Document:

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                                                                    EXHIBIT 10.2

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE LAWS.

                             STOCK PURCHASE WARRANT

                  To Purchase 150,000 Shares of Common Stock of

                              ARTIFICIAL LIFE, INC.

      THIS CERTIFIES that, for value received, Bluefire Capital, Inc. (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
September 23, 2001 (the "Initial Exercise Date") and on or prior to the close of
business on September 23, 2004 (the "Termination Date") but not thereafter, to
subscribe for and purchase from Artificial Life, Inc., a corporation
incorporated in the State of Delaware (the "Company"), up to 150,000 shares (the
"Warrant Shares") of Common Stock, $0.01 par value per share, of the Company
(the "Common Stock"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be $3.82. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. In the event of any conflict between the terms
of this Warrant and the Common Stock Purchase Agreement dated as of March 22,
2001 pursuant to which this Warrant has been issued (the "Purchase Agreement"),
the Purchase Agreement shall control. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.

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      1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.

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

      3. Exercise of Warrant.

         (a) Except as provided in Section 4 herein, exercise of the purchase
      rights represented by this Warrant may be made at any time or times on or
      after the Initial Exercise Date and on or before the Termination Date by
      the surrender of this Warrant and the Notice of Exercise Form annexed
      hereto duly executed, at the office of 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 such Holder appearing on the books of
      the Company) and upon payment of the Exercise Price of the shares thereby
      purchased by wire transfer or cashier's check drawn on a United States
      bank, or by means of a cashless exercise, the Holder shall be entitled to
      receive a certificate for the number of Warrant Shares so purchased.
      Certificates for shares purchased hereunder shall be delivered to the
      Holder within three (3) Trading Days after the date on which this Warrant
      shall have been exercised as aforesaid. This Warrant shall be deemed to
      have been exercised and such certificate or certificates shall be deemed
      to have been issued, and Holder or any other person so designated to be
      named therein shall be deemed to have become a holder of record of such
      shares for all purposes, as of the date the Warrant has been exercised by
      payment to the Company of the Exercise Price and all taxes required to be
      paid by the Holder, if any, pursuant to Section 5 prior to the issuance of
      such shares, have been paid. Notwithstanding anything to the contrary
      herein, in the event the Purchase Agreement is terminated pursuant to
      Section 6.2(b) therein, a pro-rata portion of half of the unexercised
      Warrant Shares herein, based upon the portion of the Commitment Amount
      that has not been previously honored, shall be null and void.

         (b) If this Warrant shall have been exercised in part, the Company
      shall, 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.

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         (c) This Warrant shall also be exercisable 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 average of the high and low trading prices per share of
         Common Stock on the Trading Day preceding the date of such election on
         the Nasdaq Stock Market, or if the Common Stock is not traded on the
         Nasdaq Stock Market, then the Principal Market in terms of volume;

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

         (X) = the number of Warrant Shares issuable upon exercise of this
         Warrant in accordance with the terms of this Warrant and the Notice of
         Exercise.

         (d) Notwithstanding anything herein to the contrary, in no event shall
      the Holder be permitted to exercise this Warrant for Warrant Shares to the
      extent that (i) the number of shares of Common Stock owned by such Holder
      (other than Warrant Shares issuable upon exercise of this Warrant) plus
      (ii) the number of Warrant Shares issuable upon exercise of this Warrant,
      would be equal to or exceed 9.9% of the number of shares of Common Stock
      then issued and outstanding, including shares issuable upon exercise of
      this Warrant held by such Holder after application of this Section 3(d).
      As used herein, beneficial ownership shall be determined in accordance
      with Section 13(d) of the Exchange Act. To the extent that the limitation
      contained in this Section 3(d) applies, the determination of whether this
      Warrant is exercisable (in relation to other securities owned by the
      Holder) and of which a portion of this Warrant is exercisable shall be in
      the sole discretion of such Holder, and the submission of a Notice of
      Exercise shall be deemed to be such Holder's determination of whether this
      Warrant is exercisable (in relation to other securities owned by such
      Holder) and of which portion of this Warrant is exercisable, in each case
      subject to such aggregate percentage limitation, and the Company shall
      have no obligation to verify or confirm the accuracy of such
      determination. Nothing contained herein shall be deemed to restrict the
      right of a Holder to exercise this Warrant into Warrant Shares at such
      time as such exercise will not violate the provisions of this Section
      3(d). The provisions of this Section 3(d) may be waived by the Holder
      upon, at the election of the Holder, with not less than 61 days' prior
      notice to the Company, and the provisions of this Section 3(d) shall
      continue to apply until such 61st day (or such later date as may be
      specified in such notice of waiver). No exercise of this Warrant in
      violation of this Section 3(d) but otherwise in accordance with this
      Warrant shall affect the status of the Warrant Shares as validly issued,
      fully-paid and nonassessable.

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

      5. 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.

      6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.

      7. Transfer, Division and Combination.

         (a) Subject to compliance with any applicable securities laws, transfer
      of this Warrant and all rights hereunder, in whole or in part, shall be
      registered on the books of the Company to be maintained for such purpose,
      upon surrender of this Warrant at the principal office of the Company,
      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. In the event that the Holder wishes to transfer a portion
      of this Warrant, the Holder shall transfer at least 100,000 shares
      underlying this Warrant to any such transferee. Upon such surrender and,
      if required, such payment, the Company shall execute and deliver a new
      Warrant or Warrants in the name of the assignee or assignees and in the
      denomination or denominations specified in such instrument of assignment,
      and shall issue to the assignor a new Warrant evidencing the portion of
      this Warrant not so assigned, and this Warrant shall promptly be
      cancelled. A Warrant, if properly assigned, may be exercised by a new
      holder for the purchase of Warrant Shares without having a new Warrant
      issued.

         (b) 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 7(a), as to any transfer which may be
      involved in such division or combination, the Company shall execute and
      deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
      to be divided or combined in accordance with such notice.

         (c) The Company shall prepare, issue and deliver at its own expense
      (other than transfer taxes) the new Warrant or Warrants under this Section
      7.

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         (d) The Company agrees to maintain, at its aforesaid office, books for
      the registration and the registration of transfer of the Warrants.

      8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price or by means of a cashless exercise, the Warrant
Shares so purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of the date
of such surrender or payment.

      9. 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 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.

      10. 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 be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.

      11. Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock
Splits, etc. The number and kind of securities purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to
time upon the happening of any of the following. In case the Company shall (i)
pay a dividend in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which it would have owned or
have been entitled to receive had such Warrant been exercised in advance
thereof. Upon each such adjustment of the kind and number of Warrant Shares or
other securities of the Company which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant Share
or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.

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      12. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
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 Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

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

      14. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder notice of such adjustment or adjustments setting forth the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such notice, in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.

      15. Notice of Corporate Action. If at any time:

         (a) the Company shall take a record of the holders of its Common Stock
      for the purpose of entitling them to receive a dividend or other
      distribution, or any right to subscribe for or purchase any evidences of
      its indebtedness, any shares of stock of any class or any other securities
      or property, or to receive any other right, or

         (b) there shall be any capital reorganization of the Company, any
      reclassification or recapitalization of the capital stock of the Company
      or any consolidation or merger of the Company with, or any sale, transfer
      or other disposition of all or substantially all the property, assets or
      business of the Company to, another corporation or,

         (c) there shall be a voluntary or involuntary dissolution, liquidation
      or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to

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Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).

      16. 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 Principal Market
upon which the Common Stock may be listed.

      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
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

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

      17. Miscellaneous.

         (a) Jurisdiction. This Warrant shall constitute a contract under the
      laws of New York, without regard to its conflict of law, principles or
      rules, and be subject to arbitration pursuant to the terms set forth in
      the Purchase Agreement.

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

         (c) Nonwaiver and Expenses. No course of dealing or any delay or
      failure to exercise any right hereunder on the part of Holder shall
      operate as a waiver of such right or otherwise prejudice Holder's rights,
      powers or remedies, notwithstanding all

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      rights hereunder terminate on the Termination Date. If the Company
      willfully and knowingly fails to comply with any provision of this
      Warrant, which results in any material damages to the Holder, the Company
      shall pay to Holder such amounts as shall be sufficient to cover any costs
      and expenses including, but not limited to, reasonable attorneys' fees,
      including those of appellate proceedings, incurred by Holder in collecting
      any amounts due pursuant hereto or in otherwise enforcing any of its
      rights, powers or remedies hereunder.

         (d) 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.

         (e) Limitation of Liability. No provision hereof, in the absence of
      affirmative action by Holder 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.

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

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

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

         (i) 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.

         (j) 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.

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         IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
      by its officer thereunto duly authorized.

      Dated: March 23, 2001

                              ARTIFICIAL LIFE, INC.

                              By: /s/ Eberhard Schoneburg
                                  ----------------------------------------
                                  Eberhard Schoneburg, President & CEO

                                       10
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                               NOTICE OF EXERCISE

To:   Artificial Life, Inc.

      (1) The undersigned hereby elects to purchase ________ Warrant Shares (the
"Common Stock"), of Artificial Life, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.

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

          -------------------------------------

The Warrant Shares shall be delivered to the following:

          -------------------------------------

          -------------------------------------

          -------------------------------------

                                          [PURCHASER]

                                          By: ______________________________
                                              Name:
                                              Title:

                                          Dated:  ________________________
<PAGE>

                   NOTICE OF EXERCISE OF COMMON STOCK WARRANT
                    PURSUANT TO CASHLESS EXERCISE PROVISIONS

To: Artificial Life, Inc.

Aggregate Price of Warrant Before Exercise:  $______
Aggregate Price Being Exercised: $______
Exercise Price: $______ per share
Number of Shares of Common Stock to be Issued Under this Notice: ______
Remaining Aggregate Price (if any) After Issuance: $______

Gentlemen:

      The undersigned, registered Holder of the Warrant delivered herewith,
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of Artificial Life, Inc., a Delaware corporation, as
provided below. Capitalized terms used herein, unless otherwise defined herein,
shall have the meanings given in the Warrant. The portion of the Exercise Price
(as defined in the Warrant) to be applied toward the purchase of Common Stock
pursuant to this Notice of Exercise is $_______, thereby leaving a remaining
Exercise Price (if any) equal to $________. Such exercise shall be pursuant to
the cashless exercise provisions of Section 3 of the Warrant; therefore, Holder
makes no payment with this Notice of Exercise. The number of shares to be issued
pursuant to this exercise shall be determined by reference to the formula in
Section 3 of the Warrant which, by reference to Section 3, requires the use of
the high and low trading price of the Company's Common Stock on the Trading Day
preceding the date of such election. The high and low trading price of the
Company's Common Stock has been determined by Holder to be $______ and
$_________, respectively, which figure is acceptable to Holder for calculations
of the number of shares of Common Stock issuable pursuant to this Notice of
Exercise. Holder requests that the certificates for the purchased shares of
Common Stock be issued in the name of _________________________ and delivered to
______________________________________________. To the extent the foregoing
exercise is for less than the full Aggregate Price of the Warrant, a replacement
Warrant representing the remainder of the Aggregate Price (and otherwise of like
form, tenor and effect) shall be delivered

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to Holder along with the share certificate evidencing the Common Stock issued in
response to this Notice of Exercise.

                                          [Purchaser]

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

                                          Date:

                                      NOTE

      The execution to the foregoing Notice of Exercise must exactly correspond
to the name of the Holder on the Warrant

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                                 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, 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 an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.

                                       4<PAGE>

                                                                    EXHIBIT 10.3

                          REGISTRATION RIGHTS AGREEMENT

      THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 23, 2001 between
Bluefire Capital, Inc. ("Purchaser") and Artificial Life, Inc. (the "Company").

      WHEREAS, simultaneously with the execution and delivery of this Agreement,
the parties shall enter into the Common Stock Purchase Agreement, dated as of
the date hereof, (the "Purchase Agreement") pursuant to which the Purchaser has
committed to purchase up to $25,000,000 of the Company's Common Stock (terms not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement) and the Warrant; and

      WHEREAS, the execution and delivery of this Agreement and granting to the
Purchaser of the registration rights set forth herein with respect to the Shares
is a component part of the transaction contemplated under the Purchase
Agreement.

      NOW, THEREFORE, the parties hereto mutually agree as follows:

      Section 1. Registrable Securities. As used herein the term "Registrable
Security" means all Shares that (i) have not been sold under the Registration
Statement, (ii) have not been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) have not been otherwise
transferred to persons who may trade such Shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such Shares not bearing a restrictive legend, or (iv)
may not be sold without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act. In
the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be deemed to be made in the definition of "Registrable Security" as is
appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Agreement.

      Section 2. Restrictions on Transfer. The Purchaser acknowledges and
understands that in the absence of an effective Registration Statement
authorizing the resale of the Shares as provided herein, the Shares are
"restricted securities" as defined in Rule 144. The Purchaser understands that
no disposition or transfer of the Shares may be made by Purchaser in the absence
of (i) an opinion of counsel to the Purchaser, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.

      With a view to making available to the Purchaser the benefits of Rule 144,
the Company agrees to:

            (a)   comply with the provisions of paragraph (c)(1) of Rule 144;
      and

                                       1
<PAGE>

            (b) file with the Commission in a timely manner all reports and
      other documents required to be filed by the Company pursuant to Section 13
      or 15(d) under the Exchange Act; and, if at any time it is not required to
      file such reports but in the past had been required to or did file such
      reports, it will, upon the request of the Purchaser, make available other
      information as required by, and so long as necessary to permit sales of,
      its Registrable Securities pursuant to Rule 144.

      Section 3. Registration Rights With Respect to the Shares.

            (a) The Company agrees that it will prepare and file with the
      Securities and Exchange Commission ("Commission"), within sixty (60) days
      after the date hereof, a registration statement (on Form S-3 and/or S-1,
      or other appropriate form of registration statement) under the Securities
      Act (the "Registration Statement"), at the sole expense of the Company
      (except as provided in Section 3(c) hereof), so as to permit a public
      offering and resale of the Shares under the Securities Act by Purchaser.

            (b) The Company shall cause the Registration Statement to become
      effective within the earlier of (i) one hundred twenty (120) days (or, in
      the event of a "full review" by the Commission, one hundred fifty (150)
      days of the date of filing the Registration Statement, or (ii) five (5)
      days after receiving written notice of SEC clearance and will within said
      five (5) days request acceleration of effectiveness. The Company will
      notify Purchaser of the effectiveness of the Registration Statement within
      one Trading Day of such event.

            (c) The Company will maintain the Registration Statement or
      post-effective amendment filed under this Section 3 hereof effective under
      the Securities Act until the earliest of (i) the date that all the Shares
      have been disposed of pursuant to the Registration Statement, (ii) the
      date that all of the Shares have been sold pursuant to the Registration
      Statement, (iii) all Shares have been otherwise transferred to persons who
      may trade such shares without restriction under the Securities Act, and
      the Company has delivered a new certificate or other evidence of ownership
      for such Shares not bearing a restrictive legend, (iv) all Shares may be
      sold without any time, volume or manner limitations pursuant to Rule
      144(k) or any similar provision then in effect under the Securities Act in
      the opinion of counsel to the Company, which counsel shall be reasonably
      acceptable to the Purchaser, or (vi) provided that the Purchaser no longer
      holds any portions of the Warrant that are unexercised, 180 days
      immediately subsequent to the date of the most recent Settlement Date,
      provided that the Company notifies the Purchaser at least ten (10) Trading
      Days prior to the date the Company will no longer maintain the
      Registration Statement (the "Effectiveness Period") (the "Effectiveness
      Period").

            (d) All fees, disbursements and out-of-pocket expenses and costs
      incurred by the Company in connection with the preparation and filing of
      the Registration Statement under subparagraph 3(a) and in complying with
      applicable securities and Blue Sky laws (including, without limitation,
      all attorneys' fees of the Company) shall be

                                       2
<PAGE>

      borne by the Company. The Purchaser shall bear the cost of underwriting
      and/or brokerage discounts, fees and commissions, if any, applicable to
      the Shares being registered and the fees and expenses of its counsel.

            (e) The Purchaser and its counsel shall have a reasonable period,
      not to exceed ten (10) Trading Days, to review the proposed Registration
      Statement or any amendment thereto, prior to filing with the Commission,
      and the Company shall provide the Purchaser with copies of any comment
      letters received from the Commission with respect thereto within two (2)
      Trading Days of receipt thereof.

            (f) The Company shall make reasonably available for inspection by
      Purchaser, any underwriter participating in any disposition pursuant to
      the Registration Statement, and any attorney, accountant or other agent
      retained by the Purchaser or any such underwriter all relevant financial
      and other records, pertinent corporate documents and properties of the
      Company and its subsidiaries, and cause the Company's officers, directors
      and employees to supply all information reasonably requested by the
      Purchaser or any such underwriter, attorney, accountant or agent in
      connection with the Registration Statement, in each case, as is customary
      for due diligence examinations; provided, however, all records,
      information and documents that are designated in writing by the Company,
      in good faith, as confidential, proprietary or containing any material
      non-public information shall be kept confidential by the Purchaser and any
      such underwriter, attorney, accountant or agent, unless such disclosure is
      made pursuant to judicial process in a court proceeding (after first
      giving the Company an opportunity promptly to seek a protective order or
      otherwise limit the scope of the information sought to be disclosed) or is
      required by law, or such records, information or documents become
      available to the public generally or through a third party not in
      violation of an accompanying obligation of confidentiality. If the
      foregoing inspection and information gathering would otherwise disrupt the
      Company's conduct of its business, such inspection and information
      gathering shall, to the maximum extent possible, be coordinated on behalf
      of the Purchaser and the other parties entitled thereto by one firm of
      counsel designed by and on behalf of the majority in interest of Purchaser
      and other parties.

            (g) The Company shall qualify any of the Shares for sale in such
      states as the Purchaser reasonably designates, subject to the approval of
      the Company, which shall not be unreasonably withheld, and shall furnish
      indemnification in the manner provided in Section 6 hereof. However, the
      Company shall not be required to qualify in any state which will require
      an escrow or other restriction relating to the Company and/or the sellers,
      or which will require the Company to qualify to do business in such state
      or require the Company to file therein any general consent to service of
      process.

            (h) The Company at its expense will supply the Purchaser with copies
      of the Registration Statement and the final prospectus included therein
      (the "Prospectus") and other related documents in such quantities as may
      be reasonably requested by the Purchaser.

                                       3
<PAGE>

            (i) The Company shall not be required by this Section 3 to include
      the Purchaser's Shares in any Registration Statement which is to be filed
      if, in the opinion of counsel for both the Purchaser and the Company (or,
      should they not agree, in the opinion of another counsel experienced in
      securities law matters acceptable to counsel for the Purchaser and the
      Company) the proposed offering or other transfer as to which such
      registration is requested is exempt from applicable federal and state
      securities laws and would result in all purchasers or transferees
      obtaining securities which are not "restricted securities", as defined in
      Rule 144 under the Securities Act.

            (j) If at any time or from time to time after the effective date of
      the Registration Statement, the Company notifies the Purchaser in writing
      of the existence of a Potential Material Event (as defined in Section 3(k)
      below), the Purchaser shall not offer or sell any Shares or engage in any
      other transaction involving or relating to Shares, from the time of the
      giving of notice with respect to a Potential Material Event until the
      Purchaser receives written notice from the Company that such Potential
      Material Event either has been disclosed to the public or no longer
      constitutes a Potential Material Event (the "Suspension Period").
      Notwithstanding anything herein to the contrary, if a Suspension Period
      occurs at any time during any period commencing on a Trading Day a Draw
      Down Notice is deemed delivered and ending ten (10) Trading Days following
      the end of the corresponding Draw Down Pricing Period, then the Company
      must compensate the Purchaser for any net decline in the market value of
      any Shares purchased or committed to be purchased by the Purchaser
      pursuant to such recent Draw Down Pricing Period through the end of such
      Suspension Period. Net decline shall be calculated as the difference
      between the highest VWAP during the applicable Suspension Period and the
      VWAP on the Trading Day immediately following a properly delivered notice
      to the Purchaser that such Suspension Period has ended. If a Potential
      Material Event shall occur prior to the date the Registration Statement is
      filed, then the Company's obligation to file the Registration Statement
      shall be delayed without penalty for not more than thirty (30) calendar
      days. The Company must give Purchaser notice in writing of the existence
      of a Potential Material Event promptly upon knowledge that such an event
      exists and, where possible, at least two (2) days prior to the first day
      of a Suspension Period, if lawful to do so.

            (k) "Potential Material Event" means any of the following: (i) the
      possession by the Company of material information that is not ripe for
      disclosure in a registration statement, as determined in good faith by the
      Chief Executive Officer or the Board of Directors of the Company or that
      disclosure of such information in the Registration Statement would be
      detrimental to the business and affairs of the Company; (ii) any material
      engagement or activity by the Company which would, in the good faith
      determination of the Chief Executive Officer or the Board of Directors of
      the Company, be adversely affected by disclosure in a registration
      statement at such time, which determination shall be accompanied by a good
      faith determination by the Chief Executive Officer or the Board of
      Directors of the Company that the Registration Statement would be
      materially misleading absent the inclusion of such information; or (iii)
      pursuant to applicable law, the Company is required to file a
      post-effective amendment to the

                                       4
<PAGE>

      Registration Statement because the Company experiences a fundamental
      change, must change the plan of distribution to the Prospectus, or must
      update the information included in the Prospectus pursuant to Section
      10(a)(3) of the Securities Act.

      Section 4. Cooperation with Company. The Purchaser will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Purchaser and proposed manner of sale of
the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering. The
Purchaser shall consent to be named as an underwriter in the Registration
Statement. Purchaser acknowledges that in accordance with current Commission
policy, the Purchaser will be named as the underwriter of the Shares in the
Registration Statement.

      Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Securities Act, the Company shall
(except as otherwise provided in this Agreement), as expeditiously as possible,
subject to the Purchaser's assistance and cooperation as reasonably required:

            (a) Subject to Section 3(c) herein, prepare and file with the
      Commission such amendments and supplements to the Registration Statement
      and the Prospectus as may be necessary to keep such registration statement
      effective and to comply with the provisions of the Securities Act with
      respect to the sale or other disposition of all securities covered by such
      registration statement whenever the Purchaser of such Registrable
      Securities shall desire to sell or otherwise dispose of the same
      (including prospectus supplements with respect to the sales of securities
      from time to time in connection with a registration statement pursuant to
      Rule 415 promulgated under the Securities Act) and (ii) take all lawful
      action such that each of (A) the Registration Statement and any amendment
      thereto does not, when it becomes effective, contain an untrue statement
      of a material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading and (B)
      the Prospectus, and any amendment or supplement thereto, does not at any
      time during the Effectiveness Period include an untrue statement of a
      material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading;

            (b) prior to the filing with the Commission of any Registration
      Statement (including any amendments thereto) and the distribution or
      delivery of the Prospectus (including any supplements thereto), provide
      draft copies thereof to the Purchaser and reflect in such documents all
      such comments as the Purchaser (and its counsel) reasonably may propose
      and (ii) furnish to the Purchaser such numbers of copies of the

                                       5
<PAGE>

      Prospectus including a preliminary prospectus or any amendment or
      supplement to the Prospectus, as applicable, in conformity with the
      requirements of the Securities Act, and such other documents, as the
      Purchaser may reasonably request in order to facilitate the public sale or
      other disposition of the Registrable Securities;

            (c) comply with the New York blue sky laws with respect to the
      Registrable Securities (subject to the limitations set forth in Section
      3(g) above), and do any and all other acts and things which may be
      reasonably necessary or advisable to enable the Purchaser to consummate
      the public sale or other disposition in such jurisdiction of the
      Registrable Securities;

            (d) list such Registrable Securities on the Principal Market, and
      any other exchange on which the Common Stock of the Company is then
      listed, if the listing of such Registrable Securities is then permitted
      under the rules of such exchange or the Nasdaq Stock Market;

            (e) notify the Purchaser at any time when the Prospectus is required
      to be delivered under the Securities Act, of the happening of any event of
      which it has knowledge as a result of which the Prospectus, as then in
      effect, includes an untrue statement of a material fact or omits to state
      a material fact required to be stated therein or necessary to make the
      statements therein not misleading in the light of the circumstances then
      existing, and the Company shall prepare and file a curative amendment
      under Section 5(a) as quickly as commercially possible and such period
      during which the Purchaser is precluded from making sales under the
      Prospectus shall be a Suspension Period (if during the periods set forth
      in Section 3(j)) and the Company shall compensate the Purchaser as set
      forth in Section 3(j) herein;

            (f) as promptly as practicable after becoming aware of such event,
      notify the Purchaser (or, in the event of an underwritten offering, the
      managing underwriters) of the issuance by the Commission or any state
      authority of any stop order or other suspension of the effectiveness of
      the Registration Statement at the earliest possible time and take all
      lawful action to effect the withdrawal, rescission or removal of such stop
      order or other suspension;

            (g) take all such other lawful actions reasonably necessary to
      expedite and facilitate the disposition by the Purchaser of its
      Registrable Securities in accordance with the intended methods therefor
      provided in the Prospectus which are customary for issuers to perform
      under the circumstances;

            (h) in the event of an underwritten offering, promptly include or
      incorporate in a prospectus supplement or post-effective amendment to the
      Registration Statement such information as the managing underwriters
      reasonably agree should be included therein and to which the Company does
      not reasonably object and make all required filings of such prospectus
      supplement or post-effective amendment as soon as practicable after it is
      notified of the matters to be included or incorporated in such prospectus
      supplement or post-effective amendment; and

                                       6
<PAGE>

            (i) maintain a transfer agent for its Common Stock.

      Section 6. Indemnification.

            (a) The Company agrees to indemnify and hold harmless the Purchaser
      and each person, if any, who controls the Purchaser within the meaning of
      the Securities Act ("Distributing Purchaser") against any losses, claims,
      damages or liabilities, joint or several (which shall, for all purposes of
      this Agreement, include, but not be limited to, all reasonable costs of
      defense and investigation and all reasonable attorneys' fees), to which
      the Distributing Purchaser may become subject, under the Securities Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or
      actions in respect thereof) arise out of or are based upon any untrue
      statement or alleged untrue statement of any material fact contained in
      the Registration Statement, or any related preliminary prospectus, the
      Prospectus or amendment or supplement thereto, or arise out of or are
      based upon the omission or alleged omission to state therein a material
      fact required to be stated therein or necessary to make the statements
      therein not misleading; provided, however, that the Company will not be
      liable in any such case to the extent that any such loss, claim, damage or
      liability arises out of or is based upon an untrue statement or alleged
      untrue statement or omission or alleged omission made in the Registration
      Statement, preliminary prospectus, the Prospectus or amendment or
      supplement thereto in reliance upon, and in conformity with, written
      instructions or information furnished to the Company by the Distributing
      Purchaser specifically for use in the preparation thereof. This Section
      6(a) shall not inure to the benefit of any Distributing Purchaser with
      respect to any person asserting such loss, claim, damage or liability who
      purchased the Registrable Securities which are the subject thereof if the
      Distributing Purchaser failed to send or give (in violation of the
      Securities Act or the rules and regulations promulgated thereunder) a copy
      of the Prospectus to such person at or prior to the written confirmation
      to such person of the sale of such Registrable Securities, where the
      Distributing Purchaser was obligated to do so under the Securities Act or
      the rules and regulations promulgated thereunder. This indemnity agreement
      will be in addition to any liability which the Company may otherwise have.

            (b) Each Distributing Purchaser agrees that it will indemnify and
      hold harmless the Company, and each officer, director of the Company or
      person, if any, who controls the Company within the meaning of the
      Securities Act, against any losses, claims, damages or liabilities (which
      shall, for all purposes of this Agreement, include, but not be limited to,
      all reasonable costs of defense and investigation and all reasonable
      attorneys' fees) to which the Company or any such officer, director or
      controlling person may become subject under the Securities Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or
      actions in respect thereof) arise out of or are based upon any untrue
      statement or alleged untrue statement of any material fact contained in
      the Registration Statement, or any related preliminary prospectus, the
      Prospectus or amendment or supplement thereto, or arise out of or are
      based upon the omission or the alleged omission to state therein a
      material fact required to be stated therein or necessary to make the
      statements therein not misleading, but in each case only to the extent
      that

                                       7
<PAGE>

      such untrue statement or alleged untrue statement or omission or alleged
      omission was made in the Registration Statement, preliminary prospectus,
      the Prospectus or amendment or supplement thereto in reliance upon, and in
      conformity with, written instructions or information furnished to the
      Company by such Distributing Purchaser specifically for use in the
      preparation thereof. This indemnity agreement will be in addition to any
      liability which the Distributing Purchaser may otherwise have.
      Notwithstanding anything to the contrary herein, the Distributing
      Purchaser shall not be liable under this Section 6(b) for any amount in
      excess of the net proceeds to such Distributing Purchaser as a result of
      the sale of Registrable Securities pursuant to the Registration Statement.

            (c) Promptly after receipt by an indemnified party under this
      Section 6 of notice of the commencement of any action, such indemnified
      party will, if a claim in respect thereof is to be made against the
      indemnifying party under this Section 6, notify the indemnifying party of
      the commencement thereof; but the omission so to notify the indemnifying
      party will not relieve the indemnifying party from any liability which it
      may have to any indemnified party except to the extent of actual prejudice
      demonstrated by the indemnifying party. In case any such action is brought
      against any indemnified party, and it notifies the indemnifying party of
      the commencement thereof, the indemnifying party will be entitled to
      participate in, and, to the extent that it may wish, jointly with any
      other indemnifying party similarly notified, assume the defense thereof,
      subject to the provisions herein stated and after notice from the
      indemnifying party to such indemnified party of its election so to assume
      the defense thereof, the indemnifying party will not be liable to such
      indemnified party under this Section 6 for any legal or other expenses
      subsequently incurred by such indemnified party in connection with the
      defense thereof other than reasonable costs of investigation, unless the
      indemnifying party shall not pursue the action to its final conclusion.
      The indemnified party shall have the right to employ separate counsel in
      any such action and to participate in the defense thereof, but the fees
      and expenses of such counsel shall not be at the expense of the
      indemnifying party if the indemnifying party has assumed the defense of
      the action with counsel reasonably satisfactory to the indemnified party;
      provided that if the indemnified party is the Distributing Purchaser, the
      fees and expenses of such counsel shall be at the expense of the
      indemnifying party if (i) the employment of such counsel has been
      specifically authorized in writing by the indemnifying party, or (ii) the
      named parties to any such action (including any impleaded parties) include
      both the Distributing Purchaser and the indemnifying party and the
      Distributing Purchaser shall have been advised by such counsel that there
      may be one or more legal defenses available to the indemnifying party
      different from or in conflict with any legal defenses which may be
      available to the Distributing Purchaser (in which case the indemnifying
      party shall not have the right to assume the defense of such action on
      behalf of the Distributing Purchaser, it being understood, however, that
      the indemnifying party shall, in connection with any one such action or
      separate but substantially similar or related actions in the same
      jurisdiction arising out of the same general allegations or circumstances,
      be liable only for the reasonable fees and expenses of one separate firm
      of attorneys for the Distributing Purchaser, which firm shall be
      designated in writing by the Distributing Purchaser and be

                                       8
<PAGE>

      approved by the indemnifying party). No settlement of any action against
      an indemnified party shall be made without the prior written consent of
      the indemnified party, which consent shall not be unreasonably withheld.

            All fees and expenses of the indemnified party (including reasonable
      costs of defense and investigation in a manner not inconsistent with this
      Section and all reasonable attorneys' fees and expenses) shall be paid to
      the indemnified party, as incurred, within ten (10) Trading Days of
      written notice thereof to the indemnifying party; provided, that the
      indemnifying party may require such indemnified party to undertake to
      reimburse all such fees and expenses to the extent it is finally
      judicially determined that such indemnified party is not entitled to
      indemnification hereunder.

      Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified party, then the Company and the
applicable Distributing Purchaser shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Purchaser on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

      Notwithstanding any other provision of this Section 7, in no event shall
any (i) Purchaser be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the net proceeds to
be received by the Purchaser from the sale of the Purchaser's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable

                                       9
<PAGE>

Securities are or were to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.

      Section 8. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be delivered as set forth in the
Purchase Agreement.

      Section 9. Assignment. Neither this Agreement nor any rights of the
Purchaser or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased by the Purchaser pursuant to the Purchase Agreement
other than through open-market sales, and (b) upon the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed in the
case of an assignment to an affiliate of the Purchaser, the Purchaser's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any affiliate of the Purchaser) who agrees to be
bound hereby.

      Section 10. Counterparts/Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when together shall constitute but one and the same instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.

      Section 11. Remedies and Severability. The remedies provided in this
Agreement are cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is held by a
board of arbitration or a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of those
that may be hereafter declared invalid, illegal, void or unenforceable.

      Section 12. Conflicting Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the purchasers of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.

      Section 13. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

                                       10
<PAGE>

      Section 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any action may be brought as set
forth in the Purchase Agreement. The Company and the Purchaser agree to submit
themselves to the in personam jurisdiction of the state and federal courts
situated within the Southern District of the State of New York with regard to
any controversy arising out of or relating to this Agreement. Any party shall
have the right to seek injunctive relief from any court of competent
jurisdiction in any case where such relief is available. Any dispute under this
Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.

                            [SIGNATURE PAGE FOLLOWS]

                                       11
<PAGE>

                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

      IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on this 23rd day of March, 2001.

                              ARTIFICIAL LIFE, INC.

                              By: /s/ Eberhard Schoneburg
                                  ------------------------------------
                                  Eberhard Schoneburg, President & CEO

                              BLUEFIRE CAPITAL, INC.

                              By: N.D. Nominees Ltd.

                              By: /s/ Ian Goodall
                                  ------------------------------------
                                  Ian Goodall, Authorized Signatory

                                       12

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