Document:

ex10_1.htm

     

    EXHIBIT
10.1

     

    
      These securities have not been registered with the United States
Securities and Exchange Commission or the securities commission of any state
because they are believed to be exempt from registration under Regulation D
and/or Regulation S promulgated under the Securities Act of 1933, as amended
(the “Act”).  The foregoing authorities have not confirmed the
accuracy or determined the adequacy of this document.  Any
representation to the contrary is a criminal offense.  This
subscription agreement shall not constitute an offer to sell nor a solicitation
of an offer to buy the securities in any jurisdiction in which such offer or
solicitation would be unlawful.

      

      These
securities are subject to restrictions on transferability and resale and may not
be transferred or resold except as permitted under the Act, and applicable state
securities laws, pursuant to registration or exemption
therefrom.  Investors should be aware that they will be required to
bear the financial risks of this investment for an indefinite period of
time.  All offers and sales of the herein-described securities by
non-U.S. persons before the expiration of a period commencing on the date of the
closing of this offering and ending one year thereafter shall only be made in
compliance with Regulation S, pursuant to registration under the Act, or
pursuant to an exemption from registration, and all offers and sales after the
expiration of the one-year period shall be made only pursuant to registration or
an exemption from registration.  Hedging transactions involving these
securities may not be conducted unless in compliance with the Act.

      

      

      OFFSHORE SUBSCRIPTION
AGREEMENT

      

      This Offshore Subscription
Agreement (the “Agreement”) is entered into this 15th day of May, 2009 (the
“Effective Date”), by and between China Fruits Corporation, a Nevada
corporation (“CHFR”) and Ning, Fen (“MS.
NING”), an individual.

      

      WHEREAS,
MS. NING desires to subscribe to and purchase one million and seven hundred
fifty thousand shares (1,750,000) of restricted common stock of CHFR (the
“Shares”); and

      

      WHEREAS,
CHFR agrees to deliver the Shares for the Consideration (as defined below) to be
paid by MS. NING, subject to the terms and conditions set forth
below.

      

      NOW,
THEREFORE, for and in consideration of the mutual promises herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

      

      
        	
                1.

              	
                Purchase and
      Sale.   On the basis of the representations and
      warranties herein contained, subject to the terms and conditions set forth
      herein, MS. NING hereby agrees to purchase the Shares at a purchase price
      of twenty cents (US$.20) per share (aggregate sum of $350,000), and CHFR
      hereby agrees to sell the Shares to MS. NING for such
      Consideration.

              

      

      

      
        	
                2.

              	
                Closing.  The
      closing of the purchase and sale contemplated by this Agreement (the
      “Closing”) shall occur upon the transfer of the Consideration to CHFR at
      Fu Xi Technology & Industry Park, Nan Feng County, Jiang Xi Province,
      P. R. China (the “Corporate Address”). CHFR shall deliver the Shares to
      MS. NING within 14 days of receiving full payment under this
      Agreement.

              

      

       

      A.    Transactions
and Document Exchange at Closing.  Prior to or at the Closing, the
following transactions shall occur and documents shall be exchanged, all of
which shall be deemed to occur simultaneously: (1) by MS. NING: MS. NING
shall deliver, or cause to be deliver, to CHFR: (a) the balance of the
Consideration (if any); and (b) such other documents, instruments, and/or
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement, or which are reasonably determined by the parties to be
required to effectuate the transactions contemplated in this Agreement, or as
otherwise may be reasonably requested by CHFR in furtherance of the intent of
this Agreement; (2) by
CHFR: CHFR shall deliver, or cause the following to be delivered, to MS.
NING: (a) the Shares; and (b) such other documents, instruments, and/or
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement, or which are reasonably determined by the parties to be
required to effectuate the transactions contemplated in this Agreement, or as
otherwise may be reasonably requested by MS. NING in furtherance of the intent
of this Agreement.

       

       B.    Post
-Closing Documents.  From time to time after the Closing, upon the
reasonable request of any party, the party to whom the request is made shall
deliver such other and further documents, instruments, and/or certificates as
may be necessary to more fully vest in the requesting party the Consideration or
the Shares as provided for in this Agreement, or to enable the requesting party
to obtain the rights and benefits contemplated by this Agreement.

       

       C.    Payment.  MS.
NING will ensure that all payments are forwarded to the Corporate
Address.

      
        	
                3.

              	
                      Private
      Offering.  MS. NING and CHFR both understand and agree
      that the purchase and sale of securities contemplated herein constitutes a
      private, arms-length transaction between a willing seller and willing
      buyer without the use or reliance upon a broker, distributor or securities
      underwriter.

              

      

      

      
        	
                A.  
      

              	
                Purchase
      for Investment.  Neither MS. NING nor CHFR are underwriters of,
      or dealers in, the securities to be sold and exchanged
      hereunder.

              

      

      

      
        	
                B.
        

              	
                Investment
      Risk.  Because of CHFR’s financial position and other factors as
      disclosed in CHFR’s business plan (which MS. NING represents it has
      received and reviewed), the  transaction contemplated by this
      Agreement may involve a high degree of financial risk, including the risk
      that one or both parties may lose its entire investment, and both parties
      hereby  agree that they have each undertaken an independent
      evaluation of the risks associated with the Shares, and both parties
      understand those risks and are willing to accept the risk that they may be
      required to bear the financial risks of this investment for an indefinite
      period of time.

              

      

      

      
        	
                C. 
       

              	
                Access
      to Information.  MS. NING and CHFR and their advisors have been
      afforded the opportunity to discuss the transaction with legal and
      accounting professionals and to examine and evaluate the financial impact
      of the sale and exchange contemplated herein. MS. NING acknowledges that
      it has been furnished with the information required to conform with the
      provisions of subparagraph (a)(5) of Rule 15c2-11 of the Securities and
      Exchange Commission.

              

      

       

      
        	
                4.

              	
                Representations and
      Warranties of MS. NING: MS. NING hereby covenants and represents
      and warrants to CHFR that:

              

      

      

      
        	
                 
      A.    

              	
                Organization.  MS.
      NING is an individual, with the power and authority to carry on business
      as now being conducted.  This Agreement has been duly executed
      and delivered by MS. NING and constitutes a binding and enforceable
      obligation of MS. NING.

              

      

      

      
        	
                 
      B.   

              	
                Third
      Party Consent.  No authorization, consent, or approval of, or
      registration or filing with, any governmental authority or any other
      person is required to be obtained or made by MS. NING in connection with
      the execution, delivery, or performance of this Agreement or the transfer
      of the Shares, or if any such is required, MS. NING will have or will
      obtain the same prior to Closing.

              

      

      

      
        	
                 
      C.    

              	
                Litigation.  MS.
      NING is not a defendant against whom a claim has been made or a judgment
      rendered in any litigation or proceedings before any local, state, or
      federal government, including but not limited to the United States, or any
      department, board, body, or agency
thereof.

              

      

      

      
        	
                 
      D.    

              	
                Authority.  This
      Agreement has been duly executed by MS. NING, and the execution and
      performance of this Agreement will not violate, or result in a breach of,
      or constitute a default in, any agreement, instrument, judgment, order, or
      decree to which MS. NING is a party or to which the Consideration is
      subject.

              

      

      

      
        	
                 
      E.    

              	
                Offshore
      Transaction. MS. NING represents and warrants to CHFR as follows: (i) MS.
      NING is not a “U.S. person” as that term is defined in Rule 902 of
      Regulation S; (ii) at the execution of this Agreement, as well as the time
      this transaction is or was due, MS. NING was outside the United States,
      and no offer to purchase the Shares was made in the United States; (iii)
      MS. NING agrees that all offers and sales of the Shares shall not be made
      to U.S. persons unless the Shares are registered or a valid exemption from
      registration can be relied on under applicable U.S. state and federal
      securities laws; (iv) MS. NING is not a distributor or dealer; (v) the
      transactions contemplated hereby have not been and will not be made on
      behalf of any U.S. person or pre-arranged by MS. NING with a purchaser
      located in the United States or a purchaser which is a U.S. person, and
      such transactions are not and will not be part of a plan or scheme to
      evade the registration provisions of the Act; (vi)all offering documents
      received by MS. NING include statements to the effect that the Shares have
      not been registered under the Securities Act of 1933 and may not be
      offered or sold in the United States or to U.S. Persons (other than
      distributors as defined in Regulation S) during the Restricted Period
      unless the Shares are registered under the Securities Act of 1933 or an
      exemption from registration is
available.

              

      

      

      The
foregoing representations and warranties are true and accurate as of the date
hereof, shall be true and accurate as of the date of the acceptance by CHFR of
MS. NING’s purchase, and shall survive thereafter. If MS. NING has knowledge,
prior to the acceptance of this Offshore Subscription Agreement by CHFR, that
any such representations and warranties shall not be true and accurate in any
respect, MS. NING prior to such acceptance, will give written notice of such
fact to CHFR specifying which representations and warranties are not true and
accurate and the reasons therefore.

      

      MS. NING
agrees to fully indemnify, defend and hold harmless CHFR, its officers,
directors, employees, agents and attorneys from and against any and all losses,
claims, damages, liabilities and expenses, including reasonable attorney's fees
and expenses, which may result from a breach of MS. NING’s representations,
warranties and agreements contained herein.

      

      
        	
                 
      F.    

              	
                Accredited
      Investor.  MS. NING is an accredited investor as that term is
      defined in Rule 501(a) of Regulation D promulgated under the
      Act.

              

      

       

      
        	
                 
      G.    

              	
                Beneficial
      Owner.  MS. NING is purchasing stock for its own account or for
      the account of beneficiaries for whom MS. NING has full investment
      discretion with respect to stock and whom MS. NING has full authority to
      bind, so that each such beneficiary is bound hereby as if such beneficiary
      were a direct signatory hereunder, and all representations, warranties and
      agreements herein were made directly by such
  beneficiary.

              

      

      

      
        	
                 
      H.    

              	
                Directed
      Selling Efforts.  MS. NING will not engage in any activity for
      the purpose of, or that could reasonably be expected to have the effect
      of, conditioning the market in the United States for any of the Shares
      sold hereunder.  To the best of its knowledge, neither MS. NING
      nor any person acting for MS. NING has conducted any “directed selling
      efforts” as that term is defined in Rule 902 of Regulation
    S.

              

      

      

      
        	
                 
      I.   

              	
                Independent
      Investigation; Access.  MS. NING, in electing to purchase the
      Shares herein, has relied solely upon independent investigation made by
      him and his representatives.  MS. NING has been given no oral or
      written representation or warranty from CHFR other than as set forth in
      this Agreement.  MS. NING and his representatives, if any, have,
      prior to any sale to it, been given access and the opportunity to examine
      all material books and records of CHFR, all material contracts and
      documents relating to CHFR and this offering and an opportunity to ask
      questions of, and to receive answers from, CHFR or any officer of CHFR
      acting on its behalf concerning CHFR and the terms and conditions of this
      offering. MS. NING and his advisors, if any, have been furnished with
      access to all publicly available materials relating to the business,
      finances and operations of CHFR and materials relating to the offer and
      sale of the Shares which have been requested. MS. NING and his advisors,
      if any, have received complete and satisfactory answers to any such
      inquiries.

              

      

      

      
        	
                 
      J.    

              	
                No
      Government Recommendation or Approval. MS. NING understands that no United
      States federal or state agency, or similar agency of any other country,
      has passed upon or made any recommendation or endorsement of the Shares,
      or this transaction.

              

      

      

      
        	
                K.
         

              	
                No
      Formation or Membership in “Group.”  MS. NING is not part of a
      “group” as that term is defined under the Act.  MS. NING is not,
      and does not intend to become, included with two or more persons acting as
      a partnership, syndicate, or other group for the purpose of acquiring,
      holding or disposing of securities of the
  Company.

              

      

      

      
        	
                L. 
        

              	
                Hedging
      Transactions.  MS. NING hereby agrees not to engage in any
      hedging transactions involving the securities described herein unless in
      compliance with the Act and Regulation S promulgated
      thereunder.

              

      

      

      
        	
                5.

              	
                Conditions Precedent
      to CHFR’s Closing.  All obligations of CHFR under his
      Agreement, and as an inducement to CHFR to enter into this Agreement, are
      subject to MS. NING’s covenants and agreements to each of the
      following:

              

      

      
        
        

      

      
        
        

      

      

      

      
        	
                A.
         

              	
                Acceptance
      of Documents.  All instruments and documents delivered to CHFR
      pursuant to this Agreement or reasonably requested by CHFR to verify the
      representations and warranties of MS. NING herein, shall be satisfactory
      to CHFR and its legal counsel.

              

      

      

      
        	
                B.   
      

              	
                Representations
      and Warranties.  The representations and warranties by MS. NING
      set forth in this Agreement shall be true and correct at and as of the
      Closing date, with the same force and effect as though made at and as of
      the date hereof, except for changes permitted or contemplated by this
      Agreement.

              

      

      

      
        	
                C.
          

              	
                No
      Breach or Default.  MS. NING shall have performed and complied
      with all covenants, agreements, and conditions required by this Agreement
      to be performed or complied with by it prior to or at the
      Closing.

              

      

      

      
        	
                 6.
      

              	
                Termination.  This
      Agreement may be terminated at any time prior to the date of Closing by
      either party if (a) there shall be any actual or threatened action or
      proceeding by or before any court or any other governmental body which
      shall seek to restrain, prohibit, or invalidate the transaction
      contemplated by this Agreement, and which in the judgment of such party
      giving notice to terminate and based upon the advice of legal counsel
      makes it inadvisable to proceed with the transaction contemplated by this
      Agreement, or (b) if this Agreement has not been approved and properly
      executed by the parties by May 31,
2009.

              

      

      

      
        	
                7. 
      

              	
                Restrictive
      Legend.  MS. NING agrees that the Shares shall bear a
      restrictive legend to the effect that transfer is prohibited except in
      accordance with the provisions of Regulation S, pursuant to registration
      under the Act, or pursuant to an available exemption from registration,
      and that hedging transactions involving those securities may not be
      conducted unless in compliance with the
Act.

              

      

      

      
        	
                8.

              	
                CHFR’s Obligation to
      Refuse Transfer.  Pursuant to Regulation S promulgated
      under the Act, CHFR hereby agrees to refuse to register any transfer of
      the Shares not made in accordance with the provisions of Regulation S,
      pursuant to registration under the Act, or pursuant to an available
      exemption from registration.

              

      

      

      
        	
                9. 
      

              	
                Miscellaneous.

              

      

      

      
        	
                 A.   
      

              	
                Authority.  MS.
      NING and the officers of CHFR executing this Agreement are duly authorized
      to do so, and each party has taken all action required for valid
      execution.

              

      

      

      
        	
                B.   
      

              	
                Notices.  Any
      notice under this Agreement shall be deemed to have been sufficiently
      given if sent by registered or certified mail, postage prepaid, or by
      express mail service substantially equivalent to Federal Express,
      addressed as follows

              

      

      
        
        

      

      

      
        	
                 
      

              	
                       To
      MS. NING:     Ms. Ning,
  Fen.

              

      

                                              11 Huang Tu Ke Zu, Dongxi Cun, Fufang
Xiang

                                              Nanfeng
County, Jiangxi, P.R. China  

                                              (offshore
address)

                                        

      
        	
                 
      

              	
                       To
      CHFR:

              	
                China
      Fruits Corporation

              

      

                                             Fu
Xi Technology & Industry Park, Nan Feng County

                                            
Jiang Xi
Province, P. R. China

                                            
(86794)
326-6199

      

      
        	
                C.   
      

              	
                Entire
      Agreement. This Agreement constitutes the entire agreement among the
      parties hereto with respect to the subject matter hereof and supersedes
      any and all prior or contemporaneous representations, warranties,
      agreements and understandings in connection therewith. This Agreement may
      be amended only by a writing executed by all parties
    hereto.

              

      

      

      
        	
                D.
         

              	
                Severability.  If
      a court of competent jurisdiction determines that any clause or provision
      of this Agreement is invalid, illegal or unenforceable, the other clauses
      and provisions of the Agreement  shall remain in full force and
      effect and the clauses and provisions which are determined to be void,
      illegal or unenforceable shall be limited so that they shall remain in
      effect to the extent permissible by
law.

              

      

      

      
        	
                E.   
      

              	
                Assignment.  None
      of the parties hereto may assign this Agreement without the express
      written consent of the other parties and any approved assignment shall be
      binding on and inure to the benefit of such successor or, in the event of
      death or incapacity, on assignor’s heirs, executors, administrators,
      representatives, and successors.

              

      

      

      
        	
                F.   
      

              	
                Applicable
      Law. This Agreement has been negotiated and is being contracted for in the
      United States, State of Delaware.  It shall be governed by and
      interpreted in accordance with the laws of the United States and the State
      of Delaware, regardless of any conflict-of-law provision to the
      contrary.

              

      

      

      
        	
                G.   
      

              	
                Attorney’s
      Fees.  If any legal action or other proceeding (including but
      not limited to binding arbitration) is brought for the enforcement of or
      to declare any right or obligation under this Agreement or as a result of
      a breach, default or misrepresentation in connection with any of the
      provisions of this Agreement, or otherwise because of a dispute among the
      parties hereto, the prevailing party will be entitled to recover actual
      attorney’s fees (including for appeals and collection and including the
      actual cost of in-house counsel, if any) and other expenses incurred in
      such action or proceeding, in addition to any other relief to which such
      party may be entitled.

              

      

      

      
        	
                H.   
      

              	
                Counterparts
      and Facsimile.  This Agreement may be executed in any number of
      identical counterparts (except as to signature only), each of which may be
      deemed an original for all purposes.  A fax, telecopy or other
      reproduction of this instrument may be executed by one or more parties
      hereto and such executed copy may be delivered by facsimile or similar
      instantaneous electronic transmission device pursuant to which the
      signature of or on behalf of such party can be seen, and such execution
      and delivery shall be considered valid, binding and effective for all
      purposes.

              

      

      
        
        

      

      
        
        

      

      
        
        

      

       

       

      IN
WITNESS WHEREOF, the parties have executed this agreement below.

      

      Ms. Ning,
Fen                                                      China
Fruits Corporation

      

      By: /s/ Ning,
Fen                                                 /s/ Chen Quan Long

      Ning, Fen,
Individual                                         Cheng Quan Long, PresidentEX-4.1

EXHIBIT A

COMMON STOCK PURCHASE WARRANT

CONVERTED ORGANICS INC.

Warrant Shares:        Initial Exercise Date:             , 2009

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
     (the “Holder”) is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial Exercise Date”) and on or prior to the close of business on August 15, 2009 (the
“Termination Date”) but not thereafter, to subscribe for and purchase from Converted
Organics Inc., a Delaware corporation (the “Company”), up to        shares (the
“Warrant Shares”) of Common Stock.

Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated May   , 2009, among the Company and the purchasers signatory
thereto.

Section 2. Exercise.

a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company (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) of a
duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within
three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank or, if
available, pursuant to the cashless exercise procedure specified in Section 2(c) below.
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 three
(3) Trading Days of the date the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a portion of the total number of
Warrant Shares available hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the applicable number of
Warrant Shares purchased. The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of
such notice. In the event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the
number of Warrant Shares available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.

b) Exercise Price. The exercise price per share of the Common Stock under this
Warrant shall be $1.40, subject to adjustment hereunder (the “Exercise Price”).

c) Cashless Exercise. If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained therein is not available for
the issuance of the Warrant Shares to the Holder and all of the Warrant Shares are not then
registered for resale by Holder into the market at market prices from time to time on an
effective registration statement for use on a continuous basis (or the prospectus contained
therein is not available for use), then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in which the Holder shall be entitled
to receive a certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

	 	(A)	 	= the VWAP on the Trading Day immediately preceding the date
on which Holder elects to exercise this Warrant by means of a “cashless
exercise,” as set forth in the applicable Notice of Exercise;

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

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

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

d) Mechanics of Exercise.

i. Delivery of Certificates Upon Exercise. Certificates for
            shares purchased hereunder shall be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission
(“DWAC”) system if the Company is then a participant in such system
and either (A) there is an effective Registration Statement permitting the
issuance of the Warrant Shares to or resale of the Warrant Shares by Holder
or (B) this Warrant is being exercised via cashless exercise, and otherwise
by physical delivery to the address specified by the Holder in the Notice of
Exercise by the date that is three (3) Trading Days after the latest of (A)
the delivery to the Company of the Notice of Exercise Form, (B) surrender of
this Warrant (if required) and (C) payment of the aggregate Exercise Price
as set forth above (including by cashless exercise, if permitted) (such
date, the “Warrant Share Delivery Date”). This Warrant shall be
deemed to have been exercised on the first date on which all of the
foregoing have been delivered to the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of such
            shares for all purposes, as of the date the Warrant has been exercised, with
payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant
to Section 2(d)(vi) prior to the issuance of such shares, having been paid.
If the Company fails for any reason to deliver to the Holder certificates
evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant
Share Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant Shares
subject to such exercise (based on the VWAP of the Common Stock on the date
of the applicable Notice of Exercise), $10 per Trading Day (increasing to
$20 per Trading Day on the fifth Trading Day after such liquidated damages
begin to accrue) for each Trading Day after such Warrant Share Delivery Date
until such certificates are delivered or Holder rescinds such exercise.

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

iii. Rescission Rights. If the Company fails to cause the
Transfer Agent to transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant
Share Delivery Date, then, the Holder will have the right to rescind such
exercise.

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

v. 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 the 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.

vi. 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.

vii. 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.

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2 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, and any other Persons acting as a group together with the Holder or
any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by 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 (i) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) 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 2(e), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by 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 2(e) 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 2(e), 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 (A) the Company’s most recent periodic or annual
report filed with the Commission, as the case may be, (B) a more recent public announcement
by the Company or (C) a more recent written notice by the Company or the 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 4.9% 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 2(e), 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 2(e) 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 2(e) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation herein contained or to
make changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a successor holder of
this Warrant.

f) Call Provision. Subject to the provisions of Section 2(e) and this Section
2(f), if, (i) the VWAP for each of 5 consecutive Trading Days (the “Measurement
Period”) exceeds $2.10 (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial Exercise Date) and (ii)
the Holder is not in possession of any information that constitutes, or might constitute,
material non-public information which was provided by the Company, then the Company may,
within 1 Trading Day of the end of such Measurement Period, call for cancellation of all or
any portion of this Warrant for which a Notice of Exercise has not yet been delivered (such
right, a “Call”) for consideration equal to $.001 per Share. To exercise this
right, the Company must deliver to the Holder an irrevocable written notice (a “Call
Notice”), indicating therein the portion of unexercised portion of this Warrant to which
such notice applies. If the conditions set forth below for such Call are satisfied from the
period from the date of the Call Notice through and including the Call Date (as defined
below), then any portion of this Warrant subject to such Call Notice for which a Notice of
Exercise shall not have been received by the Call Date will be cancelled at 6:30 p.m. (New
York City time) on the tenth Trading Day after the date the Call Notice is received by the
Holder (such date and time, the “Call Date”). Any unexercised portion of this
Warrant to which the Call Notice does not pertain will be unaffected by such Call Notice.
In furtherance thereof, the Company covenants and agrees that it will honor all Notices of
Exercise with respect to Warrant Shares subject to a Call Notice that are tendered through
6:30 p.m. (New York City time) on the Call Date. The parties agree that any Notice of
Exercise delivered following a Call Notice which calls less than all the Warrants shall
first reduce to zero the number of Warrant Shares subject to such Call Notice prior to
reducing the remaining Warrant Shares available for purchase under this Warrant. For
example, if (A) this Warrant then permits the Holder to acquire 100 Warrant Shares, (B) a
Call Notice pertains to 75 Warrant Shares, and (C) prior to 6:30 p.m. (New York City time)
on the Call Date the Holder tenders a Notice of Exercise in respect of 50 Warrant Shares,
then (x) on the Call Date the right under this Warrant to acquire 25 Warrant Shares will be
automatically cancelled, (y) the Company, in the time and manner required under this
Warrant, will have issued and delivered to the Holder 50 Warrant Shares in respect of the
exercises following receipt of the Call Notice, and (z) the Holder may, until the
Termination Date, exercise this Warrant for 25 Warrant Shares (subject to adjustment as
herein provided and subject to subsequent Call Notices). Subject again to the provisions of
this Section 2(f), the Company may deliver subsequent Call Notices for any portion of this
Warrant for which the Holder shall not have delivered a Notice of Exercise. Notwithstanding
anything to the contrary set forth in this Warrant, the Company may not deliver a Call
Notice or require the cancellation of this Warrant (and any such Call Notice shall be void),
unless, from the beginning of the Measurement Period through the Call Date, (1) the Company
shall have honored in accordance with the terms of this Warrant all Notices of Exercise
delivered by 6:30 p.m. (New York City time) on the Call Date, and (2) the Registration
Statement shall be effective as to all Warrant Shares, and (3) the Common Stock shall be
listed or quoted for trading on the Trading Market, and (4) there is a sufficient number of
authorized shares of Common Stock for issuance of all Securities under the Transaction
Documents, and (5) the issuance of the shares shall not cause a breach of any provision of
2(e) herein. The Company’s right to call the Warrants under this Section 2(f) shall be
exercised ratably among the Holders based on each Holder’s initial purchase of Warrants.

Section 3. Certain Adjustments.

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

b) RESERVED.

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

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

e) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(i) the Company, directly or indirectly, in one or more related transactions effects any
merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization 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, (v) the Company, directly or
indirectly, in one or more related transactions consummates a stock or share purchase
agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other
Person acquires more than 50% of the outstanding shares of Common Stock (not including any
            shares of Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have
the right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at the option
of the Holder (without regard to any limitation in Section 2(e) on the exercise of this
Warrant), 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 Fundamental Transaction by
a holder of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such Fundamental Transaction (without regard to any limitation in
Section 2(e) on the exercise of this Warrant). 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. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to
written agreements in form and substance reasonably satisfactory to the Holder and approved
by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall,
at the option of the holder of this Warrant, deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent
to the shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative value of the
            shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares
of capital stock, such number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably satisfactory in form
and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the same effect as if
such Successor Entity had been named as the Company herein. Notwithstanding anything to the
contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2)
a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national securities
exchange, including, but not limited to, the Nasdaq Global Select Market, the Nasdaq Global
Market, or the Nasdaq Capital Market, the Company or any Successor Entity (as defined below)
shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days
after, the consummation of the Fundamental Transaction, purchase this Warrant from the
Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of the consummation of such
Fundamental Transaction. “Black Scholes Value” means the value of this Warrant
based on the Black and Scholes Option Pricing Model obtained from the “OV” function on
Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the
applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction and the
Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction, (C) the
underlying price per share used in such calculation shall be the sum of the price per share
being offered in cash, if any, plus the value of any non-cash consideration, if any, being
offered in such Fundamental Transaction and (D) a remaining option time equal to the time
between the date of the public announcement of the applicable Fundamental Transaction and
the Termination Date. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to
written agreements in form and substance reasonably satisfactory to the Holder and approved
by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall,
at the option of the holder of this Warrant, deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent
to the shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative value of the
            shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares
of capital stock, such number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably satisfactory in form
and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the same effect as if
such Successor Entity had been named as the Company herein.

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

g) Notice to Holder.

i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.

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, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (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. To the
extent that any notice provided hereunder constitutes, or contains,
material, non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain 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 except as may otherwise be expressly set forth herein.

Section 4. Transfer of Warrant.

a) Transferability. 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, as applicable, 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. The
Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.

b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall be dated the initial issuance date set forth on the first page of this Warrant 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) Representation by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise hereof,
will acquire the Warrant Shares issuable upon such exercise, for its own account and not
with a view to or for distributing or reselling such Warrant Shares or any part thereof in
violation of the Securities Act or any applicable state securities law, except pursuant to
sales registered or exempted under the Securities Act.

Section 5. Miscellaneous.

a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights, dividends or other rights as a stockholder of the Company prior
to the exercise hereof as set forth in Section 2(d)(i).

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 and payment for such Warrant Shares in accordance herewith, 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).

Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will (i) 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, (ii) 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 (iii) use commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction thereof,
as may be, necessary to enable the Company to perform its obligations under this
Warrant.

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

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

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

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right
or otherwise prejudice Holder’s rights, powers or remedies. Without limiting any other
provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results in any material damages to
the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

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

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

j) Remedies. 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.

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 and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any
Holder 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 Holders holding Warrants at least equal
to 67% of the Warrant Shares issuable upon exercise of all then outstanding Warrants.

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.

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

(Signature Pages Follow)

1

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.

	 
	CONVERTED ORGANICS INC.

	By:     

Name:

	Title:

NOTICE OF EXERCISE

TO: CONVERTED ORGANICS INC.

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

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

[ ] in lawful money of the United States; or

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

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

      

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

      

      

      

[SIGNATURE OF HOLDER]

Name of Investing Entity:      

Signature of Authorized Signatory of Investing Entity:
     

Name of Authorized Signatory:      

Title of Authorized Signatory:      

Date:       

2

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

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

       whose address is

      .

      

Dated:       ,       

	 	 	 	 	 
	Holder’s Signature:
	 	 	—	 
	Holder’s Address:
	 	 	—	 

      

Signature Guaranteed:       

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

3

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