Document:

Exhibit 10.06

    
      

      

    

    

      Exhibit
        10.6

       

      Dated:
        December 20, 2006

       

      NEITHER
        THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
        HAVE
        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
        ACT”),
        AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
        EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
        SECURITIES LAWS.

       

      
        	
                No. CLSC-1-1

              	
                $2,500,000

              

      

       

      COBALIS
        CORPORATION

       

      Secured
        Convertible Debenture

       

       

      Due:
        December 20, 2008

       

      This
        Secured Convertible Debenture (the “Debenture”)
        is
        issued by COBALIS
        CORPORATION, a
        Nevada
        corporation (the “Company”),
        to
CORNELL
        CAPITAL PARTNERS, LP
        (the
“Holder”),
        pursuant to that certain Securities Purchase Agreement (the “Securities
        Purchase Agreement”)
        dated
        December 20, 2006. 

       

      FOR
        VALUE RECEIVED,
        the
        Company hereby promises to pay to the Holder or its successors and assigns
        the
        principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000) together
        with accrued but unpaid interest on or before December 20, 2008 (the
“Maturity
        Date”)
        in
        accordance with the following terms:

       

      Section
        1. General
        Terms

       

      (a)     Interest.
        Interest shall accrue on the outstanding principal balance hereof at an annual
        rate equal to eight percent (8%). Interest shall be calculated on the basis
        of a
        365-day year and the actual number of days elapsed, to the extent permitted
        by
        applicable law. Interest hereunder shall be paid on the Maturity Date (or
        sooner
        as provided herein) to the Holder or its assignee in whose name this Debenture
        is registered on the records of the Company regarding registration and transfers
        of Debentures in cash or in Common Stock (valued at the Closing Bid Price
        on the
        Trading Day immediately prior to the date paid) at the option of the Company.
        

       

      (b)     Security.
        The
        Debenture is secured by (i) a security interest in all of the assets of the
        Company and of each of the Company's subsidiaries as evidenced by the security
        agreement of even date herewith (the “Security
        Agreement”)
        and
        (ii) certain shares of common stock of the Company (the “Pledged
        Shares”)
        as
        evidenced by the pledge and escrow agreement of even date herewith (the
“Pledge
        Agreement,”
and
        together with the Security Agreement, the “Security
        Documents”).

       

      
        
          
          

        

        
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      Section
        2. Events
        of Default.

       

      (a)     An
        “Event
        of Default”,
        wherever used herein, means any one of the following events (whatever the
        reason
        and whether it shall be voluntary or involuntary or effected by operation
        of law
        or pursuant to any judgment, decree or order of any court, or any order,
        rule or
        regulation of any administrative or governmental body):

       

      (i)  Any
        default in the payment of the principal of, interest on or other charges
        in
        respect of this Debenture, free of any claim of subordination, as and when
        the
        same shall become due and payable whether upon an Optional Redemption (as
        defined in Section
        3(a)),
        the
        Maturity Date, by acceleration, or otherwise;

       

      (ii)  The
        Company or any subsidiary of the Company shall commence, or there shall be
        commenced against the Company or any subsidiary of the Company under any
        applicable bankruptcy or insolvency laws as now or hereafter in effect or
        any
        successor thereto, or the Company or any subsidiary of the Company commences
        any
        other proceeding under any reorganization, arrangement, adjustment of debt,
        relief of debtors, dissolution, insolvency or liquidation or similar law
        of any
        jurisdiction whether now or hereafter in effect relating to the Company or
        any
        subsidiary of the Company or there is commenced against the Company or any
        subsidiary of the Company any such bankruptcy, insolvency or other proceeding
        which remains undismissed for a period of 61 days; or the Company or any
        subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
        of
        relief or other order approving any such case or proceeding is entered; or
        the
        Company or any subsidiary of the Company suffers any appointment of any
        custodian, private or court appointed receiver or the like for it or any
        substantial part of its property which continues undischarged or unstayed
        for a
        period of sixty one (61) days; or the Company or any subsidiary of the Company
        makes a general assignment for the benefit of creditors; or the Company or
        any
        subsidiary of the Company shall fail to pay, or shall state that it is unable
        to
        pay, or shall be unable to pay, its debts generally as they become due; or
        the
        Company or any subsidiary of the Company shall call a meeting of its creditors
        with a view to arranging a composition, adjustment or restructuring of its
        debts; or the Company or any subsidiary of the Company shall by any act or
        failure to act expressly indicate its consent to, approval of or acquiescence
        in
        any of the foregoing; or any corporate or other action is taken by the Company
        or any subsidiary of the Company for the purpose of effecting any of the
        foregoing;

       

      (iii)  The
        Company or any subsidiary of the Company shall default in any of its obligations
        under any other debenture or any mortgage, credit agreement or other facility,
        indenture agreement, factoring agreement or other instrument under which
        there
        may be issued, or by which there may be secured or evidenced any indebtedness
        for borrowed money or money due under any long term leasing or factoring
        arrangement of the Company or any subsidiary of the Company in an amount
        exceeding $500,000, whether such indebtedness now exists or shall hereafter
        be
        created and such default shall result in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable;

       

      
        
          
          

        

        
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      (iv)  The
        Common Stock shall cease to be quoted for trading or listing for trading
        on any
        of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the
        Nasdaq
        National Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin
        Board (“OTC”)
        (each,
        a “Primary
        Market”)
        and
        shall not again be quoted or listed for trading on any Primary Market within
        five (5) Trading Days of such delisting;

       

      (v)  The
        Company or any subsidiary of the Company shall be a party to any Change of
        Control Transaction not approved by a majority of the Board of the Company
        (as
        defined in Section
        6);
        

       

      (vi)  The
        Company shall fail to file the Underlying Shares Registration Statement (as
        defined in Section
        6)
        with
        the Commission (as defined in Section
        6),
        or the
        Underlying Shares Registration Statement shall not have been declared effective
        by the Commission, in each case within the time periods set forth in the
        Investor Registration Rights Agreement (“Registration
        Rights Agreement”)
        dated
        December 20, 2006 between the Company and the Holder, provided however, no
        event
        of default shall be deemed to have occurred if the Company has used its
        reasonable best efforts to timely obtain effectiveness of the Underlying
        Shares
        Registration Statement and failure to timely obtain effectiveness is due
        to
        changes in the Commission’s, or its staff’s, policy or interpretations with
        respect to the registration of transactions of the nature contemplated
        hereunder;

       

      (vii)  If
        the
        effectiveness of the Underlying Shares Registration Statement lapses for
        any
        reason or the Holder shall not be permitted to resell the shares of Common
        Stock
        underlying this Debenture under the Underlying Shares Registration Statement,
        in
        either case, for more than five (5) consecutive Trading Days or an aggregate
        of
        eight Trading Days (which need not be consecutive Trading Days);

       

      (viii)  The
        Company shall fail for any reason to deliver Common Stock certificates to
        a
        Holder prior to the fifth (5th)
        Trading
        Day after a Conversion Date, or the Company shall provide notice to the Holder,
        including by way of public announcement, at any time, of its intention not
        to
        comply with requests for conversions in accordance with the terms hereof;
        

       

      (ix)  The
        Company shall fail for any reason to deliver the payment in cash pursuant
        to a
        Buy-In (as defined herein) within three (3) days after notice is claimed
        delivered hereunder; 

       

      (x)  The
        Company shall fail to observe or perform any other covenant, agreement or
        warranty contained in, or otherwise commit any breach or default of any
        provision of this Debenture (except as may be covered by Section
        2(a)(i) through 2(a)(ix)
        hereof)
        or any Transaction Document (as defined in Section
        6)
        which
        is not cured with in the time prescribed, or an Event of Default under any
        other
        debenture issued to the Holder in connection with the Securities Purchase
        Agreement shall occur;

       

      
        
          
          

        

        
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      (b)   During
        the time that any portion of this Debenture is outstanding, if any Event
        of
        Default has occurred, the full principal amount of this Debenture, together
        with
        interest and other amounts owing in respect thereof, to the date of acceleration
        shall become at the Holder's election, immediately due and payable in cash,
        provided
        however,
        the
        Holder may request (but shall have no obligation to request) payment of such
        amounts in Common Stock of the Company. However, the Company shall have a
        fifteen (15) day cure period for any Event of Default that is not within
        the
        control of the Company. In addition to any other remedies, the Holder shall
        have
        the right (but not the obligation) to convert this Debenture at any time
        after
        (x) an Event of Default or (y) the Maturity Date at the Conversion Price
        then
        in-effect. The Holder need not provide and the Company hereby waives any
        presentment, demand, protest or other notice of any kind, and the Holder
        may
        immediately and without expiration of any grace period enforce any and all
        of
        its rights and remedies hereunder and all other remedies available to it
        under
        applicable law. Such declaration may be rescinded and annulled by Holder
        at any
        time prior to payment hereunder. No such rescission or annulment shall affect
        any subsequent Event of Default or impair any right consequent thereon. Except
        with respect to the limitation set forth in Section 4(b)(i) hereof upon an
        Event
        of Default, notwithstanding any other provision of this Debenture or any
        Transaction Document, the Holder shall have no obligation to comply with
        or
        adhere to any limitations, if any, on the conversion of this Debenture or
        the
        sale of the Underlying Shares. 

       

      Section
        3. Redemptions.

       

      (a)   Company’s
        Optional Cash Redemption.
        The
        Company at its option shall have the right to redeem (“Optional
        Redemption”)
        a
        portion or all amounts outstanding under this Debenture prior to the Maturity
        Date provided
        that
        as of
        the date of the Holder’s receipt of a Redemption Notice (as defined herein) the
        Underlying Share Registration Statement is effective and has been effective
        for
        the prior 120 days. The Company shall pay an amount equal to the principal
        amount being redeemed plus accrued interest plus a redemption premium
        (“Redemption
        Premium”)
        equal
        to the following amounts: (i) twenty percent (20%) of the principal amount
        being
        redeemed if at the time of redemption the average daily VWAP of the Common
        Stock
        on the Primary Market has been below $1.00 for the prior ten consecutive
        Trading
        Days, (ii) thirty five percent (35%) of the principal amount being redeemed
        if
        at the time of redemption the average daily VWAP of the Common Stock on the
        Primary Market has been between $1.00 and $2.00 for the prior ten consecutive
        Trading Days, or (iii) twenty percent (20%) of the principal amount being
        redeemed if at the time of redemption the average daily VWAP of the Common
        Stock
        on the Primary Market has been above $2.00 for the prior ten consecutive
        Trading
        Days (collectively referred to as the “Redemption
        Amount”).
        In
        order to make a redemption, the Company shall first provide written notice
        to
        the Holder of its intention to make a redemption (the “Redemption
        Notice”)
        setting forth the amount of principal it desires to redeem. After receipt
        of the
        Redemption Notice the Holder shall have twenty (20) Business Days to elect
        to
        convert all or any portion of this Debenture, subject to the limitations
        set
        forth in Section
        4(b).
        On the
        twenty first (21st) Business Day after the Redemption Notice, the Company
        shall
        deliver to the Holder the Redemption Amount with respect to the principal
        amount
        redeemed after giving effect to conversions effected during the twenty (20)
        Business Day period. 

       

      Section
        4. Conversion.

       

      (a)    Conversion
        at Option of Holder.

       

      
        
          
          

        

        
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      (i)   This
        Debenture shall be convertible into shares of Common Stock at the option
        of the
        Holder, in whole or in part at any time and from time to time, after the
        Original Issue Date (as defined in Section
        6)
        (subject to the limitations on conversion set forth in Section
        4(b)
        hereof).
        The number of shares of Common Stock issuable upon a conversion hereunder
        equals
        the quotient obtained by dividing (x) the outstanding amount of this Debenture
        to be converted by (y) the Conversion Price (as defined in Section
        4(c)(i)).
        The
        Company shall deliver Common Stock certificates to the Holder prior to the
        Fifth
        (5th)
        Trading
        Day after a Conversion Date.

       

      (ii)  Notwithstanding
        anything to the contrary contained herein, if on any Conversion Date: (1)
        the
        number of shares of Common Stock at the time authorized, unissued and unreserved
        for all purposes, or held as treasury stock, is insufficient to pay principal
        and interest hereunder in shares of Common Stock; (2) the Common Stock is
        not
        listed or quoted for trading on the a Primary Market; or (3) the Company
        has
        failed to timely satisfy a conversion; then, at the option of the Holder,
        the
        Company, in lieu of delivering shares of Common Stock pursuant to Section
        4(a)(i),
        shall
        deliver, within three (3) Trading Days of each applicable Conversion Date,
        an
        amount in cash equal to the product of the outstanding principal amount to
        be
        converted divided by the applicable Conversion Price, and multiplied by the
        highest Closing Bid Price of the stock from date of the conversion notice
        till
        the date that such cash payment is made.

       

      Further,
        if the Company shall not have delivered any cash due in respect of conversion
        of
        this Debenture by the fifth (5th)
        Trading
        Day after the Conversion Date, the Holder may, by notice to the Company,
        require
        the Company to issue shares of Common Stock pursuant to Section
        4(c),
        except
        that for such purpose the Conversion Price applicable thereto shall be the
        lesser of the Conversion Price on the Conversion Date and the Conversion
        Price
        on the date of such Holder demand. Any such shares will be subject to the
        provisions of this Section.

       

      (iii)  The
        Holder shall effect conversions by delivering to the Company a completed
        notice
        in the form attached hereto as Exhibit A (a “Conversion
        Notice”).
        The
        date on which a Conversion Notice is delivered is the “Conversion
        Date.”
Unless
        the Holder is converting the entire principal amount outstanding under this
        Debenture, the Holder is not required to physically surrender this Debenture
        to
        the Company in order to effect conversions. Conversions hereunder shall have
        the
        effect of lowering the outstanding principal amount of this Debenture plus
        all
        accrued and unpaid interest thereon in an amount equal to the applicable
        conversion. The Holder and the Company shall maintain records showing the
        principal amount converted and the date of such conversions. In the event
        of any
        dispute or discrepancy, the records of the Holder shall be controlling and
        determinative in the absence of manifest error.

       

      (b)    Certain
        Conversion Restrictions.

       

      
        
          
          

        

        
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      (i)  The
        Company shall not effect any conversions of this Debenture and the Holder
        shall
        not have the right to convert any portion of this Debenture or receive shares
        of
        Common Stock as payment of interest hereunder to the extent that after giving
        effect to such such conversion or receipt of such interest payment, the Holder,
        together with any affiliate thereof, would beneficially own (as determined
        in
        accordance with Section 13(d) of the Exchange Act and the rules promulgated
        thereunder) in excess of 4.99% of the number of shares of Common Stock
        outstanding immediately after giving effect to such conversion or receipt
        of
        shares as payment of interest. Since the Holder will not be obligated to
        report
        to the Company the number of shares of Common Stock it may hold at the time
        of a
        conversion hereunder, unless the conversion at issue would result in the
        issuance of shares of Common Stock in excess of 4.99% of the then outstanding
        shares of Common Stock without regard to any other shares which may be
        beneficially owned by the Holder or an affiliate thereof, the Holder shall
        have
        the authority and obligation to determine whether the restriction contained
        in
        this Section will limit any particular conversion hereunder and to the extent
        that the Holder determines that the limitation contained in this Section
        applies, the determination of which portion of the principal amount of this
        Debenture is convertible shall be the responsibility and obligation of the
        Holder. If the Holder has delivered a Conversion Notice for a principal amount
        of this Debenture that, without regard to any other shares that the Holder
        or
        its affiliates may beneficially own, would result in the issuance in excess
        of
        the permitted amount hereunder, the Company shall notify the Holder of this
        fact
        and shall honor the conversion for the maximum principal amount permitted
        to be
        converted on such Conversion Date in accordance with the periods described
        in
Section
        4(a)(i)
        and, any
        principal amount tendered for conversion in excess of the permitted amount
        hereunder shall remain outstanding under this Debenture. The provisions of
        this
        Section may be waived by a Holder (but only as to itself and not to any other
        Holder) upon not less than 65 days prior notice to the Company. Other Holders
        shall be unaffected by any such waiver.

       

      (ii)  The
        Company shall not
        issue any shares of Common Stock pursuant to this Debenture, and the Holder
        of
        this Debenture shall not have the right to receive any shares of Common Stock
        pursuant to this Debenture, if the issuance of any such shares of Common
        Stock
        would cause the total shares of Common Stock issued under this Debenture
        or any
        other debenture issued pursuant to the Securities Purchase Agreement to be
        greater than 77,000,000 shares of Common Stock.  

       

      (c)    Conversion
        Price and Adjustments to Conversion Price.

       

      (i)  The
        conversion price in effect on any Conversion Date shall be equal to the lesser
        of (a) $0.9955 (the “Fixed
        Conversion Price”)
        or (b)
        ninety percent (90%) of the average
        of the three (3)lowest
        daily Volume Weighted Average Prices
        of the
        Common Stock during the fifteen (15) Trading Days immediately preceding the
        Conversion Date as quoted by Bloomberg, LP (the “Market
        Conversion Price”).
        The
        Fixed Conversion Price and the Market Conversion Price are collectively referred
        to as the “Conversion
        Price.”
The
        Conversion Price may be adjusted pursuant to the other terms of this Debenture.
        

       

      (ii)  If
        the
        Company, at any time while this Debenture is outstanding, shall (a) pay a
        stock dividend or otherwise make a distribution or distributions on shares
        of
        its Common Stock or any other equity or equity equivalent securities payable
        in
        shares of Common Stock, (b) subdivide outstanding shares of Common Stock
        into a
        larger number of shares, (c) combine (including by way of reverse stock split)
        outstanding shares of Common Stock into a smaller number of shares, or (d)
        issue
        by reclassification of shares of the Common Stock any shares of capital stock
        of
        the Company, then the Conversion Price shall be multiplied by a fraction
        of
        which the numerator shall be the number of shares of Common Stock (excluding
        treasury shares, if any) outstanding before such event and of which the
        denominator shall be the number of shares of Common Stock outstanding after
        such
        event. Any adjustment made pursuant to this Section shall become effective
        immediately after the record date for the determination of stockholders entitled
        to receive such dividend or distribution and shall become effective immediately
        after the effective date in the case of a subdivision, combination or
        re-classification.

       

      
        
          
          

        

        
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      (iii)  If
        the
        Company, at any time while this Debenture is outstanding, shall issue rights,
        options or warrants to all holders of Common Stock (and not to the Holder)
        entitling them to subscribe for or purchase shares of Common Stock at a price
        per share less than the Conversion Price, then the Conversion Price shall
        be
        multiplied by a fraction, of which the denominator shall be the number of
        shares
        of the Common Stock (excluding treasury shares, if any) outstanding on the
        date
        of issuance of such rights or warrants (plus the number of additional shares
        of
        Common Stock offered for subscription or purchase), and of which the numerator
        shall be the number of shares of the Common Stock (excluding treasury shares,
        if
        any) outstanding on the date of issuance of such rights or warrants, plus
        the
        number of shares which the aggregate offering price of the total number of
        shares so offered would purchase at the Conversion Price. Such adjustment
        shall
        be made whenever such rights or warrants are issued, and shall become effective
        immediately after the record date for the determination of stockholders entitled
        to receive such rights, options or warrants. However, upon the expiration
        of any
        such right, option or warrant to purchase shares of the Common Stock the
        issuance of which resulted in an adjustment in the Conversion Price pursuant
        to
        this Section, if any such right, option or warrant shall expire and shall
        not
        have been exercised, the Conversion Price shall immediately upon such expiration
        be recomputed and effective immediately upon such expiration be increased
        to the
        price which it would have been (but reflecting any other adjustments in the
        Conversion Price made pursuant to the provisions of this Section after the
        issuance of such rights or warrants) had the adjustment of the Conversion
        Price
        made upon the issuance of such rights, options or warrants been made on the
        basis of offering for subscription or purchase only that number of shares
        of the
        Common Stock actually purchased upon the exercise of such rights, options
        or
        warrants actually exercised.

       

      (iv)  If
        the
        Company or any subsidiary thereof, as applicable, at any time while this
        Debenture is outstanding, shall issue shares of Common Stock or rights,
        warrants, options or other securities or debt that are convertible into or
        exchangeable for shares of Common Stock (“Common
        Stock Equivalents”)
        entitling any Person to acquire shares of Common Stock, at a price per share
        less than the Conversion Price (if the holder of the Common Stock or Common
        Stock Equivalent so issued shall at any time, whether by operation of purchase
        price adjustments, reset provisions, floating conversion, exercise or exchange
        prices or otherwise, or due to warrants, options or rights per share which
        is
        issued in connection with such issuance, be entitled to receive shares of
        Common
        Stock at a price per share which is less than the Conversion Price, such
        issuance shall be deemed to have occurred for less than the Conversion Price),
        then, at the sole option of the Holder, the Conversion Price shall be adjusted
        to mirror the conversion, exchange or purchase price for such Common Stock
        or
        Common Stock Equivalents (including any reset provisions thereof) at issue.
        Such
        adjustment shall be made whenever such Common Stock or Common Stock Equivalents
        are issued. The Company shall notify the Holder in writing, no later than
        one
        (1) business day following the issuance of any Common Stock or Common Stock
        Equivalent subject to this Section, indicating therein the applicable issuance
        price, or of applicable reset price, exchange price, conversion price and
        other
        pricing terms. No adjustment under this Section shall be made as a result
        of
        issuances of Excluded Securities.

       

      
        
          
          

        

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

       

      (vi)  In
        case
        of any reclassification of the Common Stock or any compulsory share exchange
        pursuant to which the Common Stock is converted into other securities, cash
        or
        property, the Holder shall have the right thereafter to, at its option, (A)
        convert the then outstanding principal amount, together with all accrued
        but
        unpaid interest and any other amounts then owing hereunder in respect of
        this
        Debenture into the shares of stock and other securities, cash and property
        receivable upon or deemed to be held by holders of the Common Stock following
        such reclassification or share exchange, and the Holder of this Debenture
        shall
        be entitled upon such event to receive such amount of securities, cash or
        property as the shares of the Common Stock of the Company into which the
        then
        outstanding principal amount, together with all accrued but unpaid interest
        and
        any other amounts then owing hereunder in respect of this Debenture could
        have
        been converted immediately prior to such reclassification or share exchange
        would have been entitled, or (B) require the Company to prepay the outstanding
        principal amount of this Debenture, plus all interest and other amounts due
        and
        payable thereon. The entire prepayment price shall be paid in cash. This
        provision shall similarly apply to successive reclassifications or share
        exchanges.

       

      (vii)  Whenever
        the Conversion Price is adjusted pursuant to Section
        4
        hereof,
        the Company shall promptly mail to the Holder a notice setting forth the
        Conversion Price after such adjustment and setting forth a brief statement
        of
        the facts requiring such adjustment.

       

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

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (ix)  In
        case
        of any (1) merger or consolidation of the Company or any subsidiary of the
        Company with or into another Person, or (2) sale by the Company or any
        subsidiary of the Company of more than one-half of the assets of the Company
        in
        one or a series of related transactions, a Holder shall have the right to
        (A)
        exercise any rights under Section
        2(b),
        (B)
        convert the aggregate amount of this Debenture then outstanding into the
        shares
        of stock and other securities, cash and property receivable upon or deemed
        to be
        held by holders of Common Stock following such merger, consolidation or sale,
        and such Holder shall be entitled upon such event or series of related events
        to
        receive such amount of securities, cash and property as the shares of Common
        Stock into which such aggregate principal amount of this Debenture could
        have
        been converted immediately prior to such merger, consolidation or sales would
        have been entitled, or (C) in the case of a merger or consolidation, require
        the
        surviving entity to issue to the Holder a convertible Debenture with a principal
        amount equal to the aggregate principal amount of this Debenture then held
        by
        such Holder, plus all accrued and unpaid interest and other amounts owing
        thereon, which such newly issued convertible Debenture shall have terms
        identical (including with respect to conversion) to the terms of this Debenture,
        and shall be entitled to all of the rights and privileges of the Holder of
        this
        Debenture set forth herein and the agreements pursuant to which this Debentures
        were issued. In the case of clause (C), the conversion price applicable for
        the
        newly issued shares of convertible preferred stock or convertible Debentures
        shall be based upon the amount of securities, cash and property that each
        share
        of Common Stock would receive in such transaction and the Conversion Price
        in
        effect immediately prior to the effectiveness or closing date for such
        transaction. The terms of any such merger, sale or consolidation shall include
        such terms so as to continue to give the Holder the right to receive the
        securities, cash and property set forth in this Section upon any conversion
        or
        redemption following such event. This provision shall similarly apply to
        successive such events.

       

      (d)    Other
        Provisions.

       

      (i)  The
        Company shall at all times reserve and keep available out of its authorized
        Common Stock the Initial Share Reserve (as defined in the Securities Purchase
        Agreement) and after the Company increases its authorized Common Stock in
        accordance with Section 4(o) of the Securities Purchase Agreement, the Share
        Reserve (as defined in the Securities Purchase Agreement)and within three
        (3)
        Business Days following the receipt by the Company of a Holder's notice that
        such applicable number of Underlying Shares is not so reserved, the Company
        shall promptly reserve a sufficient number of shares of Common Stock to comply
        with such requirement. If at any time the Share Reserve is insufficient to
        effect the full conversion of the Convertible Debentures or the full exercise
        of
        the Warrants, the Company shall increase the Share Reserve accordingly. If
        the
        Company does not have sufficient authorized and unissued shares of Common
        Stock
        available to increase the Share Reserve, the Company shall call and hold
        a
        special meeting of the shareholders within seventy five (75) days of such
        occurrence, for the sole purpose of increasing the number of shares authorized.
        The Company’s management shall recommend to the shareholders to vote in favor of
        increasing the number of shares of Common Stock authorized. Management shall
        also vote all of its shares in favor of increasing the number of authorized
        shares of Common Stock.

       

      (ii)  All
        calculations under this Section
        4
        shall be
        rounded up to the nearest $0.0001 or whole share.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (iiii)  The
        Company covenants that it will at all times reserve and keep available out
        of
        its authorized and unissued shares of Common Stock solely for the purpose
        of
        issuance upon conversion of this Debenture and payment of interest on this
        Debenture, each as herein provided, free from preemptive rights or any other
        actual contingent purchase rights of persons other than the Holder, not less
        than such number of shares of the Common Stock as shall (subject to any
        additional requirements of the Company as to reservation of such shares set
        forth in this Debenture or in the Transaction Documents) be issuable (taking
        into account the adjustments and restrictions set forth herein) upon the
        conversion of the outstanding principal amount of this Debenture and payment
        of
        interest hereunder. The Company covenants that all shares of Common Stock
        that
        shall be so issuable shall, upon issue, be duly and validly authorized, issued
        and fully paid, nonassessable and, if the Underlying Shares Registration
        Statement has been declared effective under the Securities Act, registered
        for
        public sale in accordance with such Underlying Shares Registration
        Statement.

       

      (iv)   Upon
        a
        conversion hereunder the Company shall not be required to issue stock
        certificates representing fractions of shares of the Common Stock, but may
        if
        otherwise permitted, make a cash payment in respect of any final fraction
        of a
        share based on the Closing Bid Price at such time. If the Company elects
        not, or
        is unable, to make such a cash payment, the Holder shall be entitled to receive,
        in lieu of the final fraction of a share, one whole share of Common
        Stock.

       

      (v)   The
        issuance of certificates for shares of the Common Stock on conversion of
        this
        Debenture shall be made without charge to the Holder thereof for any documentary
        stamp or similar taxes that may be payable in respect of the issue or delivery
        of such certificate, provided that the Company shall not be required to pay
        any
        tax that may be payable in respect of any transfer involved in the issuance
        and
        delivery of any such certificate upon conversion in a name other than that
        of
        the Holder of such Debenture so converted and the Company shall not be required
        to issue or deliver such certificates unless or until the person or persons
        requesting the issuance thereof shall have paid to the Company the amount
        of
        such tax or shall have established to the satisfaction of the Company that
        such
        tax has been paid.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (vi)  Nothing
        herein shall limit a Holder's right to pursue actual damages or declare an
        Event
        of Default pursuant to Section
        2
        herein
        for the Company 's failure to deliver certificates representing shares of
        Common
        Stock upon conversion within the period specified herein and such Holder
        shall
        have the right to pursue all remedies available to it at law or in equity
        including, without limitation, a decree of specific performance and/or
        injunctive relief, in each case without the need to post a bond or provide
        other
        security. The exercise of any such rights shall not prohibit the Holder from
        seeking to enforce damages pursuant to any other Section hereof or under
        applicable law. 

       

      (vii)  In
        addition to any other rights available to the Holder, if the Company fails
        to
        deliver to the Holder such certificate or certificates pursuant to Section
        4(a)(i) by
        the
        fifth (5th)
        Trading
        Day after the Conversion Date, and if after such fifth (5th)
        Trading
        Day the Holder purchases (in an open market transaction or otherwise) Common
        Stock to deliver in satisfaction of a sale by such Holder of the Underlying
        Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
        then
        the Company shall (A) pay in cash to the Holder (in addition to any remedies
        available to or elected by the Holder) the amount by which (x) the Holder's
        total purchase price (including brokerage commissions, if any) for the Common
        Stock so purchased exceeds (y) the product of (1) the aggregate number of
        shares
        of Common Stock that such Holder anticipated receiving from the conversion
        at
        issue multiplied by (2) the market price of the Common Stock at the time
        of the
        sale giving rise to such purchase obligation and (B) at the option of the
        Holder, either reissue a Debenture in the principal amount equal to the
        principal amount of the attempted conversion or deliver to the Holder the
        number
        of shares of Common Stock that would have been issued had the Company timely
        complied with its delivery requirements under Section
        4(a)(i).
        For
        example, if the Holder purchases Common Stock having a total purchase price
        of
        $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
        with respect to which the market price of the Underlying Shares on the date
        of
        conversion was a total of $10,000 under clause (A) of the immediately preceding
        sentence, the Company shall be required to pay the Holder $1,000. The Holder
        shall provide the Company written notice indicating the amounts payable to
        the
        Holder in respect of the Buy-In.

       

      Section
        5. Notices.    Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms hereof 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 transmission is mechanically
        or
        electronically generated and kept on file by the sending party); or (iii)
        one
        (1) Trading 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 the Company, to:

              	
                Cobalis
                  Corporation

              
	 	
                2445
                  McCabe Way, Suite 150

              
	 	
                Irvine,
                  CA 92614

              
	 	
                Attention:
                  Dr. Gerald J. Yaktan

              
	 	
                Telephone: 

              
	 	
                Facsimile: 

              
	 	 
	
                With
                  a copy to: 

              	
                Wilson
                  Sonsini Goodrich & Rosati

              
	 	
                12235
                  El Camino Real, Suite 200

              
	 	
                San
                  Diego, CA 92130

              
	 	
                Attention:
                  Martin J. Waters, Esq.

              
	 	
                Telephone:
                   858-350-2300

              
	 	
                Facsimile:
                   858-350-2399

              

      

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      
 

      
        	
                If
                  to the Holder:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street, Suite 3700

              
	 	
                Jersey
                  City, NJ 07303

              
	 	
                Attention: Mark
                  Angelo

              
	 	
                Telephone: (201)
                  985-8300

              
	 	 
	
                With
                  a copy to:

              	
                David
                  Gonzalez, Esq.. 

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 

      

      

      or
        at
        such other address and/or facsimile number and/or to the attention of such
        other
        person as the recipient party has specified by written notice given to each
        other party three (3) business days prior to the effectiveness of such change.
        Written confirmation of receipt (i) given by the recipient of such notice,
        consent, waiver or other communication, (ii) mechanically or electronically
        generated by the sender's facsimile machine containing the time, date, recipient
        facsimile number and an image of the first page of such transmission or (iii)
        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
        6. Definitions.    For
        the
        purposes hereof, the following terms shall have the following
        meanings:

       

      “Approved
        Stock Plan”
means
        a
        stock option plan that has been approved by the Board of Directors of the
        Company prior to the date of the Securities Purchase Agreement, pursuant
        to
        which the Company’s securities may be issued only to any employee, officer or
        director for services provided to the Company.

       

      “Business
        Day”
means
        any day except Saturday, Sunday and any day which shall be a federal legal
        holiday in the United States or a day on which banking institutions are
        authorized or required by law or other government action to close.

       

      “Change
        of Control Transaction”
means
        the occurrence of (a) an acquisition after the date hereof by an individual
        or
        legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
        Exchange Act) of effective control (whether through legal or beneficial
        ownership of capital stock of the Company, by contract or otherwise) of in
        excess of fifty percent (50%) of the voting securities of the Company (except
        that the acquisition of voting securities by the Holder shall not constitute
        a
        Change of Control Transaction for purposes hereof), (b) a replacement at
        one
        time or over time of more than one-half of the members of the board of directors
        of the Company which is not approved by a majority of those individuals who
        are
        members of the board of directors on the date hereof (or by those individuals
        who are serving as members of the board of directors on any date whose
        nomination to the board of directors was approved by a majority of the members
        of the board of directors who are members on the date hereof), (c) the merger,
        consolidation or sale of fifty percent (50%) or more of the assets of the
        Company or any subsidiary of the Company in one or a series of related
        transactions with or into another entity, or (d) the execution by the Company
        of
        an agreement to which the Company is a party or by which it is bound, providing
        for any of the events set forth above in (a), (b) or (c).

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      “Closing
        Bid Price”
means
        the price per share in the last reported trade of the Common Stock on a Primary
        Market or on the exchange which the Common Stock is then listed as quoted
        by
        Bloomberg, LP.

       

      “Commission”
means
        the Securities and Exchange Commission.

       

      “Common
        Stock”
means
        the common stock, par value $.001, of the Company and stock of any other
        class
        into which such shares may hereafter be changed or reclassified.

       

      “Conversion
        Date”
shall
        mean the date upon which the Holder gives the Company notice of their intention
        to effectuate a conversion of this Debenture into shares of the Company’s Common
        Stock as outlined herein.

       

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

       

      “Excluded
        Securities”
means,
        (a) shares issued or deemed to have been issued by the Company pursuant to
        an
        Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued
        by
        the Company upon the conversion, exchange or exercise of any right, option,
        obligation or security outstanding on the date prior to date of the Securities
        Purchase Agreement, provided that the terms of such right, option, obligation
        or
        security are not amended or otherwise modified on or after the date of the
        Securities Purchase Agreement, and provided that the conversion price, exchange
        price, exercise price or other purchase price is not reduced, adjusted or
        otherwise modified and the number of shares of Common Stock issued or issuable
        is not increased (whether by operation of, or in accordance with, the relevant
        governing documents or otherwise) on or after the date of the Securities
        Purchase Agreement, and (c) the shares of Common Stock issued or deemed to
        be issued by the Company upon conversion of this Debenture.

       

      “Original
        Issue Date”
shall
        mean the date of the first issuance of this Debenture regardless of the number
        of transfers and regardless of the number of instruments, which may be issued
        to
        evidence such Debenture.

       

      “Person”
means
        a
        corporation, an association, a partnership, organization, a business, an
        individual, a government or political subdivision thereof or a governmental
        agency.

       

      “Securities
        Act”
means
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated thereunder.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      “Trading
        Day”
means
        a
        day on which the shares of Common Stock are quoted on the OTC or quoted or
        traded on such Primary Market on which the shares of Common Stock are then
        quoted or listed; provided, that in the event that the shares of Common Stock
        are not listed or quoted, then Trading Day shall mean a Business
        Day.

       

      “Transaction
        Documents”
means
        the Securities Purchase Agreement or any other agreement delivered in connection
        with the Securities Purchase Agreement, including, without limitation, the
        Security Agreement, the Irrevocable Transfer Agent Instructions, and the
        Registration Rights Agreement.

       

      “Underlying
        Shares”
means
        the shares of Common Stock issuable upon conversion of this Debenture or
        as
        payment of interest in accordance with the terms hereof.

       

      “Underlying
        Shares Registration Statement”
means
        a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement.

       

      Section
        7.    Except
        as
        expressly provided herein, no provision of this Debenture shall alter or
        impair
        the obligations of the Company, which are absolute and unconditional, to
        pay the
        principal of, interest and other charges (if any) on, this Debenture at the
        time, place, and rate, and in the coin or currency, herein prescribed. This
        Debenture is a direct obligation of the Company. This Debenture ranks pari
        passu
        with all other Debentures now or hereafter issued under the terms set forth
        herein. As long as this Debenture is outstanding, the Company shall not and
        shall cause their subsidiaries not to, without the consent of the Holder,
        (i)
        amend its certificate of incorporation, bylaws or other charter documents
        so as
        to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
        to
        repay, repurchase or otherwise acquire shares of its Common Stock or other
        equity securities other than as to the Underlying Shares to the extent permitted
        or required under the Transaction Documents; or (iii) enter into any agreement
        with respect to any of the foregoing. 

       

      Section
        8.    This
        Debenture shall not entitle the Holder to any of the rights of a stockholder
        of
        the Company, including without limitation, the right to vote, to receive
        dividends and other distributions, or to receive any notice of, or to attend,
        meetings of stockholders or any other proceedings of the Company, unless
        and to
        the extent converted into shares of Common Stock in accordance with the terms
        hereof.

       

      Section
        9.    If
        this
        Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and
        deliver, in exchange and substitution for and upon cancellation of the mutilated
        Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
        Debenture, a new Debenture for the principal amount of this Debenture so
        mutilated, lost, stolen or destroyed but only upon receipt of evidence of
        such
        loss, theft or destruction of such Debenture, and of the ownership hereof,
        and
        indemnity, if requested, all reasonably satisfactory to the
        Company.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      Section
        10.    No
        indebtedness of the Company is senior to this Debenture in right of payment,
        whether with respect to interest, damages or upon liquidation or dissolution
        or
        otherwise. Without the Holder’s consent, the Company will not and will not
        permit any of their subsidiaries to, directly or indirectly, enter into,
        create,
        incur, assume or suffer to exist any indebtedness of any kind, on or with
        respect to any of its property or assets now owned or hereafter acquired
        or any
        interest therein or any income or profits there from that is senior in any
        respect to the obligations of the Company under this Debenture.

       

      Section
        11.    This
        Debenture shall be governed by and construed in accordance with the laws
        of the
        State of New Jersey, without giving effect to conflicts of laws thereof.
        Each of
        the parties consents to the jurisdiction of the Superior Courts of the State
        of
        New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
        for the District of New Jersey sitting in Newark, New Jersey in connection
        with
        any dispute arising under this Debenture and hereby waives, to the maximum
        extent permitted by law, any objection, including any objection based on
        forum non conveniens
        to the
        bringing of any such proceeding in such jurisdictions. 

       

      Section
        12.    If
        the
        Company fails to strictly comply with the terms of this Debenture, then the
        Company shall reimburse the Holder promptly for all fees, costs and expenses,
        including, without limitation, attorneys’ fees and expenses incurred by the
        Holder in any action in connection with this Debenture, including, without
        limitation, those incurred: (i) during any workout, attempted workout, and/or
        in
        connection with the rendering of legal advice as to the Holder’s rights,
        remedies and obligations, (ii) collecting any sums which become due to the
        Holder, (iii) defending or prosecuting any proceeding or any counterclaim
        to any
        proceeding or appeal; or (iv) the protection, preservation or enforcement
        of any
        rights or remedies of the Holder.

       

      Section
        13.    Any
        waiver by the Holder of a breach of any provision of this Debenture shall
        not
        operate as or be construed to be a waiver of any other breach of such provision
        or of any breach of any other provision of this Debenture. The failure of
        the
        Holder to insist upon strict adherence to any term of this Debenture on one
        or
        more occasions shall not be considered a waiver or deprive that party of
        the
        right thereafter to insist upon strict adherence to that term or any other
        term
        of this Debenture. Any waiver must be in writing.

       

      Section
        14.    If
        any
        provision of this Debenture is invalid, illegal or unenforceable, the balance
        of
        this Debenture shall remain in effect, and if any provision is inapplicable
        to
        any person or circumstance, it shall nevertheless remain applicable to all
        other
        persons and circumstances. If it shall be found that any interest or other
        amount deemed interest due hereunder shall violate applicable laws governing
        usury, the applicable rate of interest due hereunder shall automatically
        be
        lowered to equal the maximum permitted rate of interest. The Company covenants
        (to the extent that it may lawfully do so) that it shall not at any time
        insist
        upon, plead, or in any manner whatsoever claim or take the benefit or advantage
        of, any stay, extension or usury law or other law which would prohibit or
        forgive the Company from paying all or any portion of the principal of or
        interest on this Debenture as contemplated herein, wherever enacted, now
        or at
        any time hereafter in force, or which may affect the covenants or the
        performance of this indenture, and the Company (to the extent it may lawfully
        do
        so) hereby expressly waives all benefits or advantage of any such law, and
        covenants that it will not, by resort to any such law, hinder, delay or impeded
        the execution of any power herein granted to the Holder, but will suffer
        and
        permit the execution of every such as though no such law has been
        enacted.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      Section
        15.    Whenever
        any payment or other obligation hereunder shall be due on a day other than
        a
        Business Day, such payment shall be made on the next succeeding Business
        Day.

       

      Section
        16.    This
        Debenture is exchangeable for an equal aggregate principal amount of Debentures
        of different authorized denominations, as requested by the Holder surrendering
        the same. No service charge will be made for such registration of transfer
        or
        exchange.

       

      Section
        17.    THE
        PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
        OF
        THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
        OR
        ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
        DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
        VERBAL
        OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
        FOR
        THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

       

      [REMAINDER
        OF PAGE INTENTIONLLY LEFT BLANK]

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      

       

      IN
        WITNESS WHEREOF,
        the
        Company has caused this Secured Convertible Debenture to be duly executed
        by a
        duly authorized officer as of the date set forth above.

       

      
        	 	 	 
	 	
                
                  COMPANY:

                

              
	 	
                COBALIS
                  CORPORATION 

              
	 
 	 
 	 
 
	Date: 	By:  	/s/ Gerald
                Yakatan
	 	
                

                Name: Gerald
                  Yakatan

              
	 	
                Title: Chief
                  Executive Officer

              

      

       

      

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

       

       

      CONVERSION
        NOTICE

       

      (To
        be executed by the Holder in order to Convert the
        Debenture)

       

      

      
        	
                TO:
                  

              

      

      

      The
        undersigned hereby irrevocably elects to convert $     of
        the
        principal amount of Debenture No. CLSC-1-1 into Shares of Common Stock of
        COBALIS
        CORPORATION,
        according to the conditions stated therein, as of the Conversion Date written
        below.

       

      
        	
                Conversion
                  Date:

              	
              
	
                Amount
                  to be converted:

              	
                $        

              
	
                Conversion
                  Price:

              	
                $        

              
	
                Number
                  of shares of 

                Common
                  Stock to be issued:

              	
              
	
                Amount
                  of Debenture

                Unconverted:

              	
                $          

              
	 	 
	 	 
	
                Please
                  issue the shares of Common Stock in the following name and to the
                  following address:

              
	
                Issue
                  to:

              	 
	 	 
	 	 
	
                Authorized
                  Signature:

              	 
	
                Name:

              	 
	
                Title:

              	 
	
                Broker
                  DTC Participant Code:

              	 
	
                Account
                  Number:

              	 

      

       

      18Registration Rights Agreement

    
      

      

    

    Exhibit
      10.7

     

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    THIS
      REGISTRATION RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of December 20, 2006, by and among COBALIS
      CORPORATION,
      a Nevada
      corporation (the “Company”),
      and
      the undersigned Buyers listed on Schedule I attached hereto (each, a
“Buyer”
and
      collectively, the “Buyers”).

     

    WHEREAS:

     

    A.    In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the “Securities
      Purchase Agreement”),
      the
      Company has agreed, upon the terms and subject to the conditions of the
      Securities Purchase Agreement, to issue and sell to the Buyers secured
      convertible debentures (the “Convertible
      Debentures”)
      which
      shall be convertible into that number of shares of the Company’s common stock,
      par value $0.001 per share (the “Common
      Stock”),
      pursuant to the terms of the Securities Purchase Agreement for an aggregate
      purchase price of up to Three Million Eight Hundred Fifty Dollars ($3,850,000).
      Capitalized terms not defined herein shall have the meaning ascribed to them
      in
      the Securities Purchase Agreement.

     

    B.    To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations thereunder, or any similar
      successor statute (collectively, the “Securities
      Act”),
      and
      applicable state securities laws.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Buyers hereby agree as
      follows:

     

    1.  DEFINITIONS.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    (a)  “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency.

     

    (b)  “Register,”
      “registered,”
and
      “registration”
refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the Securities Act and pursuant
      to Rule 415 under the Securities Act or any successor rule providing for
      offering securities on a continuous or delayed basis (“Rule
      415”),
      and
      the declaration or ordering of effectiveness of such Registration Statement(s)
      by the United States Securities and Exchange Commission (the “SEC”).

     

    (c)  “Registrable
      Securities”
means
      the shares of Common Stock issuable to the Buyers upon conversion of the
      Convertible Debentures pursuant to the Securities Purchase
      Agreement,
      and the
      Warrant Shares
      as this
      term is defined in the Securities Purchase Agreement.

     

    
      
        
        

      

      
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    (d)  “Registration
      Statement”
means
      a
      registration statement under the Securities Act which covers Registrable
      Securities.

     

    2.  REGISTRATION.

     

    (a)  Subject
      to the terms and conditions of this Agreement, the Company shall prepare and
      file, no later than forty five (45) days from the date hereof (the “Scheduled
      Filing Deadline”),
      with
      the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
      then
      eligible, on Form S-3) under the Securities Act (the “Cornell
      Registration Statement”)
      registering for resale by the Buyers up to 10,583,737 Registrable Securities.
      Subject to the terms of this Agreement, the Company shall use its reasonable
      best efforts to cause the Cornell Registration Statement to be declared
      effective under the Securities Act as promptly as possible after the filing
      thereof, but in any event prior to the applicable Scheduled Effective Deadline
      (as defined below), and shall use its reasonable best efforts to keep the
      Cornell Registration Statement continuously effective under the Securities
      Act
      until the earliest of when all Registrable Securities covered by the Cornell
      Registration Statement have been sold, or when the Registrable Securities may
      be
      sold without volume restrictions pursuant to Rule 144(k), as determined by
      the
      counsel to the Company pursuant to a written opinion letter to such effect,
      addressed and acceptable to the Company’s transfer agent and the affected
      Holders The Buyers shall furnish comments on the Cornell Registration Statement
      to the Company within twenty-four (24) hours of the receipt thereof from the
      Company. The Company shall file any additional Registration Statements (each
      an
“Additional Registration Statement” and collectively, the “Additional
      Registration Statements”) as may be necessary to register all of the Registrable
      Securities no earlier than one year from the date in which the Cornell
      Registration Statement was declared effective by the SEC. Notwithstanding
      any other provision hereof, any reduction in the number of shares of Common
      Stock registered for resale under the Registration Statements as a result of
      comments received in writing from the SEC with respect to the Registration
      Statements shall not constitute a breach or default by the Company under this
      Agreement or any other agreement between the Buyer and the Company.

     

    (b)  Effectiveness
      of the Cornell Registration Statement.
      The
      Company shall use its reasonable best efforts (i) to have the Cornell
      Registration Statement declared effective by the SEC no later than one hundred
      thirty five (135) days from the date hereof (the “Scheduled
      Effective Deadline”)
      and
      (ii) to insure that the Cornell Registration Statement remain in effect until
      all of the Registrable Securities covered by such Cornell Registration Statement
      have been sold, subject to the terms and conditions of this Agreement. No breach
      of this section shall be deemed to have occurred if the Company has used its
      reasonable best efforts to timely obtain effectiveness of the Cornell
      Registration Statement or any Additional Registration Statement and failure
      to
      timely obtain effectiveness is due to changes in the Commission’s, or its
      staff’s, policy or interpretations with respect to the registration of
      transactions of the nature contemplated hereunder. 

     

    (c)  Failure
      to File or Obtain Effectiveness of the Cornell Registration
      Statement.
      In the
      event the Cornell Registration Statement is not filed by the Scheduled Filing
      Deadline or is not declared effective by the SEC on or before the Scheduled
      Effective Date, or if after the Cornell Registration Statement has been declared
      effective by the SEC, sales cannot be made pursuant to the Cornell Registration
      Statement (whether because of a failure to keep the Cornell Registration
      Statement effective, failure to disclose such information as is necessary for
      sales to be made pursuant to the Cornell Registration Statement, but excluding
      failure to register sufficient shares of Common Stock) then as partial relief
      for the damages to any holder of Registrable Securities covered by such Cornell
      Registration Statement by reason of any such delay in or reduction of its
      ability to sell the underlying shares of Common Stock (which remedy shall not
      be
      exclusive of any other remedies at law or in equity), the Company will pay
      as
      liquidated damages (the “Liquidated
      Damages”)
      to the
      holder, at the holder’s option, a cash amount within three (3) business days,
      after demand therefore, equal to one percent (1%) of the liquidated value of
      the
      Convertible Debentures outstanding as Liquidated Damages for each thirty (30)
      day period after the Scheduled Filing Deadline or the Scheduled Effective Date
      as the case may be. Notwithstanding anything herein to the contrary, in no
      event
      shall Liquidated Damages be paid for a period in excess of fifteen (15) months
      from the First Closing. No Liquidated Damages if failure is due to a Buyer’s
      failure to provide timely information or the SEC’s finding that the terms of the
      transactions are non-compliant with law and requires the Registration Statement
      to be withdrawn and renegotiate terms.

     

    
      
        
        

      

      
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    (d)  Liquidated
      Damages.
      The
      Company and the Buyer hereto acknowledge and agree that the sums payable under
      subsection 2(d) above shall constitute liquidated damages and not penalties
      and
      are in addition to all other rights of the Buyer, including the right to call
      a
      default. The parties further acknowledge that (i) the amount of loss or damages
      likely to be incurred is incapable or is difficult to precisely estimate, (ii)
      the amounts specified in such subsections bear a reasonable relationship to,
      and
      are not plainly or grossly disproportionate to, the probable loss likely to
      be
      incurred in connection with any failure by the Company to obtain or maintain
      the
      effectiveness of the Cornell Registration Statement, (iii) one of the reasons
      for the Company and the Buyer reaching an agreement as to such amounts was
      the
      uncertainty and cost of litigation regarding the question of actual damages,
      and
      (iv) the Company and the Buyer are sophisticated business parties and have
      been
      represented by sophisticated and able legal counsel and negotiated this
      Agreement at arm’s length. 

     

    3.  RELATED
      OBLIGATIONS.

     

    (a)  Upon
      filing a Registration Statement, the Company agrees to keep such Registration
      Statement effective pursuant to Rule 415 at all times until the date on
      which the Buyer shall have sold all the Registrable Securities covered by such
      Registration Statement (the “Registration
      Period”),
      which
      Registration Statement (including any amendments or supplements thereto and
      prospectuses contained therein) shall not contain any 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 in
      which
      they were made, not misleading.

     

    (b)  The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to such Registration Statement and
      the prospectus used in connection with such Registration Statement, which
      prospectus is to be filed pursuant to Rule 424 promulgated under the Securities
      Act, as may be necessary to keep such Registration Statement effective at all
      times during the Registration Period, and, during such period, comply with
      the
      provisions of the Securities Act with respect to the disposition of all
      Registrable Securities of the Company covered by such Registration Statement
      until such time as all of such Registrable Securities shall have been disposed
      of in accordance with the intended methods of disposition by the seller or
      sellers thereof as set forth in such Registration Statement. In the case of
      amendments and supplements to a Registration Statement which are required to
      be
      filed pursuant to this Agreement (including pursuant to this Section 3(b))
      by
      reason of the Company’s filing a report on Form 10-KSB, Form 10-QSB or Form 8-K
      or any analogous report under the Securities Exchange Act of 1934, as amended
      (the “Exchange
      Act”),
      the
      Company shall incorporate such report by reference into the Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the Exchange Act report is filed which created
      the
      requirement for the Company to amend or supplement the Registration Statement.
      

     

    
      
        
        

      

      
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    (c)  The
      Company shall make available to each Buyer whose Registrable Securities are
      included in any Registration Statement, without charge, (i) at least one (1)
      copy of such Registration Statement as declared effective by the SEC and any
      amendment(s) thereto, including financial statements and schedules, all
      documents incorporated therein by reference, all exhibits and each preliminary
      prospectus, (ii) ten (10) copies of the final prospectus included in such
      Registration Statement and all amendments and supplements thereto (or such
      other
      number of copies as such Buyer may reasonably request) and (iii) such other
      documents as such Buyer may reasonably request from time to time in order to
      facilitate the disposition of the Registrable Securities owned by such
      Buyer.

     

    (d)  The
      Company shall use its reasonable best efforts to (i) register and qualify the
      Registrable Securities covered by a Registration Statement under such other
      securities or “blue sky” laws of such jurisdictions in the United States as any
      Buyer reasonably requests, (ii) prepare and file in those jurisdictions,
      such amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be reasonably necessary to maintain such registrations and
      qualifications in effect at all times during the Registration Period, and (iv)
      take all other actions reasonably necessary or advisable to qualify the
      Registrable Securities for sale in such jurisdictions; provided, however, that
      the Company shall not be required in connection therewith or as a condition
      thereto to (w) make any change to its articles of incorporation or by-laws,
      (x)
      qualify to do business in any jurisdiction where it would not otherwise be
      required to qualify but for this Section 3(d), (y) subject itself to general
      taxation in any such jurisdiction, or (z) file a general consent to service
      of
      process in any such jurisdiction. The Company shall promptly notify each Buyer
      who holds Registrable Securities of the receipt by the Company of any
      notification with respect to the suspension of the registration or qualification
      of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice
      of
      the initiation or threat of any proceeding for such purpose.

     

    (e)  As
      promptly as practicable after becoming aware of such event or development,
      the
      Company shall notify each Buyer in writing of the happening of any event as
      a
      result of which the prospectus included in a Registration Statement, as then
      in
      effect, includes an untrue statement of a material fact or omission 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 (provided that in no event shall such notice contain any material,
      nonpublic information), and promptly prepare a supplement or amendment to such
      Registration Statement to correct such untrue statement or omission, and deliver
      ten (10) copies of such supplement or amendment to each Buyer. The Company
      shall
      also promptly notify each Buyer in writing (i) when a prospectus or any
      prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to each Buyer by email
      or
      facsimile on the same day of such effectiveness), (ii) of any request by the
      SEC
      for amendments or supplements to a Registration Statement or related prospectus
      or related information, and (iii) of the Company’s reasonable determination
      that a post-effective amendment to a Registration Statement would be
      appropriate.

     

    
      
        
        

      

      
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    (f)  The
      Company shall use its reasonable best efforts to prevent the issuance of any
      stop order or other suspension of effectiveness of a Registration Statement,
      or
      the suspension of the qualification of any of the Registrable Securities for
      sale in any jurisdiction within the United States of America and, if such an
      order or suspension is issued, to obtain the withdrawal of such order or
      suspension at the earliest possible moment and to notify each Buyer who holds
      Registrable Securities being sold of the issuance of such order and the
      resolution thereof or its receipt of actual notice of the initiation or threat
      of any proceeding for such purpose.

     

    (g)  The
      Company shall make available for inspection upon reasonable notice by (i) any
      Buyer and (ii) one (1) firm of accountants or other agents retained by the
      Buyers (collectively, the “Inspectors”)
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree,
      and
      each Buyer hereby agrees, to hold in strict confidence and shall not make any
      disclosure (except to a Buyer) or use any Record or other information which
      the
      Company determines in good faith to be confidential, and of which determination
      the Inspectors are so notified, unless (a) the disclosure of such Records is
      necessary to avoid or correct a misstatement or omission in any Registration
      Statement or is otherwise required under the Securities Act, (b) the release
      of
      such Records is ordered pursuant to a final, non-appealable subpoena or order
      from a court or government body of competent jurisdiction, or (c) the
      information in such Records has been made generally available to the public
      other than by disclosure in violation of this or any other agreement of which
      the Inspector and the Buyer has knowledge. Each Buyer agrees that it shall,
      upon
      learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential.

     

    (h)  The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Buyer provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning a Buyer is sought in or by a court or governmental
      body of competent jurisdiction or through other means, give prompt written
      notice to such Buyer and allow such Buyer, at the Buyer’s expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

     

    
      
        
        

      

      
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    (i)  The
      Company shall use its reasonable best efforts either to cause all the
      Registrable Securities covered by a Registration Statement (i) to be listed
      on
      each securities exchange on which securities of the same class or series issued
      by the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange or (ii) the
      inclusion for quotation on the National Association of Securities Dealers,
      Inc.
      OTC Bulletin Board for such Registrable Securities. The Company shall pay all
      fees and expenses in connection with satisfying its obligation under this
      Section 3(j).

     

    (j)  The
      Company shall cooperate with each Buyer who holds Registrable Securities being
      offered and, to the extent applicable, to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Buyers may reasonably request and registered in such names as the
      Buyers may request.

     

    (k)  The
      Company shall use its reasonable best efforts to cause the Registrable
      Securities covered by the applicable Registration Statement to be registered
      with or approved by such other governmental agencies or authorities as may
      be
      necessary to consummate the disposition of such Registrable
      Securities.

     

    (l)  The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with the provisions
      of
      Rule 158 under the Securities Act) covering a twelve (12) month period beginning
      not later than the first day of the Company’s fiscal quarter next following the
      effective date of the Registration Statement.

     

    (m)  The
      Company shall otherwise use its reasonable best efforts to comply with all
      applicable rules and regulations of the SEC in connection with any registration
      hereunder.

     

    (n)  Within
      two (2) business days after a Registration Statement which covers Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities (with copies to the Buyer whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      A.

     

    (o)  The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by each Buyer of Registrable Securities pursuant to
      a
      Registration Statement.

     

    
      
        
        

      

      
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    4.  OBLIGATIONS
      OF THE BUYERS.

     

    Each
      Buyer agrees that, upon receipt of any notice from the Company of the happening
      of any event of the kind described in Section 3(f) or the first sentence of
      3(e), such Buyer will immediately discontinue disposition of Registrable
      Securities pursuant to any Registration Statement(s) covering such Registrable
      Securities until such Buyer’s receipt of the copies of the supplemented or
      amended prospectus contemplated by Section 3(e) or receipt of notice that no
      supplement or amendment is required. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended certificates
      for shares of Common Stock to a transferee of a Buyer in accordance with the
      terms of the Securities Purchase Agreement in connection with any sale of
      Registrable Securities with respect to which a Buyer has entered into a contract
      for sale prior to the Buyer’s receipt of a notice from the Company of the
      happening of any event of the kind described in Section 3(f) or the first
      sentence of 3(e) and for which the Buyer has not yet settled.

     

    5.  EXPENSES
      OF REGISTRATION.

     

    All
      expenses incurred in connection with registrations, filings or qualifications
      pursuant to Sections 2 and 3, including, without limitation, all registration,
      listing and qualifications fees, printers, legal and accounting fees shall
      be
      paid by the Company. 

     

    6.  INDEMNIFICATION.

     

    With
      respect to Registrable Securities which are included in a Registration Statement
      under this Agreement:

     

    (a)  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Buyer, the directors, officers, partners,
      employees, agents, representatives of, and each Person, if any, who controls
      any
      Buyer within the meaning of the Securities Act or the Exchange Act (each, an
      “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
      expenses, joint or several (collectively, “Claims”)
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“Indemnified
      Damages”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other “blue sky” laws of any jurisdiction in
      which Registrable Securities are offered (“Blue
      Sky Filing”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading; (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      final prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading; or (iii) any violation or alleged violation by the Company
      of the Securities Act, the Exchange Act, any other law, including, without
      limitation, any state securities law, or any rule or regulation there under
      relating to the offer or sale of the Registrable Securities pursuant to a
      Registration Statement (the matters in the foregoing clauses (i) through (iii)
      being, collectively, “Violations”).
      The
      Company shall reimburse the Buyers and each such controlling person promptly
      as
      such expenses are incurred and are due and payable, for any legal fees or
      disbursements or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto; (y) shall not
      be
      available to the extent such Claim is based on a failure of the Buyer to deliver
      or to cause to be delivered the prospectus made available by the Company, if
      such prospectus was timely made available by the Company pursuant to Section
      3(c); and (z) shall not apply to amounts paid in settlement of any Claim if
      such settlement is effected without the prior written consent of the Company,
      which consent shall not be unreasonably withheld, conditioned, or delayed.
      Such
      indemnity shall remain in full force and effect regardless of any investigation
      made by or on behalf of the Indemnified Person and shall survive the transfer
      of
      the Registrable Securities by the Buyers pursuant to Section 9
      hereof.

     

    
      
        
        

      

      
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    (b)  In
      connection with a Registration Statement, each Buyer agrees to severally and
      not
      jointly indemnify, hold harmless and defend, to the same extent and in the
      same
      manner as is set forth in Section 6(a), the Company, each of its directors,
      each
      of its officers, employees, representatives, or agents and each Person, if
      any,
      who controls the Company within the meaning of the Securities Act or the
      Exchange Act (each an “Indemnified
      Party”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the Securities Act, the Exchange Act or otherwise, insofar as
      such Claim or Indemnified Damages arise out of or is based upon any Violation,
      in each case to the extent, and only to the extent, that such Violation occurs
      in reliance upon and in conformity with written information furnished to the
      Company by such Buyer expressly for use in connection with such Registration
      Statement; and, subject to Section 6(d), such Buyer will reimburse any legal
      or
      other expenses reasonably incurred by them in connection with investigating
      or
      defending any such Claim; provided, however, that the indemnity agreement
      contained in this Section 6(b) and the agreement with respect to contribution
      contained in Section 7 shall not apply to amounts paid in settlement of any
      Claim if such settlement is effected without the prior written consent of such
      Buyer, which consent shall not be unreasonably withheld; provided, further,
      however, that the Buyer shall be liable under this Section 6(b) for only that
      amount of a Claim or Indemnified Damages as does not exceed the net proceeds
      to
      such Buyer as a result of the sale of Registrable Securities pursuant to such
      Registration Statement. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of such Indemnified Party
      and shall survive the transfer of the Registrable Securities by the Buyers
      pursuant to Section 9. Notwithstanding anything to the contrary contained
      herein, the indemnification agreement contained in this Section 6(b) with
      respect to any prospectus shall not inure to the benefit of any Indemnified
      Party if the untrue statement or omission of material fact contained in the
      prospectus was corrected and such new prospectus was delivered to each Buyer
      prior to such Buyer’s use of the prospectus to which the Claim
      relates.

     

    (c)  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one (1) counsel for such Indemnified Person or Indemnified Party
      to be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      fully apprised at all times as to the status of the defense or any settlement
      negotiations with respect thereto. No indemnifying party shall be liable for
      any
      settlement of any action, claim or proceeding effected without its prior written
      consent; provided, however, that the indemnifying party shall not unreasonably
      withhold, delay or condition its consent. No indemnifying party shall, without
      the prior written consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (d)  The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

     

    (e)  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others, and (ii) any liabilities the
      indemnifying party may be subject to pursuant to the law.

     

    7.  CONTRIBUTION.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no seller of
      Registrable Securities guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any seller of Registrable Securities who was not guilty of
      fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
      Securities shall be limited in amount to the net amount of proceeds received
      by
      such seller from the sale of such Registrable Securities.

     

    8.  REPORTS
      UNDER THE EXCHANGE ACT.

     

    With
      a
      view to making available to the Buyers the benefits of Rule 144 promulgated
      under the Securities Act or any similar rule or regulation of the SEC that
      may
      at any time permit the Buyers to sell securities of the Company to the public
      without registration (“Rule
      144”)
      the
      Company agrees to:

     

    (a)  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    (b)  file
      with
      the SEC all reports and other documents required of the Company under the
      Securities Act and the Exchange Act so long as the Company remains subject
      to
      such requirements (it being understood that nothing herein shall limit the
      Company’s obligations under Section 4(c) of the Securities Purchase Agreement)
      and the filing of such reports and other documents as are required by the
      applicable provisions of Rule 144; and

     

    (c)  make
      available to each Buyer so long as such Buyer owns Registrable Securities,
      promptly upon request, (i) a written statement by the Company that it has
      complied with the reporting requirements of Rule 144, the Securities Act and
      the
      Exchange Act, (ii) a copy of the most recent annual or quarterly report of
      the
      Company and such other reports and documents so filed by the Company, and (iii)
      such other information as may be reasonably requested to permit the Buyers
      to
      sell such securities pursuant to Rule 144 without registration.

     

    9.  AMENDMENT
      OF REGISTRATION RIGHTS.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and Buyers who
      then
      hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
      or
      waiver effected in accordance with this Section 9 shall be binding upon
      each Buyer and the Company. No such amendment shall be effective to the extent
      that it applies to fewer than all of the holders of the Registrable Securities.
      No consideration shall be offered or paid to any Person to amend or consent
      to a
      waiver or modification of any provision of any of this Agreement unless the
      same
      consideration also is offered to all of the parties to this
      Agreement.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    10.  MISCELLANEOUS.

     

    (a)  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities or owns the right to
      receive the Registrable Securities. If the Company receives conflicting
      instructions, notices or elections from two (2) or more Persons with respect
      to
      the same Registrable Securities, the Company shall act upon the basis of
      instructions, notice or election received from the registered owner of such
      Registrable Securities.

     

    (b)  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement 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 transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) 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 the Company, to:

            	
              Cobalis
                Corporation

            
	
               

            	
              2445
                McCabe Way, Suite 150

            
	
               

            	
              Irvine,
                CA 92614

            
	
               

            	
              Attention:
                Dr. Gerald J. Yaktan

            
	
               

            	
              Telephone: 

            
	
               

            	
              Facsimile: 

            
	
               

            	
               

            
	
              With
                Copy to:

            	
              Wilson
                Sonsini Goodrich & Rosati

            
	
               

            	
              12235
                El Camino Real, Suite 200

            
	
               

            	
              San
                Diego, CA 92130

            
	
               

            	
              Attn:
                Martin J. Waters, Esq.

            
	
               

            	
              Telephone:
                 858-350-2300

            
	
               

            	
              Facsimile:
                 858-350-2399

            
	
               

            	
               

            

    

     

    If
      to an
      Buyer, to its address and facsimile number on the Schedule of Buyers attached
      hereto, with copies to such Buyer’s representatives as set forth on the Schedule
      of Buyers or to such other address and/or facsimile number and/or to the
      attention of such other person as the recipient party has specified by written
      notice given to each other party five (5) days prior to the effectiveness of
      such change. Written confirmation of receipt (A) given by the recipient of
      such
      notice, consent, waiver or other communication, (B) mechanically or
      electronically generated by the sender’s facsimile machine containing the time,
      date, recipient facsimile number and an image of the first page of such
      transmission or (C) provided by a courier or overnight courier 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.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (d)  The
      laws
      of the State of New Jersey shall govern all issues concerning the relative
      rights of the Company and the Buyers as 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 jurisdiction) that would cause
      the application of the laws of any jurisdiction other than the State of New
      Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
      of the Superior Courts of the State of New Jersey, sitting in Hudson County,
      New
      Jersey and federal courts for the District of New Jersey sitting Newark, New
      Jersey, for the adjudication of any dispute hereunder or in connection herewith
      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. If any provision of
      this
      Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
      or unenforceability shall not affect the validity or enforceability of the
      remainder of this Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other jurisdiction.
      EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
      TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    (e)  This
      Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
      Agreement and related documents including the Convertible Debenture and the
      Security Agreement dated the date hereof (the “Security
      Agreement”)
      constitute the entire agreement among the parties hereto with respect to the
      subject matter hereof and thereof. There are no restrictions, promises,
      warranties or undertakings, other than those set forth or referred to herein
      and
      therein. This Agreement, the Irrevocable Transfer Agent Instructions, the
      Securities Purchase Agreement and related documents including the Convertible
      Debenture, and the Security Agreement supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

     

    (f)  This
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.

     

    (g)  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (h)  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

    The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

     

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

     

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

     

    
      	 	 	 
	 	
              COMPANY:

            
	 	
              COBALIS
                CORPORATION

            
	 
 	 
 	 
 
	 	By:  	/s/ Gerald
              Yakatan
	 	
              

              Name: Gerald
                Yakatan

            
	 	
              Title: Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

     

    
      	 	 	 
	 	
              BUYER:

            
	 	
              CORNELL
                CAPITAL PARTNERS, LP

            
	 	 
	 	By:
              Yorkville Advisors, LLC
	 	Its:
              General Partner
	 
 	 
 	 
 
	 	By:  	/s/ Mark
              Angelo
	 	
              
Name:
              Mark Angelo
	 	Title:
              Portfolio Manager

    

     

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
      I

     

    SCHEDULE
      OF BUYERS

     

    

    
      	
              Buyer

            	
              Address/Facsimile
                

              Number
                of Buyer

            	
              Address/Facsimile
                

              Number
                of Buyer’s Representative

            
	
               

            	
               

            	
               

            
	
              Cornell
                Capital Partners, LP

            	
              101
                Hudson Street - Suite 3700

            	
              101
                Hudson Street - Suite 3700

            
	
               

            	
              Jersey
                City, NJ 07303

            	
              Jersey
                City, NJ 07303

            
	
               

            	
              Facsimile: (201)
                985-8266

            	
              Facsimile: (201)
                985-8266

            
	
               

            	
               

            	
              Attention:
                David Gonzalez, Esq.

            
	
               

            	
               

            	
               

            

    

    

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    

    EXHIBIT
      A

     

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    

    Attention: 

    

    
      	 	
              Re:

            	
              COBALIS
                CORPORATION

            

    

    

    Ladies
      and Gentlemen:

    

    We
      are
      counsel to Cobalis Corporation, a Nevada corporation (the “Company”),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the “Securities
      Purchase Agreement”)
      entered into by and among the Company and the Buyers named therein
      (collectively, the “Buyers”)
      pursuant to which the Company issued to the Buyers shares of its Common Stock,
      par value $0.001 per share (the “Common
      Stock”).
      Pursuant to the Purchase Agreement, the Company also has entered into a
      Registration Rights Agreement with the Buyers (the “Registration
      Rights Agreement”)
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement) under
      the Securities Act of 1933, as amended (the “Securities
      Act”).
      In
      connection with the Company’s obligations under the Registration Rights
      Agreement, on ________________, the Company filed a Registration Statement
      on
      Form ________ (File No. 333-_____________) (the “Registration
      Statement”)
      with
      the Securities and Exchange SEC (the “SEC”)
      relating to the Registrable Securities which names each of the Buyers as a
      selling stockholder there under.

     

    In
      connection with the foregoing, we advise you that a member of the SEC’s staff
      has advised us by telephone that the SEC has entered an order declaring the
      Registration Statement effective under the Securities Act at [ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and we
      have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
      any stop order suspending its effectiveness has been issued or that any
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      the Registrable Securities are available for resale under the Securities Act
      pursuant to the Registration Statement.

     

     

    Very
      truly yours,

    

    [Law
      Firm]

    

    By:      

    

    cc: [LIST
      NAMES OF BUYERS]

    

    16

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