Document:

Exhibit
10.4

EXHIBIT
A

NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY 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 AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.

Original
Issue Date: March 15, 2005

$200,000.00

8%
SENIOR SECURED NOTE DUE JUNE 15, 2005

THIS NOTE
is a duly authorized and issued 8% Senior Secured Note of Grant Life Sciences,
Inc., a Nevada corporation, having a principal place of business at 5511 Capital
Center Drive, Suite 224, Raleigh NC 27606, (the “Company”),
designated as its 8% Senior Secured Note, due June 15, 2005 (the “Note(s)”).

FOR VALUE
RECEIVED, the Company promises to pay to DCOFI MASTER LDC or its registered
assigns (the “Holder”), the
principal sum of $200,000.00 on June 15, 2005 or such earlier date as the Notes
are required or permitted to be repaid as provided hereunder (the “Maturity
Date”), and
to pay interest to the Holder on the aggregate outstanding principal amount of
this Note in accordance with the provisions hereof. This Note is subject to the
following additional provisions:

Section
1. Definitions. For the
purposes hereof, in addition to the terms defined elsewhere in this Note: (a)
capitalized terms not otherwise defined herein have the meanings given to such
terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:

“Alternate
Consideration” shall
have the meaning set forth in Section 4(c).

“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 in the State
of New York are authorized or required by law or other government action to
close.

 

“Change
of Control Transaction” means
the occurrence of any of (i) 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 33% of the voting securities of the Company, or (ii)
a replacement at one time or within a three year period of more than one-half of
the members of the Company's board of directors 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), or (iii) 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 (i) or (ii).

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

 

“Event
of Default” shall
have the meaning set forth in Section 8.

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

 

“Fundamental
Transaction” shall
have the meaning set forth in Section 4(c) hereof.

 

“Late
Fee” shall
have the meaning set forth in Section 2(c) hereof.

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

“Penalty
Warrants” means
warrants to purchase 250,000 shares of Common Stock issuable to the Holder in
accordance with the terms herein.

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

“Purchase
Agreement” means
the Securities Purchase Agreement, dated as of March 15, 2005, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.

 

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

  

 “Trading
Day” means a
day on which (i) the New York Stock Exchange is open for business, if the Common
Stock is not publicly traded or (ii) if the Company’s Common Stock is publicly
traded, the Common Stock is traded on a Trading Market.

 

“Trading
Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.

 

“Transaction
Documents” shall
have the meaning set forth in the Purchase Agreement.

Section
2. Interest
and Prepayments.

 

a)  Payment
of Interest in Cash. The
Company shall pay interest to the Holder on the aggregate and outstanding
principal amount of this Note at the rate of 8% per annum, payable monthly in
arrears, in cash on the last day of each month, beginning on the first such date
after the Original Issue Date and on the Maturity Date (except that, if any such
date is not a Business Day, then such payment shall be due on the next
succeeding Business Day). 

b)  Late
Fee. All
overdue accrued and unpaid interest to be paid hereunder shall entail a late fee
at the rate of 20% per annum (or such lower maximum amount of interest permitted
to be charged under applicable law) (“Late
Fee”) which
will accrue daily, from the date such interest is due hereunder through and
including the date of payment.

 

c)  Optional
Prepayment. The
Company shall have the right to prepay, in cash, all or a portion of the Notes
at any time at (i) 100% of the principal amount thereof plus accrued interest to
the date of repayment if in the first 60 days and (ii) 106% of the principal
amount thereof plus accrued interest to the date of repayment if after 60
days.

 

d) Mandatory
Prepayment. In the
event that the Company receives proceeds of at least $2,000,000 from the sale of
Common Stock, preferred stock, or debt securities of the Company, the Company
shall be required to redeem the Notes at (i) 100% of the principal amount
thereof plus accrued interest to the date of repayment if in the first 60 days
and (ii) 106% of the principal amount thereof plus accrued interest to the date
of repayment if after 60 days. 

Section
3.  Registration
of Transfers and Exchanges.

 

a)  Different
Denominations. This
Note is exchangeable for an equal aggregate principal amount of Notes 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.

 

 

b)  Investment
Representations. This
Note has been issued subject to certain investment representations of the
original Holder set forth in the Purchase Agreement and may be transferred or
exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations. 

c)  Reliance
on Note Register. Prior
to due presentment to the Company for transfer of this Note, the Company and any
agent of the Company may treat the Person in whose name this Note is duly
registered on the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note
is overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.

Section
4. Intentionally
Omitted.

 

Section
5. Intentionally
Omitted.

Section
6. Penalty
Warrant Issuance. In
addition to all of the remedies available to the Holder pursuant to Section 8,
in the event that the principal amount of the Note, together with all accrued,
but unpaid, interest is not paid within two (2) Trading Days of the Maturity
Date, the Company shall issue the Penalty Warrants to the Holder. 

 

Section
7. Negative
Covenants. So long
as any portion of this Note is outstanding, the Company will not and will not
permit any of its Subsidiaries to directly or indirectly:

a)  enter
into, create, incur, assume or suffer to exist any indebtedness or liens 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 therefrom that
is senior
to, or pari passu with, in
any respect, the Company’s obligations under the Notes;

 

b)  amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holder;

c)  repay,
repurchase or offer to repay, repurchase or otherwise acquire any of its Common
Stock, Preferred Stock, or other equity securities; or

d)  enter
into any agreement with respect to any of the foregoing.

 

Section
8. Events
of Default.

a)  “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 (A) the principal of amount of any Note, or (B)
interest (including Late Fees) on, or damages in respect of, any Note, in each
case free of any claim of subordination, as and when the same shall become due
and payable (whether on the Maturity Date or by acceleration or otherwise) which
default, solely in the case of an interest payment or other default under clause
(B) above, is not cured, within 2 Trading Days;

 

ii.  the
Company shall fail to observe or perform any other covenant or agreement
contained in this Note or any of the other Transaction Documents which failure
is not cured, if possible to cure, within the earlier to occur of
(A) 5
Trading
Days after notice of such default sent by the Holder or by any other
Holder and (B)
10 Trading Days after the Company shall become or should have become aware of
such failure;

iii.  a default
or event of default (subject to any grace or cure period provided for in the
applicable agreement, document or instrument) shall occur under (A) any of the
Transaction Documents other than the Notes, or (B) any other material agreement,
lease, document or instrument to which the Company or any Subsidiary is
bound;

iv.  any
representation or warranty made herein, in any
other Transaction Document, in any written statement pursuant hereto or thereto,
or in any other report, financial statement or certificate made or delivered to
the Holder or any other holder of Notes shall be
untrue or incorrect in any material respect as of the date when made or deemed
made;

v.  (i) the
Company or any of its Subsidiaries shall commence, or there shall be commenced
against the Company or any such Subsidiary, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary 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
thereof or (ii) there is commenced against the Company or any Subsidiary thereof
any such bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or (iii) the Company or any Subsidiary thereof is
adjudicated by a court of competent jurisdiction insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or (iv) the Company or any Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or (v) the Company
or any Subsidiary thereof makes a general assignment for the benefit of
creditors; or (vi) 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 (vii) the Company or any Subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or (viii) the Company or any Subsidiary thereof shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or (ix) any corporate or other action is taken by the
Company or any Subsidiary thereof for the purpose of effecting any of the
foregoing;

 

 

vi.  the
Company or any Subsidiary shall default in any of its obligations under 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 in an amount
exceeding $150,000, 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; 

vii.  if any of
the Company’s Common Stock is registered with the Commission, the Common Stock
shall not be eligible for quotation on or quoted for trading on a Trading Market
and shall not again be eligible for and quoted or listed for trading thereon
within five Trading Days;

viii.  the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction, shall agree to sell or dispose of all or in excess of 33% of its
assets in one or more transactions (whether or not such sale would constitute a
Change of Control Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or other equity
securities of the Company (other than repurchases of shares of Common Stock or
other equity securities of departing officers and directors of the Company;
provided such repurchases shall not exceed $100,000, in the aggregate, for all
officers and directors during the term of this Note);

b)  Remedies
Upon Event of Default. If any
Event of Default occurs, the full principal amount of this Note, 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. The
aggregate amount payable upon an Event of Default shall be equal to the
Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any Event
of Default that results in the eventual acceleration of this Note, the interest
rate on this Note shall accrue at the rate of 20% per annum, or such lower
maximum amount of interest permitted to be charged under applicable law. All
Notes for which the full Mandatory Prepayment Amount hereunder shall have been
paid in accordance herewith shall promptly be surrendered to or as directed by
the Company. 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 and the Holder shall have all rights as a Note
holder until such time, if any, as the full payment under this Section shall
have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.

 

Section
9. Miscellaneous.

a)  Notices. Any and
all notices or other communications or deliveries to be provided by the Holders
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service, addressed to the Company, at
the address set forth above, facsimile number
212-922-2081, Attn: General Counsel, or such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to each Holder at the
facsimile telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.

 

b)  Absolute
Obligation. Except
as expressly provided herein, no provision of this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the
principal of, interest and liquidated damages (if any) on, this Note at the
time, place, and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of the Company. This Note ranks pari passu with all
other Notes now or hereafter issued under the terms set forth
herein. 

 

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

d)  Security
Interest/Subordination. This
Note is a direct debt obligation of the Company and, pursuant to the Security
Agreement is secured by a first priority perfected security interest in all of
the assets of the Company for the benefit of the Holders. 

e)  Governing
Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Note shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New
York Courts”). Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
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, or such New York Courts are improper or inconvenient venue for
such proceeding. 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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Note 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. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Note or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Note, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

 

f)  Waiver. Any
waiver by the Company or the Holder of a breach of any provision of this Note
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 Note. The failure of
the Company or the Holder to insist upon strict adherence to any term of this
Note 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 Note. Any waiver must be in writing.

 

g)  Severability. If any
provision of this Note is invalid, illegal or unenforceable, the balance of this
Note 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 violates 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 Note 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.

 

h)  Next
Business Day.
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.

i)  Headings. The
headings contained herein are for convenience only, do not constitute a part of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.

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

 

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

 

	 	GRANT LIFE SCIENCES,
      INC.	 
	 	 	 
	 	/s/
      Stan Yakatan	 
	 	Name: Stan Yakatan	 
	 	
      Title:
      Chief Executive OfficerExhibit
10.5

 

EXHIBIT
C   

 

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

COMMON
STOCK PURCHASE WARRANT

To
Purchase 250,000 Shares
of Common Stock of

 

Grant
Life Sciences, Inc.

 

THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, DCOFI
Master LDC (the
“Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial
Exercise Date”) and on
or prior to the close of business on the five year anniversary of the Initial
Exercise Date (the “Termination
Date”) but
not thereafter, to subscribe for and purchase from Grant Life Sciences, Inc., a
Nevada corporation (the “Company”), up to
250,000
shares
(the “Warrant
Shares”) of
Common Stock, $0.001 par value, of the Company (the “Common
Stock”). The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 2(b). 

 

Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated
March 15, 2005, among the Company and the purchasers signatory
thereto.

 

Section
2. Exercise.

 

	a)  	
      Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made at
      any time or times on or after the Initial Exercise Date and on or before
      the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or such
      other office or agency of the Company as it may designate by notice in
      writing to the registered Holder at the address of such Holder appearing
      on the books of the Company); provided,
      however,
      within 5 Trading Days of the date said Notice of Exercise is delivered to
      the Company, the Holder shall have surrendered this Warrant to the Company
      and the Company shall have received payment of the aggregate Exercise
      Price of the shares thereby purchased by wire transfer or cashier’s check
      drawn on a United States bank. 

 

1

 

	b)  	
      Exercise
      Price.
      The exercise price of the Common Stock under this Warrant shall be $0.40,
      subject to adjustment hereunder (the “Exercise
      Price”).

 

	c)  	
      Cashless
      Exercise.
      If at any time after one year from the date of issuance of this Warrant
      there is no effective Registration Statement registering the resale of the
      Warrant Shares by the Holder, then this Warrant may also be exercised at
      such time by means of a “cashless exercise” in which the Holder shall be
      entitled to receive a certificate for the number of Warrant Shares equal
      to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

 

(A) = the
VWAP on the Trading Day immediately preceding the date of such
election;

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

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

2

 

	d)  	
      Exercise
      Limitations;
      Holder’s
      Restrictions.
      The Holder shall not have the right to exercise any portion of this
      Warrant, pursuant to Section 2(c) or otherwise, to the extent that after
      giving effect to such issuance after exercise, the Holder (together with
      the Holder’s affiliates), as set forth on the applicable Notice of
      Exercise, would beneficially own in excess of 9.99% of the number of
      shares of the Common Stock outstanding immediately after giving effect to
      such issuance.  For purposes of the foregoing sentence, the number of
      shares of Common Stock beneficially owned by the Holder and its affiliates
      shall include the number of shares of Common Stock issuable upon exercise
      of this Warrant with respect to which the determination of such sentence
      is being made, but shall exclude the number of shares of Common Stock
      which would be issuable upon (A) exercise of the remaining, nonexercised
      portion of this Warrant beneficially owned by the Holder or any of its
      affiliates and (B) exercise or conversion of the unexercised or
      nonconverted portion of any other securities of the Company (including,
      without limitation, any other Notes or Warrants) subject to a limitation
      on conversion or exercise analogous to the limitation contained herein
      beneficially owned by the Holder or any of its affiliates.  Except as
      set forth in the preceding sentence, for purposes of this Section 2(d),
      beneficial ownership shall be calculated in accordance with Section 13(d)
      of the Exchange Act, it being acknowledged by Holder that the Company is
      not representing to Holder that such calculation is in compliance with
      Section 13(d) of the Exchange Act and Holder is solely responsible for any
      schedules required to be filed in accordance therewith. To the extent that
      the limitation contained in this Section 2(d) applies, the determination
      of whether this Warrant is exercisable (in relation to other securities
      owned by the Holder) and of which a portion of this Warrant is exercisable
      shall be in the sole discretion of such Holder, and the submission of a
      Notice of Exercise shall be deemed to be such Holder’s determination of
      whether this Warrant is exercisable (in relation to other securities owned
      by such Holder) and of which portion of this Warrant is exercisable, in
      each case subject to such aggregate percentage limitation, and the Company
      shall have no obligation to verify or confirm the accuracy of such
      determination. For purposes of this Section 2(d), in determining the
      number of outstanding shares of Common Stock, the Holder may rely on the
      number of outstanding shares of Common Stock as reflected in (x) the
      Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y)
      a more recent public announcement by the Company or (z) any other notice
      by the Company or the Company’s Transfer Agent setting forth the number of
      shares of Common Stock outstanding.  Upon the written or oral request
      of the Holder, the Company shall within two Trading Days confirm orally
      and in writing to the Holder the number of shares of Common Stock then
      outstanding.  In any case, the number of outstanding shares of Common
      Stock shall be determined after giving effect to the conversion or
      exercise of securities of the Company, including this Warrant, by the
      Holder or its affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The provisions of this
      Section 2(d) may be waived by the Holder upon, at the election of the
      Holder, not less than 61 days’ prior notice to the Company, and the
      provisions of this Section 2(d) shall continue to apply until such
      61st
      day (or such later date, as determined by the Holder, as may be specified
      in such notice of waiver).

	e)  	
      Mechanics
      of Exercise.
      

	i)  	
       Authorization
      of Warrant Shares.
      The Company covenants that all Warrant Shares which may be issued upon the
      exercise of the purchase rights represented by this Warrant will, upon
      exercise of the purchase rights represented by this Warrant, be duly
      authorized, validly issued, fully paid and nonassessable and free from all
      taxes, liens and charges in respect of the issue thereof (other than taxes
      in respect of any transfer occurring contemporaneously with such issue).
      The Company covenants that during the period the Warrant is outstanding,
      it will reserve from its authorized and unissued Common Stock a sufficient
      number of shares to provide for the issuance of the Warrant Shares upon
      the exercise of any purchase rights under this Warrant. The Company
      further covenants that its issuance of this Warrant shall constitute full
      authority to its officers who are charged with the duty of executing stock
      certificates to execute and issue the necessary certificates for the
      Warrant Shares upon the exercise of the purchase rights under this
      Warrant. The Company will take all such reasonable action as may be
      necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be
      listed.

 

3

 

	ii)  	
       Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the
      transfer agent of the Company to the Holder by crediting the account of
      the Holder’s prime broker with the Depository Trust Company through its
      Deposit Withdrawal Agent Commission (“DWAC”)
      system if the Company is a participant in such system, and otherwise by
      physical delivery to the address specified by the Holder in the Notice of
      Exercise within 3 Trading Days from the delivery to the Company of the
      Notice of Exercise Form, surrender of this Warrant and payment of the
      aggregate Exercise Price as set forth above (“Warrant
      Share Delivery Date”).
      This Warrant shall be deemed to have been exercised on the date the
      Exercise Price is received by the Company. The Warrant Shares shall be
      deemed to have been issued, and Holder or any other person so designated
      to be named therein shall be deemed to have become a holder of record of
      such shares for all purposes, as of the date the Warrant has been
      exercised by payment to the Company of the Exercise Price and all taxes
      required to be paid by the Holder, if any, pursuant to Section 2(e)(vii)
      prior to the issuance of such shares, have been paid.

 

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

 

	iv)  	
       Rescission
      Rights.
      If the Company fails to cause its transfer agent to transmit to the Holder
      a certificate or certificates representing the Warrant Shares pursuant to
      this Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder
      will have the right to rescind such exercise.

 

4

 

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

 

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

 

5

 

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

 

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

 

Section
3. Certain Adjustments.

 

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

 

6

 

	b)  	
      Subsequent
      Equity Sales.
      If the Company or any Subsidiary thereof, as applicable, at any time while
      this Warrant is outstanding, shall offer, sell, grant any option to
      purchase or offer, sell or grant any right to reprice its securities, or
      otherwise dispose of or issue (or announce any offer, sale, grant or any
      option to purchase or other disposition) any Common Stock or Common Stock
      Equivalents entitling any Person to acquire shares of Common Stock, at an
      effective price per share less than the then Exercise Price (such lower
      price, the “Base
      Share Price”
      and such issuances collectively, a “Dilutive
      Issuance”),
      as adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents 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 an effective price per share which is
      less than the Exercise Price, such issuance shall be deemed to have
      occurred for less than the Exercise Price), then, the Exercise Price shall
      be reduced to equal the Base Share Price and the number of Warrant Shares
      issuable hereunder shall be increased such that the aggregate Exercise
      Price payable hereunder, after taking into account the decrease in the
      Exercise Price, shall be equal to the aggregate Exercise Price prior to
      such adjustment. Such adjustment shall be made whenever such Common Stock
      or Common Stock Equivalents are issued. 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 the Trading Day
      following the issuance of any Common Stock or Common Stock Equivalents
      subject to this section, indicating therein the applicable issuance price,
      or of applicable reset price, exchange price, conversion price and other
      pricing terms (such notice the “Dilutive
      Issuance Notice”).
      For purposes of clarification, whether or not the Company provides a
      Dilutive Issuance Notice pursuant to this Section 3(b), upon the
      occurrence of any Dilutive Issuance, after the date of such Dilutive
      Issuance the Holder is entitled to receive a number of Warrant Shares
      based upon the Base Share Price regardless of whether the Holder
      accurately refers to the Base Share Price in the Notice of Exercise.
      

 

	c)  	
      Pro
      Rata Distributions.
      If the Company, at any time prior to the Termination Date, shall
      distribute to all holders of Common Stock (and not to Holders of the
      Warrants) evidences of its indebtedness or assets or rights or warrants to
      subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise
      Price shall be adjusted by multiplying the Exercise Price in effect
      immediately prior to the record date fixed for determination of
      stockholders entitled to receive such distribution by a fraction of which
      the denominator shall be the VWAP determined as of the record date
      mentioned above, and of which the numerator shall be such VWAP on such
      record date less the then per share fair market value at such record date
      of the portion of such assets or evidence of indebtedness so distributed
      applicable to one outstanding share of the Common Stock as determined by
      the Board of Directors in good faith. In either case the adjustments shall
      be described in a statement provided to the Holders 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.

 

7

 

	d)  	
      Calculations.
      All calculations under this Section 3 shall be made to the nearest cent or
      the nearest 1/100th of a share, as the case may be. The number of shares
      of Common Stock outstanding at any given time shall not includes shares of
      Common Stock owned or held by or for the account of the Company, and the
      description of any such shares of Common Stock shall be considered on
      issue or sale of Common Stock. For purposes of this Section 3, the number
      of shares of Common Stock deemed to be issued and outstanding as of a
      given date shall be the sum of the number of shares of Common Stock
      (excluding treasury shares, if any) issued and
  outstanding.

 

e)  Notice
to Holders.

 

i.  Adjustment
to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company
shall promptly mail to each Holder a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. If the Company issues a variable rate security, despite the
prohibition thereon in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price in the case of an MFN
Transaction (as defined in the Purchase Agreement.

 

ii.  Notice
to Allow Exercise by Holder. 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; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last addresses as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.

 

8

 

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

 

9

                                         
g) Intentionally
Omitted.

 

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

 

Section
4. Transfer
of Warrant.

 

	a)  	
      Transferability.
      Subject to compliance with any applicable securities laws and the
      conditions set forth in Sections 5(a) and 4(d) hereof and to the
      provisions of Section 4.1 of the Purchase Agreement, this Warrant and all
      rights hereunder are transferable, in whole or in part, upon surrender of
      this Warrant at the principal office of the Company, together with a
      written assignment of this Warrant substantially in the form attached
      hereto duly executed by the Holder or its agent or attorney and funds
      sufficient to pay any transfer taxes payable upon the making of such
      transfer. Upon such surrender and, if required, such payment, the Company
      shall execute and deliver a new Warrant or Warrants in the name of the
      assignee or assignees and in the denomination or denominations specified
      in such instrument of assignment, and shall issue to the assignor a new
      Warrant evidencing the portion of this Warrant not so assigned, and this
      Warrant shall promptly be cancelled. A Warrant, if properly assigned, may
      be exercised by a new holder for the purchase of Warrant Shares without
      having a new Warrant issued. 

 

	b)  	
      New
      Warrants.
      This Warrant may be divided or combined with other Warrants upon
      presentation hereof at the aforesaid office of the Company, together with
      a written notice specifying the names and denominations in which new
      Warrants are to be issued, signed by the Holder or its agent or attorney.
      Subject to compliance with Section 4(a), as to any transfer which may be
      involved in such division or combination, the Company shall execute and
      deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
      to be divided or combined in accordance with such
  notice.

 

10

 

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

 

	d)  	
      Transfer
      Restrictions.
      If,
      at the time
      of the surrender of this Warrant in connection with any transfer of this
      Warrant, the transfer of this Warrant shall not be registered pursuant to
      an effective registration
      statement under the Securities Act
      and under
      applicable state securities or blue sky laws, the Company may require, as
      a condition of allowing such transfer (i) that the Holder or transferee of
      this Warrant, as the case may be, furnish to the Company a written opinion
      of counsel (which opinion shall be in form, substance and scope customary
      for opinions of counsel in comparable transactions) to the effect that
      such transfer may be made without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws,
      (ii) that the holder or transferee execute and deliver to the Company an
      investment letter in form and substance acceptable to the Company and
      (iii) that the transferee be an “accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
      promulgated under the Securities Act or a qualified institutional buyer as
      defined in Rule 144A(a) under the Securities Act.

 

Section
5. Miscellaneous.

 

	a)  	
      Title
      to Warrant.
      Prior to the Termination Date and subject to compliance with applicable
      laws and Section 4 of this Warrant, this Warrant and all rights hereunder
      are transferable, in whole or in part, at the office or agency of the
      Company by the Holder in person or by duly authorized attorney, upon
      surrender of this Warrant together with the Assignment Form annexed hereto
      properly endorsed. The transferee shall sign an investment letter in form
      and substance reasonably satisfactory to the
Company.

 

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

 

11

 

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

 

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

 

	e)  	
      Authorized
      Shares.
      The Company covenants that during the period the Warrant is outstanding,
      it will reserve from its authorized and unissued Common Stock a sufficient
      number of shares to provide for the issuance of the Warrant Shares upon
      the exercise of any purchase rights under this Warrant. The Company
      further covenants that its issuance of this Warrant shall constitute full
      authority to its officers who are charged with the duty of executing stock
      certificates to execute and issue the necessary certificates for the
      Warrant Shares upon the exercise of the purchase rights under this
      Warrant. The Company will take all such reasonable action as may be
      necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be
      listed. 

 

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

 

12

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

14

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

 

Dated:
March 15, 2005

 

	 	
      GRANT
      LIFE SCIENCES, INC.

       

	 	
      /s/
      Stan Yakatan

      Name:
      Stan Yakatan

      Title:
      Chief Executive Officer

 

15

NOTICE
OF EXERCISE

TO:
GRANT LIFE SCIENCES, INC.

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

 

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

 

o in lawful money of the United States; or

 

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

 

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

 

_______________________________

The
Warrant Shares shall be delivered to the following:

_______________________________

                                   

_______________________________

                                               

_______________________________

                                             

(4)
Accredited
Investor. The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.

[SIGNATURE
OF HOLDER]

 

Name of
Investing Entity:
________________________________________________________________________

Signature
of Authorized Signatory of Investing Entity:
_________________________________________________

Name of
Authorized Signatory:
___________________________________________________________________

Title of
Authorized Signatory:
____________________________________________________________________

Date:
________________________________________________________________________________________

 

 

ASSIGNMENT
FORM

(To
assign the foregoing warrant, execute

this form
and supply required information. 

Do not
use this form to exercise the warrant.)

FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

 

_______________________________________________
whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:
______________, _______

Holder’s
Signature: _____________________________

Holder’s
Address: _____________________________

                                                                                 
_____________________________

Signature
Guaranteed: ___________________________________________

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

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