Document:

Exhibit 10.3

         THIS NOTE HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933 AND
         MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
         UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

                                BIONUTRICS, INC.

                           CONVERTIBLE PROMISSORY NOTE

$____________                                         Dated:  September __, 2005
(Original Principal Amount)                                (the "Issuance Date")

                  FOR VALUE RECEIVED BIONUTRICS, INC., a Nevada corporation (the
"COMPANY"),  hereby promises to pay to  _____________________  (the "PAYEE"), or
its  registered   assigns,   the  principal   amount  of   _____________________
($____________)  together with interest thereon  calculated from the date hereof
in  accordance  with the  provisions  of this  Convertible  Promissory  Note (as
amended, modified and supplemented from time to time, this "CONVERTIBLE NOTE" or
upon transfer or exchange, the "CONVERTIBLE NOTES").

                  Certain capitalized terms are defined in SECTION 9 hereof.

                  1.       PAYMENT OF INTEREST.  Interest shall accrue at a rate
equal to nine percent (9%) per annum (the "INTEREST RATE") beginning on the date
of this Convertible Note on the unpaid principal amount of this Convertible Note
outstanding from time to time; PROVIDED that so long as any Event of Default has
occurred and is continuing,  interest  shall be deemed to accrue,  to the extent
permitted by law, at the rate of 18% per annum  retroactive  to the date of this
Convertible  Note  on the  unpaid  principal  amount  of this  Convertible  Note
outstanding  from time to time  through  the date on which such Event of Default
ceases to exist. Interest shall be computed on the basis of the actual number of
days  elapsed and a 360-day  year.  Interest on this  Convertible  Note shall be
payable quarterly in arrears beginning on April 1, 2006.

                  2.       MATURITY  DATE. The entire  principal  amount of this
Convertible  Note and all accrued but unpaid  interest  thereon shall be due and
payable in full in cash in  immediately  available  funds on the  eighteen  (18)
month anniversary of the Issuance Date (the "MATURITY DATE"),  provided that, in
the event that the Company  consummates a Qualified Equity Financing (as defined
in Section 9 below) prior to the eighteen (18) month anniversary of the Issuance
Date, the Maturity Date of this Note shall be extended to the third  anniversary
of the Issuance Date. Any overdue  principal and overdue interest  together with
any interest thereon shall be due and payable upon demand.

                  3.       CONVERSION.  (i) The Payee  shall  have the option to
convert this  Convertible Note into common stock of the Company at any time at a
conversion  price  equal to the lesser of (i) $3.00 per share or (ii) 75% of the
then  current  conversion  price  per  common  share of the  Company's  Series A
Preferred Stock (as defined in Section 9 below) (the  "CONVERSION  PRICE").  The
optional  conversion  of this  Convertible  Note  shall be  deemed  to have

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been effected as of the close of business on the date on which this  Convertible
Note has been surrendered for conversion at the principal office of the Company.
At the time such conversion has been effected,  the rights of the holder of this
Convertible  Note as the holder of such note shall  cease  (with  respect to the
amount so  converted),  and the  Person or  Persons  in whose  name or names any
certificate  or  certificates  for shares of the Company  common stock are to be
issued upon such conversion shall be deemed to have become the holder or holders
of record of the shares of such Company  common stock (such  common  stock,  the
"CONVERSION SHARES") represented thereby.

         (ii)     If at any  time  prior to the  earlier  of (x) the date of the
optional conversion of this Convertible Note into shares of Company common stock
or (y) the  Maturity  Date,  (i) the  Company  consummates  a  Qualified  Equity
Financing and (ii) the Company common stock trades at a 30 day trailing  average
closing price equal to 300% of the then  applicable  Conversion  Price per share
and the average  Common  Stock share volume  during such 30 day trailing  period
equals  or  exceeds  40,000  shares  per  day,  this   Convertible   Note  shall
automatically  and without any further action by any Person convert into Company
common  stock at the then  applicable  Conversion  Price,  provided  that,  this
mandatory  conversion  right  will  only be  applicable  to the  holder  of this
Convertible Note if the Company common stock into which this Convertible Note is
convertible is subject to an effective  registration  statement  relating to the
resale of such common stock at the time of such mandatory conversion.

         (iii)    As soon as possible after any  conversion of this  Convertible
Note  has been  effected  (but in any  event  within  three  (3)  Business  Days
following such conversion (the "CERTIFICATE  DELIVERY DATE")), the Company shall
deliver  to the  converting  holder  an  original  certificate  or  certificates
representing  the number of shares of Company common stock issuable by reason of
such conversion in such name or names and such  denomination or denominations as
the converting holder has specified.

         (iv)     The  issuance  of  certificates  for shares of Company  common
stock upon conversion of this  Convertible  Note shall be made without charge to
the holder hereof for any issuance tax in respect thereof or other cost incurred
by the Company in connection  with such  conversion and the related  issuance of
shares of Company common stock.  Upon conversion of this  Convertible  Note, the
Company shall take all such actions as are necessary in order to insure that the
Company common stock issuable with respect to such  conversion  shall be validly
issued, fully paid and nonassessable.

         (v)      Except as required by  applicable  law, the Company  shall not
close its books against the transfer of Company  common stock issued or issuable
upon conversion of this Convertible Note in any manner which interferes with the
timely  conversion  of this  Convertible  Note.  The  Company  shall  assist and
cooperate  with  any  holder  of this  Convertible  Note  required  to make  any
governmental  filings  or  obtain  any  governmental  approval  prior  to  or in
connection  with the conversion of this  Convertible  Note  (including,  without
limitation, making any filings required to be made by the Company).

         (vi)     The Company shall at all times reserve and keep  available out
of its  authorized but unissued  shares of Company common stock,  solely for the
purpose of issuance upon

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conversion  hereunder,  such number of shares of Company  common stock  issuable
upon  conversion.  All shares of such capital stock which are so issuable shall,
when issued,  be duly and validly issued,  fully paid and nonassessable and free
from all taxes,  liens and  charges  (except  for any such liens  created by the
Holder).  The Company  shall take all such actions as may be necessary to assure
that all such shares of capital stock may be so issued without  violation of any
applicable law or  governmental  regulation or any  requirements of any domestic
securities exchange upon which such shares of capital stock.

                  4.       ADJUSTMENTS   OF  CONVERSION   PRICE  AND  NUMBER  OF
CONVERSION  SHARES.  The  number  of and  kind of  securities  purchasable  upon
conversion  of this  Note for  shares of the  Company's  common  stock  shall be
subject to adjustment from time to time as set forth in this Section 4.

                           (a)      SUBDIVISIONS, COMBINATIONS, STOCK DIVIDENDS,
         SALES AND OTHER  ISSUANCES.  If at any time after the date hereof,  the
         Company shall issue shares of Common Stock or rights, options, warrants
         or other  securities  to subscribe  for or purchase  Common  Stock,  or
         securities  convertible or exercisable  into or exchangeable for Common
         Stock ("COMMON STOCK EQUIVALENTS")  (excluding shares, rights, options,
         warrants, or convertible or exchangeable securities, issued or issuable
         (i) upon exercise of the Warrants or any other Common Stock Equivalents
         outstanding as of the date hereof,  or issuable in connection  with the
         Company's  Series A Preferred Stock  offering,  (ii) upon conversion of
         the  Series A  Preferred  Stock,  par  value  $0.01 per  share,  of the
         Company,  (iii)  pursuant  to the  exercise  of any  stock  options  or
         warrants currently  outstanding or options or warrants issued after the
         date hereof  pursuant to any Company  benefit plan,  stock option plan,
         stock bonus plan or other  equity  program  approved  by the  Company's
         Board of Directors,  but only to the extent, that such shares of Common
         Stock  issued or issuable  pursuant to such stock option  plans,  stock
         bonus plans or stock  incentive plans does not exceed ten percent (10%)
         of the then  outstanding  Common Stock on a fully diluted basis, or (i)
         with respect to any issuance or  transaction  as to which  holders of a
         66-2/3%  of the  then  outstanding  shares  of the  Company's  Series A
         Preferred Stock, have provided prior written  consent),  at a price per
         share  lower  than the  Conversion  Price per share of Common  Stock in
         effect  immediately  prior to such issuance,  then the Conversion Price
         shall be reduced on the date of such issuance to a price (calculated to
         the nearest cent)  determined by multiplying  the  Conversion  Price in
         effect  immediately  prior  to such  issuance  by a  fraction,  (1) the
         numerator  of  which  shall  be an  amount  equal to the sum of (A) the
         number of shares of Common  Stock on a fully  diluted  basis  (assuming
         conversion,  exchange  or  exercise  of all Common  Stock  Equivalents)
         immediately  prior to such issuance  plus (B) the quotient  obtained by
         dividing the  consideration  received by the Company upon such issuance
         by the Conversion  Price, and (2) the denominator of which shall be the
         total  number  of  shares  of  Common  Stock on a fully  diluted  basis
         (assuming  conversion,   exchange  or  exercise  of  all  Common  Stock
         Equivalents)  immediately after such issuance. For the purposes of such
         adjustments, the maximum number of shares which the holders of any such
         Common Stock Equivalents shall be entitled to subscribe for or purchase
         or  convert  or  exchange  such  securities  into shall be deemed to be
         issued and outstanding as of the date of such issuance  (whether or not
         such  Common  Stock  Equivalent  is then  exercisable,  convertible  or
         exchangeable),  and the consideration  received by the Company therefor
         shall be deemed to be the consideration received by

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         the  Company  for such  Common  Stock  Equivalents,  plus  the  minimum
         aggregate  consideration  or  premiums  stated  in  such  Common  Stock
         Equivalents,  to be paid for the  shares  covered  thereby.  No further
         adjustment  of the  Conversion  Price  shall be made as a result of the
         actual  issuance  of shares of Common  Stock on exercise of such Common
         Stock Equivalents.  On the expiration or the termination of such Common
         Stock  Equivalents,  or the  termination  of such  right to  convert or
         exchange,  the Conversion Price shall forthwith be readjusted (but only
         with  respect  to that  portion  of the  Notes  which  has not yet been
         exercised)  to such  Conversion  Price as would have  obtained  had the
         adjustments  made upon the issuance of such Common  Stock  Equivalents,
         been made upon the basis of the  delivery  of only the number of shares
         of Common  Stock  actually  delivered  upon the exercise of such Common
         Stock Equivalents;  and on any change of the number of shares of Common
         Stock   deliverable   upon  the  exercise  of  any  such  Common  Stock
         Equivalents,  or any change in the  consideration to be received by the
         Company upon such exercise, conversion, or exchange, including, but not
         limited  to,  a change  resulting  from  the  anti-dilution  provisions
         thereof,  the Conversion  Price, as then in effect,  shall forthwith be
         readjusted (but only with respect to that portion of the Note which has
         not yet been converted after such change) to such  Conversion  Price as
         would have been obtained had an adjustment  been made upon the issuance
         of such Common Stock Equivalents not exercised prior to such change, or
         securities  not  converted  or exchanged  prior to such change,  on the
         basis of such change.

                           (b)      MERGER,  ETC.  If at any time after the date
         hereof there shall be a merger or  consolidation of the Company with or
         into or a  transfer  of all or  substantially  all of the assets of the
         Company to another entity, then the Holder shall be entitled to receive
         upon  or  after  such  transfer,   merger  or  consolidation   becoming
         effective, and upon payment of the Conversion Price then in effect, the
         number of shares or other  securities  or property of the Company or of
         the successor  corporation resulting from such merger or consolidation,
         which  would have been  received  by the Holder for the shares of stock
         subject  to this Note had this Note been  converted  just prior to such
         transfer,   merger  or  consolidation  becoming  effective  or  to  the
         applicable  record date  thereof,  as the case may be. The Company will
         not merge or consolidate with or into any other corporation, or sell or
         otherwise transfer its property,  assets and business  substantially as
         an entirety to another  corporation,  unless the corporation  resulting
         from  such  merger  or  consolidation  (if  not the  Company),  or such
         transferee  corporation,  as the case may be, shall expressly assume in
         writing the due and punctual  performance  and  observance  of each and
         every  covenant and condition of this Note to be performed and observed
         by the Company.

                           (c)      RECLASSIFICATION,  ETC. If at any time after
         the date hereof there shall be a reorganization or  reclassification of
         the securities as to which conversion rights under this Note exist into
         the same or a  different  number of  securities  of any other  class or
         classes,  then the Holder shall  thereafter be entitled to receive upon
         conversion of this Note,  during the period  specified  herein and upon
         payment of the Conversion Price then in effect, the number of shares or
         other  securities or property  resulting  from such  reorganization  or
         reclassification,  which would have been received by the Holder for the
         shares  of stock  subject  to this Note had this Note at such time been
         exercised.

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                           (d)      For   the   purposes   of   the    foregoing
         adjustments,  in the case of the issuance of any convertible securities
         (including,  without  limitation,  shares of Series A Preferred  Stock)
         warrants,  options or other rights to  subscribe  for or to purchase or
         exchange for, shares of Common Stock  ("Convertible  Securities"),  the
         maximum  number  of  shares of Common  Stock  issuable  upon  exercise,
         exchange or conversion of such  Convertible  Securities shall be deemed
         to be outstanding,  provided that no further  adjustment  shall be made
         upon the actual  issuance of Common  Stock upon  exercise,  exchange or
         conversion of such Convertible  Securities.  Upon the expiration of any
         such  Convertible  Securities or the  termination  of any such right to
         convert or exchange such  Convertible  Securities,  the Exercise  Price
         then in effect  hereunder  shall forthwith be increased to the Exercise
         Price which would have been in effect at the time of such expiration or
         termination had such Convertible Securities,  to the extent outstanding
         immediately prior to such expiration or termination, never been issued,
         and the Common Stock issuable  thereunder  shall no longer be deemed to
         be outstanding.

                           (e)      In the event of any adjustment in the number
         of Conversion Shares issuable  hereunder upon conversion,  the Exercise
         Price shall be inversely  proportionately increased or decreased as the
         case may be, such that aggregate  purchase price for Conversion  Shares
         upon full conversion of this Note shall remain the same. Similarly,  in
         the event of any  adjustment  in the  Conversion  Price,  the number of
         Conversion Shares issuable hereunder upon conversion shall be inversely
         proportionately  increased  or  decreased as the case may be, such that
         aggregate  purchase price for Conversion Shares upon full conversion of
         this Note shall remain the same.

                  5.       METHOD OF PAYMENTS.

                  (i)      PAYMENT.  So long as the Payee or any of its nominees
shall be the  holder  of any  Convertible  Note,  and  notwithstanding  anything
contained  elsewhere in this Convertible Note to the contrary,  the Company will
pay all sums for principal,  interest, premiums, dividends or otherwise becoming
due on this  Convertible  Note held by the Payee or such  nominee not later than
5:00  p.m.  New York  time,  on the date such  payment  is due,  in  immediately
available funds, in accordance with the payment  instructions that the Payee may
designate in writing,  without the presentation or surrender of such Convertible
Note or the making of any notation thereon. Any payment made after 5:00 p.m. New
York time, on a Business Day will be deemed made on the next following  Business
Day. If the due date of any payment in respect of this Note would otherwise fall
on a day that is not a Business Day, such due date shall be extended to the next
succeeding  Business  Day,  and  interest  shall be payable on any  principal so
extended  for the  period of such  extension.  All  amounts  payable  under this
Convertible  Note  shall be paid free and clear of,  and  without  reduction  by
reason of, any deduction,  set-off or counterclaim.  The Company will afford the
benefits  of this  Section to the Payee and to each other  Person  holding  this
Convertible Note.

                  (ii)     TRANSFER AND  EXCHANGE.  Subject to  applicable  law,
upon  surrender  of any  Convertible  Note for  registration  of transfer or for
exchange to the Company at its principal office, the Company at its sole expense
will  execute  and  deliver in  exchange  therefore  a new  Convertible  Note or
Convertible Notes, as the case may be, as requested by the holder or

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transferee,  which  aggregate the unpaid  principal  amount of such  Convertible
Note,  registered as such holder or transferee may request,  dated so that there
will be no loss of interest on the Convertible Note and otherwise of like tenor;
provided  that  this  Convertible  Note may not be  transferred  by Payee to any
Person other than Payee's  affiliates  without the prior written  consent of the
Company  (which  consent  shall not be  unreasonably  withheld or delayed).  The
issuance of new Convertible  Notes shall be made without charge to the holder(s)
of the surrendered  Convertible  Note for any issuance tax in respect thereof or
other cost incurred by the Company in connection  with such  issuance,  provided
that  each  Convertible  Noteholder  shall  pay any  transfer  taxes  associated
therewith. The Company shall be entitled to regard the registered holder of this
Convertible  Note as the holder of the  Convertible  Note so registered  for all
purposes until the Company or its agent, as applicable,  is required to record a
transfer of this Convertible Note on its register.

                  (iii)    REPLACEMENT.  Upon  receipt  of  evidence  reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Convertible  Note and, in the case of any such loss, theft or destruction of any
Convertible  Note, upon receipt of an indemnity  reasonably  satisfactory to the
Company  or,  in the  case  of any  such  mutilation,  upon  the  surrender  and
cancellation of such Convertible Note, the Company, at its expense, will execute
and deliver, in lieu thereof, a new Convertible Note of like tenor and dated the
date of such lost, stolen, destroyed or mutilated Convertible Note.

                  6.       REPRESENTATIONS  AND  WARRANTIES OF THE COMPANY.  The
Company represents and warrants to Payee that:

                  (i)      ORGANIZATION AND QUALIFICATION.  The Company and each
of its  subsidiaries is an entity duly organized,  validly  existing and in good
standing  under the laws of its  jurisdiction  of  organization,  with power and
authority  to conduct its business as it is now being  conducted,  to own or use
its properties and assets that it purports to own or use and, in the case of the
Company, to perform its obligations under this Convertible Note. The Company and
each of its  subsidiaries  is duly qualified to do business as a foreign company
and is in good standing  under the laws of each state or other  jurisdiction  in
which either the ownership or use of the properties  owned or used by it, or the
nature of the activities conducted by it, requires such qualification.

                  (ii)     ABSENCE OF CONFLICTS. Neither the execution, delivery
and performance of this Convertible Note by Company, nor the consummation of the
transactions  contemplated  hereby,  nor  compliance  by Company with any of the
provisions hereof, will (a) violate, conflict with, or result in a breach of any
provision of, constitute a default under, or permit or result in the termination
of, acceleration of any obligation under, or creation of a lien under any of the
terms, conditions or provisions of, (i) the certificate of incorporation, bylaws
or stockholders  agreements of Company, or (ii) any note,  mortgage,  agreement,
indenture, or license by which Company or any of its properties or assets may be
bound, or to which Company or any of its properties or assets may be subject, or
(b) violate or conflict with any law, rule, regulation, judgment, ruling, order,
writ,  injunction or decree  applicable  to Company or any of its  properties or
assets.

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                  (iii)    AUTHORIZATION  OF  AGREEMENTS,  ETC.  Each of (i) the
execution  and  delivery  by the  Company  of this  Convertible  Note,  (ii) the
performance by the Company of its obligations hereunder, and (iii) the issuance,
sale and  delivery  by the  Company  of this  Convertible  Note  has  been  duly
authorized by corporate action of the Company.

                  (iv)     VALIDITY.   This   Convertible  Note  has  been  duly
executed  and  delivered  by the Company and  constitutes  the legal,  valid and
binding obligation of the Company, enforceable against the Company in accordance
with  its  terms,   except  as  may  be  limited  by   bankruptcy,   insolvency,
reorganization,  moratorium  or similar laws  relating to or limiting  creditors
rights generally or by equitable principles relating to enforceability.

                  (v)      CAPITALIZATION.    After   giving   effect   to   the
transactions contemplated by this Convertible Note, the reservation of 1,900,000
shares of  Common  Stock for  employees  of the  Company,  and the  issuance  of
warrants to certain Convertible  Noteholders,  the capitalization of the Company
shall be as reflected in the capitalization table attached hereto as SCHEDULE A.

                  (vi)     SECURITIES   ACT.   Assuming   the  accuracy  of  the
representations  of  Convertible  Noteholders  set  forth in  Section  5 hereof,
neither the  registration  of any security  under the Securities Act of 1933, as
amended,  or the  securities  laws of any  state,  nor the  qualification  of an
indenture in respect  thereof under the Trust Indenture Act of 1939, as amended,
is required in  connection  with the  issuance,  execution  and  delivery of the
Convertible Notes in the manner contemplated hereunder.

                  7.       COVENANTS OF THE COMPANY.  The Company  covenants and
agrees as follows:

                  (i)      CONSOLIDATION,  MERGER AND SALE. The Company will not
(i)  consolidate  or merge with or into (or permit any subsidiary to consolidate
or merge with or into) any other  person,  or (ii) sell or otherwise  dispose of
(or permit any subsidiary to sell or otherwise dispose of) a material portion of
its  property  or assets in one or more  transactions  to,  any other  person or
entity or enter into (or permit any  subsidiary to enter into) an agreement with
respect to any of the foregoing.

                  (ii)     RESTRICTED  PAYMENTS.  The Company will not, and will
not permit any of its  subsidiaries  to: (i) declare or pay any dividends on, or
make any other  distribution  or  payment  on  account  of, or  redeem,  retire,
purchase or otherwise acquire,  directly or indirectly,  any equity interests of
any  class  of  the  Company  or  any  subsidiary,   whether  now  or  hereafter
outstanding,  or make any other distribution in respect thereof, either directly
or indirectly, whether in cash, property or in obligations of the Company or any
of its  subsidiaries,  (ii) other than in  respect  to  accounts  payable in the
ordinary course of business,  make any payments of principal of, or interest on,
or retire,  redeem,  purchase or otherwise  acquire any indebtedness  other than
this Convertible Note and the other Convertible Notes or (iii) enter into a loan
agreement of any kind without receiving the prior written consent of Convertible
Noteholders  representing  a majority of the aggregate  principal  amount of all
Convertible Notes then outstanding.

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                  (iii)    NOTICE OF QUALIFIED EQUITY FINANCING.  At least three
(3) days prior to the closing of any  Qualified  Equity  Financing,  the Company
shall  provide  Payee  with  written  notice  of such  projected  closing  date,
specifying  the terms of the  transaction  and the  proposed  price per share of
Series A Preferred  Stock to be paid in such  Qualified  Equity  Financing.  The
Company shall promptly provide telephonic notice to Payee of any adjournments or
rescheduling of such projected closing date.

                  (iv)     CONVERTIBLE  NOTES. All Convertible Notes shall be on
the same terms and shall be in substantially  the same form. All payments to the
holder of any  Convertible  Note  shall be made to all  holders  of  Convertible
Notes, pro rata, based on the aggregate principal amount plus accrued but unpaid
interest outstanding on such Convertible Notes at such time.

                  (v)      SENIOR  STATUS;  NO  ASSIGNMENT.   Beginning  on  the
Issuance Date and for so long as any Convertible Notes remain  outstanding,  the
Company shall not,  without the prior written  consent of noteholders  holding a
majority of the aggregate outstanding principal amount of the Convertible Notes:
(a) incur or otherwise become liable with respect to any indebtedness that would
rank senior or PARI PASSU to the Convertible  Notes in order of payment,  or (b)
make  any  distribution,  transfer,  assignment  or  other  disposition  of  the
Company's  operating assets (or any interest  therein) or encumber of any assets
of the Company in any manner.

                  8.       EVENTS OF  DEFAULT.  If any of the  following  events
takes place before the Maturity Date (each, an "EVENT OF DEFAULT"), Payee at its
option may declare all principal and accrued and unpaid interest thereon and all
other amounts payable under this  Convertible  Note immediately due and payable;
PROVIDED, HOWEVER, that this Convertible Note shall automatically become due and
payable without any declaration in the case of an Event of Default  specified in
clause (iii) or (v), below:

                  (i)      Company  fails to make payment of the full amount due
                           under this Convertible Note on a demand following the
                           Maturity Date; or

                  (ii)     A receiver,  liquidator  or trustee of Company or any
                           substantial part of Company's assets or properties is
                           appointed by a court order; or

                  (iii)    Company is adjudicated bankrupt or insolvent; or

                  (iv)     Any of  Company's  property is  sequestered  by or in
                           consequence  of a court order and such order  remains
                           in effect for more than 30 days; or

                  (v)      Company  files a petition in voluntary  bankruptcy or
                           requests  reorganization  under any  provision of any
                           bankruptcy,   reorganization  or  insolvency  law  or
                           consents  to the  filing of any  petition  against it
                           under such law; or

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                  (vi)     Any   petition   against   Company  is  filed   under
                           bankruptcy,  receivership  or insolvency law and such
                           petition is not  withdrawn  within 60 days  following
                           the filing thereof; or

                  (vii)    Company makes a formal or informal general assignment
                           for  the  benefit  of its  creditors,  or  admits  in
                           writing its  inability  to pay debts  generally  when
                           they become due, or consents to the  appointment of a
                           receiver  or  liquidator  of Company or of all or any
                           part of its property; or

                  (viii)   An  attachment  or  execution  is levied  against any
                           substantial  part  of  Company's  assets  that is not
                           released within 30 days; or

                  (ix)     Company  dissolves,  liquidates  or  ceases  business
                           activity,  or  transfers  any  major  portion  of its
                           assets other than in the ordinary course of business;
                           or

                  (x)      Company  breaches  any  covenant or  agreement on its
                           part  contained  in  this  Convertible  Note  or  the
                           Subscription Agreement; or

                  (xi)     Any  material  inaccuracy  or  untruthfulness  of any
                           representation  or  warranty of the Company set forth
                           in  this   Convertible   Note  or  the   Subscription
                           Agreement.

                  9.       DEFINITIONS.

                  "BUSINESS  DAY" means a day (other  than a Saturday or Sunday)
on which  banks  generally  are open in New York,  New York for the  conduct  of
substantially all of their activities.

                  "CONVERTIBLE NOTEHOLDER" with respect to any Convertible Note,
means at any time each  Person  then the record  owner  hereof and  "Convertible
Noteholders" means all of such Convertible Noteholders collectively.

                  "EQUITY  FINANCING" means the issuance of stock of the Company
to one or more  investors  for  cash  following  the  date of  issuance  of this
Convertible Note.

                  "PERSON" means any person or entity of any nature  whatsoever,
specifically including,  without limitation, an individual, a firm, a company, a
corporation,  a  partnership,  a  limited  liability  company,  a trust or other
entity.

                  "QUALIFIED  EQUITY  FINANCING"  shall mean an Equity Financing
resulting  in cash  proceeds  to the  Company  of not  less  than  $3.0  million
(including the principal amount of the Convertible  Notes)  substantially on the
terms set forth in the term sheet attached hereto as EXHIBIT A.

                                       9
<PAGE>

                  "SERIES A PREFERRED  STOCK" means the  preferred  stock of the
Company issuable in a Qualified Equity Financing.

                  10.      EXPENSES OF  ENFORCEMENT,  ETC. The Company agrees to
pay all  fees  and  expenses  incurred  by the  Payee  in  connection  with  the
negotiation,  execution and delivery of this  Convertible  Note  (including  the
reasonable fees of counsel to the placement  agent for the Payees).  The Company
agrees  to pay all  reasonable  fees  and  expenses  incurred  by the  Payee  in
connection with any amendments,  modifications,  waivers, extensions,  renewals,
renegotiations  or "workouts" of the provisions  hereof or incurred by the Payee
in  connection  with the  enforcement  or protection of its rights in connection
with this  Convertible  Note,  or in  connection  with any pending or threatened
action,  proceeding,  or investigation relating to the foregoing,  including but
not limited to the reasonable fees and  disbursements  of counsel for the Payee.
The  Company  indemnifies  the Payee and its  directors,  managers,  affiliates,
partners,  members,  officers,  employees and agents against, and agrees to hold
the Payee and each such person and/or entity  harmless from, any and all losses,
claims, damages,  liabilities and related expenses, including reasonable counsel
fees and  expenses,  incurred  by, or  asserted  against,  the Payee or any such
person and/or entity  arising out of, in any way connected  with, or as a result
of (i) the  consummation of the loan evidenced by this  Convertible Note and the
use of the  proceeds  thereof or (ii) any claim,  litigation,  investigation  or
proceedings  relating to any of the  foregoing,  whether or not the Payee or any
such person and/or entity is a party thereto other than any loss, claim, damage,
liability or related expense  incurred or asserted against the payee or any such
person on account of the payee's or such  person's  gross  negligence or willful
misconduct.

                  11.      AMENDMENT   AND  WAIVER.   The   provisions  of  this
Convertible Note may not be modified, amended or waived, and the Company may not
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, without the written  consent of the holders of a majority of
the then outstanding  principal amount of all Convertible  Notes (including this
Convertible  Note);  provided,  however,  that any amendment to this Convertible
Note which (i) changes the  Interest  Rate in Section 1 hereof,  or (ii) changes
the  Maturity  Date in  Section 2 hereof,  must be  approved  in  writing by the
holders of 100% of the then outstanding principal amount of all such Convertible
Notes (including this Convertible Note).

                  12.      REMEDIES CUMULATIVE.  No remedy herein conferred upon
the Payee is intended  to be  exclusive  of any other  remedy and each and every
such remedy shall be  cumulative  and shall be in addition to every other remedy
given  hereunder or now or hereafter  existing at law or in equity or by statute
or otherwise.

                  13.      REMEDIES NOT WAIVED. No course of dealing between the
Company  and the Payee or any delay on the part of the Payee in  exercising  any
rights hereunder shall operate as a waiver of any right of the Payee.

                  14.      ASSIGNMENTS. Subject to applicable law, the Payee may
assign, participate,  transfer or otherwise convey this Convertible Note and any
of its rights or  obligations  hereunder or interest  herein to any affiliate of
Payee and to any other Person that the Company  consents to (such consent not to
be unreasonably withheld or delayed), and this Convertible Note

                                       10
<PAGE>

shall inure to the benefit of the Payee's  successors  and assigns.  The Company
shall not assign or delegate this  Convertible Note or any of its liabilities or
obligations hereunder.

                  15.      HEADINGS. The headings of the sections and paragraphs
of this Convertible Note are inserted for convenience only and do not constitute
a part of this Convertible Note.

                  16.      SEVERABILITY.  If any  provision of this  Convertible
Note is held invalid or  unenforceable  by any court of competent  jurisdiction,
the other  provisions  of this  Convertible  Note will  remain in full force and
effect.  Any provision of this  Convertible  Note held invalid or  unenforceable
only in part or degree  will  remain in full  force and effect to the extent not
held invalid or unenforceable.

                  17.      CANCELLATION.  After all principal, premiums (if any)
and accrued interest at any time owed on this Convertible Note have been paid in
full, or this  Convertible Note has been converted this Convertible Note will be
surrendered to the Company for cancellation and will not be reissued.

                  18.      MAXIMUM  LEGAL RATE.  If at any time an interest rate
applicable  hereunder exceeds the maximum rate permitted by law, such rate shall
be reduced to the maximum rate so permitted by law.

                  19.      PLACE OF PAYMENT AND NOTICES. Subject to SECTION 4(a)
above, payments of principal and interest are to be delivered to the Convertible
Noteholder   of   this    Convertible    Note   at   the   following    address:
________________________________________,  or at  such  other  address  as  such
Convertible  Noteholder has specified by prior written notice to the Company. No
notice  shall be deemed  to have been  delivered  until the first  Business  Day
following actual receipt thereof at the foregoing address.

                  20.      WAIVER OF JURY TRIAL.  THE PAYEE AND THE COMPANY EACH
HEREBY  WAIVES  ANY  RIGHT  IT MAY  HAVE TO A TRIAL  BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF, UNDER OR IN CONNECTION  WITH
THIS CONVERTIBLE NOTE AND/OR THE TRANSACTIONS CONTEMPLATED HEREUNDER.

                  21.      SUBMISSION  TO  JURISDICTION.  Any  legal  action  or
proceeding with respect to this Convertible Note may be brought in the courts of
the State of New York or of the  United  States of  America  sitting in New York
County,  and, by execution and delivery of this  Convertible  Note,  the Company
hereby  accepts  for  itself  and in  respect  of its  property,  generally  and
unconditionally, the jurisdiction of the aforesaid courts.

                  (i)      The Company hereby irrevocably  waives, in connection
with  any  such  action  or  proceeding,  any  objection,   including,   without
limitation,  any  objection  to the  laying of venue or based on the  grounds of
forum non  conveniens,  which they may now or hereafter  have to the bringing of
any such action or proceeding in such respective jurisdictions.

                                       11
<PAGE>

                  (ii)     Nothing herein shall affect the right of the Payee to
serve  process  in any  other  manner  permitted  by law  or to  commence  legal
proceedings or otherwise proceed against the Company in any other jurisdiction.

                  22.      GOVERNING  LAW. ALL ISSUES AND  QUESTIONS  CONCERNING
THE CONSTRUCTION,  VALIDITY,  ENFORCEMENT AND INTERPRETATION OF THIS CONVERTIBLE
NOTE SHALL BE GOVERNED BY, AND  CONSTRUED IN  ACCORDANCE  WITH,  THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION  OTHER THAN THE
STATE OF NEW YORK.

                  IN WITNESS WHEREOF,  the parties have executed and the Company
has delivered this Convertible Promissory Note on the date first written above.

                                    COMPANY:

                                    BIONUTRICS, INC.

                                    By:_______________________________
                                       Name:
                                       Title:

                                       12
<PAGE>

                                   SCHEDULE A

                              CAPITALIZATION TABLE

BIONUTRICS, INC. FULLY DILUTED SHARES OUTSTANDING AS OF SEPTEMBER 12, 2005

Shares Outstanding as of 09/12/05                             22,681,725
Unexercised Options & Warrants                                   129,000
Unexercised Warrants                                             170,000
Series A Preferred Shares, As Converted                          118,370
                                                          -------------------
Accumulated Series A Preferred Dividends                           46,440
TOTAL                                                          23,145,535

<PAGE>

                                    EXHIBIT A
                                    ---------

                                OFFERING SUMMARY

                           EQUITY PLACEMENT TERM SHEET

ISSUER:                           Bionutrics, Inc. ("the COMPANY")

PLACEMENT AGENT:                  Indigo Securities, LLC (the "PLACEMENT AGENT")

THE OFFERING:                     Series  A  Convertible  Preferred  Stock  (the
                                  "SERIES A PREFERRED"),  initially  convertible
                                  on a 1:4 basis  into  shares of the  Company's
                                  Common Stock (the "COMMON STOCK") and warrants
                                  to acquire 25% of the Common  Stock into which
                                  the   Series   A   Preferred    is   initially
                                  convertible (the "WARRANTS" and, together with
                                  the Series A Preferred,  the  "SECURITIES") at
                                  an  exercise   price  equal  to  150%  of  the
                                  Original  Purchase  Price (as defined  below).
                                  The  Warrants  shall be  exercisable  for five
                                  years.  In addition,  the Company's  currently
                                  outstanding  indebtedness  and preferred stock
                                  must  be  converted  into  Common  Stock  as a
                                  condition to closing of the Offering.

AMOUNT OF FINANCING:              A  minimum  of  $3,000,000  and a  maximum  of
                                  $6,000,000  of  Securities.   This  investment
                                  shall  close  for  all   investors   upon  the
                                  earliest of the date (i) the parties  agree to
                                  terminate  the offering or (ii) the sale of $6
                                  million  of  Securities,   provided  that  the
                                  Placement  Agent shall have an over  allotment
                                  option  to  sell  an  additional  10%  of  the
                                  Maximum Offering.  Conversion of the Company's
                                  Secured  Notes  shall not be  included  in the
                                  amount of the financing.

PRICE:                            $16  per   share   of   Series   A   Preferred
                                  convertible  into four shares of common  stock
                                  (the "ORIGINAL PURCHASE PRICE").

INVESTOR(S):                      Accredited Investors introduced to the Company
                                  by the Placement Agent.

ESCROW ARRANGEMENTS:              Investors  shall  fund their  investment  into
                                  escrow  with  a  mutually   acceptable  escrow
                                  agent. The escrow shall be released as soon as
                                  the aggregate amount funded into escrow equals
                                  or exceeds $3,000,000.

<PAGE>

FEES AND EXPENSES:                The   Placement   Agent   shall   receive   as
                                  compensation  in connection with the Offering:
                                  (i) 9% of the gross  proceeds of the  Offering
                                  in  cash,   and  (ii)   warrants  (the  "AGENT
                                  WARRANTS") exercisable for 9% of the number of
                                  shares  of  Series  A  Preferred  sold  in the
                                  Offering.   The   Agent   Warrants   shall  be
                                  exercisable  at a price equal to the  Original
                                  Purchase Price per share.  The Placement Agent
                                  and its  affiliates and counsel shall have the
                                  right to purchase  Securities  in the Offering
                                  net of cash  commissions and shall receive its
                                  pro  rata  share  of  the  Agent  Warrants  in
                                  connection  with  any  such  investment.   The
                                  Company  shall  pay the  reasonable  fees  and
                                  expenses,  including  reasonable legal fees of
                                  the Placement Agent, incurred by the Placement
                                  Agent in connection with the Offering.

ANTICIPATED CLOSING DATE          [October 31, 2005] (the "Closing").

TERMS OF SERIES A PREFERRED STOCK

Dividends:                        The holders of the Series A Preferred shall be
                                  entitled to receive  cumulative  dividends  in
                                  preference to any dividend on the Common Stock
                                  at the  rate  of 8% of the  Original  Purchase
                                  Price per  annum,  accruing  on a  semi-annual
                                  basis in cash or additional shares of Series A
                                  Preferred   (which  shall  be  valued  at  the
                                  Original   Purchase  Price  per  share).   The
                                  holders  of Series A  Preferred  also shall be
                                  entitled  to  participate   pro  rata  in  any
                                  dividends  paid  on  the  Common  Stock  on an
                                  as-if-converted basis.

Liquidation Preference:           In the event of any  liquidation or winding up
                                  of the  Company,  the  holders of the Series A
                                  Preferred  shall be  entitled  to  receive  in
                                  preference  to the holders of the Common Stock
                                  a per  share  amount  equal  to  the  Original
                                  Purchase  Price plus any accrued,  but unpaid,
                                  dividends  (the   "LIQUIDATION   PREFERENCE").
                                  After   the   payment   of   the   Liquidation
                                  Preference  to the  holders  of the  Series  A
                                  Preferred,   the  remaining  assets  shall  be
                                  distributed  ratably  to  the  holders  of the
                                  Common  Stock and the Series A Preferred on an
                                  as if converted basis. A merger,  acquisition,
                                  sale  of  voting  control  or  sale  of all or
                                  substantially all of the assets of the Company
                                  in which the  pre-transaction  shareholders of
                                  the  Company  do  not  own a  majority  of the
                                  outstanding    shares    of   the    surviving
                                  corporation   shall   be   deemed   to   be  a
                                  liquidation.

Conversion:                       The  holders of the Series A  Preferred  shall
                                  have the  right to  convert  any or all of the
                                  Series A Preferred,  at any time,  into shares
                                  of Common Stock.  The initial  conversion rate
                                  shall  be  1:4,   subject  to   adjustment  as
                                  provided below.

                                       2
<PAGE>

Antidilution Provisions:          The conversion price of the Series A Preferred
                                  and the exercise price of the Warrants will be
                                  subject  to  a  weighted-average  antidilution
                                  adjustment (based on all outstanding shares of
                                  Preferred and Common Stock) to reduce dilution
                                  in  the   event   that  the   Company   issues
                                  additional  equity securities (other than: (a)
                                  up to  1,900,000  shares  issued  pursuant  to
                                  reserved employee options,  and (b) a one time
                                  issuance  of up to  $2,000,000  in  additional
                                  equity securities during the twelve (12) month
                                  period following the final closing date of the
                                  Offering)  at a  purchase  price less than (i)
                                  the applicable conversion price in the case of
                                  the Series A Preferred or (ii) the  applicable
                                  exercise  price in the  case of the  Warrants.
                                  The  conversion  price and exercise price will
                                  also be subject to proportional adjustment for
                                  stock      splits,       stock      dividends,
                                  recapitalizations and the like.

Voting Rights:                    Except  as  otherwise   provided  herein,  the
                                  Series A Preferred will vote together with the
                                  Common Stock on an as if  converted  basis and
                                  not as a separate class except as specifically
                                  provided  herein or as  otherwise  required by
                                  law.  Each share of Series A  Preferred  shall
                                  have a number of votes  equal to the number of
                                  shares  of Common  Stock  then  issuable  upon
                                  conversion   of  such   share   of   Series  A
                                  Preferred.

Board of Directors:               The size of the  Company's  Board of Directors
                                  shall be set at five (5). The Board of Company
                                  will  elect  Edward  Neugeboren  to the  Board
                                  prior to close and  Nirmal  Mulye  and  Ronald
                                  Lane  shall  agree  to vote  their  respective
                                  shares   of   Common   Stock   for  the   next
                                  shareholders meetings in favor of the election
                                  of Mr.  Neugeboren  to a one-year  term on the
                                  Board.  The  placement  agent  shall  also  be
                                  entitled  to  observer  rights  at  all  board
                                  meetings.

Notification Rights:              The Company shall provide the Placement  Agent
                                  with written notice of any and all future debt
                                  or equity  financings upon execution of a term
                                  sheet or letter of intent in  connection  with
                                  such  financing  and in no event less than ten
                                  (10)  business  days  prior  to  closing  such
                                  financing.

Right of First Refusal:           The  Placement  Agent  shall  have a right  of
                                  first refusal to serve as (i) placement  agent
                                  with respect to future security  issuances and
                                  (ii)   financial   advisor   in  any   merger,
                                  acquisition,  sale or similar  transaction  by
                                  the Company (other than an underwritten public
                                  offering)  for  a  period  of  two  (2)  years
                                  following the final closing of the Offering.

Protective Provisions:            For so long as at  least  25% of the  Series A
                                  Preferred remains outstanding,  consent of (i)
                                  Edward Neugeboren, if he is a member

                                       3
<PAGE>

                                  of the Board of  Directors  of the  Company at
                                  the time, or (ii) holders of a majority of the
                                  shares of Series A Preferred then outstanding,
                                  shall  be  required  for any  action  that (i)
                                  alters or changes the rights,  preferences  or
                                  privileges  of the  Series A  Preferred,  (ii)
                                  constitutes  the incurrence of indebtedness by
                                  the Company  (other  indebtedness  incurred in
                                  the ordinary course of the Company's business,
                                  consistent with past practice) which possesses
                                  senior   repayment  rights  to  the  Series  A
                                  Preferred, except for acquisition indebtedness
                                  (or  guarantees  thereof)  used to acquire the
                                  shares of Kirk  Pharmaceuticals,  LLC, and its
                                  affiliate,  Andapharm,  LLC, or an refinancing
                                  of  such   acquisition   indebtedness,   (iii)
                                  creates (by reclassification or otherwise) any
                                  new class or  series  of shares or  securities
                                  having   rights,   preferences  or  privileges
                                  senior  to, or on a parity,  with the Series A
                                  Preferred,  (iv) results in the  redemption of
                                  any  shares  of  Common   Stock   (other  than
                                  pursuant to equity  incentive  agreements with
                                  service providers giving the Company the right
                                  to repurchase  shares upon the  termination of
                                  services),  (v) results in any  merger,  other
                                  corporate reorganization,  sale of control, or
                                  any transaction in which all or  substantially
                                  all of the  assets  of the  Company  are sold,
                                  (vi)  amends or waives  any  provision  of the
                                  Company's  Articles of Incorporation or Bylaws
                                  relative  to the  Series  A  Preferred,  (vii)
                                  increases the authorized size of the Company's
                                  board,   (viii)  results  in  the  payment  or
                                  declaration  of any  dividend on any shares of
                                  Common Stock,  (ix) results in a confession of
                                  judgment  against  the  Company,  or settle or
                                  compromise by or against the Company (provided
                                  that no such  consent  shall be  required  for
                                  matters involving less than $500,000.00),  (x)
                                  file  for  bankruptcy  or  receivership,  (xi)
                                  results in any  material  loans to any insider
                                  or  shareholder or any guaranty of any debt of
                                  a third  party,  other  than  in the  ordinary
                                  course  of  business;  (xii)  results  in  the
                                  removal of one of the  following  officers  of
                                  the  Company  other  than for  "cause":  Chief
                                  Executive   Officer,   President   and   Chief
                                  Financial    Officer,    or    the    material
                                  modification  of the  compensation  payable by
                                  the Company to any such officer, (xii) results
                                  in  the  making  of any  material  investments
                                  other than in the ordinary course of business,
                                  (xiv) results in the mortgaging,  pledging, or
                                  creating a security  interest in the  property
                                  of the  Company,  other  than in the  ordinary
                                  course  of  business   consistent   with  past
                                  practice,   (xiii)   results  in  the  Company
                                  entering  into new  businesses  not related to
                                  the  purpose  of the  Company,  (xvi) or (xvi)
                                  results in the  consummation  of any  material
                                  contracts  with any  shareholder,  insider  or
                                  affiliates,  except  those  in place as of the
                                  closing date or anticipated in the next twelve
                                  (12) months with Nostrum Pharmaceuticals, Inc.
                                  ("Nostrum") as required to develop and

                                       4
<PAGE>

                                  execute  the  Company's   technology   license
                                  agreement with Nostrum.

Information Rights:               So  long  as any  Investor  continues  to hold
                                  shares of Series A Preferred  or Common  Stock
                                  issued  upon   conversion   of  the  Series  A
                                  Preferred,   the  Company   will  furnish  the
                                  Placement   Agent  with   monthly   management
                                  reports  as  well  as   confidential   monthly
                                  financial   statements  compared  against  the
                                  Company's   annual  operating  plan  and  will
                                  provide a copy of the  Company's  confidential
                                  annual  operating plan within 30 days prior to
                                  the   beginning  of  the  fiscal  year.   Each
                                  Investor  shall also be  entitled  to standard
                                  inspection  and  visitation  rights  under the
                                  Nevada Revised Statutes.

Registration Rights:              UPFRONT REGISTRATION:  The Company shall cause
                                  a   Registration   Statement   (the   "INITIAL
                                  REGISTRATION  STATEMENT") covering the 125% of
                                  the  Common  Stock (i) into which the Series A
                                  Preferred  is  convertible  and (ii) for which
                                  the Warrant and Agent Warrants are exercisable
                                  (the   "REGISTRABLE   SECURITIES")  to  become
                                  effective  no later  that  120  days  from the
                                  Closing Date (the "Required  Effective Date").
                                  The  Company  shall  use its best  efforts  to
                                  maintain    the    effectiveness    of    this
                                  Registration  Statement  until  the date  (the
                                  "Registration  Termination Date") which is the
                                  earlier of (i) the second  anniversary  of the
                                  Closing  Date,  (ii) the date  upon  which the
                                  last  Registrable  Security  included  in such
                                  Registration  Statement  is sold by the holder
                                  thereof,  and (iii)  the date  upon  which all
                                  investors    may   sell   their    Registrable
                                  Securities  without  limitation  by  virtue of
                                  paragraph (e) of Rule 144 under the Securities
                                  Act of 1933, as amended.  Penalty for default:
                                  (i) for the  first two one  month  periods  of
                                  delay after the Required  Effective  Date, the
                                  penalty  shall be 1.0% per  month  payable  in
                                  cash or stock valued at the Original  Purchase
                                  Price;  and (ii) for  each  additional  month,
                                  2.5% per month payable in cash or stock valued
                                  at the Original  Purchase  Price.  The penalty
                                  for partial months shall be pro rated.

                                  DEMAND RIGHTS:  If for some reason the Initial
                                  Registration Statement is not effective at any
                                  time  during  the  period  beginning  120 days
                                  after the Closing Date, Investors holding more
                                  than  $500,000  in  value  of the  Registrable
                                  Securities  may require the Company to use its
                                  best efforts efforts to cause such Registrable
                                  Securities to be  registered.  The  Investors'
                                  demand  registration  rights  shall expire two
                                  years  after  the  effectiveness  date  of the
                                  Upfront Registration  covering all Registrable
                                  Securities.

                                       5
<PAGE>

                                  COMPANY  REGISTRATION:  The Investors shall be
                                  entitled to "piggy back"  registration  rights
                                  on all  registrations  of the  Company  (other
                                  than  registrations  on Forms S-8,  S-4 or any
                                  successor  or similar  forms) or on any demand
                                  registrations of any other investor subject to
                                  the right,  however,  of the  Company  and its
                                  underwriters  to reduce  the  number of shares
                                  proposed  to be  registered  in view of market
                                  conditions.  If the  Investors are so limited,
                                  however,  no party  shall sell  shares in such
                                  registration  other  than the  Company  or the
                                  investor,   if  any,   invoking   the   demand
                                  registration.  No  shareholder  of the Company
                                  shall be granted piggyback registration rights
                                  which  would   reduce  the  number  of  shares
                                  includable  by the holders of the  Registrable
                                  Securities  in such  registration  without the
                                  consent of the holders of at least  two-thirds
                                  of  the  Registrable  Securities.   Investors'
                                  piggy-back  registration  rights  shall expire
                                  two years after the effectiveness  date of the
                                  Upfront Registration  covering all Registrable
                                  Securities.

                                  In  connection  with  an  underwritten  public
                                  offering of  securities  of the Company,  upon
                                  the request of the managing underwriter,  each
                                  holder of  Registrable  Securities who owns at
                                  least 2% of the  outstanding  capital stock of
                                  the Company on an  "as-converted"  basis or is
                                  an officer or director  of the  Company  shall
                                  agree   (provided   all  other   officers  and
                                  directors also agree) not to effect any public
                                  sale  or   distribution   (other   than  those
                                  included   in   the   registration)   of   any
                                  securities of the Company,  or any securities,
                                  options   or   rights   convertible   into  or
                                  exchangeable    or   exercisable    for   such
                                  securities  during  the sixty  (60) day period
                                  beginning on such effective  date,  unless the
                                  managing  underwriter  otherwise  agrees  to a
                                  shorter period of time.

                                  S-3  RIGHTS.  Investors  shall be  entitled to
                                  unlimited demand registrations on Form S-3 (if
                                  available  to the  Company)  so  long  as such
                                  registered   offerings   are  not  less   than
                                  $1,000,000.

                                  LIMITATION  ON  PIGGYBACK  & S-3  RIGHTS.  The
                                  Investors'  "piggy back" and S-3  registration
                                  rights  shall not apply during any period that
                                  there   exists   an   effective   registration
                                  statement covering the Investors'  Registrable
                                  Securities.

                                  EXPENSES:  The Company shall bear registration
                                  expenses (exclusive of underwriting  discounts
                                  and  commissions  and  expenses of counsel) of
                                  all  such   demands,   piggy-backs,   and  S-3
                                  registrations  (including  the  expense of one
                                  special counsel of the selling shareholders).

                                       6
<PAGE>

                                  TRANSFER OF RIGHTS:  The  registration  rights
                                  may be  transferred  to  (i)  any  partner  or
                                  retired  partner  of  any  holder  which  is a
                                  partnership,  (ii) any family  member or trust
                                  for the benefit of any individual  holder,  or
                                  (iii) any  transferee  who  acquires  at least
                                  5,000  shares of  Registrable  Securities;  in
                                  each case,  provided that the Company is given
                                  written notice thereof.

                                  OTHER  PROVISIONS:  Other  provisions shall be
                                  contained  in the  Investor  Rights  Agreement
                                  with  respect  to  registration  rights as are
                                  reasonable,  including cross  indemnification,
                                  the  period of time in which the  Registration
                                  Statement   shall   be  kept   effective   and
                                  underwriting arrangements.

Pre-Emptive Rights:               Investors  shall  have the  right in the event
                                  the   Company    sells   equity    securities,
                                  convertible  securities  or  warrants  to  any
                                  person to purchase  their pro rata  portion of
                                  such  shares for a period of 30 days after the
                                  closing  of  such  sale.  Any  securities  not
                                  subscribed for by an eligible  Investor may be
                                  reallocated    among   the   other    eligible
                                  Investors. Such keep even right will not apply
                                  to any underwritten public offering of Company
                                  equity   securities   by  a   internationally,
                                  nationally,     or    regionally    recognized
                                  underwriter,  at a price  per  share of Common
                                  Stock no less than  three  times the  Original
                                  Purchase Price.

Subscription Agreement:           The  investment  shall be made  pursuant  to a
                                  Subscription  Agreement reasonably  acceptable
                                  to  the  Company  and  the  Investors,   which
                                  agreement  shall contain,  among other things,
                                  appropriate  representations and warranties of
                                  the   Company,   covenants   of  the   Company
                                  reflecting the provisions set forth herein and
                                  appropriate  conditions of closing,  including
                                  an  opinion of counsel  for the  Company.  The
                                  Subscription  Agreement  shall provide that it
                                  may only be amended and any waivers thereunder
                                  shall  only be made with the  approval  of the
                                  holders   of   two-thirds   of  the  Series  A
                                  Preferred.  Registration rights provisions may
                                  be amended or waived  solely  with the consent
                                  of   the   holders   of   two-thirds   of  the
                                  Registrable Securities.

EMPLOYEE MATTERS

Employee Option Pool:             Upon the Closing of this financing,  1,900,000
                                  shares of Common Stock will have been reserved
                                  for issuance pursuant to employee options.

Stock Vesting:                    All stock and stock  equivalents  issued after
                                  the   Closing   to    employees,    directors,
                                  consultants  and other service  providers will
                                  be subject to vesting as follows:  33% to vest
                                  at the end of the first

                                       7
<PAGE>

                                  year  following   such   issuance,   with  the
                                  remaining  66% to vest  monthly  over the next
                                  two years. The repurchase option shall provide
                                  that upon termination of the employment of the
                                  shareholder,   with  or  without  cause,   the
                                  Company  or  its   assignee   (to  the  extent
                                  permissible  under  applicable  securities law
                                  qualification)    retains    the   option   to
                                  repurchase at cost any unvested shares held by
                                  such shareholder.

Proprietary Information
and Inventions Agreement:         Each officer,  employee and  consultant of the
                                  Company  shall have entered into an acceptable
                                  proprietary    information    and   inventions
                                  agreement.

Forced Conversion:                If at any time prior to the  conversion of the
                                  Series  A  Preferred  into  shares  of  Common
                                  Stock,  the  Common  Stock  trades at a 30 day
                                  trailing  average  closing price equal to 300%
                                  of the equivalent effective purchase price per
                                  share of Common Stock in this Offering and the
                                  average  Common Stock share volume during this
                                  30  day  trailing  period  equals  or  exceeds
                                  40,000  shares  per day and the  Common  Stock
                                  into which the Series A  Preferred  is covered
                                  by an effective registration statement at such
                                  time,    the   Series   A   Preferred    shall
                                  automatically convert into Common Stock at the
                                  then applicable conversion price. In the event
                                  of such conversion,  all preferences and other
                                  special provisions  described and provided for
                                  herein to the  Series A  Preferred  or related
                                  Warrants  including   protective   provisions,
                                  information  rights  and  pre-emptive  rights,
                                  shall  become  null and void,  except that the
                                  registration   rights  shall  remain  and  the
                                  Company   will  be   required  to  perform  as
                                  described herein.

OTHER MATTERS

Conditions Precedent
to Financing:                     1.  Completion    of    legal    documentation
                                  satisfactory   to  the  Placement   Agent  and
                                  prospective Investors.

                                  2.  Execution of mutually agreeable employment
                                  agreements with key employees including:  John
                                  S.  Copanos,  Nirmal Mulye and Ronald H. Lane,
                                  Ph.D.

                                  3.  Bionutrics'  receipt  of DEA  approval  in
                                  connection   with  the   acquisition  of  Kirk
                                  Pharmaceuticals.

                                       8
<PAGE>

                                  4.  Conversion of  outstanding  Bionutrics (i)
                                  Revolving  Note  in the  principal  amount  of
                                  approximately  $1,500,000  and (ii)  preferred
                                  equity to common stock.

                                  5.  Satisfactory  completion  of due diligence
                                  by  the   Placement   Agent  and   prospective
                                  Investors  (including a complete review of all
                                  requested   Nostrum    Pharmaceutical's    due
                                  diligence materials).

                                  6.  Conversion    of   B.    Berk's    Nostrum
                                  Pharmaceutical's shares to Bionutrics shares.

Exclusivity:                      The  Company  agrees that until  November  30,
                                  2005,  or such earlier date as the Company and
                                  Placement  Agent  mutually  agree to terminate
                                  the Offering (the "TERMINATION DATE"), neither
                                  the   Company   or  any  of  its   affiliates,
                                  officers,  directors,   employees,  agents  or
                                  representatives   who   are   aware   of   the
                                  discussions  between the Company and Placement
                                  Agent will,  either  directly  or  indirectly,
                                  solicit, entertain or conduct discussions with
                                  any person with respect to any offer  relating
                                  to the sale of securities of the Company.  The
                                  term  "person"  as used  in  herein  shall  be
                                  interpreted to include without  limitation any
                                  individual,   corporation,  limited  liability
                                  Company,      unincorporated      association,
                                  partnership, trust, estate or other entity.

Capitalization:                   The Company is authorized to issue  50,000,000
                                  shares of which 45,000,000  shares,  par value
                                  $.001  per  share,  are  designated  as Common
                                  Stock ("COMMON  STOCK") and 5,000,000  shares,
                                  par value $.001 per share,  are  designated as
                                  Preferred   Stock   ("PREFERRED   STOCK").   A
                                  complete  capitalization  table as of the date
                                  hereof is attached above as Schedule A.

                                  In addition,  the Placement Agent's affiliate,
                                  Indigo  Ventures LLC,  shall  purchase a three
                                  (3) year  warrant  from the  Company  ("INDIGO
                                  VENTURES   WARRANT")  for  500,000  shares  of
                                  Common  Stock with an exercise  price equal to
                                  $5.00 per share. The aggregate  purchase price
                                  for  the  Indigo  Ventures  Warrant  shall  be
                                  $150,000.  Such purchase  price may be paid by
                                  Indigo  Ventures  LLC, at its option,  through
                                  the issuance of a partial recourse note.

Governing Law:                    The definitive  documentation  relating to the
                                  offering of the  Securities  shall be governed
                                  by and construed in  accordance  with the laws
                                  of the State of New York.

Additional Information:           For  additional   information   regarding  the
                                  Company   generally   and   for   Management's
                                  Discussion   and  Analysis  of  the  Company's
                                  Financial  Condition  and Results,  please see
                                  the 10-K and 10-Q attached as exhibits hereto.

                                       9Exhibit 10.4

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"),  dated as of September
__, 2005, by and among Bionutrics,  Inc., a Nevada  corporation (the "COMPANY"),
Indigo  Securities,  LLC (the "PLACEMENT  AGENT"),  and the purchasers listed on
SCHEDULE  1  of  the  Securities,  as  defined  below  (each  an  "INVESTOR"  or
collectively, the "INVESTORS")

         WHEREAS,  the Company and each of the Investors (i) have entered into a
Subscription  Agreement dated the date hereof or (ii) in the case of Bridge Note
Investors  have  previously  entered  into  a  Subscription  Agreement  (each  a
"SUBSCRIPTION AGREEMENT" and collectively, the "SUBSCRIPTION AGREEMENTS").

         WHEREAS, to induce each Investors to execute and deliver a Subscription
Agreement,  the Company has agreed to provide certain  registration rights under
the Securities  Act, and the rules and  regulations  thereunder,  or any similar
successor statute, as well as any applicable state securities laws.

         NOW,  THEREFORE,  in  consideration  of the premises,  representations,
warranties, and the mutual covenants and agreements contained herein, and in the
Subscription  Agreement,  and for other  good and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the  Company,  the
Placement Agent and the Investors,  intending to be legally bound,  hereby agree
as follows:

1.       DEFINITIONS.

         Capitalized terms defined in the Subscription Agreements shall have the
same meanings  herein as are ascribed to them therein.  In addition,  as used in
this Agreement,  the following terms shall have the following  meanings ascribed
to them below:

         "AFFILIATE"  means any Person that has a relationship with a designated
Person  whereby  either of such Persons  directly or  indirectly  controls or is
controlled  by or is under  common  control  with the  other.  For this  purpose
"control" means the power, direct or indirect,  of one Person to direct or cause
direction of the management and policies of another,  or any act with respect to
the securities of the Company, whether by contract, through voting securities or
otherwise.

         "BRIDGE NOTE  INVESTORS"  means  Investors that  purchased  convertible
bridge  notes and  warrants of the Company in a closing  held on  September  __,
2005.

         "CLOSING"  refers to that event which occurs when the Securities  shall
have been  subscribed  for, the funds  representing  the sale of the  Securities
shall have cleared, and the Company shall accept the subscriptions.

                                       1
<PAGE>

         "COMMON  STOCK" shall be the  Company's  authorized  common  stock,  as
constituted  on the date of this  Agreement,  any stock into  which such  common
stock may thereafter be changed and any stock of the Company of any other class,
which is not  preferred  as to dividends or assets over any other class of stock
of the Company  issued to the  Investors of shares of such common stock upon any
re-classification thereof.

         "COMPANY  REGISTRATION  EXPENSES"  shall mean bills or invoices  (other
than Selling  Expenses)  incident to the Company's  performance of or compliance
with this Agreement including, without limitation, all registration,  filing and
NASDR fees,  fees and expenses of compliance  with  securities or blue sky laws,
word  processing,  duplicating  and printing  expenses,  messenger  and delivery
expenses,  fees and disbursements of counsel for the Company and one counsel for
the Investors in connection with each  registration  and all independent  public
accountants  including the expenses of any audit and/or "cold  comfort"  letter,
all fees and expenses in connection with the Company's obligations under Section
3.1, if applicable, and other Persons retained by the Company.

         "CONTROLLING  PERSON" shall have the meaning set forth under Section 15
of the Securities Act.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "EXCLUDED  FORM"  means  a  Form  S-4  or  Form  S-8,  pursuant  to the
Securities Act or any similar or successor form then in effect.

         "INVESTORS"  means the Investors and any  transferees  or assignees who
agree to become bound by the  provisions of this  Agreement in  accordance  with
Section 9 hereof. Investors also refers to the Placement Agent and its assignees
when referring to the offer and sale of Registrable  Securities and other rights
arising under Sections 2 and 3.

         "NASDR" means the NASD Regulation, Inc.

         "NOTEHOLDER  WARRANTS"  means the  warrants to  purchase  shares of the
Company's common stock issued to the lenders providing acquisition financing for
the Company's purchase of Kirk Pharmaceuticals on ________, 2005.

         "OFFERING" means the solicitation by the Placement Agent of Subscribers
for the purchase of the Securities.

         "ORIGINAL  PURCHASE  PRICE" means the  purchase  price for the Series A
Preferred Stock initially paid by the Subscribers.

         "PERSON" means a corporation,  an association, a partnership, a limited
liability  company, a joint venture,  a trust, an organization,  a business,  an
entity,  an  individual,  a  government  or political  subdivision  thereof or a
governmental body.

                                       2
<PAGE>

         "PLACEMENT AGENT" shall mean Indigo Securities, LLC.

         "PLACEMENT  AGENT  AGREEMENT" shall mean the placement agent agreement,
dated as of September 27, 2005, between the Placement Agent and the Company.

         "PLACEMENT  AGENT  WARRANTS" shall mean the warrants to purchase shares
of Common  Stock and Series A  Preferred  Stock  issued to the  Placement  Agent
pursuant to the Placement Agent Agreement.

         "PRIVATE  PLACEMENT"  shall mean the placement of the Securities by the
Company through the Placement Agent pursuant to the Placement Agent Agreement.

         "REGISTER,  REGISTERED and REGISTRATION" means a registration  effected
by preparing and filing a  Registration  Statement on a form approved by the SEC
other  than an  Excluded  Form in  compliance  with the  Securities  Act and the
declaration of effectiveness  ordering the  effectiveness  of such  Registration
Statement.

         "REGISTRABLE  SECURITIES" means Common Stock issued upon (i) conversion
of the Series A Preferred  Stock  issued at the Closing or obtained  through the
exercise of Placement  Agent  Warrants,  (ii)  exercise of the  Warrants,  (iii)
exercise of the  Placement  Agent  Warrants,  (iv)  exercise  of the  Noteholder
Warrants and (v) any securities issued upon the Series A Preferred Stock or such
Common Stock by way of stock  dividend or stock  split,  penalty  under  Section
2.1.2  hereof,  or in connection  with a  combination,  recapitalization,  share
exchange,  consolidation  or  other  reorganization  of the  Company.  As to any
Registrable  Securities,   once  issued,  such  securities  shall  cease  to  be
Registrable  Securities  when (i) a  Registration  Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement, (ii) they shall have been sold to the public pursuant to Rule 144 (or
any successor  provision)  under the Securities  Act, (iii) they shall have been
otherwise  transferred  and the new  certificates  issued by the  Company to the
transferee  do not bear a legend  restricting  further  transfer and  subsequent
disposition of such shares shall not require registration or qualification under
the  Securities  Act or any similar state law then in force,  or (iv) they shall
have ceased to be outstanding.

         "REGISTRATION  STATEMENT" means one or more registration  statements of
the  Company  on Form  S-3  under  the  Securities  Act  registering  all of the
Registrable Securities, including any amendments or supplements thereto.

         "SEC"  means  the  Securities  and  Exchange  Commission  or any  other
governmental body at the time administering the Securities Act.

         "SECURITIES" means (i) [________](1) shares of Series A Preferred Stock
(subject to a 10% over  allotment  option in favor of the  Placement  Agent) and
(ii) warrants to purchase [__________](2) shares of Common Stock.

----------------------------
(1) To be completed  with actual share  numbers at Closing.
(2) To be completed with actual share numbers at Closing.

                                       3
<PAGE>

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         "SELLING  EXPENSES" shall mean all  underwriting  discounts,  brokerage
fees  and  selling   commissions   applicable  to  the  Registrable   Securities
registered.

         "SERIES  A  PREFERRED  STOCK"  means  shares  of  Series A  Convertible
Preferred Stock, par value $0.01 per share issued by the Company.

          "SUBSCRIBER" means an "accredited  investor" as defined under Rule 501
of the Securities Act, subscribing to purchase the Securities.

         "WARRANTS"  means the warrants to purchase up to [_________]  shares of
Common  Stock,  granted by the  Company on  September  ___,  2005 to Bridge Note
Investor or at the Closing to  Investors in  connection  with the closing of the
Private Placement and the Noteholder Warrants.

2.       REGISTRATION.

         2.1      MANDATORY REGISTRATION.

                  2.1.1    The Company shall file with the SEC,  promptly  after
the Closing Date, a  Registration  Statement on Form S-3 (or, if Form S-3 is not
available, on such form of Registration Statement as is then available to effect
a registration of all of the Registrable Securities;  provided, that the Company
shall  convert such other form to Form S-3, or file a  replacement  registration
statement  on Form S-3  promptly  after  the first  date on which it meets  such
requirement),  covering the resale of 125% of the Registrable Securities,  which
Registration Statement, to the extent allowable under the Securities Act and the
rules promulgated thereunder,  shall state that such Registration Statement also
covers such  indeterminate  number of  additional  shares of Common Stock as may
become issuable upon conversion of the Series A Preferred Stock, exercise of the
Warrants or exercise of the Placement  Agent Warrants  pursuant to provisions to
prevent  dilution  resulting  from  stock  splits,  stock  dividends  or similar
transactions   (the   "MANDATORY   REGISTRATION   STATEMENT").   The   Mandatory
Registration  Statement shall contain,  unless otherwise  required by applicable
law or the SEC, the "SELLING SHAREHOLDERS" and "PLAN OF DISTRIBUTION" section of
the Prospectus in a form  reasonably  satisfactory  to the Investors  based upon
information  provided by the selling  shareholder.  The  Registrable  Securities
included in the Mandatory  Registration  Statement shall be registered on behalf
of the  Investors  set forth on SCHEDULE 1 hereof.  The  Mandatory  Registration
Statement  (and each  amendment  or  supplement  thereto,  and each  request for
acceleration  of  effectiveness  thereof) shall be provided to the Investors and
their  counsel  at least  five (5)  business  days  prior to its filing or other
submission; such notice to specify the securities to be registered, the proposed
numbers and amounts  thereof and the date  thereafter  by which the Company must
receive the  Investors'  written  indication  if any  Investor  does not wish to
include their Registrable Securities in such Registration Statement and advising
the  Investors of their rights under this Section 2. The Company  shall file the
Mandatory  Registration  Statement and cause all of the  Registrable  Securities
(unless an Investor has indicated  otherwise  with respect to all or any portion
of such Investor's Registrable Securities pursuant to the preceding sentence) to
be registered  under the  Securities  Act, in connection  with the sale or other
disposition by the Investors of the  Registrable  Securities so registered.  The
Company shall use its best efforts (i) to cause the Mandatory Registration

                                       4
<PAGE>

Statement,  as amended,  to become  effective as soon as  practicable  after the
filing  thereof  and  (ii)  to  maintain  the  effectiveness  of  the  Mandatory
Registration Statement for a period of two years from the date such registration
statement is initially declared effective..

                  2.1.2    If the Mandatory  Registration Statement has not been
declared or ordered  effective  within one hundred  twenty  (120) days after the
Closing,  the Company  shall pay each Investor a fee equal to 1% of the purchase
price paid by such Investor for the Securities plus the aggregate exercise price
of the Warrants and the Placement  Agent  Warrants for the first two thirty (30)
day  periods  after such  failure  and 2.5% of such  amount for each  subsequent
thirty  (30) day period (pro rata,  in each case,  for  partial  months),  which
payments  shall be payable at the end of each calendar month until the date upon
which the Mandatory Registration  Statement is declared effective.  This payment
may be made, at the election of the Company,  in cash or in additional shares of
Series A Preferred Stock valued at the Original Purchase Price.

         2.1.3    In the  event  that the  Registration  Statement  is filed and
declared  effective but, during the  Registration  Period (as defined in Section
3.1.2  below),  shall  thereafter  cease  to be  effective  or  useable  or  the
prospectus included in the Registration Statement (the "PROSPECTUS",  as amended
or supplemented by any prospectus supplement and by all other amendments thereto
and all material  incorporated  by reference  in such  Prospectus)  ceases to be
usable (other than as a result of any act or omission by a holder of Registrable
Securities),  in either case,  in  connection  with  resales of the  Registrable
Securities,  without such lapse being cured within ten (10)  business  days (the
"CURE  PERIOD"),  with the maximum number of days in any Cure Periods during any
365 day period not to exceed  forty-five (45) business days, by a post-effective
amendment to the  Registration  Statement,  a supplement to the  Prospectus or a
report filed with the SEC pursuant to Section 13(a),  13(c),  14 or 15(d) of the
Exchange Act that cures such lapse,  then the Company shall pay to each Investor
(in  addition  to the rights  and  remedies  available  to each  Investor  under
applicable law and this Agreement),  for the period from and including the first
day following the  expiration of the Cure Period (or number of days in such Cure
Periods exceeding the aforementioned forty-five (45) days) until, but excluding,
the earlier of (i) the date on which such  failure is cured and (ii) the date on
which the  Registration  Period  expires,  at a rate  equal to two and  one-half
percent  (2.5%) for every  thirty days after such  failure (pro rata for partial
months) of the purchase price paid by such Investor for the Securities  plus the
aggregate exercise price of the Warrants and the Placement Agent Warrants, which
payment  shall be payable at the end of each calendar  month.  The Company shall
have the option to pay such  amounts in cash or Common  Stock as provided for in
Section 2.1.2 above.

         2.2      DEMAND REGISTRATION

                  2.2.1    If the  Mandatory  Registration  Statement  shall not
have been declared or ordered  effective and the Company shall receive a written
request no earlier than one hundred  twenty (120) days following the Closing but
no later than 24 months  after the  Closing  from  Investors  holding  more than
$500,000 in value  (based on the  Original  Purchase  Price) of the  Registrable
Securities then outstanding (the "INITIATING  INVESTOR") that the Company file a
registration statement under the Securities Act covering the registration of the
Registrable  Securities,  then the Company shall, within thirty (30) days of the
receipt  thereof,  give  written  notice of such request to all  Investors,  and
subject to the limitations set forth herein, effect, as

                                       5
<PAGE>

expeditiously as reasonably possible,  the registration under the Securities Act
of all Registrable Securities that the Investors request to be registered.

                  2.2.2    The  Company  shall  not  be  required  to  effect  a
registration  pursuant  to this  Section 2.2 if (i) the  Mandatory  Registration
Statement  has been  declared or ordered  effective,  whether or not one or more
holders  of  Registrable  Securities  elected  not  to  register  all  of  their
respective shares in the Mandatory  Registration  Statement (ii) the Company has
previously  effected  two  registrations  pursuant to this  Section 2.2 and such
previous  registrations  has been  declared  or ordered  effective  or (iii) the
Registrable Securities not covered by registrations pursuant to this Section 2.2
may be sold pursuant to Rule 144(k)  promulgated under the Securities Act or any
successor  provision.  Subject  to  the  foregoing,  the  Company  shall  file a
registration  statement covering the Registrable Securities and other securities
so  requested  to be  registered  pursuant  to  this  Section  2.2  as  soon  as
practicable after receipt of the request or requests of the Investors.

         2.3      PIGGYBACK RIGHTS.

                  2.3.1    If the Company  shall  determine  to prepare and file
with  the SEC a  registration  statement  relating  to an  offering  for its own
account or the account of others under the  Securities  Act of any of its equity
securities (other than on an Excluded Form), then the Company shall send to each
Investor  holding  Registrable  Securities  that  have  not  been  covered  by a
registration  statement that has been declared or ordered  effective  (each,  an
"ELIGIBLE  INVESTOR"),  written notice of such  determination  and if, within 15
business days after receipt of such notice any such Eligible  Investor  shall so
request in writing, the Company shall include in such registration statement the
Registrable  Securities  requested by the Eligible  Investors to be so included.
Such  written  notice  shall state the  intended  method of  disposition  of the
Registrable  Securities  by such  Eligible  Investor.  If an  Eligible  Investor
decides not to include all of its  Registrable  Securities  in any  registration
statement  thereafter  filed  by  the  Company,  such  Eligible  Investor  shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its  securities,  all upon the terms
and conditions set forth herein,  to the extent all Registrable  Securities held
by such Investor have not been covered by a registration statement that has been
declared  or  ordered  effective  by the time of such  subsequent  registration.
Notwithstanding  any provision of this  Agreement to the  contrary,  the Company
shall not file a registration statement for its account or the account of others
until the Mandatory  Registration Statement or a Registration Statement pursuant
to Section 2.2 shall have been declared and ordered effective.

                  2.3.2    If the registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, the Company
shall so advise the Eligible Investors of Registrable Securities. In such event,
the  right  of any such  Eligible  Investor  to be  included  in a  registration
pursuant to this Section 2.3 shall be conditioned upon such Eligible  Investor's
participation in such underwriting and the inclusion of such Eligible Investor's
Registrable  Securities in the underwriting to the extent provided  herein.  All
Eligible Investors proposing to distribute their Registrable  Securities through
such underwriting  shall enter into an underwriting  agreement in customary form
with the  underwriter  or  underwriters  selected for such  underwriting  by the
Company. Notwithstanding any other provision of the Agreement, if the

                                       6
<PAGE>

underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be  underwritten,  the  number of shares  that may be
included in the underwriting shall be allocated,  first, to the Company; second,
to any selling  shareholders  that shall have  exercised  a demand  registration
right;  third,  on a PRO RATA basis,  to the  Eligible  Investors  and any other
shareholders of the Company exercising  incidental  registration rights based on
the total  number of  Registrable  Securities  sought to be  registered  in such
registration  by the  Eligible  Investors  and  such  other  shareholder  of the
Company.

                  2.3.3    If any Eligible Investor  disapproves of the terms of
any such underwriting, such Eligible Investor may elect to withdraw therefrom by
written notice to the Company and the  underwriter,  delivered at least ten (10)
business days prior to the effective  date of the  registration  statement.  Any
Registrable  Securities  excluded or withdrawn from such  underwriting  shall be
excluded and withdrawn from the registration. For any Eligible Investor which is
a partnership,  limited liability company, or corporation, the partners, retired
partners,  members,  retired members and shareholders of such Eligible Investor,
or the estates and family members of any such partners and retired  partners and
any trusts for the benefit of any of the foregoing  person shall be deemed to be
a single  "Eligible  Investor,"  and any PRO RATA reduction with respect to such
"Eligible  Investor" shall be based upon the aggregate amount of shares carrying
registration  rights  owned by all  entities  and  individuals  included in such
"Eligible Investor," as defined in this sentence.

                  2.3.4    The  Company  shall  have the right to  terminate  or
withdraw  any  registration  initiated by it under this Section 2.3 prior to the
effectiveness  of such  registration  whether or not any  Eligible  Investor has
elected to include securities in such registration.

         2.4      FORM S-3 REGISTRATION. In the event any Registrable Securities
shall not have been  registered  pursuant to Section  2.1, and if the Company is
eligible  to use Form S-3 under the  Securities  Act (or any  similar  successor
form) and shall  receive  from a Investors or  permitted  transferees  (the "S-3
INITIATING  HOLDERS") a written  request or requests  that the Company  effect a
registration on such Form S-3, including,  without limitation,  pursuant to Rule
415 of the  Securities  Act and any related  qualification  or  compliance  with
respect to all or part of the Registrable Securities owned by the S-3 Initiating
Holders  or their  permitted  transferees  (PROVIDED,  THAT  the S-3  Initiating
Holders registering  Registrable  Securities in such registration (together with
all other holders of Registrable Securities to be included in such registration)
propose to sell their  Registrable  Securities at an aggregate price (calculated
based upon the Market Price of the Registrable  Securities on the date of filing
of the Form S-3 with respect to such Registrable Securities) to the public of no
less than the lesser of $1,000,000 or the remaining Registrable Securities), the
Company shall (i) promptly give written notice of the proposed registration, and
any related  qualification  or  compliance,  to all other holders of Registrable
Securities; and (ii) as soon as practicable, use reasonable best efforts to file
and effect such registration and all such  qualifications and compliances as may
be so requested and as would permit or facilitate the sale and  distribution  of
all or such  portion of the  Registrable  Securities  as are  specified  in such
request,  together with all or such portion of the Registrable Securities of any
other holder in the group of holders  joining in such request as is specified in
a written  request given within fifteen (15) days after the holder's  receipt of
such written notice from the Company.

                                       7
<PAGE>

3.       REGISTRATION PROCEDURES.

         3.1      If and  whenever  the Company is  required  by the  provisions
hereof to effect or cause the  registration of any Registrable  Securities under
the Securities Act as provided  herein,  the Company shall, as  expeditiously as
possible:

                  3.1.1    prepare  and  file  with the SEC,  on or  before  the
Filing Deadline the Mandatory  Registration Statement required by Section 2.1 or
a demand  Registration  Statement  pursuant to Section 2.2 with  respect to such
Registrable  Securities  and use its best  efforts  to cause  such  Registration
Statement to become and remain effective (pursuant to Rule 415 of the Securities
Act) as soon as practicable  after such filing  (provided that,  before filing a
Registration  Statement or prospectus or any amendments or supplements  thereto,
the Company shall furnish to the Investors copies of all such documents proposed
to be filed);

                  3.1.2    prepare  and  file  with  the  SEC  such   amendments
(including  post-effective  amendments)  and  supplements  to such  Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep  such  Registration  Statement  effective,  true  and  correct  during  the
Registration Period. For purposes of this Agreement, "REGISTRATION PERIOD" means
the period  commencing  with the effective date and ending on the earlier of (i)
the sale of all Registrable Securities covered thereby, (ii) the date upon which
the  Investors  may sell the  Registrable  Securities  pursuant  to Rule  144(k)
promulgated under the Securities Act without regard to volume  restrictions,  or
(iii) the  expiration of the 24 months after  Closing or such shorter  period as
shall be  necessary  to complete  the  distribution  of the  securities  covered
thereby, and to comply with the provisions of the Securities Act with respect to
the sale or other  disposition  of all  Registrable  Securities  covered by such
Registration  Statement  during  such  period in  accordance  with the  intended
methods of disposition by the Investors in such Registration Statement;

                  3.1.3    permit the  Investors and their counsel to review and
comment upon all  Registration  Statements at least five (5) business days prior
to  its  filing  with  the  SEC  and  all  amendments  and  supplements  to  all
Registration Statements (except for documents incorporated by reference therein)
within a reasonable number of days prior to their filing with the SEC;

                  3.1.4    submit to the SEC, within two (2) business days after
the Company learns that no review of the Registration  Statement will be made by
the staff of the SEC (the "STAFF") or that the Staff has no further  comments on
the  Registration  Statement,  as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request;

                  3.1.5    furnish to each Investor whose Registrable Securities
are included in the Registration Statement, and to the Placement Agent's counsel
and each  underwriter of the securities  being sold by the Investors such number
of  copies  of such  Registration  Statement  and of  each  such  amendment  and
supplement thereto (in each case including all exhibits),  such number of copies
of the  prospectus  included  in such  Registration  Statement  (including  each
preliminary  prospectus),  in conformity with the requirements of the Securities
Act, and such

                                       8
<PAGE>

other  documents,  as such counsel and  underwriter  may reasonably request,  in
substantially  the form in which they are  proposed to be filed with the SEC, in
order to  facilitate  the public sale or other  disposition  of the  Registrable
Securities owned by the participating Investors. In the case of all Registration
Statements  referred to in Section 2, the Company shall furnish to each Investor
which requests (i) a copy of any request to accelerate the  effectiveness of any
Registration  Statement or amendment thereto,  (ii) on the date of effectiveness
of the Registration  Statement or any amendment  thereto,  a notice stating that
the Registration  Statement or amendment has been declared effective,  and (iii)
such number of copies of a prospectus,  including a preliminary prospectus,  and
all amendments and supplements thereto and such other documents as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities  owned by such Investor.  In responding to comments from the staff of
the SEC, the Company shall cooperate with any Investor that notifies the Company
that it desires to be consulted with respect to such process. To the extent that
issues  raised  by the  staff of the SEC have an  impact  primarily  on any such
Investor rather than the Company, the Company shall give reasonable deference to
such Investor's  requests with respect to the process and substance of responses
with respect to such issues;

                  3.1.6    use its best  efforts to (i) register and qualify the
Registrable  Securities  covered by the Registration  Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as each
Investor who holds  Registrable  Securities being offered  reasonably  requests,
(ii)  prepare  and  file  in  those  jurisdictions  such  amendments  (including
post-effective   amendments)   and   supplements  to  such   registrations   and
qualifications as may be necessary to maintain the effectiveness  thereof during
the  Registration  Period,  (iii) take such other  actions as may be  reasonably
necessary to maintain such  registrations  and  qualifications  in effect at all
times during the Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the  Registrable  Securities  for sale in such
jurisdictions;  PROVIDED,  HOWEVER,  that the  Company  shall not be required in
connection  therewith or as a condition thereto to qualify to do business in any
jurisdiction  where it would not  otherwise  be required to qualify but for this
Section 3.1.6;

                  3.17     subject to  Section  3.1.6,  use its best  efforts to
cause such Registrable  Securities covered by such Registration  Statement to be
registered with or approved by such other  governmental  agencies or authorities
as  may be  reasonably  necessary  to  enable  the  participating  Investors  to
consummate the disposition of its Registrable Securities;

                  3.1.8    notify the participating Investors at any time when a
prospectus  relating to its  Registrable  Securities is required to be delivered
under the  Securities  Act, of the Company's  becoming aware that the prospectus
included in the related Registration  Statement,  as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements  therein not misleading
in light of the circumstances then existing, and promptly prepare and furnish to
the  participating  Investors and each underwriter a reasonable number of copies
of a prospectus  supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities,  such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements  therein not misleading in
the light of the circumstances then existing;

                                       9
<PAGE>

                  3.1.9    otherwise  use its best  efforts  to comply  with all
applicable rules and regulations of the SEC;

                  3.1.10   if  the   Common   Stock  is  listed  on  a  national
securities  exchange,  or on the Nasdaq  Stock  Market,  as the case may be, the
Company  shall use its best  efforts  to cause all such  Registrable  Securities
covered by such Registration  Statement to be listed on the national  securities
exchange, or on the Nasdaq Stock Market, as the case may be (if such Registrable
Securities  are not  already so  listed),  if the  listing  of such  Registrable
Securities is then permitted under the rules of such exchange or market;

                  3.1.11   provide a transfer agent and registrar,  which may be
a single  entity,  for the  Registrable  Securities not later than the effective
date of the Registration Statement;

                  3.1.12   in the case of an underwritten  offering,  enable the
Registrable  Securities to be in such denominations and registered in such names
as the  underwriters may request at least two business days prior to the sale of
the Registrable Securities;

                  3.1.13   cooperate  with the  Investors  who hold  Registrable
Securities  being offered to facilitate the timely  preparation  and delivery of
certificates  (not bearing any  restrictive  legends)  representing  Registrable
Securities to be offered pursuant to the Registration  Statement and enable such
certificates to be in such denominations or amounts,  as the case may be, as the
Investors may  reasonably  request and registered in such names as the Investors
may request;

                  3.1.14   notify the Investors of any stop order threatened, to
the knowledge of the Company, or issued by the SEC (and the Company shall notify
the  Investors of the  resolution of any issued stop order) and take all actions
reasonably  necessary to prevent the entry of such stop order or to remove it if
entered;

                  3.1.15   make available for inspection the Investors and their
representatives  and  advisors  (collectively,  the  "INSPECTORS")  based on the
number of shares  of Common  Stock  acquired  by the  Investors  in the  Private
Placement,  pertinent  financial  and other  records,  and  pertinent  corporate
documents and properties of the Company, as shall be reasonably deemed necessary
by each  Inspector  to enable  each  Inspector  to  exercise  its due  diligence
responsibility,  and cause the  Company's  officers,  directors and employees to
supply all information  which any Inspector may reasonably  request for purposes
of such due diligence;

                  3.1.16   hold in  confidence  and not make any  disclosure  of
information concerning an Investor provided to the Company unless (i) disclosure
of such  information  is necessary  to comply with  federal or state  securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement  or omission in any  Registration  Statement,  (iii) the release of
such  information is ordered  pursuant to a subpoena or other order from a court
or governmental body of competent  jurisdiction,  (iv) such information has been
made generally  available to the public other than by disclosure in violation of
this  Agreement,  or (v) such  Investor  consents to the form and content of any
such disclosure. The Company agrees that it shall, upon learning that disclosure
of such  information  concerning  an  Investor  is  sought  in or by a court  or
governmental body of competent  jurisdiction or through other means, give prompt
notice to such

                                       10
<PAGE>

Investor  prior to  making  such  disclosure,  and allow  the  Investor,  at its
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information;

                  3.1.17   instruct the Company's  transfer  agent to remove the
restrictive  legend  on  the  stock  certificates  after  effectiveness  of  the
applicable  Registration  Statement  and provide.  with the  cooperation  of the
Investors, any required legal opinions at the Company's sole expense; and

                  3.1.18   use its commercially  reasonable  efforts to (subject
to applicable  law), as soon as  practicable,  (A)  incorporate  in a prospectus
supplement or post-effective  amendment the information  provided by an Investor
pursuant to Section 3.2  relating to the sale and  distribution  of  Registrable
Securities,  including,  without  limitation,  information  with  respect to the
number of Registrable Securities being offered or sold, the purchase price being
paid therefor and any other terms of the offering of the Registrable  Securities
to be sold in such offering,  (B) make all required  filings of such  prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus  supplement or post-effective  amendment and (C)
supplement  or make  amendments  to any  Registration  Statement  if  reasonably
requested by an Investor holding any Registrable Securities as it relates to the
information provided by an Investor pursuant to Section 3.2 relating to the sale
and distribution of Registrable Securities.

         3.2      In  connection  with  the   registration  of  the  Registrable
Securities, the Investors shall have the following obligations:

                  3.2.1    each  participating  Investor  shall  furnish  to the
Company  in  writing  such  information  and  documents  regarding  it  and  the
distribution  of its securities as may reasonably be required to be disclosed in
the  Registration  Statement in question by the rules and regulations  under the
Securities Act or under any other applicable  securities or blue sky laws of the
jurisdictions  referred  to in  Section  3.1.4  above,  or as may  otherwise  be
reasonably requested; and

                  3.2.2    if any  such  registration  or  comparable  statement
refers to any participating Investor by name or otherwise as the Investor of any
securities of the Company, but such reference to such participating  Investor by
name or otherwise is not required by the Securities  Act or any similar  federal
statute then in force, then such participating  Investor shall have the right to
require the deletion of the reference to such participating Investor.

         3.3      From and after the date of this  Agreement,  the Company shall
not, and shall not agree to, allow the holders of any  securities of the Company
to include any of their securities in the Mandatory Registration Statement under
Section 2.1 hereof or any  amendment or  supplement  thereto under Section 3.1.2
hereof  without the consent of the  Investors  of a majority in interest  (based
upon the dollars invested) of the Registrable Securities.

4.       REGISTRATION EXPENSES.

         In connection with any registration of Registrable  Securities pursuant
to Section 2, the  Company  shall,  whether or not any such  registration  shall
become  effective,  from  time to time  promptly  pay all  Company  Registration
Expenses. Such expenses shall not include any Selling

                                       11
<PAGE>

Expenses other than the reasonable fees and expenses of one counsel  selected by
the Placement Agent.

5.       INDEMNIFICATION.

         5.1      The  Company  shall,  and  hereby  does,  indemnify  and  hold
harmless,  to the  fullest  extent  permitted  by law,  each  Investor  and each
Placement Agent (and their respective officers,  directors,  managers,  members,
partners,  stockholders,  employees,  agents and  advisors)  and each Person who
controls any Investor or  Placement  Agent within the meaning of the  Securities
Act (each, an "INDEMNIFIED PARTY") from and against all losses, claims, damages,
liabilities and expenses,  joint or several, to which any such Indemnified Party
may become subject under the Securities  Act, the Exchange Act and all rules and
regulations  under each such act,  any other  federal or state  statute,  law or
regulation at common law or otherwise,  insofar as such losses, claims, damages,
liabilities  or  expenses  (or  actions or  proceedings,  whether  commenced  or
threatened,  in respect  thereof)  arise out of or are based upon (i) any untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
Registration Statement or any amendment or supplement thereto or any omission or
alleged  omission to state therein a material fact required to be stated therein
or  necessary to make the  statements  therein not  misleading,  (ii) any untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
preliminary,   final  or  summary   prospectus,   together  with  the  documents
incorporated  by reference  therein (as amended or  supplemented  if the Company
shall have filed with the SEC, any amendment thereof or supplement thereto),  or
any omission or alleged omission to state therein a material fact required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the circumstances under which they were made, not misleading,  or (iii)
any  violation  by the  Company  of any  federal,  state or  common  law rule or
regulation  applicable  to the Company and  relating to action of or inaction by
the Company in connection  with any such  registration  including the failure to
deliver any  document  required  herein to be  delivered,  to an Investor  and a
Placement  Agent;  and in each such case, the Company shall  reimburse each such
Indemnified  Party for any reasonable legal or other expenses as such reasonable
expenses  are  incurred  by  any  of  them  in  connection  with  investigating,
defending,  settling,  compromising,  proving or defending any such loss, claim,
damage, liability,  expense, action or proceeding;  PROVIDED,  HOWEVER, that the
Company  shall not be  liable  to any such  Indemnified  Party  insofar  as such
losses,  claims,  damages,  liabilities,  expenses,  actions or proceedings  are
caused by any untrue  statement  or  material  omission  to provide  information
pursuant to Section 5.2 made in reliance on and in  conformity  with any written
information furnished to the Company by or on behalf of any Indemnified Party to
be  furnished  under  the  Section  5.2 or as a  result  of the  failure  of the
Indemnified  Party to furnish a  prospectus  to a  purchaser  which the  Company
previously furnished to Indemnified Party in a timely manner.

         5.2      In  connection  with any  Registration  Statement in which any
Investor and the Placement Agent is participating,  such  participating  parties
shall furnish to the Company in writing such  information as shall be reasonably
requested  by the  Company  for  use  in  any  such  Registration  Statement  or
prospectus and shall indemnify and hold harmless,  severally and not jointly, to
the extent permitted by law, the Company,  its officers,  directors,  employees,
agents,  advisors and each Person,  if any, who controls the Company  within the
meaning  of  Section 15 of the  Securities  Act,  against  any  losses,  claims,
damages, liabilities, expenses, actions or proceedings resulting from any untrue
statement of a material  fact or any omission of a material

                                       12
<PAGE>

fact with respect to information expressly requested by the Company and required
to be  stated  in  the  Registration  Statement  or  prospectus  or  preliminary
prospectus or any amendment thereof or supplement  thereto, or necessary to make
the statements  therein in the light of the  circumstance  under which they were
made (in the case of a prospectus) not  misleading,  in each case to the extent,
but only to the extent,  that such untrue  statement or omission with respect to
information  expressly  requested  by the  Company is made in reliance on and in
conformity with any information so furnished in writing or to be furnished under
this  Section 5.2 by such  participating  Investor  expressly  for use  therein.
Notwithstanding  the  provisions  of this  Section 5.2,  the  Investors  and the
Placement  Agent shall not be liable for any  indemnification  obligation  under
this  Agreement in excess of the  aggregate  amount of net proceeds  received by
such  persons  from  the  sale of the  Registrable  Securities  pursuant  to the
applicable Registration Statement.

         5.3      Any Person entitled to indemnification under the provisions of
this  Section 5 shall (i) give prompt  notice to the  indemnifying  party of any
claim with  respect to which it seeks  indemnification  but the  omission  to so
notify the indemnifying  party will not relieve the indemnifying  party from any
liability  which it may have  pursuant to this Section 5 to the extent it is not
materially  prejudiced  as a result  of such  failure,  and (ii)  unless  in the
reasonable judgment of counsel for such indemnified party a conflict of interest
between such indemnified and  indemnifying  parties may exist in respect of such
claim,  permit such indemnifying party to assume the defense of such claim, with
counsel reasonably satisfactory to the indemnified party; and if such defense is
so assumed,  such indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement  attributes liability to
the indemnified  party and such  indemnifying  party shall not be subject to any
liability  for  any  settlement  made  without  its  consent.  In the  event  an
indemnifying  party shall not be entitled,  or elects not, to assume the defense
of a claim, such  indemnifying  party shall not be obligated to pay the fees and
expenses  of  more  than  one  law  firm  for all  parties  indemnified  by such
indemnifying party hereunder in respect of such claim,  unless in the reasonable
judgment  of any such  counsel a conflict  of interest  may exist  between  such
indemnified  party and any other of such indemnified  parties in respect to such
claim.  Such indemnity  shall remain in full force and effect  regardless of any
investigation  made by or on behalf of any  indemnified  party and shall survive
the transfer of such securities by such indemnified party.

         5.4      If for any reason the foregoing indemnity is unavailable, then
the  indemnifying  party shall  contribute  to the amount paid or payable by the
indemnified party as a result of such losses,  claims,  damages,  liabilities or
expenses in such  proportion as is  appropriate to reflect the relative fault of
the indemnifying  party and the indemnified  party as well as any other relevant
equitable considerations in accordance with Section 6 below. Notwithstanding the
foregoing,  each of the Investors and the Placement  Agent shall not be required
to  contribute  any amount in excess of the amount such  Investor  or  Placement
Agent would have been required to pay to an  indemnified  party if the indemnity
under   Section   5.2  was   available.   No   Person   guilty   of   fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any Person who was not guilty of such
fraudulent misrepresentation.

         5.5      An  indemnifying  party  shall make  payments  of all  amounts
required to be made pursuant to the foregoing provisions of this Section 5 to or
for the account of the indemnified

                                       13
<PAGE>

party from time to time  promptly  upon  receipt of bills or  invoices  relating
thereto or when otherwise due and payable.

6.       CONTRIBUTION.

         To provide for just and equitable  contribution,  if (i) an Indemnified
Party makes a claim for indemnification pursuant to Section 5 but it is found in
a final  judicial  determination,  not  subject  to  further  appeal,  that such
indemnification  may not be  enforced in such case,  even though this  Agreement
expressly  provides  indemnification in such case, or (ii) any indemnified party
or indemnifying  party seeks contribution under the Securities Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on  behalf  of any  officer,  director,  employee  or  agent  for the
Company,  or any  Controlling  Person of the Company),  on the one hand, and the
indemnified   party,  on  the  other  hand,  shall  contribute  to  the  losses,
liabilities,  claims,  damages, and expenses whatsoever to which any of them may
be subject,  in such  proportions  as are  appropriate  to reflect the  relative
benefits received by the Company, on the one hand, and the indemnified party, on
the other hand; PROVIDED,  HOWEVER,  that if applicable law does not permit such
allocation,  then other relevant equitable  considerations  such as the relative
fault of the  Company and the  indemnified  party in  connection  with the facts
which resulted in such losses, liabilities,  claims, damages, and expenses shall
also be considered. No Person liable for a fraudulent misrepresentation shall be
entitled to  contribution  from any person who is not liable for such fraudulent
misrepresentation.  Anything in this Section 6 to the contrary  notwithstanding,
no party shall be liable for contribution  with respect to the settlement of any
claim or action effected without its written consent. This Section 6 is intended
to supersede any right to  contribution  under the Securities  Act, the Exchange
Act, or otherwise unless such statute makes such right  exclusive.  The Company,
the  Investors  and the  Placement  Agent  agree  that it would  not be just and
equitable if contribution  pursuant to this Section 6 were determined  solely by
pro rata  allocation  or by any other method of  allocation  which does not take
account  of  the  equitable  considerations  referred  to  in  this  Section  6.
Notwithstanding  the provisions of this Section 6, each of the Investors and the
Placement  Agent shall not be required to contribute any amount in excess of the
amount such  Investor or Placement  Agent would have been  required to pay to an
indemnified  party  if the  indemnity  under  Section  5.2  was  available.  The
Investors' and the Placement Agent's  obligations to contribute pursuant to this
Section 6 are several and not joint.

7.       RULE 144.

         The Company  covenants  that it shall file the  reports  required to be
filed  under  the  Securities  Act  and the  Exchange  Act  and  the  rules  and
regulations  adopted by the SEC thereunder (or, in the event that the Company is
not required to file such reports, it shall make publicly available  information
as set forth in Rule 144(c)(2)  promulgated under the Securities Act), or to the
extent  required  from time to time to enable the  Investors  and the  Placement
Agent to sell  their  Registrable  Securities  without  registration  under  the
Securities Act within the  limitation of the exemption  provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the SEC (collectively, "RULE
144").

                                       14
<PAGE>

8.       REGISTRATION RIGHTS OF OTHERS.

         If the  Company  shall at any time  hereafter  provide  any  Person any
rights with respect to the  registration  of any securities of the Company under
the Securities  Act, such rights shall not permit any such  securities to become
registered during the period between Closing and the date that is 180 days after
the Mandatory  Registration Statement becomes effective or, in any other manner,
be superior to the rights  provided  herein to the  Investors  and the Placement
Agent.

9.       REPORTING STATUS AND LISTING.

         (a)      Until the date on which the  Investors  shall have sold all of
their Registrable Securities,  the Company shall file all reports required to be
filed with the SEC  pursuant to the  Exchange  Act,  and the  Company  shall not
terminate  its status as an issuer  required to file reports  under the Exchange
Act even if the  Exchange  Act or the rules  and  regulations  thereunder  would
otherwise permit such termination.

         (b)      The Company shall  maintain the  eligibility  for quotation of
the Common Stock on the OTC BB market  (other than any  criteria of  eligibility
that is beyond  the  Company's  control,  such as its stock  price).  Subject to
applicable law, neither the Company nor any of its  Subsidiaries  shall take any
action  which  would be  reasonably  expected  to  result  in the  delisting  or
suspension  of the Common Stock on the OTC BB market.  The Company shall pay all
fees and expenses in  connection  with  satisfying  its  obligations  under this
section.

10.      TRANSFER OF REGISTRATION RIGHTS.

         If and to the extent that any Investor or the Placement  Agent sells or
otherwise  disposes  of  Registrable  Securities  or  warrants  exercisable  for
Registrable  Securities in any  transaction  that does not require  registration
under the Securities  Act (other than a transaction  exempt under Rule 144), the
rights of the Investor or the  Placement  Agent  hereunder  with respect to such
Registrable Securities shall be assignable to any transferee of such Registrable
Securities;  PROVIDED,  HOWEVER,  that such  transferee  agrees in writing to be
bound by all the terms and conditions of this Agreement.

11.      MISCELLANEOUS.

         11.1     The   registration   rights   provided  to  the  Investors  of
Registrable  Securities  shall be in effect  whenever such Person owns of record
such Registrable Securities;  PROVIDED,  HOWEVER that the Company shall act upon
the basis of this Agreement.

         11.2     A Person is deemed to be an Investor in Registrable Securities
whenever such Person owns of record such Registrable Securities.  If the Company
receives conflicting instructions, notices or elections from two or more Persons
with respect to the same Registrable Securities,  the Company shall act upon the
basis of instructions,  notice or election received from the registered owner of
such Registrable Securities.

         11.3     All notices, offers,  acceptance and any other acts under this
Agreement shall be in writing,  and shall be sufficiently  given if delivered to
the addressees in person, by Federal Express

                                       15
<PAGE>

or similar  receipted  overnight  delivery,  or by facsimile or e-mail  delivery
followed  by a copy sent by  Federal  Express  or  similar  receipted  overnight
delivery, as follows:

            If to the Company:       Bionutrics, Inc.
                                     2415 East Camelback Road
                                     Suite 700
                                     Phoenix, AZ 85022
                                     Attention: Ronald H. Lane, Ph.D., President

            With a copy to:          Reitler Brown & Rosenblatt LLC
                                     800 Third Avenue, 21st Floor
                                     New York, NY 10022
                                     Facsimile No.: (212) 371-5500
                                     Attention: [                ]

If to an  Investor,  at such  address as such  Investor  shall have  provided in
writing to the  Company or such other  address  as such  Investor  furnishes  by
notice given in accordance with this Section 12.3, with a copy to:

                                     Indigo Securities, LLC
                                     780 Third Avenue, 23rd Floor
                                     New York, NY 10017
                                     Facsimile No.: (212) 298-9933
                                     Attention: Eric Brachfeld

            With a Copy to:          Wollmuth Maher & Deutsch LLP
                                     500 Fifth Avenue
                                     New York, New York  10110
                                     Facsimile No.:  (212) 382-0050
                                     Attention: Rory M. Deutsch, Esq.

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

         11.5     This   Agreement   shall  be  governed  by  and  construed  in
accordance  with the laws of the State of New York  applicable to contracts made
and to be performed in the State of New York.

         11.6     Each party agrees that all legal  proceedings  concerning  the
interpretations,  enforcement  and defense of the  transactions  contemplated by
this  Agreement  (whether  brought  against  a party  hereto  or its  respective
affiliates,  directors,  officers,  shareholders,  employees or agents) shall be
commenced exclusively in the state and federal courts sitting in Manhattan,  New
York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction
of the  state  and  federal  courts  sitting  in  Manhattan,  New  York  for the
adjudication of any dispute hereunder or in

                                       16
<PAGE>

connection  herewith or with any  transaction  contemplated  hereby or discussed
herein (including with respect to the enforcement hereof). Each party agrees not
to commence a claim or proceeding  hereunder in a court other than a state court
or federal  court sitting in  Manhattan,  New York,  except (i) if required as a
mandatory counterclaim or cross-claim in a proceeding commenced by a Person in a
different  jurisdiction  or (ii) if such party has first  brought  such claim or
proceeding  in such  court  sitting  in  Manhattan,  New York and both the state
courts  and the  federal  courts  sitting  in  Manhattan,  New York have  denied
jurisdiction over such claim or proceeding. Each party hereto 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  Agreement 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 manner  permitted by law.  Each party hereto  (including
its affiliates,  agents,  officers,  directors and employees) 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
Agreement or the transactions contemplated hereby.

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

         11.8     Subject  to  the  requirements  of  Section  10  hereof,  this
Agreement  shall inure to the benefit of and be binding upon the  successors and
assigns of each of the parties hereto.

         11.9     The  headings  in  this  Agreement  are  for   convenience  of
reference only and shall not form part of or effect the  interpretation  of this
Agreement.

         11.10    This  Agreement  may be executed in one or more  counterparts,
each of which  shall be  deemed  an  original  but all of which  together  shall
constitute one and the same  instrument.  The execution of this Agreement may be
by actual or facsimile signature.

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

         11.12    Except as otherwise set forth herein, all consents,  approvals
and other  determinations to be made by the Investors pursuant to this Agreement
shall be made by the  Investors  holding  more  than 66 2/3% of the  Registrable
Securities then held by all Investors.

                                       17
<PAGE>

         11.13    If any  provision  of  this  Agreement  shall  be  invalid  or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

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

               [REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]

                                       18
<PAGE>

BIONUTRICS, INC.

By:_______________________________
Name:  Ronald H. Lane, Ph.D.
Title: President

PLACEMENT AGENT:

INDIGO SECURITIES, LLC

By:_______________________________
Name:  Eric Brachfeld
Title: Managing Member

INVESTORS:

                      [ADDITIONAL SIGNATURE PAGES ATTACHED]

                                       19
<PAGE>

                                   SCHEDULE 1
                                   ----------

                                       TO

                          REGISTRATION RIGHTS AGREEMENT

                                  BY AND AMONG

                                BIONUTRICS, INC.

                          AND THE FOLLOWING INVESTORS:

                                                                 NO OF
                                                                 -----
     NAME                     ADDRESS                  STATE   SECURITIES
     ----                     -------                  -----   ----------

                                                               $

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