, or such New York Courts are improper or inconvenient
      venue
      for such proceeding. Each party hereby irrevocably waives personal service
      of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Certificate of Designation and agrees that
      such service shall constitute good and sufficient service of process and notice
      thereof. Nothing contained herein shall be deemed to limit in any way any right
      to serve process in any other manner permitted by

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    applicable
      law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Certificate of Designation or
      the
      transactions contemplated hereby. If either party shall commence an action
      or
      proceeding to enforce any provisions of this Certificate of Designation, then
      the prevailing party in such action or proceeding shall be reimbursed by the
      other party for its attorneys’ fees and other costs and expenses incurred in the
      investigation, preparation and prosecution of such action or
      proceeding.

     

    e)  Waiver.
      Any
      waiver by the Corporation or a Holder of a breach of any provision of this
      Certificate of Designation shall not operate as or be construed to be a waiver
      of any other breach of such provision or of any breach of any other provision
      of
      this Certificate of Designation or a waiver by any other Holders. The failure
      of
      the Corporation or a Holder to insist upon strict adherence to any term of
      this
      Certificate of Designation on one or more occasions shall not be considered
      a
      waiver or deprive that party (or any other Holder) of the right thereafter
      to
      insist upon strict adherence to that term or any other term of this Certificate
      of Designation. Any waiver by the Corporation or a Holder must be in
      writing.

     

    f)  Severability.
      If any
      provision of this Certificate of Designation is invalid, illegal or
      unenforceable, the balance of this Certificate of Designation shall remain
      in
      effect, and if any provision is inapplicable to any Person or circumstance,
      it
      shall nevertheless remain applicable to all other Persons and circumstances.
      If
      it shall be found that any interest or other amount deemed interest due
      hereunder violates the applicable law governing usury, the applicable rate
      of
      interest due hereunder shall automatically be lowered to equal the maximum
      rate
      of interest permitted under applicable law. 

    

    g)  Next
      Business Day.
      Whenever any payment or other obligation hereunder shall be due on a day other
      than a Business Day, such payment shall be made on the next succeeding Business
      Day.

    

    h)  Headings.
      The
      headings contained herein are for convenience only, do not constitute a part
      of
      this Certificate of Designation and shall not be deemed to limit or affect
      any
      of the provisions hereof.

    

    i)  Status
      of Converted or Redeemed Preferred Stock.
      Shares
      of Preferred Stock may only be issued pursuant to the Purchase Agreement. If
      any
      shares of Preferred Stock shall be converted, redeemed or reacquired by the
      Corporation, such shares shall resume the status of authorized but unissued
      shares of preferred stock and shall no longer be designated as Series A
      Preferred Stock.

    

    

    *********************

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    RESOLVED,
      FURTHER, that the Chairman, the president or any vice-president, and the
      secretary or any assistant secretary, of the Corporation be and they hereby
      are
      authorized and directed to prepare and file a Certificate of Designation of
      Preferences, Rights and Limitations in accordance with the foregoing resolution
      and the provisions of Texas law.

    

    IN
      WITNESS WHEREOF, the undersigned have executed this Certificate this 7th
      day of January 2008.

    

    
      	
               

            	
                  
                /s/ Joseph M. Cummins

              Name:
                Joseph M. Cummins 

              Title
                Chief Executive Officer 

            
	
               

            	
               

            

    

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    ANNEX
      A

    

    NOTICE
      OF
      CONVERSION

    

    (TO
      BE
      EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED
      STOCK)

    

    The
      undersigned hereby elects to convert the number of shares of Series A 10%
      Convertible Preferred Stock indicated below into shares of common stock, par
      value $.01 per share (the “Common
      Stock”),
      of
      Amarillo Biosciences, Inc., a Texas corporation (the “Corporation”),
      according to the conditions hereof, as of the date written below. If shares
      of
      Common Stock are to be issued in the name of a Person other than the
      undersigned, the undersigned will pay all transfer taxes payable with respect
      thereto and is delivering herewith such certificates and opinions as may be
      required by the Corporation in accordance with the Purchase Agreement. No fee
      will be charged to the Holders for any conversion, except for any such transfer
      taxes.

    

    Conversion
      calculations:

    

    
      	
              Date
                to Effect Conversion:
                _____________________________________________

            
	
              Number
                of shares of Preferred Stock owned prior to Conversion:
                _______________

            
	
              Number
                of shares of Preferred Stock to be Converted:
                ________________________

            
	
              Stated
                Value of shares of Preferred Stock to be Converted:
                ____________________

            
	
              Number
                of shares of Common Stock to be Issued:
                ___________________________

            
	
              Applicable
                Conversion
                Price:____________________________________________

            
	
              Number
                of shares of Preferred Stock subsequent to Conversion:
                ________________

            
	
               

              [HOLDER]

               

              By:___________________________________

              Name:

              Title:

            

    

    

    
      
        
        

      

      
        25EXHIBIT
      10.57

     

    EXHIBIT
      C

     

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    SERIES
      A COMMON STOCK PURCHASE WARRANT

    

    AMARILLO
      BIOSCIENCES, INC. 

     

     

    Warrant
      Shares: _______              Initial
      Exercise Date: January 8, 2008

     

     

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      certifies that, for value received, _____________ (the “Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date hereof (the
      “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the earlier of December ___, 2012
      anniversary of the Initial Exercise Date (the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from Amarillo Biosciences, Inc.,
      a
      Texas corporation (the “Company”),
      up to
      ______ shares (the “Warrant
      Shares”)
      of
      common stock, par value $.01 per share (the “Common
      Stock”),
      of
      the Company. The purchase price of one share of Common Stock under this Warrant
      shall be equal to the Exercise Price, as defined in Section 2(b). 

     

    Section
      1. Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      January 8, 2008, among the Company and the purchasers signatory
      thereto.

     

    Section
      2. Exercise.

     

    a)  Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made, in
      whole or in part, at any time or times on or after the Initial Exercise Date
      and
      on or before the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or such

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    other
      office or agency of the Company as it may designate by notice in writing to
      the
      registered Holder at the address of such Holder appearing on the books of the
      Company); and, within 3 Trading Days of the date said Notice of Exercise is
      delivered to the Company, the Company shall have received payment of the
      aggregate Exercise Price of the shares thereby purchased by wire transfer or
      cashier’s check drawn on a United States bank. Notwithstanding anything herein
      to the contrary, the Holder shall not be required to physically surrender this
      Warrant to the Company until the Holder has purchased all of the Warrant Shares
      available hereunder and the Warrant has been exercised in full, in which case,
      the Holder shall surrender this Warrant to the Company for cancellation within
      3
      Trading Days of the date the final Notice of Exercise is delivered to the
      Company. Partial exercises of this Warrant resulting in purchases of a portion
      of the total number of Warrant Shares available hereunder shall have the effect
      of lowering the outstanding number of Warrant Shares purchasable hereunder
      in an
      amount equal to the applicable number of Warrant Shares purchased. The Holder
      and the Company shall maintain records showing the number of Warrant Shares
      purchased and the date of such purchases. The Company shall deliver any
      objection to any Notice of Exercise Form within 1 Business Day of receipt of
      such notice. In the event of any dispute or discrepancy, the records of the
      Holder shall be controlling and determinative in the absence of manifest error.
      The Holder and any assignee, by acceptance of this Warrant, acknowledge and
      agree that, by reason of the provisions of this paragraph, following the
      purchase of a portion of the Warrant Shares hereunder, the number of Warrant
      Shares available for purchase hereunder at any given time may be less than
      the
      amount stated on the face hereof.

     

    b)  Exercise
      Price.
      The
      exercise price per share of the Common Stock under this Warrant shall be
$
      0.30
      subject
      to adjustment hereunder (the “Exercise
      Price”).

     

    c)  Cashless
      Exercise.
      If at
      any time after one year from the date of issuance of this Warrant there is
      no
      effective Registration Statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    (A)
      = the
      VWAP on the Trading Day immediately preceding the date of such
      election;

    

    (B)
      = the
      Exercise Price of this Warrant, as adjusted; and 

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

    d)  Exercise
      Limitations.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2(c)
      or otherwise, to the extent that after giving effect to such 

     

    e)  issuance
      after exercise as set forth on the applicable Notice of Exercise, such Holder
      (together with such Holder’s Affiliates, and any other person or entity acting
      as a group together with such Holder or any of such Holder’s Affiliates), as set
      forth on the applicable Notice of Exercise, would beneficially own in excess
      of
      the Beneficial Ownership Limitation (as defined below).  For purposes of
      the foregoing sentence, the number of shares of Common Stock beneficially owned
      by such Holder and its Affiliates shall include the number of shares of Common
      Stock issuable upon exercise of this Warrant with respect to which such
      determination is being made, but shall exclude the number of shares of Common
      Stock which would be issuable upon (A) exercise of the remaining, nonexercised
      portion of this Warrant beneficially owned by such Holder or any of its
      Affiliates and (B) exercise or conversion of the unexercised or nonconverted
      portion of any other securities of the Company (including, without limitation,
      any other Preferred Stock or Warrants) subject to a limitation on conversion
      or
      exercise analogous to the limitation contained herein beneficially owned by
      such
      Holder or any of its affiliates.  Except as set forth in the preceding
      sentence, for purposes of this Section 2(d), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder, it being acknowledged by a Holder that
      the Company is not representing to such Holder that such calculation is in
      compliance with Section 13(d) of the Exchange Act and such Holder is solely
      responsible for any schedules required to be filed in accordance therewith.
      To
      the extent that the limitation contained in this Section 2(d) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by such Holder together with any Affiliates) and of which
      a
      portion of this Warrant is exercisable shall be in the sole discretion of a
      Holder, and the submission of a Notice of Exercise shall be deemed to be each
      Holder’s determination of whether this Warrant is exercisable (in relation to
      other securities owned by such Holder together with any Affiliates) and of
      which
      portion of this Warrant is exercisable, in each case subject to such aggregate
      percentage limitation, and the Company shall have no obligation to verify or
      confirm the accuracy of such determination. In addition, a determination as
      to
      any group status as contemplated above shall be determined in accordance with
      Section 13(d) of the Exchange Act and the rules and regulations promulgated
      thereunder. For purposes of this Section 2(d), in determining the number of
      outstanding shares of Common Stock, a Holder may rely on the number of
      outstanding shares of Common Stock as reflected in (x) the Company’s most recent
      Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
      announcement by the Company or (z) any other notice by the Company or the
      Company’s Transfer Agent setting forth the number of shares of Common Stock
      outstanding.  Upon the written or oral request of a Holder, the Company
      shall within two Trading Days confirm orally and in writing to such Holder
      the
      number of shares of Common Stock then outstanding.  In any case, the number
      of outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Warrant,
      by such Holder or its Affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The “Beneficial
      Ownership Limitation”
shall
      be 4.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      exercise of this Warrant. The Beneficial Ownership Limitation provisions of
      this
      Section 2(d) may be waived by such 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Holder,
      at the election of such Holder, upon not less than 61 days’ prior notice to the
      Company to change the Beneficial Ownership Limitation to 9.99% of the number
      of
      shares of the Common Stock outstanding immediately after giving effect to the
      issuance of shares of Common Stock upon exercise of this Warrant, and the
      provisions of this Section 2(d) shall continue to apply. Upon such a change
      by a
      Holder of the Beneficial Ownership Limitation from such 4.99% limitation to
      such
      9.99% limitation, the Beneficial Ownership Limitation may not be further waived
      by such Holder. The provisions of this paragraph shall be construed and
      implemented in a manner otherwise than in strict conformity with the terms
      of
      this Section 2(d) to correct this paragraph (or any portion hereof) which may
      be
      defective or inconsistent with the intended Beneficial Ownership Limitation
      herein contained or to make changes or supplements necessary or desirable to
      properly give effect to such limitation. The limitations contained in this
      paragraph shall apply to a successor holder of this Warrant.

     

    f)  Mechanics
      of Exercise.
      

     

    i.  Authorization
      of Warrant Shares.
      The
      Company covenants that all Warrant Shares which may be issued upon the exercise
      of the purchase rights represented by this Warrant will, upon exercise of the
      purchase rights represented by this Warrant, be duly authorized, validly issued,
      fully paid and nonassessable and free from all taxes, liens and charges created
      by the Company in respect of the issue thereof (other than taxes in respect
      of
      any transfer occurring contemporaneously with such issue). 

     

    ii.  Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the transfer
      agent of the Company to the Holder by crediting the account of the Holder’s
      prime broker with the Depository Trust Company through its Deposit Withdrawal
      Agent Commission (“DWAC”)
      system
      if the Company is a participant in such system, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      3 Trading Days from the delivery to the Company of the Notice of Exercise Form,
      surrender of this Warrant (if required) and payment of the aggregate Exercise
      Price as set forth above (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price (or by cashless exercise, if permitted) and all taxes required to be
      paid
      by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance
      of
      such shares, have been paid. 

     

    iii.  Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the request
      of
      a Holder and upon surrender of this Warrant certificate, at the time of

     

    
      
         

      

      
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    delivery
      of the certificate or certificates representing Warrant Shares, deliver to
      Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
      Warrant Shares called for by this Warrant, which new Warrant shall in all other
      respects be identical with this Warrant.

     

    iv.  Rescission
      Rights.
      If the
      Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have
      the right to rescind such exercise.

     

    v.  Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise on or before the Warrant
      Share Delivery Date, and if after such date the Holder is required by its broker
      to purchase (in an open market transaction or otherwise) or the Holder’s
      brokerage firm otherwise purchases, shares of Common Stock to deliver in
      satisfaction of a sale by the Holder of the Warrant Shares which the Holder
      anticipated receiving upon such exercise (a “Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (B) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (2) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the Holder in respect of the Buy-In and, upon request of
      the
      Company, evidence of the amount of such loss. Nothing herein shall limit a
      Holder’s right to pursue any other remedies available to it hereunder, at law or
      in equity including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to the Company’s failure to timely deliver
      certificates representing shares of Common Stock upon exercise of the Warrant
      as
      required pursuant to the terms hereof.

     

    
      
         

      

      
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    vi.  No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall at
      its
      election, either pay a cash adjustment in respect of such final fraction in
      an
      amount equal to such fraction multiplied by the Exercise Price or round up
      to
      the next whole share.

     

    vii.  Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    viii.  Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    Section
      3. Certain Adjustments.

     

    a)  Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding: (A) pays a stock
      dividend or otherwise make a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company upon exercise of this Warrant),
      (B)
      subdivides outstanding shares of Common Stock into a larger number of shares,
      (C) combines (including by way of reverse stock split) outstanding shares of
      Common Stock into a smaller number of shares, or (D) issues by reclassification
      of shares of the Common Stock any shares of capital stock of the Company, then
      in each case the Exercise Price shall be multiplied by a fraction of which
      the
      numerator shall be the number of shares of Common Stock (excluding treasury
      shares, if any) outstanding immediately before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding
      immediately after such event and the number of shares issuable upon exercise
      of
      this Warrant shall be proportionately adjusted. Any adjustment made pursuant
      to
      this Section 3(a) shall become effective immediately after the record date
      for
      the determination of stockholders entitled to receive such dividend or
      distribution and shall become effective immediately after the effective date
      in
      the case of a subdivision, combination or re-classification.

     

    b)  Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall sell or grant any option to purchase or sell or grant
      any
      right to reprice its securities, or otherwise dispose of or issue (or announce
      any offer, sale, grant or any option to purchase or other disposition) any
      Common Stock or Common Stock Equivalents entitling any Person to acquire shares
      of Common Stock, at an effective price per share less than the then Exercise
      Price (such lower price, the “Base
      Share Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share which is less than the Exercise Price, such issuance shall be deemed
      to have occurred for less than the Exercise Price on such date of the Dilutive
      Issuance), then the Exercise Price shall be reduced and only reduced to equal
      the Base Share Price and the number of Warrant Shares issuable hereunder shall
      be increased such that the aggregate Exercise Price payable hereunder, after
      taking into account the decrease in the Exercise Price, shall be equal to the
      aggregate Exercise Price prior to such adjustment. Such adjustment shall be
      made
      whenever such Common Stock or Common Stock Equivalents are issued.
      Notwithstanding the foregoing, no adjustments shall be made, paid or issued
      under this Section 3(b) in respect of an Exempt Issuance. The Company shall
      notify the Holder in writing, no later than the Trading Day following the
      issuance of any Common Stock or Common Stock Equivalents subject to this Section
      3(b), indicating therein the applicable issuance price, or applicable reset
      price, exchange price, conversion price and other pricing terms (such notice
      the
“Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise.

     

    c)  Subsequent
      Rights Offerings.
      If the
      Company, at any time while the Warrant is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to Holders)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the VWAP at the record date mentioned below, then the
      Exercise Price shall be multiplied by a fraction, of which the denominator
      shall
      be the number of shares of the Common Stock outstanding on the date of issuance
      of such rights or warrants plus the number of additional shares of Common Stock
      offered for subscription or purchase, and of which the numerator shall be the
      number of shares of the Common Stock outstanding on the date of issuance of
      such
      rights or warrants plus the number of shares which the aggregate offering price
      of the total number of shares so offered (assuming receipt by the Company in
      full of all consideration payable upon exercise of such rights, options or
      warrants) would purchase at such VWAP. Such adjustment shall be made whenever
      such rights or warrants are issued, and shall become effective immediately
      after
      the record date for the determination of stockholders entitled to receive such
      rights, options or warrants. 

     

    d)  Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    e)  Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property, or (D) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (in any such case, a “Fundamental
      Transaction”),
      then,
      upon any subsequent exercise of this Warrant, the Holder shall have the right
      to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, the number
      of shares of Common Stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional consideration
      (the “Alternate
      Consideration”)
      receivable upon or as a result of such reorganization, reclassification, merger,
      consolidation or disposition of assets by a holder of the number of shares
      of
      Common Stock for which this Warrant is exercisable immediately prior to such
      event. For purposes of any such exercise, the determination of the Exercise
      Price shall be appropriately adjusted to apply to such Alternate Consideration
      based on the amount of Alternate Consideration issuable in respect of one share
      of Common Stock in such Fundamental Transaction, and the Company shall apportion
      the Exercise Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holder shall be given the same choice as to the Alternate Consideration
      it
      receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder’s right to exercise such warrant into 

     

    
      
         

      

      
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     Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3(e) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental Transaction.
      Notwithstanding anything to the contrary, in the event of a Fundamental
      Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction”
as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended,
      or (3) a Fundamental Transaction involving a person or entity not traded on
      a
      national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global
      Market, or the Nasdaq Capital Market, the Company or any successor entity shall
      pay at the Holder’s option, exercisable at any time concurrently with or within
      30 days after the consummation of the Fundamental Transaction, an amount of
      cash
      equal to the value of this Warrant as determined in accordance with the Black
      Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P.
      using (i) a price per share of Common Stock equal to the VWAP of the Common
      Stock for the Trading Day immediately preceding the date of consummation of
      the
      applicable Fundamental Transaction, (ii) a risk-free interest rate corresponding
      to the U.S. Treasury rate for a period equal to the remaining term of this
      Warrant as of the date of consummation of the applicable Fundamental Transaction
      and (iii) an expected volatility equal to the 100 day volatility obtained from
      the “HVT” function on Bloomberg L.P. determined as of the Trading Day
      immediately following the public announcement of the applicable Fundamental
      Transaction.

     

    f)  Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    g)  Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

     

    h)  Notice
      to Holder.
      

     

    i.  Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to any provision of this
      Section 3, the Company shall promptly mail to the Holder a notice setting forth
      the Exercise Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment. If the Company issues a variable rate
      security, despite the prohibition thereon in the Purchase Agreement, the Company
      shall be deemed to have issued Common Stock or Common Stock Equivalents at
      the
      lowest possible conversion or exercise price at which such securities may be
      converted or exercised in the case of a Variable Rate Transaction (as defined
      in
      the Purchase Agreement).

     

    ii.  Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution in whatever
      form) on the Common Stock; (B) the Company shall declare a special nonrecurring
      cash dividend on or a redemption of the Common Stock; (C) the Company shall
      authorize the granting to all holders of the Common Stock rights or warrants
      to
      subscribe for or purchase any shares of capital stock of any class or of any
      rights; (D) the approval of any stockholders of the Company shall be required
      in
      connection with any reclassification of the Common Stock, any consolidation
      or
      merger to which the Company is a party, any sale or transfer of all or
      substantially all of the assets of the Company, of any compulsory share exchange
      whereby the Common Stock is converted into other securities, cash or property;
      (E) the Company shall authorize the voluntary or involuntary dissolution,
      liquidation or winding up of the affairs of the Company; then, in each case,
      the
      Company shall cause to be mailed to the Holder at its last address as it shall
      appear upon the Warrant Register of the Company, at least 20 calendar days
      prior
      to the applicable record or effective date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution, redemption, rights or warrants, or if a record is not
      to
      be taken, the date as of which the holders of the Common Stock of record to
      be
      entitled to such dividend, distributions, redemption, rights or warrants are
      to
      be determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange; provided that the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period commencing on the date of such notice to the effective date of
      the
      event triggering such notice.

     

    Section
      4. Transfer
      of Warrant.

     

    a)  Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
      Agreement, this Warrant and all rights hereunder (including, without limitation,
      any registration rights) are transferable, in whole or in part, upon surrender
      of this Warrant at the principal office of the Company or its designated agent,
      together with a written assignment of this Warrant substantially in the form
      attached hereto duly executed by the Holder or its agent or attorney and funds
      sufficient to pay any transfer taxes payable upon the making of such transfer.
      Upon such surrender and, if required, such payment, the Company shall execute
      and deliver a new Warrant or Warrants in the name of the assignee or assignees
      and in the denomination or denominations specified in such instrument of
      assignment, and shall issue to the assignor a new Warrant evidencing the portion
      of this Warrant not so assigned, and this 

     

    
      
         

      

      
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    Warrant
      shall promptly be cancelled. A Warrant, if properly assigned, may be exercised
      by a new holder for the purchase of Warrant Shares without having a new Warrant
      issued. 

     

    b)  New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c)  Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    d)  Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be registered pursuant to an effective
      registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such transfer, that (i) the Holder or transferee of this
      Warrant, as the case may be, furnish to the Company a written opinion of counsel
      (which opinion shall be in form, substance and scope customary for opinions
      of
      counsel in comparable transactions) to the effect that such transfer may be
      made
      without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws, and
      (ii)
      the Holder or transferee execute and deliver to the Company an investment letter
      in form and substance acceptable to the Company, and (iii) the transferee be
      an
“accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
      promulgated under the Securities Act or a “qualified institutional buyer” as
      defined in Rule 144A(a) promulgated under the Securities Act.

     

    Section
      5. Miscellaneous.

     

    a)  No
      Rights as Shareholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof as set forth in Section
      2(e)(ii). 

     

    b)  Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
      or any stock certificate relating to the Warrant Shares, and in case of loss,
      theft or destruction, of indemnity or security reasonably satisfactory to it
      (which, in the case of the Warrant, shall not include the posting of any bond),
      and upon surrender and cancellation of such Warrant or stock certificate, if
      mutilated, the Company will make and deliver a new Warrant or stock

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    certificate
      of like tenor and dated as of such cancellation, in lieu of such Warrant or
      stock certificate.

     

    c)  Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall not be a Business Day, then such action
      may be taken or such right may be exercised on the next succeeding Business
      Day.

     

    d)  Authorized
      Shares.
      

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be listed.
      

     

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, 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 Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    
      
         

      

      
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    e)  Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    f)  Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    g)  Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date. If the Company willfully and
      knowingly fails to comply with any provision of this Warrant, which results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    h)  Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    i)  Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

     

    j)  Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive and not to assert the
      defense in any action for specific performance that a remedy at law would be
      adequate.

     

    k)  Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant and shall be enforceable by any such Holder
      or
      holder of Warrant Shares.

     

    l)  Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    
      
         

      

      
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    m)  Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

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

     

    

    ********************

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized as of the date first above
      indicated.

     

    

     

    
      	
              AMARILLO
                BIOSCIENCES, INC. 

            
	
               

              By:
                /s/
                Joseph M. Cummins

              Name:
                JOSEPH M. CUMMINS

              Title:
                President, Chief Executive Officer and 

              Chairman
                of the Board

            

    

    

     

    

    
      
        
           

        

         

      

      
        11

        
          

        

      

      
         

        
        

      

    

     

    NOTICE
      OF EXERCISE

    

    TO: AMARILLO
      BIOSCIENCES, INC. 

    

    (1)  The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

     

    (2)  Payment
      shall take the form of (check applicable box):

     

    [
      ] in
      lawful money of the United States; or

     

    [
      ] [if
      permitted] the cancellation of such number of Warrant Shares as is necessary,
      in
      accordance with the formula set forth in subsection 2(c), to exercise this
      Warrant with respect to the maximum number of Warrant Shares purchasable
      pursuant to the cashless exercise procedure set forth in subsection
      2(c).

     

    (3)  Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following DWAC Account Number or by
      physical delivery of a certificate to:

    

    _______________________________

     

    _______________________________

     

    _______________________________

    

    (4)
      Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      ________________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      ________________________________________________________________________________________

    

    

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
      rights evidenced thereby are hereby assigned to

     

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:
      ______________, _______

    

    

    Holder’s
      Signature: _____________________________

    

    Holder’s
      Address: _____________________________

     

    _____________________________

    

    

    

    Signature
      Guaranteed: ___________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.

    

     

    
      
         

      

      
        13

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