Document:

Exhibit 10.1

 

SECOND AMENDMENT TO CREDIT AGREEMENT

 

This SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of September 8,
2005 (this “Amendment”), is entered into among WATSON PHARMACEUTICALS,
INC., a Nevada corporation (the “Borrower”), the Lenders (as defined
below) and the Administrative Agent (as defined below), and amends the Credit
Agreement, dated as of May 30, 2003 (as amended, supplemented or modified
from time to time, the “Credit Agreement”), entered into among the
Borrower, the financial institutions from time to time party hereto, whether by
execution of the Credit Agreement or an Assignment and Acceptance (the “Lenders”),
WACHOVIA BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent
for the Lenders (in such capacity, the “Administrative Agent”), BANK OF
AMERICA, N.A. and CIBC WORLD MARKETS CORP., each in its capacity as
co-syndication agent for the Lenders (each, in such capacity, a “Syndication
Agent”), and LEHMAN COMMERCIAL PAPER, INC., in its capacity as
documentation agent for the Lenders (in such capacity, the “Documentation
Agent”).  Unless otherwise defined
herein, the terms defined in the Credit Agreement shall be used herein as
therein defined.

 

PRELIMINARY STATEMENT

 

The Lenders and the Borrower have agreed, subject to the terms and
conditions of this Amendment, to amend the Credit Agreement as hereinafter set
forth.

 

STATEMENT OF AGREEMENT

 

SECTION 1.  Amendment to
Credit Agreement.  The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 2 hereof, hereby amended
as follows:

 

(a)                                  Section 1.01
of the Credit Agreement is amended by adding the following defined term in
proper alphabetical order:

 

“ ‘Applicable Commitment Fee Percentage’
means, as of any date, a percentage per annum determined by reference to the
Debt Rating in effect on such date as set forth below:

 

	
   

  	
   

  	
  Debt Rating

  	
   

  	
  Applicable Commitment

  	
   

  
	
  Tier

  	
   

  	
  S&P/Moody’s

  	
   

  	
  Fee Percentage

  	
   

  
	
  I

  	
   

  	
  >
  BBB+/Baa1

  	
   

  	
  0.10%

  	
   

  
	
  II

  	
   

  	
  BBB/Baa2

  	
   

  	
  0.125%

  	
   

  
	
  III

  	
   

  	
  BBB-/Baa3

  	
   

  	
  0.15%

  	
   

  
	
  IV

  	
   

  	
  BB+/Ba1

  	
   

  	
  0.20%

  	
   

  
	
  V

  	
   

  	
  < BB+/Ba1

  	
   

  	
  0.25%”

  	
   

  

 

(b)                                 The
definition of “Applicable Base Rate Margin” is amended by deleting such
definition in its entirety and substituting therefor the following:

 

 

“ ‘Applicable Base Rate Margin’ means,
as of any date, a percentage per annum determined by reference to the Debt
Rating in effect on such date as set forth below:

 

	
   

  	
   

  	
  Debt Rating

  	
   

  	
  Applicable Base

  	
   

  
	
  Tier

  	
   

  	
  S&P/Moody’s

  	
   

  	
  Rate Margin

  	
   

  
	
  I

  	
   

  	
  >
  BBB+/Baa1

  	
   

  	
  0.0%

  	
   

  
	
  II

  	
   

  	
  BBB/Baa2

  	
   

  	
  0.0%

  	
   

  
	
  III

  	
   

  	
  BBB-/Baa3

  	
   

  	
  0.0%

  	
   

  
	
  IV

  	
   

  	
  BB+/Ba1

  	
   

  	
  0.0%

  	
   

  
	
  V

  	
   

  	
  < BB+/Ba1

  	
   

  	
  0.25%”

  	
   

  

 

(c)                                  The
definition of “Applicable Eurodollar Rate Margin” is amended by deleting such
definition in its entirety and substituting therefor the following:

 

“ ‘Applicable Eurodollar Rate Margin’
means, as of any date, a percentage per annum determined by reference to the
Debt Rating in effect on such date as set forth below:

 

	
   

  	
   

  	
  Debt Rating

  	
   

  	
  Applicable Eurodollar

  	
   

  
	
  Tier

  	
   

  	
  S&P/Moody’s

  	
   

  	
  Rate Margin

  	
   

  
	
  I

  	
   

  	
  >
  BBB+/Baa1

  	
   

  	
  0.50%

  	
   

  
	
  II

  	
   

  	
  BBB/Baa2

  	
   

  	
  0.625%

  	
   

  
	
  III

  	
   

  	
  BBB-/Baa3

  	
   

  	
  0.75%

  	
   

  
	
  IV

  	
   

  	
  BB+/Ba1

  	
   

  	
  1.00%

  	
   

  
	
  V

  	
   

  	
  < BB+/Ba1

  	
   

  	
  1.25%”

  	
   

  

 

(d)                                 The
definition of “Debt Rating” is amended by deleting such definition in its
entirety and substituting therefor the following:

 

“ ‘Debt Rating’ means, as of any date,
the higher rating that has been most recently announced by either S&P or
Moody’s, as the case may be, for any class of non-credit enhanced long-term
senior unsecured debt issued by the Borrower; provided that if at any
time the difference between the ratings of such type most recently announced by
S&P and Moody’s is more than one rating grade, the rating that is one grade
above the lower of such two ratings shall apply.  For purposes of the foregoing, (a) if
either S&P or Moody’s shall not have a rating in effect, then the Debt
Rating shall be the available rating, (b) if any rating established by
S&P or Moody’s shall be changed, such change shall be effective as of the
date on which such change is first announced publicly by the rating agency
making such change, and (c) if S&P or Moody’s shall change the basis
on which ratings are established, each reference herein to ratings announced by
S&P or Moody’s, as the case may be, shall refer to the then equivalent
rating by S&P or Moody’s, as the case may be.”

 

2

 

(e)                                  Section 4.03(a) of
the Credit Agreement is hereby amended by deleting the words “rate of 0.375%
per annum” therein and inserting in substitution therefor the words “Applicable
Commitment Fee Rate.”

 

(f)                                    Section 6.01(J)
of the Disclosure Letter is amended by inserting the following at the end of
the sentence immediately before the period:

 

“and to the matters described and set forth under the caption “Legal
Proceedings” in Part I, Item 3 of the Borrower’s Report on Form 10-K
for the fiscal year ended December 31, 2004 and under the caption “Legal
Proceedings” in Part II, Item 1 of the Borrower’s Reports on Form 10-Q
for the quarterly periods ended March 31, 2005 and June 30, 2005.”

 

SECTION 2.  Conditions
Precedent to Effectiveness.  This
Amendment shall become effective as of the date first above written upon the
satisfaction of the following conditions precedent:

 

(a)                                  The
Administrative Agent shall have received this Amendment executed by the
Borrower and the Lenders.

 

(b)                                 In
consideration of this Amendment and the amendments made herein, the Borrower
shall have paid (i) to the Administrative Agent, for the account of each
Lender, a fee in the amount of 3.5 basis points (0.035%) on the aggregate
principal amount of such Lender’s Revolving Loan Commitment, and (ii) the
arrangement fee payable to Wachovia Capital Markets, LLC (the “Arranger”)
pursuant to the Engagement Letter dated as of August 16, 2005 between the
Borrower and the Arranger.

 

SECTION 3.  Representations
and Warranties.  The Borrower
represents and warrants as follows:

 

(a)                                  After
giving effect to this Amendment, all of the representations and warranties
contained in Section 6.01 of the Credit Agreement and in the other Loan
Documents are true and complete in all material respects (except to the extent
that such representations or warranties are made as of an earlier date, in
which case they shall be true and complete in all material respects as of such
earlier date).

 

(b)                                 After
giving effect to this Amendment, no Default or Event of Default has occurred
and is continuing.

 

SECTION 4.  Reference to
and Effect on the Loan Documents.

 

(a)                                  Upon
the effectiveness of this Amendment, on and after the date hereof each
reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof” or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to “the Credit Agreement,” “thereunder,” “thereof” or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.

 

3

 

(b)                                 Except
as specifically amended above, the Credit Agreement and all other Loan
Documents are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed.

 

(c)                                  The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of any Lender or the Administrative Agent
under any of the Loan Documents, nor constitute a waiver of any provision of
any of the Loan Documents.

 

SECTION 5.  Execution in
Counterparts.  This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.

 

SECTION 6.  Governing Law.  This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.

 

4

 

IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be executed as of the date first above written.

 

 

	
   

  	
  WATSON PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. Todd Joyce

  	
   

  
	
   

  	
  Title:

  	
  VP Corporate
  Controller and Treasurer

  	
   

  

 

 

S-1

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  
	
   

  	
  ASSOCIATION, as Administrative Agent and

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard L. Nelson

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  	
   

  

 

 

S-2

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  CIBC INC., as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Knight

  	
   

  
	
   

  	
   

  	
  George
  Knight

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  	
  CIBC World
  Markets Corp. As Agent

  	
   

  

 

 

S-3

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  BANK OF AMERICA, N.A., as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph L. Corah

  	
   

  
	
   

  	
   

  	
  Joseph L. Corah

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  

 

 

S-4

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  LEHMAN COMMERCIAL PAPER, INC., as

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Janine M. Shugan

  	
   

  
	
   

  	
   

  	
  Janine M. Shugan

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  

 

 

S-5

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  BANCO POPULAR DE PUERTO RICO,

  
	
   

  	
  NEW YORK BRANCH, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hector J. Gonzalez

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

S-6

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  BANK LEUMI USA, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joung Hee Hong

  	
   

  
	
   

  	
   

  	
  Joung Hee Hong

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

S-7

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  THE BANK OF EAST ASIA, LIMITED, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Loh

  	
   

  
	
   

  	
  Title:

  	
  SVP–Commercial Lending

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon Keung

  	
   

  
	
   

  	
  Title:

  	
  SVP & Controller

  	
   

  

 

 

S-8

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

[This page Intentionally
left blank.]

 

 

S-9

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  COMERCIA BANK, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Don R. Carruth

  	
   

  
	
   

  	
  Name:

  	
  Don R. Carruth

  	
   

  
	
   

  	
  Title:

  	
  Corporate Banking Officer

  	
   

  

 

 

S-10

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  E.SUN COMMERCIAL BANK, LTD., LOS

  
	
   

  	
  ANGELES BRANCH, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin Lin

  	
   

  
	
   

  	
  Title:

  	
  E.V.P. & General Manager

  	
   

  

 

 

S-11

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  FIRST COMMERCIAL BANK, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Helen Tong

  	
   

  
	
   

  	
  Title:

  	
  VP & General Manager

  	
   

  

 

 

S-12

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  THE NORTHERN TRUST COMPANY, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John E. Burda

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

S-13

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  SUMITOMO MITSUI BANKING

  
	
   

  	
  CORPORATION, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Yoshihiro Hyakutome

  	
   

  
	
   

  	
   

  	
  Yoshihiro Hyakutome

  	
   

  
	
   

  	
  Title:

  	
  Joint General Manager

  	
   

  

 

 

S-14

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  TAIPEI FUBON COMMERCIAL BANK, NEW

  
	
   

  	
  YORK AGENCY, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sophia Jing

  	
   

  
	
   

  	
  Name:

  	
  Sophia Jing

  	
   

  
	
   

  	
  Title:

  	
  VP & General Manager

  	
   

  

 

 

S-15

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  U.S. BANK, NATIONAL ASSOCIATION, as

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Janet Jordan

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

S-16

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  UNION BANK OF CALIFORNIA, N.A., as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Thompson

  	
   

  
	
   

  	
  Title:

  	
  Peter
  Thompson, Vice President

  	
   

  

 

 

S-17

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  UNITED OVERSEAS BANK LIMITED, LOS

  
	
   

  	
  ANGELES AGENCY, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hoong Chen

  	
   

  
	
   

  	
  Title:

  	
  First VP & General Manager

  	
   

  

 

 

S-18

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  CATHAY UNITED BANK (fka United World

  
	
   

  	
  Chinese Commercial Bank), as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Allen Peng

  	
   

  
	
   

  	
  Title:

  	
  EVP &
  General Manager

  	
   

  

 

 

S-19

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit Agreement

 

 

	
   

  	
  WELLS FARGO BANK, N.A., as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lucy Nixon

  	
   

  
	
   

  	
   

  	
  Lucy Nixon

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  	
   

  

 

 

S-20

 

Watson Pharmaceuticals, Inc.

Second Amendment to Credit AgreementEXHIBIT 10.37

                                     WARRANT

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.

                            CORD BLOOD AMERICA, INC.

                        WARRANT TO PURCHASE COMMON STOCK

Warrant No.: CCP-002                                Number of Shares: 7,285,000

Date of Issuance: September 9, 2005

Cord Blood America, Inc., a Florida corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, CORNELL CAPITAL PARTNERS, LP ("Cornell"), the
registered holder hereof or its permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after 11:59
P.M. Eastern Time on the Expiration Date (as defined herein) Seven Million Two
Hundred Eighty-Five Thousand (7,285,000) fully paid and nonassessable shares of
Common Stock (as defined herein) of the Company (the "Warrant Shares") at the
exercise price per share provided in Section 1(b) below or as subsequently
adjusted; provided, however, that in no event shall the holder be entitled to
exercise this Warrant for a number of Warrant Shares in excess of that number of
Warrant Shares which, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by the holder and
its affiliates to exceed 4.99% of the outstanding shares of the Common Stock
following such exercise, except within sixty (60) days of the Expiration Date.
For purposes of the foregoing proviso, the aggregate 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 the determination of such proviso is being made, but shall
exclude shares of Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised Warrants beneficially owned by the holder and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by the holder
and its affiliates (including, without limitation, any convertible notes or
preferred stock) subject to a limitation on conversion or exercise analogous to
the limitation contained herein. Except as set

<PAGE>

forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Warrant, 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 (1) the Company's most
recent Form 10-QSB or Form 10-KSB, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or its
transfer agent setting forth the number of shares of Common Stock outstanding.
Upon the written request of any holder, the Company shall promptly, but in no
event later than one (1) Business Day following the receipt of such notice,
confirm in writing to any such holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the exercise of Warrants (as defined below)
by such holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.

         Section 1.

                  (a) This Warrant is the common stock purchase warrant (the
"Warrant") issued pursuant to the Securities Purchase Agreement ("Securities
Purchase Agreement") dated the date hereof by and between the Company and
Cornell.

                  (b) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:

                           (i) "Approved Stock Plan" means any employee benefit
plan which has been approved by the Board of Directors of the Company, pursuant
to which the Company's securities may be issued to any employee, officer or
director for services provided to the Company.

                           (ii) "Business Day" means any day other than
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law to remain closed.

                           (iii) "Closing Bid Price" means the closing bid price
of Common Stock as quoted on the Principal Market (as reported by Bloomberg
Financial Markets ("Bloomberg") through its "Volume at Price" function).

                           (iv) "Common Stock" means (i) the Company's common
stock, par value $0.0001 per share, and (ii) any capital stock into which such
Common Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.

                           (v) "Event of Default" means an event of default
under the Convertible Debenture issued to the holder pursuant to the Securities
Purchase Agreement which is not cured by the Company by any applicable cure
period therein.

                           (vi) "Excluded Securities" means, provided such
security is issued at a price which is greater than or equal to the arithmetic
average of the Closing Bid Prices of the Common Stock for the ten (10)
consecutive trading days immediately preceding the date of issuance, any of the
following: (a) any issuance by the Company of securities in connection with

                                       2
<PAGE>

a strategic partnership or a joint venture (the primary purpose of which is not
to raise equity capital), (b) any issuance by the Company of securities as
consideration for a merger or consolidation or the acquisition of a business,
product, license, or other assets of another person or entity and (c) options to
purchase shares of Common Stock, provided (I) such options are issued after the
date of this Warrant to employees of the Company within thirty (30) days of such
employee's starting his employment with the Company, and (II) the exercise price
of such options is not less than the Closing Bid Price of the Common Stock on
the date of issuance of such option.

                           (vii) "Expiration Date" means the date five (5) years
from the Issuance Date of this Warrant or, if such date falls on a Saturday,
Sunday or other day on which banks are required or authorized to be closed in
the City of New York or the State of New York or on which trading does not take
place on the Principal Exchange or automated quotation system on which the
Common Stock is traded (a "Holiday"), the next date that is not a Holiday.

                           (viii) "Issuance Date" means the date hereof.

                           (ix) "Options" means any rights, warrants or options
to subscribe for or purchase Common Stock or Convertible Securities.

                           (x) "Other Securities" means (i) those options and
warrants of the Company issued prior to, and outstanding on, the Issuance Date
of this Warrant, (ii) the shares of Common Stock issuable on exercise of such
options and warrants, provided such options and warrants are not amended after
the Issuance Date of this Warrant and (iii) the shares of Common Stock issuable
upon exercise of this Warrant and (iv) two million five hundred thousand
(2,500,000) options issued or issuable under the Company's 2005 Stock Option
Plan.

                           (xi) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

                           (xii) "Principal Market" means the New York Stock
         Exchange, the American Stock Exchange, the Nasdaq National Market, the
         Nasdaq SmallCap Market, whichever is at the time the principal trading
         exchange or market for such security, or the over-the-counter market on
         the electronic bulletin board for such security as reported by
         Bloomberg or, if no bid or sale information is reported for such
         security by Bloomberg, then the average of the bid prices of each of
         the market makers for such security as reported in the "pink sheets" by
         the National Quotation Bureau, Inc.

                           (xiii) "Securities Act" means the Securities Act of
1933, as amended.

                           (xiv) "Warrant" means this Warrant and all Warrants
issued in exchange, transfer or replacement thereof.

                           (xv) "Warrant Exercise Price" shall be $0.35 or as
subsequently adjusted as provided in Section 8 hereof.

                                       3
<PAGE>

                           (xvi) "Warrant Shares" means the shares of Common
Stock issuable at any time upon exercise of this Warrant.

                  (c) Other Definitional Provisions.

                           (i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the Company's
successors and (B) to any applicable law defined or referred to herein shall be
deemed references to such applicable law as the same may have been or may be
amended or supplemented from time to time.

                           (ii) When used in this Warrant, the words "herein",
"hereof", and "hereunder" and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"Section", "Schedule", and "Exhibit" shall refer to Sections of, and Schedules
and Exhibits to, this Warrant unless otherwise specified.

                           (iii) Whenever the context so requires, the neuter
gender includes the masculine or feminine, and the singular number includes the
plural, and vice versa.

         Section 2. Exercise of Warrant.

                  (a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, pro rata as hereinafter provided, at any time on any Business Day on or
after the opening of business on such Business Day, commencing with the first
day after the date hereof, and prior to 11:59 P.M. Eastern Time on the
Expiration Date (i) by delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the "Exercise Notice"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, payment to the Company of an amount
equal to the Warrant Exercise Price(s) applicable to the Warrant Shares being
purchased, multiplied by the number of Warrant Shares (at the applicable Warrant
Exercise Price) as to which this Warrant is being exercised (plus any applicable
issue or transfer taxes) (the "Aggregate Exercise Price") in cash or wire
transfer of immediately available funds and the surrender of this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) to a common carrier for overnight delivery to the
Company as soon as practicable following such date ("Cash Basis") or (ii) if at
the time of exercise, the Warrant Shares are not subject to an effective
registration statement or if an Event of Default has occurred, by delivering an
Exercise Notice and in lieu of making payment of the Aggregate Exercise Price in
cash or wire transfer, elect instead to receive upon such exercise the "Net
Number" of shares of Common Stock determined according to the following formula
(the "Cashless Exercise"):

                                       4
<PAGE>

         Net Number = (A x B) - (A x C)
                      -----------------
                              B

                  For purposes of the foregoing formula:

                  A = the total number of Warrant Shares with respect to which
                  this Warrant is then being exercised.

                  B = the Closing Bid Price of the Common Stock on the date of
                  exercise of the Warrant.

                  C = the Warrant Exercise Price then in effect for the
                  applicable Warrant Shares at the time of such exercise.

         In the event of any exercise of the rights represented by this Warrant
in compliance with this Section 2, the Company shall on or before the fifth
(5th) Business Day following the date of receipt of the Exercise Notice, the
Aggregate Exercise Price and this Warrant (or an indemnification undertaking
with respect to this Warrant in the case of its loss, theft or destruction) and
the receipt of the representations of the holder specified in Section 6 hereof,
if requested by the Company (the "Exercise Delivery Documents"), and if the
Common Stock is DTC eligible, credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with The Depository Trust Company; provided, however, if the
holder who submitted the Exercise Notice requested physical delivery of any or
all of the Warrant Shares, or, if the Common Stock is not DTC eligible then the
Company shall, on or before the fifth (5th) Business Day following receipt of
the Exercise Delivery Documents, issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (i) or (ii) above the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised. In the case of a dispute
as to the determination of the Warrant Exercise Price, the Closing Bid Price or
the arithmetic calculation of the Warrant Shares, the Company shall promptly
issue to the holder the number of Warrant Shares that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one (1) Business Day of receipt of the holder's Exercise
Notice.

                  (b) If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or arithmetic calculation of the
Warrant Shares within one (1) day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall immediately
submit via facsimile (i) the disputed determination of the Warrant Exercise
Price or the Closing Bid Price to an independent, reputable investment banking
firm or (ii) the disputed arithmetic calculation of the Warrant Shares to its
independent, outside accountant. The Company shall cause the investment banking
firm or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
forty-eight (48) hours from the time it receives the disputed

                                       5
<PAGE>

determinations or calculations. Such investment banking firm's or accountant's
determination or calculation, as the case may be, shall be deemed conclusive
absent manifest error.

                  (c) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any exercise
and at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised.

                  (d) No fractional Warrant Shares are to be issued upon any pro
rata exercise of this Warrant, but rather the number of Warrant Shares issued
upon such exercise of this Warrant shall be rounded up or down to the nearest
whole number.

                  (e) If the Company or its Transfer Agent shall fail for any
reason or for no reason to issue to the holder within ten (10) days of receipt
of the Exercise Delivery Documents, a certificate for the number of Warrant
Shares to which the holder is entitled or to credit the holder's balance account
with The Depository Trust Company for such number of Warrant Shares to which the
holder is entitled upon the holder's exercise of this Warrant, the Company
shall, in addition to any other remedies under this Warrant or the Placement
Agent Agreement or otherwise available to such holder, pay as additional damages
in cash to such holder on each day the issuance of such certificate for Warrant
Shares is not timely effected an amount equal to 0.025% of the product of (A)
the sum of the number of Warrant Shares not issued to the holder on a timely
basis and to which the holder is entitled, and (B) the Closing Bid Price of the
Common Stock for the trading day immediately preceding the last possible date
which the Company could have issued such Common Stock to the holder without
violating this Section 2.

                  (f) If within ten (10) days after the Company's receipt of the
Exercise Delivery Documents, the Company fails to deliver a new Warrant to the
holder for the number of Warrant Shares to which such holder is entitled
pursuant to Section 2 hereof, then, in addition to any other available remedies
under this Warrant or the Placement Agent Agreement, or otherwise available to
such holder, the Company shall pay as additional damages in cash to such holder
on each day after such tenth (10th) day that such delivery of such new Warrant
is not timely effected in an amount equal to 0.25% of the product of (A) the
number of Warrant Shares represented by the portion of this Warrant which is not
being exercised and (B) the Closing Bid Price of the Common Stock for the
trading day immediately preceding the last possible date which the Company could
have issued such Warrant to the holder without violating this Section 2.

                  (g) Conversion Limitations. Conversion Limitations. The holder
of this Warrant shall not be entitled to exercise this Warrant for a number of
Warrant Shares in excess of that number of Warrant Shares which, upon giving
effect to such exercise would exceed 2,000,000 Warrant Shares in any three (3)
month period, provided however, that (a) any Warrant Shares issued pursuant to
an Exercise Notice delivered to the Company on a date in which the Closing Bid
Price of the Common Stock was $0.70 per share or greater on the trading day
immediately preceding the Exercise Notice date shall not be included for the
purposes of this Section 2(g), (b) the limitation in this Section 2(g) shall not
apply upon the occurrence and

                                       6
<PAGE>

continuation of an Event of Default, and (c) the Company may waive this
limitation at any time in its sole discretion by providing the holder with
written notice of such waiver.

         Section 3. Covenants as to Common Stock. The Company hereby covenants
and agrees as follows:

                  (a) This Warrant is, and any Warrants issued in substitution
for or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.

                  (b) All Warrant Shares which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.

                  (c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized and
reserved at least one hundred percent (100%) of the number of shares of Common
Stock needed to provide for the exercise of the rights then represented by this
Warrant and the par value of said shares will at all times be less than or equal
to the applicable Warrant Exercise Price. If at any time the Company does not
have a sufficient number of shares of Common Stock authorized and available,
then the Company shall call and hold a special meeting of its stockholders
within sixty (60) days of that time for the sole purpose of increasing the
number of authorized shares of Common Stock.

                  (d) If at any time after the date hereof the Company shall
file a registration statement, the Company shall include the Warrant Shares
issuable to the holder, pursuant to the terms of this Warrant and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Warrant Shares from time to time issuable upon the exercise of
this Warrant; and the Company shall so list on each national securities exchange
or automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon the
exercise of this Warrant if and so long as any shares of the same class shall be
listed on such national securities exchange or automated quotation system.

                  (e) The Company will not, by amendment of 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.

                  (f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.

                                       7
<PAGE>

         Section 4. Taxes. The Company shall pay any and all taxes, except any
applicable withholding, which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.

         Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.

         Section 6. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor"). Upon exercise of
this Warrant the holder shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the Warrant Shares so purchased are
being acquired solely for the holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale
and that such holder is an Accredited Investor. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of this Warrant that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities laws.

         Section 7. Ownership and Transfer.

                  (a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person

                                       8
<PAGE>

in whose name this Warrant has been issued, as well as the name and address of
each transferee. The Company may treat the person in whose name any Warrant is
registered on the register as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, but in all events recognizing any
transfers made in accordance with the terms of this Warrant.

         Section 8. Adjustment of Warrant Exercise Price and Number of Shares.
The Warrant Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted from time to time as follows:

                  (a) Adjustment of Warrant Exercise Price and Number of Shares
upon Issuance of Common Stock. If and whenever on or after the Issuance Date of
this Warrant, the Company issues or sells, or is deemed to have issued or sold,
any shares of Common Stock (other than (i) Excluded Securities and (ii) shares
of Common Stock which are issued or deemed to have been issued by the Company in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
"Applicable Price") equal to the Warrant Exercise Price in effect immediately
prior to such issuance or sale, then immediately after such issue or sale the
Warrant Exercise Price then in effect shall be reduced to an amount equal to
such consideration per share. Upon each such adjustment of the Warrant Exercise
Price hereunder, the number of Warrant Shares issuable upon exercise of this
Warrant shall be adjusted to the number of shares determined by multiplying the
Warrant Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the Warrant
Exercise Price resulting from such adjustment.

                  (b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
above, the following shall be applicable:

                           (i) Issuance of Options. Except for the two million
five hundred thousand (2,500,000) options issued or issuable under the Company's
2005 Stock Option Plan, if after the date hereof, the Company in any manner
grants any Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange of any convertible securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 8(b)(i), the lowest price per share for which one share
of Common Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option or upon conversion or exchange of any
convertible security issuable upon exercise of such Option. No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock or of such convertible securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such convertible securities.

                                        9
<PAGE>

                           (ii) Issuance of Convertible Securities. Except for
the two million five hundred thousand (2,500,000) options issued or issuable
under the Company's 2005 Stock Option Plan, if the Company in any manner issues
or sells any convertible securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such convertible securities for such price per share.
For the purposes of this Section 8(b)(ii), the lowest price per share for which
one share of Common Stock is issuable upon such conversion or exchange shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Common Stock upon the
issuance or sale of the convertible security and upon conversion or exchange of
such convertible security. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock upon conversion or
exchange of such convertible securities, and if any such issue or sale of such
convertible securities is made upon exercise of any Options for which adjustment
of the Warrant Exercise Price had been or are to be made pursuant to other
provisions of this Section 8(b), no further adjustment of the Warrant Exercise
Price shall be made by reason of such issue or sale.

                           (iii) Change in Option Price or Rate of Conversion.
Except for the two million five hundred thousand (2,500,000) options issued or
issuable under the Company's 2005 Stock Option Plan, if the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion or exchange of any convertible securities, or the rate at
which any convertible securities are convertible into or exchangeable for Common
Stock changes at any time, the Warrant Exercise Price in effect at the time of
such change shall be adjusted to the Warrant Exercise Price which would have
been in effect at such time had such Options or convertible securities provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and the
number of Warrant Shares issuable upon exercise of this Warrant shall be
correspondingly readjusted. For purposes of this Section 8(b)(iii), if the terms
of any Option or convertible security that was outstanding as of the Issuance
Date of this Warrant are changed in the manner described in the immediately
preceding sentence, then such Option or convertible security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment pursuant
to this Section 8(b) shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.

                  (c) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Sections 8(a)
and 8(b), the following shall be applicable:

                           (i) Calculation of Consideration Received. Except for
the two million five hundred thousand (2,500,000) options issued or issuable
under the Company's 2005 Stock Option Plan, if any Common Stock, Options or
convertible securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefore will be deemed to be the net
amount received by the Company therefore. If any Common Stock, Options or
convertible securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except

                                       10
<PAGE>

where such consideration consists of marketable securities, in which case the
amount of consideration received by the Company will be the market price of such
securities on the date of receipt of such securities. If any Common Stock,
Options or convertible securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefore will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or convertible securities, as
the case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the holders of Warrants
representing at least two-thirds (b) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such consideration will be
determined within five (5) Business Days after the tenth (10th) day following
the Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the holders of Warrants representing at least two-thirds (b) of
the Warrant Shares issuable upon exercise of the Warrants then outstanding. The
determination of such appraiser shall be final and binding upon all parties and
the fees and expenses of such appraiser shall be borne jointly by the Company
and the holders of Warrants.

                           (ii) Integrated Transactions. Except for the two
million five hundred thousand (2,500,000) options issued or issuable under the
Company's 2005 Stock Option Plan, in case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $.01.

                           (iii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Company, and the disposition of any shares so owned or
held will be considered an issue or sale of Common Stock.

                           (iv) Record Date. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
convertible securities or (2) to subscribe for or purchase Common Stock, Options
or convertible securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                  (d) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise

                                       11
<PAGE>

Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares issuable upon exercise of this
Warrant will be proportionately decreased. Any adjustment under this Section
8(d) shall become effective at the close of business on the date the subdivision
or combination becomes effective.

                  (e) Distribution of Assets. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in each
such case:

                           (i) any Warrant Exercise Price in effect immediately
prior to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Warrant Exercise Price by a fraction of which (A) the
numerator shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (B) the denominator shall be the Closing Sale Price
of the Common Stock on the trading day immediately preceding such record date;
and

                           (ii) either (A) the number of Warrant Shares
obtainable upon exercise of this Warrant shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution multiplied by the
reciprocal of the fraction set forth in the immediately preceding clause (i), or
(B) in the event that the Distribution is of common stock of a company whose
common stock is traded on a national securities exchange or a national automated
quotation system, then the holder of this Warrant shall receive an additional
warrant to purchase Common Stock, the terms of which shall be identical to those
of this Warrant, except that such warrant shall be exercisable into the amount
of the assets that would have been payable to the holder of this Warrant
pursuant to the Distribution had the holder exercised this Warrant immediately
prior to such record date and with an exercise price equal to the amount by
which the exercise price of this Warrant was decreased with respect to the
Distribution pursuant to the terms of the immediately preceding clause (i).

                  (f) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Warrant Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided, except as set forth in section 8(d),that no such adjustment
pursuant to this Section 8(f) will increase the Warrant Exercise Price or
decrease the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 8.

                                       12
<PAGE>

                  (g) Notices.

                           (i) Immediately upon any adjustment of the Warrant
Exercise Price, the Company will give written notice thereof to the holder of
this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.

                           (ii) The Company will give written notice to the
holder of this Warrant at least ten (10) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change (as defined below), dissolution or
liquidation, provided that such information shall be made known to the public
prior to or in conjunction with such notice being provided to such holder.

                           (iii) The Company will also give written notice to
the holder of this Warrant at least ten (10) days prior to the date on which any
Organic Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.

         Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.

                  (a) In addition to any adjustments pursuant to Section 8
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then the holder of this Warrant will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

                  (b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "Acquiring Entity") a written agreement (in form and substance
satisfactory to the holders of Warrants representing at least two-thirds (iii)
of the Warrant Shares issuable upon exercise of the Warrants then outstanding)
to deliver to each holder of Warrants in exchange for such Warrants, a security
of the Acquiring Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant and satisfactory to the holders of the
Warrants (including an adjusted warrant exercise price equal to

                                       13
<PAGE>

the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and exercisable for a corresponding number of shares of Common
Stock acquirable and receivable upon exercise of the Warrants without regard to
any limitations on exercise, if the value so reflected is less than any
Applicable Warrant Exercise Price immediately prior to such consolidation,
merger or sale). Prior to the consummation of any other Organic Change, the
Company shall make appropriate provision (in form and substance satisfactory to
the holders of Warrants representing a majority of the Warrant Shares issuable
upon exercise of the Warrants then outstanding) to insure that each of the
holders of the Warrants will thereafter have the right to acquire and receive in
lieu of or in addition to (as the case may be) the Warrant Shares immediately
theretofore issuable and receivable upon the exercise of such holder's Warrants
(without regard to any limitations on exercise), such shares of stock,
securities or assets that would have been issued or payable in such Organic
Change with respect to or in exchange for the number of Warrant Shares which
would have been issuable and receivable upon the exercise of such holder's
Warrant as of the date of such Organic Change (without taking into account any
limitations or restrictions on the exercisability of this Warrant).

         Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.

         Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

If to Cornell:                      Cornell Capital Partners, LP
                                    101 Hudson Street - Suite 3700
                                    Jersey City, NJ 07302
                                    Attention:        Mark A. Angelo
                                    Telephone:        (201) 985-8300
                                    Facsimile:        (201) 985-8266

With Copy to:                       David Gonzalez, Esq.
                                    101 Hudson Street - Suite 3700
                                    Jersey City, NJ 07302
                                    Telephone:        (201) 985-8300
                                    Facsimile:        (201) 985-8266

                                       14
<PAGE>

If to the Company, to:              Cord Blood America, Inc.
                                    9000 W. Sunset Boulevard, Suite 4000
                                    Los Angeles, CA 90069
                                    Attention:        Matthew Schissler
                                    Telephone:        (310) 432-4090
                                    Facsimile:        (310) 432-4098

With a copy to:                     Kirkpatrick & Lockhart Nicholson Graham, LLP
                                    201 South Biscayne Boulevard, Suite 2000
                                    Miami, Florida 33131
                                    Attention:        Clayton E. Parker, Esquire
                                    Telephone:        (305) 539-3306
                                    Facsimile:        (305) 358-7095

If to a holder of this Warrant, to it at the address and facsimile number set
forth on Exhibit C hereto, with copies to such holder's representatives as set
forth on Exhibit C, or at such other address and facsimile as shall be delivered
to the Company upon the issuance or transfer of this Warrant. Each party shall
provide five days' prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, (or
(B) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.

         Section 12. Date. The date of this Warrant is set forth on page 1
hereof. This Warrant, in all events, shall be wholly void and of no effect after
the close of business on the Expiration Date, except that notwithstanding any
other provisions hereof, the provisions of Section 8(b) shall continue in full
force and effect after such date as to any Warrant Shares or other securities
issued upon the exercise of this Warrant.

         Section 13. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing at least two-thirds of the Warrant Shares
issuable upon exercise of the Warrants then outstanding; provided that, except
for Section 8(d), no such action may increase the Warrant Exercise Price or
decrease the number of shares or class of stock obtainable upon exercise of any
Warrant without the written consent of the holder of such Warrant.

         Section 14. Descriptive Headings; Governing Law. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Florida shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New Jersey, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New Jersey or any other

                                       15
<PAGE>

jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New Jersey. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in Hudson County
and the United States District Court for the District of New Jersey, for the
adjudication of any dispute hereunder or in connection herewith or therewith, or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.

         Section 15. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH
PARTY HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS
TRANSACTION.

                            SIGNATURE PAGE TO FOLLOW

                                       16
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as
of the date first set forth above.

                                     CORD BLOOD AMERICA, INC.

                                     By:_____________________
                                     Name:
                                     Title:

                                       17
<PAGE>

                              EXHIBIT A TO WARRANT

                                 EXERCISE NOTICE

                                 TO BE EXECUTED
                BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

                            CORD BLOOD AMERICA, INC.

         The undersigned holder hereby exercises the right to purchase
______________ of the shares of Common Stock ("Warrant Shares") of Cord Blood
America, Inc., a Florida corporation (the "Company"), evidenced by the attached
Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.

Specify Method of exercise by check mark:

         1.  ___  Cash Exercise

                (a) Payment of Warrant Exercise Price. The holder shall pay the
                Aggregate Exercise Price of $______________ to the Company in
                accordance with the terms of the Warrant.

                (b) Delivery of Warrant Shares. The Company shall deliver to the
                holder _________ Warrant Shares in accordance with the terms of
                the Warrant.

         2.  ___  Cashless Exercise

                (a) Payment of Warrant Exercise Price. In lieu of making payment
                of the Aggregate Exercise Price, the holder elects to receive
                upon such exercise the Net Number of shares of Common Stock
                determined in accordance with the terms of the Warrant.

                (b) Delivery of Warrant Shares. The Company shall deliver to the
                holder _________ Warrant Shares in accordance with the terms of
                the Warrant.

Date: _______________ __, ______

Name of Registered Holder

By:
   -----------------------------------------
Name:
     ---------------------------------------
Title:
      --------------------------------------

                                       A-1

<PAGE>

                              EXHIBIT B TO WARRANT

                              FORM OF WARRANT POWER

         FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Cord Blood America, Inc., a Florida
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.

Dated:__________________________________    ___________________________________

                                            By:________________________________
                                            Name:______________________________
                                            Title:_____________________________

                                       B-1

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