Document:

Securities Purchase Agreement, dated May 5, 2010

 Exhibit 10.6 

SECURITIES PURCHASE AGREEMENT 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is entered into as of the
5th day of May, 2010, by and between PETROALGAE INC., a
Delaware corporation (“Seller,” or the “Company”), and VALENS OFFSHORE SPV I, LTD., a Cayman Islands corporation (“Purchaser”). 

W I T N E S S E T H : 

WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, 84,375 shares (the
“Shares”) of common stock, par value $0.001 per share, of the Company (the “Common Stock”) and a warrant to purchase 84,375 shares of Common Stock, in the form attached hereto as Exhibit A (the
“Warrant”, and together with the Shares, the “Securities”) upon the terms and subject to the conditions set forth herein. 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements, undertakings and
obligations set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows: 
 ARTICLE 1

 SALE AND PURCHASE OF THE SECURITIES 

Section 1.1 Sale and Purchase of the Securities. Upon the terms and subject to the conditions set forth in this Agreement and
on the basis of the representations, warranties, covenants, agreements, undertakings and obligations contained herein, at the Closing (as defined in Section 2.1 hereof), Seller hereby agrees to sell to Purchaser, and Purchaser hereby
agrees to purchase from Seller, the Securities, free and clear of any and all Liens (as defined in Section 8.11 hereof), for the consideration specified in this Article 1. 

Section 1.2 Purchase Price. The purchase price for the Securities (the “Purchase Price”) shall be
$675,000.00. 
 Section 1.3 Payment of Purchase Price. Purchaser agrees to pay to Seller the Purchase Price at the
Closing by wire transfer or delivery of other immediately available funds to an account of Seller designated to Purchaser prior to the Closing. For purposes of this Agreement, the term “Business Day” shall mean any day, other than a
Saturday or a Sunday, that is neither a legal holiday nor a day on which banking institutions are generally authorized or required by law or regulation to close in the City of New York. 

ARTICLE 2 

CLOSING AND DELIVERY 

Section 2.1 Closing Date. The closing (the “Closing”) of the sale and purchase of the Securities (the
“Securities Purchase”) shall take place at the offices of Torys LLP, 237 Park Avenue, New York, New York 10017 at 10:00 A.M. (New York City time) on the third (3rd) Business Day following satisfaction or, if permissible, waiver
of the conditions set forth in 

 
Article 6 of this Agreement (excluding those conditions which by their nature are to be satisfied as a part of the Closing) or at such other place, time or date as the parties hereto
may agree (the time and date of the Closing being herein referred to as the “Closing Date”). 

Section 2.2 Deliveries by Seller to Purchaser. On the Closing Date, Seller shall deliver, or cause to be delivered, to
Purchaser the following: 
 (a) a certificate or certificates evidencing all of the Shares and the duly executed Warrant;

 (b) the certificates and other documents and instruments to be delivered pursuant to Section 6.2 hereof; and

 (c) such other closing documents as Seller and Purchaser shall reasonably agree. 

Section 2.3 Deliveries by Purchaser to Seller. On the Closing Date, Purchaser shall deliver, or cause to be delivered, to
Seller the following: 
 (a) the Purchase Price, in accordance with Section 1.3 hereof; 

(b) the certificates and other documents and instruments to be delivered pursuant to Section 6.3 hereof; and 

(c) such other closing documents as Seller and Purchaser shall reasonably agree. 

ARTICLE 3 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

As used herein (i) any reference to any event, change or effect being “material” with respect to the Company means
an event, change or effect which is material in relation to the condition (financial or otherwise), properties, business, operations, prospects, assets or results of operations of the Company, and (ii) the term “Material Adverse
Effect” on the Company means a material adverse effect on (x) the condition (financial or otherwise), properties, business, operations, prospects, assets, nature of assets, liabilities, or results of operations of the Company and its
subsidiaries taken individually and/or as whole, or (y) the ability of the Company to perform its obligations under this Agreement. 

The Company hereby represents and warrants to Purchaser as follows: 

Section 3.1 Organization and Good Standing. The Company is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation with full corporate power and authority to conduct its business as it is now being conducted. The Company is duly qualified or licensed to do business as a foreign corporation

  

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and is in good standing as a foreign corporation in each 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 licensing, qualification or good standing, except for any failure to so license, qualify or be in such good standing, which, when taken together with all other such failures, has not had, does not have and could not reasonably be
expected to have a Material Adverse Effect on the Company. 
 Section 3.2 Capitalization. 

(a) The authorized capital stock of the Company consists solely of 300,000,000 shares of Common Stock, and 25,000,000 shares of Preferred
Stock, of which 106,641,980 shares of Common Stock are issued and outstanding and of which no shares of Preferred Stock are issued and outstanding. Except as set forth on Schedule 3.2(a) hereto, there are no options to purchase or rights to
subscribe for shares of Common Stock, securities by their terms convertible into, exercisable or exchangeable for shares of Common Stock, or options to purchase or rights to subscribe for such convertible, exercisable or exchangeable securities
issued or outstanding. All of the issued and outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and nonassessable and have been issued in compliance with all foreign, federal and state
securities laws. 
 (b) The Securities and the shares issuable upon exercise of the Warrant to be issued and sold by the Company
to the Purchaser hereunder and thereunder have been duly and validly authorized and, when issued and delivered against payment therefore as provided herein and therein, will be duly and validly issued and fully paid and non-assessable. 

Section 3.3 Corporate Authority. The Company has taken all corporate action necessary in order to execute, deliver and
perform fully, its obligations under this Agreement and to consummate the Securities Purchase contemplated hereby. The execution and delivery by the Company of this Agreement and the consummation by the Company of the Securities Purchase
contemplated hereby have been duly authorized and approved by the Board of Directors of the Company and no other corporate proceeding with respect to the Company is necessary to authorize this Agreement or the Securities Purchase contemplated
hereby. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. 

Section 3.4 No Violations; No Consents. The execution and delivery by the Company of this Agreement does not, and the
performance and consummation by the Company of the Securities Purchase contemplated hereby will not, directly or indirectly (with or without the giving of notice or the lapse of time or both): 

(a) contravene, conflict with, or constitute or result in a breach or violation of, or a default under (i) any provision of the
Company’s Certificate of Incorporation or By-laws or (ii) any resolution adopted by the Board of Directors (or similar governing body) of the Company; 
  

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 (b) contravene, conflict with, or constitute or result in a breach or violation of any Law
(as defined below), award, decision, injunction, judgment, decree, settlement, order, process, ruling, subpoena or verdict (whether temporary, preliminary or permanent) entered, issued, made or rendered by any court, administrative agency,
arbitrator, Governmental Entity or other tribunal of competent jurisdiction (“Order”) or give any Governmental Entity or any other Person the right to challenge the Securities Purchase contemplated hereby; or 

(c) require the consent or approval of any Governmental Entity or any third party which has not already been obtained. 

For purposes of this Agreement, the term “Law” shall mean any federal, state, local, municipal, foreign, international,
multinational, or other constitution, law, rule, standard, requirement, administrative ruling, order, ordinance, principle of common law, legal doctrine, code, regulation, statute, treaty or process. 

Section 3.5 Actions. There are no civil, criminal, administrative, investigative or informal actions, audits, demands, suits,
claims, arbitrations, hearings, litigations, disputes, investigations or other proceedings of any kind or nature (“Actions”) or Orders issued, pending or, to the knowledge of the Company, threatened, against the Company or any of
its assets, at law, in equity or otherwise, in, before, by, or otherwise involving, any Governmental Entity, arbitrator or other Person that individually or in the aggregate, (i) have had, do have or could reasonably be expected to have a
Material Adverse Effect on the Company or (ii) question or challenge the validity or legality of, or have the effect of prohibiting, preventing, restraining, restricting, delaying, making illegal or otherwise interfering with, this Agreement,
the consummation of the Securities Purchase contemplated hereby or any action taken or proposed to be taken by the Company pursuant hereto or in connection with the Securities Purchase contemplated hereby. To the knowledge of the Company, no event
has occurred or circumstance exists that could reasonably be expected to give rise to or serve as a basis for the commencement of any such Action or the issuance of any such Order. 

Section 3.6 SEC Reports. The Company has filed all reports required to be filed by it under the Securities Act and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) thereof (the foregoing materials being collectively referred to herein as the “SEC Reports”), on a
timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and regulations of the Securities and Exchange Commission (the “Commission”) promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There has been no material
change in the financial condition or results of operations of the Company and its subsidiaries taken individually and/or as whole since the last audited financial statements of the Company included in the SEC Reports. 

 

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 Section 3.7 No Material Adverse Effect. There has been no Material Adverse
Effect on the Company since March 31, 2010. 
 Section 3.8 Internal Accounting Controls; Sarbanes-Oxley Act of
2002. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and designed such disclosures controls and
procedures and internal control over financial reporting to ensure that material information relating to the Company, is made known to the certifying officers by others within those entities, particularly during the period in which the
Company’s Form 10-K or 10-Q, as the case may be, is being prepared, and to provide reasonable assurance regarding the financial reporting and preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures and internal control over financial reporting as of the date of its most recently filed periodic report
(such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures and internal control
over financial reporting based on their evaluations as of the Evaluation Date. 
 Section 3.9 Trading With the Enemy
Act; Patriot Act. To the knowledge of the Company, no sale of the Company’s securities by the Company nor the Company’s use of the proceeds from such sale has violated the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Without limiting the foregoing, the Company (a) is not a person
whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66
Fed. Reg. 49079 (2001)) and (b) to the knowledge of the Company, does not engage in any dealings or transactions, or be otherwise associated, with any such person. The Company is in compliance with the USA Patriot Act of 2001 (signed into
law October 26, 2001). 
 Section 3.10 Listing of Common Stock. The Common Stock is eligible to trade and be
quoted on, and is quoted on, the over-the-counter Bulletin Board market maintained by The Nasdaq Stock Market (the “OTCBB”) and the Company has received no notice or other communication indicating that such eligibility is subject to
challenge or review by any applicable regulatory agency, electronic market administrator, or exchange. The Company has not, and shall not take any action that would preclude, or otherwise jeopardize, the inclusion of the Common

  

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Stock for quotation on the OTCBB. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all listing requirements of the OTCBB.

 ARTICLE 4 

REPRESENTATIONS AND WARRANTIES OF PURCHASER 

Purchaser hereby represents and warrants to Seller as follows: 

Section 4.1 Organization and Good Standing. Purchaser is a Caymans Island corporation duly organized and validly existing and
in good standing under the laws of the Cayman Islands. 
 Section 4.2 Corporate Authority. Purchaser has the full
legal right, requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform fully, its obligations under this Agreement and to consummate the Securities Purchase. The execution and
delivery by Purchaser of this Agreement and the consummation by Purchaser of the Securities Purchase have been duly authorized and approved by the governing body of Purchaser and no other corporate proceeding with respect to Purchaser is necessary
to authorize this Agreement or the Securities Purchase contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and constitutes a valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with
its terms. 
 Section 4.3 No Violations. (a) The execution and delivery by Purchaser of this Agreement does
not, and the performance and consummation by Purchaser of the Securities Purchase will not, with respect to Purchaser, directly or indirectly (with or without the giving of notice or the lapse of time or both): 

(i) contravene, conflict with, or constitute or result in a breach or violation of, or a default under (A) any
provision of the Certificate of Incorporation or By-laws (or equivalent documents) of Purchaser or (B) any resolution adopted by the Board of Directors (or similar governing body) of Purchaser; or 

(ii) contravene, conflict with, or constitute or result in a breach or violation of, any material Law or Order to which
Purchaser, or any of the assets owned or used by Purchaser, are subject. 
 Section 4.4 Securities Act. Purchaser is
acquiring the Securities, and will acquire the shares of Common Stock issuable upon exercise of the Warrant (“Warrant Shares”), for its own account and not with a view to their distribution within the meaning of
Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”) in any manner that would be in violation of the Securities Act. 
  

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 Section 4.5 Purchaser Status. At the time Purchaser was offered the Securities,
it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. 

Section 4.6 Experience of Purchaser. Purchaser, either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Purchaser
understands that it must be able to bear the economic risk of this investment in the Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment. 

Section 4.7 Access to Information. Purchaser acknowledges that it has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to
information (other than material non-public information) about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. 

Section 4.8 Restricted Securities. Purchaser understands that the Securities are, and the Warrant Shares will be,
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only in certain limited circumstances. 

ARTICLE 5 

COVENANTS 

Section 5.1 Public Announcements. Each of the parties hereto shall consult with each other before issuing any press release
or making any public statement with respect to this Agreement or the Securities Purchase contemplated hereby and, except as may be required by applicable law, will not issue any such press release or make any such public statement prior to such
consultation and without the consent of the other parties. 
 Section 5.2 Notices of Certain Events. In addition to
any other notice required to be given by the terms of this Agreement, each of the parties shall promptly notify the other parties hereto of: 

(a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with
the Securities Purchase contemplated by this Agreement; 
  

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 (b) any notice or other communication from any governmental or regulatory agency or
authority in connection with the Securities Purchase contemplated by this Agreement; and 
 (c) any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened against, relating to or involving or otherwise affecting such party or that relate to the consummation of the Securities Purchase contemplated by this Agreement. 

Section 5.3 Issuance of Additional Shares. 

(a) If the Company shall, at any time or from time to time after the issuance of the Shares and until such time as the Purchaser no
longer owns any shares of Common Stock issued pursuant to this Agreement (including shares issued pursuant to this Section 5.3) or six (6) months after the date of this Agreement, whichever occurs first, issue shares of Common Stock,
options to purchase or rights to subscribe for shares of Common Stock, securities by their terms convertible into, exercisable or exchangeable for shares of Common Stock, or options to purchase or rights to subscribe for such convertible,
exercisable or exchangeable securities without consideration or for consideration per share (including, in the case of such options, rights, or securities, the additional consideration required to be paid to the Company upon exercise, conversion or
exchange) less than the Effective Price Per Share (as hereinafter defined) (each such issuance, a “Triggering Issuance”), then (i) the Company shall issue to the Purchaser, for no additional consideration, such number of shares
of Common Stock which when aggregated with the Shares issued hereunder to Purchaser prior to the applicable Triggering Issuance would result in an effective purchase price per share of Common Stock to the Purchaser (calculated by dividing the
Purchase Price by such aggregate number of shares) equal to the effective price per share of Common Stock of the Triggering Issuance (calculated by dividing the total consideration received by the Company for such issuance (as determined below)
divided by the number of shares issued (as determined below)), and (ii) the Effective Price Per Share shall be adjusted to equal the effective price per share of Common Stock of the Triggering Issuance. “Effective Price Per
Share” shall mean $8.00, as subsequently adjusted pursuant to this Section 5.3. Notwithstanding the foregoing, a Triggering Issuance shall not include any options to purchase shares of Common Stock (or any shares issued in connection
therewith) or other form of incentive equity granted or issued under the Company’s 2009 Equity Compensation Plan, or any shares of Common Stock issued to a strategic partner or licensee in connection with a joint venture, strategic alliance,
licensing agreement, or other similar form of agreement. 
 (b) For the purposes of calculating the number of shares of Common
Stock issuable and the adjustment in the Effective Price Per Share pursuant to paragraph (a) of this Section 5.3, the following provisions shall be applicable: 

(i) In the case of the issuance of shares of Common Stock for cash in a public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor before deducting therefrom any discounts, commissions or placement fees payable by the Company to any underwriter or placement agent in connection with the issuance and sale thereof. 

 

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 (ii) In the case of the issuance of shares of Common Stock for a consideration in whole or
in part other than cash, the consideration other than cash shall be deemed to be the Fair Market Value (as defined in the Warrant) thereof. 

(iii) In the case of the issuance of options to purchase or rights to subscribe for shares of Common Stock, securities by their terms
convertible into, exercisable or exchangeable for shares of Common Stock, or options to purchase or rights to subscribe for such convertible, exercisable or exchangeable securities: 

(1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe
for shares of Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration, if any, received by the Company upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the shares of Common Stock covered thereby; 
 (2) the aggregate
maximum number of shares of Common Stock deliverable upon conversion of, exercise, or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible,
exercisable or exchangeable securities and subsequent conversion, exercise or exchange thereof shall be deemed to have been issued at the time such securities, options, or rights were issued and for a consideration equal to the consideration
received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any related options or rights; 
 (3) no further adjustment of the
Effective Price Per Share adjusted upon the issuance of any such options, rights, convertible securities or exchangeable securities shall be made as a result of the actual issuance of shares of Common Stock or the exercise of any such rights or
options or any conversion or exchange of any such securities. 
 Section 5.4 Extraordinary Events Regarding Common
Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company, (b) subdivide its outstanding
shares of Common Stock, (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Effective Price Per Share shall be adjusted to a number determined by multiplying
the Effective Price Per Share immediately prior to any such event by a fraction of which (a) the numerator is the number of issued and outstanding shares of Common Stock immediately prior to any such event, and (b) the denominator is the
number of issued and outstanding shares of Common Stock immediately after to any such event. 
 Section 5.5 Lock Up
Agreement. The parties acknowledge and agree that the Shares, the Warrant Shares, and any additional shares issuable in connection with this Agreement or the 

 

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Warrant, shall be “Common Stock” under, and subject to, that certain Lock-Up Letter Agreement executed on or about February 17, 2010 by the Purchaser in favor of the Company for
effectiveness as of December 30, 2009. 
 ARTICLE 6 

CONDITIONS PRECEDENT 

Section 6.1 Conditions to Each Party’s Obligations to Consummate. The respective obligations of each party to consummate
the Securities Purchase contemplated by this Agreement shall be subject to the fulfillment or waiver at or prior to the Closing of the following conditions: 

(a) No Termination. This Agreement shall not have been terminated pursuant to Section 7.1. 

(b) Absence of Litigation; No Orders. No formal or informal action or proceeding shall have been instituted on or before the
Closing Date before any court or governmental body or authority pertaining to the Securities Purchase, the result of which would prevent or make illegal the consummation of such Securities Purchase or which could have a Material Adverse Effect on
the Company. Neither the Company nor Purchaser shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction which either enjoins or prohibits the consummation of the Securities Purchase. 

Section 6.2 Conditions Precedent to Purchaser’s Obligations. The obligations of Purchaser to consummate the Securities
Purchase contemplated hereby shall be subject to the fulfillment or waiver (in whole or in part by Purchaser) at or prior to the Closing of the following conditions: 

(a) Representations and Warranties. Each of the representations and warranties of the Company set forth in this Agreement shall in
each case be true and correct in all material respects (if not qualified by “materiality” or “Material Adverse Effect”) and in all respects (if qualified by “materiality” or “Material Adverse Effect”) as of
the date of this Agreement and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of the Closing Date; 

(b) Covenants. All of the covenants, agreements, undertakings and obligations that the Company is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing, shall have been duly performed and complied with; the Company must have delivered to Purchaser each of the documents required to be delivered by Seller pursuant to Section 2.2
hereof; 
 (c) Officer’s Certificate. The Company shall have delivered to Purchaser a certificate, dated as of the
Closing Date and signed by the Chief Executive Officer of the Company, representing that the conditions referred to in Section 6.2(a) and Section 6.2(b) hereof have been satisfied; 

 

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 (d) Good Standing Certificate. The Company shall have furnished Purchaser with a
recently dated good standing and existence certificate for the Company in its jurisdiction of incorporation and any jurisdictions in which it is qualified to do business as Purchaser reasonably requests; and 

(e) Other Documentation. Purchaser shall have received such other documents, certificates, opinions or statements as Purchaser may
reasonably request, including legal opinions from the Company’s counsel covering such matters requested by the Purchaser. 

Section 6.3 Conditions Precedent to the Company’s Obligations. The obligations of the Company to consummate the
transactions contemplated hereby shall be subject to the fulfillment or waiver (in whole or in part by the Company) at or prior to the Closing of the following conditions: 

(a) Representations and Warranties. Each of the representations and warranties of Purchaser set forth in this Agreement shall in
each case be true and correct in all material respects (if qualified by “Materiality” or “Material Adverse Effect”) as of the date of this Agreement and as of the Closing Date, with the same effect as though such representations
and warranties had been made on and as of the Closing Date; 
 (b) Covenants. All of the covenants, agreements,
undertakings and obligations that Purchaser is required to perform or to comply with pursuant to this Agreement at or prior to the Closing, shall have been duly performed and substantially complied with. Purchaser must have delivered to the Company
each of the documents required to be delivered by Purchaser pursuant to Section 2.3 hereof; 
 (c) Officer’s
Certificate. Purchaser shall have delivered to the Company a certificate, dated as of the Closing Date and signed by a senior executive officer or officers of Purchaser, representing that the conditions referred to in Section 6.3(a)
and Section 6.3(b) hereof have been satisfied; and 
 (d) Payment of Purchase Price. The Company shall have
received the Purchase Price in accordance with Section 1.3. 
 ARTICLE 7 

TERMINATION 

Section 7.1 Termination. This Agreement may be terminated and the sale of Securities may be abandoned at any time prior to
the Closing: 
 (a) by mutual written consent of the parties hereto; 

(b) by either the Company or Purchaser if the Closing shall not have occurred on or before May 12, 2010 (unless the failure to
consummate the transactions by such date shall be due to the action or failure to act of the party seeking to terminate this Agreement); 
  

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 (c) by Purchaser if: (i) the Company shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement to be complied with or performed by the Company; or (ii) any representations and warranties of Seller contained in this Agreement shall not have been true when made, or
on and as of the Closing Date as if made on and as of the Closing Date (except to the extent it relates to a particular date); or 

(d) by the Company if: (i) Purchaser shall have failed to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by Purchaser; or (ii) any representations and warranties of Purchaser contained in this Agreement shall not have been true when made, or on and as of the Closing Date as if made on
and as of the Closing Date (except to the extent it relates to a particular date). 
 Section 7.2 Effect of
Termination. In the event of the termination and abandonment of this Agreement pursuant to Section 7.1 of this Agreement, this Agreement (other than Section 8.3 (Fees and Expenses), Section 8.5 (Governing Law)
and Section 8.6 (Consent to Jurisdiction; Waiver of Jury Trial), which shall remain in full force and effect) shall forthwith become null and void and no party hereto shall have any Liability or further obligation to any other party
hereto, except as provided in this Section 7.2; provided, however, that if this Agreement is terminated by a party because of the breach of this Agreement by the other party or because one or more of the conditions of the
terminating party’s obligations under this Agreement is not satisfied as a result of the other party’s failure to fully comply with its obligations under this Agreement, the terminating party’s rights to pursue all legal remedies will
survive such termination unimpaired. 
 ARTICLE 8 

MISCELLANEOUS 

Section 8.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly
given (a) on the date received if delivered personally or by facsimile or (b) on the date received if mailed by registered or certified mail (return receipt requested), to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): 
 If to Seller: 

PetroAlgae Inc. 

1901 S. Harbor City Boulevard 

Suite 300 

Melbourne, Florida 32901 

Attn:    David Szostak 

Facsimile: (321) 723-7047 
  

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 With a copy (which shall not constitute notice) to: 

Torys LLP 

237 Park Avenue 

20th Floor 

New York, New York 10017 

Attn:    Andrew J. Beck 

            Daniel P. Raglan 

Facsimile: (212) 682-0200 

If to Purchaser: 

Valens Offshore SPV I, Ltd. 

c/o Valens Capital Management LLC 

335 Madison Avenue 

10th Floor 

New York, New York 10017 

Attn:    Pat Regan 

Facsimile: (212) 541-4410 

Section 8.2 Amendments; No Waivers. 

(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in
the case of an amendment, by the Company and Purchaser; or in the case of a waiver, by the party against whom the waiver is to be effective. 

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law. 
 Section 8.3 Fees and Expenses. Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with this Agreement and the obligations contemplated hereby shall be paid by the party incurring such cost or expense. In the event of termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. 

Section 8.4 Successors and Assigns; No Third-Party Beneficiaries. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other
party hereto, but any such transfer or assignment will not relieve the appropriate party of its obligations hereunder. Nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement or any provision of this Agreement. 
  

 13 

 Section 8.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. 

Section 8.6 Consent to Jurisdiction; Waiver of Jury Trial. 

(a) Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this
Agreement or the Securities Purchase contemplated hereby may be brought in any federal or state court located in the City of New York, Borough of Manhattan, and each of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 8.1 shall be deemed effective service of process on such party.

 (b) Each party hereto hereby acknowledges and agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each such party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to
this Agreement, any document referred to in this Agreement or the Securities Purchase contemplated hereby. 
 Section 8.7
Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies
hereunder. 
 Section 8.8 Entire Agreement. This Agreement constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof. 

Section 8.9 Captions. The captions herein are included for convenience of reference only and shall be ignored in the
construction or interpretation hereof. 
 Section 8.10 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or 
  

 14 

 
invalidated so long as the economic or legal substance of the Securities Purchase contemplated hereby is not affected in any manner materially adverse to any parties. Upon such a determination,
the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible. 
 Section 8.11 Definition and Usage. 

For purposes of this Agreement: 

“Governmental Entity” means any foreign, federal, state, local, municipal, county or other governmental,
quasi-governmental, administrative or regulatory authority, body, agency, court, tribunal, commission or other similar entity (including any branch, department or official thereof). 

“Liability” means any debt, liability, commitment or obligation of any kind, character or nature whatsoever, whether
known or unknown, choate or inchoate, secured or unsecured, accrued, fixed, absolute, contingent or otherwise, and whether due or to become due. 

“Lien” means any charges, claims, community property interests, conditions, conditional sale or other title retention
agreements, covenants, easements, encumbrances, equitable interests, exceptions, liens, mortgages, options, pledges, reservations, rights of first refusal, security interests, or restrictions of any kind, including any restrictions on use, voting,
transfer, alienation, receipt of income, or exercise of any other attribute of ownership. 
 Section 8.12 Survival.
All covenants contained herein shall survive the Closing. The representations and warranties contained herein shall not survive the Closing; provided that the representations and warranties of the Company set forth in Section 3.1,
Section 3.2 and Section 3.3, and the representations and warranties of the Purchaser set forth in Section 4.4, Section 4.5, Section 4.6, Section 4.7 and Section 4.8,
shall each survive the Closing. 
 Section 8.13 Further Assurances. From time to time, each party hereto will
execute such additional instruments and take such actions as may be reasonably required to carry out the intent and purposes of this Agreement. 

Section 8.14 Review of Agreement. Each party hereto acknowledges that it has had time to review this Agreement and, as
desired, consult with counsel. In the interpretation of this Agreement, no adverse presumption shall be made against any party on the basis that it has prepared, or participated in the preparation of, this Agreement. 

Section 8.15 Brokerage. Each party hereto represents and warrants to the other that there are no claims for brokerage
commissions or finder’s fees or agent’s commissions or other like payment in connection with this Agreement or the transactions contemplated hereby, except for such commissions and fees incurred by reason of any action taken by a party
hereto that will be paid by and be the responsibility of such party. 
  

 15 

 [SIGNATURE PAGE FOLLOWS] 

 

 16 

 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of the day and
year first above written by the duly authorized officers of Seller and Purchaser. 
  

			
	SELLER:
	
	PETROALGAE INC.
		
	By:	 	 /S/    DAVID
SZOSTAK

		 	Name: David Szostak
		 	Title: President
	
	PURCHASER:
	
	VALENS OFFSHORE SPV I, LTD.
		
	 By:
	 	Valens Capital Management, LLC its investment manager
		
	By:	 	 /S/    PATRICK
REGAN

		 	Name: Patrick Regan
		 	Title: Authorized Signatory

[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] 
  

 17 

 Schedule 3.2(a) 

 

	 	1.	Outstanding employee stock options to purchase 1,369,000 shares of Common Stock. 

 

	 	2.	That certain Warrant exercisable for 68,625 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on August 28, 2009. 

 

	 	3.	That certain Warrant exercisable for 56,375 shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on August 28, 2009.

  

	 	4.	That certain Warrant exercisable for 34,313 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on September 4, 2009. 

 

	 	5.	That certain Warrant exercisable for 28,187 shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on September 4, 2009.

  

	 	6.	That certain Warrant exercisable for 68,625 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on September 14, 2009. 

 

	 	7.	That certain Warrant exercisable for 56,375shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on September 14, 2009.

  

	 	8.	That certain Warrant exercisable for 68,625 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on September 29, 2009. 

 

	 	9.	That certain Warrant exercisable for 56,375 shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on September 29, 2009.

  

	 	10.	That certain Warrant exercisable for 68,625 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on October 13, 2009. 

 

	 	11.	That certain Warrant exercisable for 56,375 shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on October 13, 2009.

  

	 	12.	That certain Warrant exercisable for 375,000 shares of Common Stock issued by the Company to Green Alternative Energy USA, LLC on October 9, 2009.

  

	 	13.	That certain Warrant exercisable for 500,000 shares of Common Stock issued by the Company to UBS AG on October 16, 2009. 

 

	 	14.	That certain Warrant exercisable for 375,000 shares of Common Stock issued by the Company to Green Science Energy LLC on December 24, 2009.

  

	 	15.	That certain Warrant exercisable for 6,250 shares of Common Stock issued by the Company to Lynn C. November on February 12, 2010. 

 

 18 

	 	16.	That certain Warrant exercisable for 140,938 shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on March 1, 2010.

  

	 	17.	That certain Warrant exercisable for 171,562 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on March 1, 2010. 

 

	 	18.	That certain Warrant exercisable for 84,375 shares of Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on April 7, 2010. 

 

	 	19.	That certain Warrant exercisable for 103,125 shares of Common Stock issued by the Company to Valens U.S. SPV I, LLC on April 7, 2010. 

 

	 	20.	Amended and Restated Convertible Note outstanding in favor of PetroTech Holdings, Corp., a Delaware corporation, with a principal balance of ten million dollars
($10,000,000), an interest rate of 12%, and a maturity date of June 30, 2012. 

  

 19Unassociated Document

     

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

      

      SERIES
E COMMON STOCK PURCHASE WARRANT

      

      HEPALIFE
TECHNOLOGIES, INC.

       

      
      

       

      
        	
                Warrant
      No. E-______ 

                 

                
                  Warrant
      Shares: _________
      

                

              	 	
                
                  Issue
      Date: _______________________

                   

                

                Initial
      Exercise Date: ________________

              

      

       

       

      THIS SERIES E COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies
that, for value received, ____________________________ (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter (the “Exercise Period”), to
subscribe for and purchase from HepaLife Technologies, Inc., a Florida
corporation (the “Company”), up to
_____________________
shares (the “Warrant Shares”) of
common stock, par value $0.001 per share (the “Common
Stock”).  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section 1(b).

       

      THIS
WARRANT IS BEING ISSUED PURSUANT TO THE TERMS OF THAT THAT CERTAIN SUBSCRIPTION
AGREEMENT (THE “SUBSCRIPTION
AGREEMENT”)  BETWEEN THE COMPANY AND THE SUBSCRIBER SIGNATORY
THERETO AND ACCEPTED BY THE COMPANY ON MAY 11, 2010.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

       

      Section
1.            Exercise.

      

      a)           Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company); and, within 3 Trading Days (as defined
below) of the date said Notice of Exercise is delivered to the Company, the
Company shall have received  payment of the aggregate Exercise Price
of the shares thereby purchased by wire transfer or cashier’s check drawn on a
United States bank.  Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the
Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder
shall surrender this Warrant to the Company for cancellation within 3 Trading
Days of the date the final Notice of Exercise is delivered to the
Company.  Partial exercises of this Warrant resulting in purchases of
a portion of the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased.  The Holder and the Company shall maintain records showing
the number of Warrant Shares purchased and the date of such
purchases.  The Company shall deliver any objection to any Notice of
Exercise Form within 2 Business Days following receipt of such
notice.  The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof. For purposes of this Agreement, the term “Trading Day” means
any day on which the New York Stock Exchange is open for business.

      

      b)           Exercise
Price.  The exercise
price per share of the Common Stock under this Warrant shall be $0.16, subject to adjustment
hereunder (the “Exercise
Price”).

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
 

      c)           Exercise
Limitations. The
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section 1 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates (as defined in the Subscription Agreement), and any
other person or entity acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own shares of Common Stock in excess of
the Beneficial Ownership Limitation (as defined below).  For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its
Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company  subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its Affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act of 1934 as amended (the “Exchange Act”) and
the rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith.   To the extent that the limitation contained in this
Section 1(c) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination.   In addition, a
determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder.  For purposes of this Section
1(c), in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as reflected in (x)
the Company’s most recent periodic or annual report, as the case may be, (y) a
more recent public announcement by the Company or (z) any other notice by the
Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding.  Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.  In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 1(c), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 1(c) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st day
after such notice is delivered to the Company.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 1(c) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
this Warrant.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

      d)           Mechanics of
Exercise.

      

      i.      Delivery
of Certificates Upon Exercise.  Certificates for
shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by physical delivery to the address specified by the
Holder in the Notice of Exercise within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company.  The Warrant
Shares shall be deemed to have been issued, and the Holder or any other person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes required
to be paid by the Holder, if any, pursuant to Section 1(d)(v) prior to the
issuance of such shares, have been paid.

       

      ii.      Delivery
of New Warrants Upon Exercise.  If this Warrant
shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to the Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.

       

      iii.      Rescission
Rights.  If the Company
fails to cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to Section 1(d)(i) by the Warrant
Share Delivery Date, then the Holder will have the right to rescind such
exercise.

       

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

       

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

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

       

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

       

      Section
2.           Adjustment
Provisions. During the Exercise Period, the Exercise Price and the number
of Warrant Shares issuable hereunder shall be subject to adjustment from time to
time as provided in this Section 2.

      

      a)           Stock
Dividends and Splits. If the Company, at any time during the Exercise
Period, subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the date of record for effecting such
subdivision, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced. If the Company, at any time during the
Exercise Period, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased.

      

      b)           Fundamental
Transaction. If,
at any time while this Warrant is outstanding, (A) the Company effects any
merger or consolidation of the Company with or into another Person (as defined
in the Subscription Agreement), (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 2(b) and insuring that
this Warrant (or any such replacement security) will be similarly adjusted upon
any subsequent transaction analogous to a Fundamental Transaction.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
 

      c)           Calculations.
All calculations under this Section 2 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 2,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

      

      d)           Voluntary
Adjustment By Company. The Company may at
any time during the term of this Warrant reduce the then current Exercise Price,
without in the sole discretion of the Company increasing the number of shares
issuable upon exercise of this Warrant, to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

      

      e)           Notice to
Holder.

      

      i.      Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 2, the Company shall promptly mail to the Holder a
notice setting forth the Exercise Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.

       

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

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

       

      Section
3.            Transfer of
Warrant.

       

      a)           Transferability.  Subject to
compliance with any applicable securities laws, this Warrant and all rights
hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer.  Upon such
surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled.  A
Warrant, if properly assigned, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.

       

      b)           New
Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 3(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the Issue Date set forth above and shall be identical with this Warrant except
as to the number of Warrant Shares issuable pursuant thereto.

       

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

       

      d)           Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer, that the Holder
or transferee of this Warrant, as the case may be, comply with the transfer provisions the Subscription
Agreement.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

       

      Section
4.            Call of Warrant.
          

       

      a)          Procedures.
The Company may at any time, subject to the conditions set forth herein, call
for the exercise of this Warrant (the “Call Notice”) if the
fair market value of the Common Stock for the twenty (20) consecutive Trading
Days ending three (3) days prior to the date of the Call Notice is at least
$0.33, subject to adjustment for stock dividends, stock splits and other
anti-dilution provisions as provided for in Section 2 of this Warrant. For
purposes of this Section
4(a), “fair
market value” at any date shall be deemed to be, as applicable: (i) the
last sale price as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading; or (ii) if the Common
Stock is not listed or admitted for trading on any national securities exchange,
the average of the closing bid and asked prices, as reported on the OTC Bulletin
Board or if no such quotation is available, then the closing bid and asked
prices in the over-the-counter market as furnished by the National Quotation
Bureau, Inc; or (iii) if the Common Stock is not listed or admitted for trading
on any national securities exchange, no quotation is available on the OTC
Bulletin Board and no closing and asked prices are available from National
Quotation Bureau, Inc., then the value determined by an independent, qualified
appraiser selected by the Company in good faith. The Call Notice shall be deemed
effective upon mailing and the time of mailing is the “Effective Date of the
Notice.” The Call Notice shall state the exercise period and cancellation
date not less than thirty (30) days from the Effective Date of the Notice (the
“Cancellation
Date”). In the event the number of shares of Common Stock issuable upon
exercise of this Warrant being called are adjusted pursuant to Section 2 hereof, then upon
each such adjustment the Exercise Price will be adjusted by multiplying the
Exercise Price in effect immediately prior to such adjustment by a fraction, the
numerator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant being exercised immediately prior to such adjustment
and the denominator of which is the number of shares of Common Stock issuable
upon exercise of this Warrant being exercised immediately after such adjustment.
The Holder may exercise this Warrant between the Effective Date of the Notice
and the Cancellation Date, such exercise being effective if done in accordance
with Section 1 hereof,
and if this Warrant, with the form of election to purchase duly executed, and
the Exercise Price are actually received by the Company at its offices no later
than 5:00 PM Eastern Time on or prior to the Cancellation Date.

       

      b)          Return
of Warrant. If the Holder does not wish to exercise this Warrant, the
Holder should mail this Warrant to the Company at its offices after receiving
the Call Notice required by this Section. If the Call Notice shall have been so
mailed, then, on and after such Cancellation Date, notwithstanding that this
Warrant subject to the Call Notice shall not have been surrendered for
redemption, the obligation evidenced by this Warrant not so surrendered or
effectively exercised shall be deemed no longer outstanding, and all rights with
respect hereto shall forthwith cease and terminate.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

       

      Section
5.            Miscellaneous.

       

      a)           No Rights
as Shareholder Until Exercise.  This Warrant does
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company prior to the exercise hereof as set forth in Section 1(a).

       

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

       

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

       

      d)           Authorized
Shares.  The Company
covenants that during the period the Warrant is outstanding, it will reserve
from its authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant.  The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be
listed.  The Company covenants that all Warrant Shares which may be
issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).  “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NYSE Amex, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange or the OTC Bulletin Board.

       

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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

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

       

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

       

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

       

       

      
        
          	
                  HEPALIFE TECHNOLOGIES,
      INC.

                
	 	 	 
	 	 	 
	
                  By: 

                	 	 
	
                   

                	
                  
                    Name:

                  

                
	
                   

                	
                  
                    Title:

                  

                

        

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      

      NOTICE
OF EXERCISE

      (Series E
Warrant)

      

      TO:           HEPALIFE TECHNOLOGIES,
INC.

      

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

       

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

       

      _______________________________

      

      _______________________________

      

      _______________________________

      

      _______________________________

      

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

      

      [SIGNATURE
OF HOLDER]

      

      Name of
Investing Entity:
_______________________________________________________________________

      

      Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

      

      Name of
Authorized Signatory:
___________________________________________________________________

      

      Title of
Authorized Signatory:
____________________________________________________________________

      

      Date:
_______________________________________________________________________________________

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      ASSIGNMENT
FORM

      

      (To
assign the foregoing warrant, execute

      this form
and supply required information.

      Do not
use this form to exercise the warrant.)

      
 

      FOR VALUE
RECEIVED,

       

      [  ]
all1;
or

      

      [                    ]2 shares of the
foregoing Series E Warrant and all rights evidenced thereby are hereby assigned
to

      

      _______________________________________________
whose address is

      

      _______________________________________________________________.

      

       

      _______________________________________________________________

      

      Dated:  ______________,
_______

       

       

      
        	 	Holder’s
      Signature:   	_____________________________ 	 	 
	 	 	 	 	 
	 	Holder’s
      Address:   	_____________________________ 	 	 
	 	 	 	 	 
	 	 	_____________________________ 	 	 

      

       

       

      Signature
Guaranteed:  ___________________________________________

      

      

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

      

      

        

      

      
        1 Check
if the entire Series E Warrant is being assigned.

      

      
        2 If
less than the entire Series E Warrant is being assigned, please indicate the
number of shares as to which the assignment is to be
effected.

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