Document:

formofnote-nov2007.htm

    EXHIBIT 4.3

     

     

    

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
      NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
      SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
      RULE
      144 OR REGULATION S UNDER SAID ACT.

     

    

     

    CALLABLE
      SECURED CONVERTIBLE NOTE

     

    New
      York,
      New York

     

    November
      14, 2007                                                                                             $21,200

     

    FOR
      VALUE RECEIVED, AVITAR INC., a Delaware corporation
      (hereinafter called the “Borrower”), hereby promises to pay to
      the order of AJW PARTNERS, LLC or registered assigns (the
“Holder”) the sum of $21,200, on November 14, 2010 (the
“Maturity Date”), and to pay interest on the unpaid principal
      balance hereof at the rate of eight percent (8%) (the “Interest
      Rate”) per annum from November 14, 2007 (the “Issue
      Date”) until the same becomes due and payable, whether at maturity or
      upon acceleration or by prepayment or otherwise.  Any amount of
      principal or interest on this Note which is not paid when due shall bear
      interest at the rate of fifteen percent (15%) per annum from the due date
      thereof until the same is paid (“Default
      Interest”).  Interest shall commence accruing on the Issue
      Date, shall be computed on the basis of a 365-day year and the actual number
      of
      days elapsed and shall be payable quarterly provided that no interest shall
      be
      due and payable for any month in which the Trading Price (as such term is
      defined below) is greater than $.20 for each Trading Day (as such term is
      defined below) of the month. All payments due hereunder (to the extent not
      converted into common stock, $.01 par value per share (the “Common
      Stock”) in accordance with the terms hereof) shall be made in lawful
      money of the United States of America.  All payments shall be made at
      such address as the Holder shall hereafter give to the Borrower by written
      notice made in accordance with the provisions of this Note.  Whenever
      any amount expressed to be due by the terms of this Note is due on any day
      which
      is not a business day, the same shall instead be due on the next succeeding
      day
      which is a business day and, in the case of any interest payment date which
      is
      not the date on which this Note is paid in full, the extension of the due date
      thereof shall not be taken into account for purposes of determining the amount
      of interest due on such date.  As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on
      which commercial banks in the city of New York, New York are authorized or
      required by law or executive order to remain closed.  Each capitalized
      term used herein, and not otherwise defined, shall have the meaning ascribed
      thereto in that certain Securities Purchase Agreement, dated November 14, 2007,
      pursuant to which this Note was originally issued (the “Purchase
      Agreement”).

     

    This
      Note
      is free from all taxes, liens, claims and encumbrances with respect to the
      issue
      thereof and shall not be subject to preemptive rights or other similar rights
      of
      shareholders of the Borrower and will not impose personal liability upon the
      holder thereof.  The obligations of the Borrower under this Note shall
      be secured by that certain Security Agreement and Intellectual Property Security
      Agreement, each dated November 14, 2007 by and between the Borrower and the
      Holder.

     

    The
      following terms shall apply to this Note:

     

     

    ARTICLE
      I.     CONVERSION RIGHTS

     

    1.1  Conversion
      Right.  The Holder shall have the right
      from time to time, and at any time on or prior to the earlier of (i) the
      Maturity Date and (ii) the date of payment of the Default Amount (as defined
      in
      Article III) pursuant to Section 1.6(a) or Article III, the Optional Prepayment
      Amount (as defined in Section 5.1 or any payments pursuant to Section 1.7,
      each
      in respect of the remaining outstanding principal amount of this Note to convert
      all or any part of the outstanding and unpaid principal amount of this Note
      into
      fully paid and non-assessable shares of Common Stock, as such Common Stock
      exists on the Issue Date, or any shares of capital stock or other securities
      of
      the Borrower into which such Common Stock shall hereafter be changed or
      reclassified at the conversion price  (the “Conversion
      Price”) determined as provided herein (a
“Conversion”); provided, however, that in no
      event shall the Holder be entitled to convert any portion of this Note in excess
      of that portion of this Note upon conversion of which the sum of (1) the number
      of shares of Common Stock beneficially owned by the Holder and its affiliates
      (other than shares of Common Stock which may be deemed beneficially owned
      through the ownership of the unconverted portion of the Notes or the unexercised
      or unconverted portion of any other security of the Borrower (including, without
      limitation, the warrants issued by the Borrower pursuant to the Purchase
      Agreement) subject to a limitation on conversion or exercise analogous to the
      limitations contained herein) and (2) the number of shares of Common Stock
      issuable upon the conversion of the portion of this Note with respect to which
      the determination of this proviso is being made, would result in beneficial
      ownership by the Holder and its affiliates of more than 4.99% of the outstanding
      shares of Common Stock and providedfurther that the Holder shall
      not be entitled to convert any portion of this Note during any month immediately
      succeeding a Determination Date on which the Borrower exercises its prepayment
      option pursuant to Section 5.2 of this Note.  For purposes of the
      proviso to the immediately preceding sentence, beneficial ownership shall be
      determined in accordance with Section 13(d) of the Securities Exchange Act
      of
      1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
      in clause (1) of such proviso.  The number of shares of Common Stock
      to be issued upon each conversion of this Note shall be determined by dividing
      the Conversion Amount (as defined below) by the applicable Conversion Price
      then
      in effect on the date specified in the notice of conversion, in the form
      attached hereto as Exhibit A (the “Notice of Conversion”),
      delivered to the Borrower by the Holder in accordance with Section 1.4 below;
      provided that the Notice of Conversion is submitted by facsimile (or by other
      means resulting in, or reasonably expected to result in, notice) to the Borrower
      before 6:00 p.m., New York, New York time on such conversion date (the
“Conversion Date”).  The term “Conversion
      Amount” means, with respect to any conversion of this Note, the sum of
      (1) the principal amount of this Note to be converted in such conversion
plus (2) accrued and unpaid interest, if any, on such principal amount
      at
      the interest rates provided in this Note to the Conversion Date, provided,
      however, that the Company shall have the right to pay any or all interest in
      cash plus (3) Default Interest, if any, on the amounts referred to in the
      immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s
      option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
      hereof or pursuant to Section 2(c) of that certain Registration Rights
      Agreement, dated as of November 14, 2007, executed in connection with the
      initial issuance of this Note and the other Notes issued on the Issue Date
      (the
“Registration Rights Agreement”).  The term
“Determination Date” means the last business day of each month
      after the Issue Date.

     

    1.2  Conversion
      Price.

     

    (a)  Calculation
      of Conversion Price.  The Conversion
      Price shall be the Variable Conversion Price (as defined herein) (subject,
      in
      each case, to equitable adjustments for stock splits, stock dividends or rights
      offerings by the Borrower relating to the Borrower’s securities or the
      securities of any subsidiary of the Borrower, combinations, recapitalization,
      reclassifications, extraordinary distributions and similar
      events).  The “Variable Conversion Price” shall mean
      the Applicable Percentage (as defined herein) multiplied by the Market Price
      (as
      defined herein).  “Market Price” means the average of
      the lowest three (3) Trading Prices (as defined below) for the Common Stock
      during the twenty (20) Trading Day period ending one Trading Day prior to the
      date the Conversion Notice is sent by the Holder to the Borrower via facsimile
      (the “Conversion Date”).  “Trading
      Price” means, for any security as of any date, the intraday trading
      price on the Over-the-Counter Bulletin Board (the “OTCBB”) as
      reported by a reliable reporting service (“Reporting Service”)
      mutually acceptable to Borrower and Holder and hereafter designated by Holders
      of a majority in interest of the Notes and the Borrower or, if the OTCBB is
      not
      the principal trading market for such security, the intraday trading price
      of
      such security on the principal securities exchange or trading market where
      such
      security is listed or traded or, if no intraday trading price of such security
      is available in any of the foregoing manners, the average of the intraday
      trading prices of any market makers for such security that are listed in the
      “pink sheets” by the National Quotation Bureau, Inc.  If the Trading
      Price cannot be calculated for such security on such date in the manner provided
      above, the Trading Price shall be the fair market value as mutually determined
      by the Borrower and the holders of a majority in interest of the Notes being
      converted for which the calculation of the Trading Price is required in order
      to
      determine the Conversion Price of such Notes.  “Trading
      Day” shall mean any day on which the Common Stock is traded for any
      period on the OTCBB, or on the principal securities exchange or other securities
      market on which the Common Stock is then being
      traded.  “Applicable Percentage” shall mean
      40.0%.

     

    (b)  Conversion
      Price During Major
      Announcements.  Notwithstanding anything
      contained in Section 1.2(a) to the contrary, in the event the Borrower (i)
      makes
      a public announcement that it intends to consolidate or merge with any other
      corporation (other than a merger in which the Borrower is the surviving or
      continuing corporation and its capital stock is unchanged) or sell or transfer
      all or substantially all of the assets of the Borrower or (ii) any person,
      group
      or entity (including the Borrower) publicly announces a tender offer to purchase
      50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the
      date of the announcement referred to in clause (i) or (ii) is hereinafter
      referred to as the  “Announcement Date”), then the
      Conversion Price shall, effective upon the Announcement Date and continuing
      through the Adjusted Conversion Price Termination Date (as defined below),
      be
      equal to the lower of (x) the Conversion Price which would have been applicable
      for a Conversion occurring on the Announcement Date and (y) the Conversion
      Price
      that would otherwise be in effect. From and after the Adjusted Conversion Price
      Termination Date, the Conversion Price shall be determined as set forth in
      this
      Section 1.2(a).  For purposes hereof,  “Adjusted
      Conversion Price Termination Date” shall mean, with respect to any
      proposed transaction or tender offer (or takeover scheme) for which a public
      announcement as contemplated by this Section 1.2(b) has been made, the date
      upon
      which the Borrower (in the case of clause (i) above) or the person, group or
      entity (in the case of clause (ii) above) consummates or publicly announces
      the
      termination or abandonment of the proposed transaction or tender offer (or
      takeover scheme) which caused this Section 1.2(b) to become
      operative.

     

    1.3  Authorized
      Shares.  Subject to Stockholder Approval
      (as such term is defined in Section 4(n) of the Securities Purchase Agreement),
      the Borrower covenants that during the period the conversion right exists,
      the
      Borrower will reserve from its authorized and unissued Common Stock a sufficient
      number of shares, free from preemptive rights, to provide for the issuance
      of
      Common Stock upon the full conversion of this Note and the other Notes issued
      pursuant to the Purchase Agreement.  The Borrower is required at all
      times to have authorized and reserved two times the number of shares that is
      actually issuable upon full conversion of the Notes (based on the Conversion
      Price of the Notes or the Exercise Price of the Warrants in effect from time
      to
      time) (the “Reserved Amount”).  The Reserved Amount
      shall be increased from time to time in accordance with the Borrower’s
      obligations pursuant to Section 4(h) of the Purchase Agreement.  The
      Borrower represents that upon issuance, such shares will be duly and validly
      issued, fully paid and non-assessable.  In addition, if the Borrower
      shall issue any securities or make any change to its capital structure which
      would change the number of shares of Common Stock into which the Notes shall
      be
      convertible at the then current Conversion Price, the Borrower shall at the
      same
      time make proper provision so that thereafter there shall be a sufficient number
      of shares of Common Stock authorized and reserved, free from preemptive rights,
      for conversion of the outstanding Notes.  The Borrower (i)
      acknowledges that it has irrevocably instructed its transfer agent to issue
      certificates for the Common Stock issuable upon conversion of this Note, and
      (ii) agrees that its issuance of this Note shall constitute full authority
      to its officers and agents who are charged with the duty of executing stock
      certificates to execute and issue the necessary certificates for shares of
      Common Stock in accordance with the terms and conditions of this
      Note.

     

    If,
      at
      any time a Holder of this Note submits a Notice of Conversion, and the Borrower
      does not have sufficient authorized but unissued shares of Common Stock
      available to effect such conversion in accordance with the provisions of this
      Article I (a “Conversion Default”), subject to Section 4.8, the
      Borrower shall issue to the Holder all of the shares of Common Stock which
      are
      then available to effect such conversion.  The portion of this Note
      which the Holder included in its Conversion Notice and which exceeds the amount
      which is then convertible into available shares of Common Stock (the
“Excess Amount”) shall, notwithstanding anything to the
      contrary contained herein, not be convertible into Common Stock in accordance
      with the terms hereof until (and at the Holder’s option at any time after) the
      date additional shares of Common Stock are authorized by the Borrower to permit
      such conversion, at which time the Conversion Price in respect thereof shall
      be
      the lesser of (i) the Conversion Price on the Conversion Default Date (as
      defined below) and (ii) the Conversion Price on the Conversion Date thereafter
      elected by the Holder in respect thereof.  In addition, the Borrower
      shall pay to the Holder payments (“Conversion Default
      Payments”) for a Conversion Default in the amount of (x) the sum
      of (1) the then outstanding principal amount of this Note plus (2)
      accrued and unpaid interest on the unpaid principal amount of this Note through
      the Authorization Date (as defined below) plus (3) Default Interest, if
      any, on the amounts referred to in clauses (1) and/or (2), multiplied by
      (y) .24, multiplied by (z) (N/365), where N = the number of days from the
      day the holder submits a Notice of Conversion giving rise to a Conversion
      Default (the “Conversion Default Date”) to the date (the
“Authorization Date”) that the Borrower authorizes a sufficient
      number of shares of Common Stock to effect conversion of the full outstanding
      principal balance of this Note.  The Borrower shall use its best
      efforts to authorize a sufficient number of shares of Common Stock as soon
      as
      practicable following the earlier of (i) such time that the Holder notifies
      the
      Borrower or that the Borrower otherwise becomes aware that there are or likely
      will be insufficient authorized and unissued shares to allow full conversion
      thereof and (ii) a Conversion Default.  The Borrower shall send notice
      to the Holder of the authorization of additional shares of Common Stock, the
      Authorization Date and the amount of Holder’s accrued Conversion Default
      Payments.  The accrued Conversion Default Payments for each calendar
      month shall be paid in cash or shall be convertible into Common Stock (at such
      time as there are sufficient authorized shares of Common Stock) at the
      applicable Conversion Price, at the Borrower’s option, as follows:

     

    (a)  In
      the
      event Holder elects to take such payment in cash, cash payment shall be made
      to
      Holder by the fifth (5th) day of
      the month
      following the month in which it has accrued; and

     

    (b)  In
      the
      event Holder elects to take such payment in Common Stock, the Holder may convert
      such payment amount into Common Stock at the Conversion Price (as in effect
      at
      the time of conversion) at any time after the fifth day of the month following
      the month in which it has accrued in accordance with the terms of this Article
      I
      (so long as there is then a sufficient number of authorized shares of Common
      Stock).

     

    The
      Holder’s election shall be made in writing to the Borrower at any time prior to
      6:00 p.m., New York, New York time, on the third day of the month following
      the
      month in which Conversion Default payments have accrued.  If no
      election is made, the Holder shall be deemed to have elected to receive
      cash.  Nothing herein shall limit the Holder’s right to pursue actual
      damages (to the extent in excess of the Conversion Default Payments) for the
      Borrower’s failure to maintain a sufficient number of authorized shares of
      Common Stock, and each holder shall have the right to pursue all remedies
      available at law or in equity (including degree of specific performance and/or
      injunctive relief).

     

    1.4  Method
      of Conversion.

     

    (a)  Mechanics
      of Conversion.  Subject to Section 1.1,
      this Note may be converted by the Holder in whole or in part at any time from
      time to time after the Issue Date, by (A) submitting to the Borrower a
      Notice of Conversion (by facsimile or other reasonable means of communication
      dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time)
      and (B) subject to Section 1.4(b), surrendering this Note at the principal
      office of the Borrower.

     

    (b)  Surrender
      of Note Upon
      Conversion.  Notwithstanding anything to
      the contrary set forth herein, upon conversion of this Note in accordance with
      the terms hereof, the Holder shall not be required to physically surrender
      this
      Note to the Borrower unless the entire unpaid principal amount of this Note
      is
      so converted.  The Holder and the Borrower shall maintain records
      showing the principal amount so converted and the dates of such conversions
      or
      shall use such other method, reasonably satisfactory to the Holder and the
      Borrower, so as not to require physical surrender of this Note upon each such
      conversion.  In the event of any dispute or discrepancy, such records
      of the Borrower shall be controlling and determinative in the absence of
      manifest error.  Notwithstanding the foregoing, if any portion of this
      Note is converted as aforesaid, the Holder may not transfer this Note unless
      the
      Holder first physically surrenders this Note to the Borrower, whereupon the
      Borrower will forthwith issue and deliver upon the order of the Holder a new
      Note of like tenor, registered as the Holder (upon payment by the Holder of
      any
      applicable transfer taxes) may request, representing in the aggregate the
      remaining unpaid principal amount of this Note.  The Holder and any
      assignee, by acceptance of this Note, acknowledge and agree that, by reason
      of
      the provisions of this paragraph, following conversion of a portion of this
      Note, the unpaid and unconverted principal amount of this Note represented
      by
      this Note may be less than the amount stated on the face hereof.

     

    (c)  Payment
      of Taxes.  The Borrower shall not be
      required to pay any tax which may be payable in respect of any transfer involved
      in the issue and delivery of shares of Common Stock or other securities or
      property on conversion of this Note in a name other than that of the Holder
      (or
      in street name), and the Borrower shall not be required to issue or deliver
      any
      such shares or other securities or property unless and until the person or
      persons (other than the Holder or the custodian in whose street name such shares
      are to be held for the Holder’s account) requesting the issuance thereof shall
      have paid to the Borrower the amount of any such tax or shall have established
      to the satisfaction of the Borrower that such tax has been paid.

     

    (d)  Delivery
      of Common Stock Upon Conversion.  Upon
      receipt by the Borrower from the Holder of a facsimile transmission (or other
      reasonable means of communication) of a Notice of Conversion meeting the
      requirements for conversion as provided in this Section 1.4, the Borrower shall
      issue and deliver or cause to be issued and delivered to or upon the order
      of
      the Holder certificates for the Common Stock issuable upon such conversion
      within three (3) business days after such receipt (and, solely in the case
      of
      conversion of the entire unpaid principal amount hereof, surrender of this
      Note)
      (such third business day being hereinafter referred to as the
“Deadline”) in accordance with the terms hereof and the
      Purchase Agreement (including, without limitation, in accordance with the
      requirements of Section 2(g) of the Purchase Agreement that certificates for
      shares of Common Stock issued on or after the effective date of the Registration
      Statement upon conversion of this Note shall not bear any restrictive
      legend).

     

    (e)  Obligation
      of Borrower to Deliver Common
      Stock.  Upon receipt by the Borrower of
      a Notice of Conversion, the Holder shall be deemed to be the holder of record
      of
      the Common Stock issuable upon such conversion, the outstanding principal amount
      and the amount of accrued and unpaid interest on this Note shall be reduced
      to
      reflect such conversion, and, unless the Borrower defaults on its obligations
      under this Article I, all rights with respect to the portion of this Note being
      so converted shall forthwith terminate except the right to receive the Common
      Stock or other securities, cash or other assets, as herein provided, on such
      conversion.  If the Holder shall have given a Notice of Conversion as
      provided herein, the Borrower’s obligation to issue and deliver the certificates
      for Common Stock shall be absolute and unconditional, irrespective of the
      absence of any action by the Holder to enforce the same, any waiver or consent
      with respect to any provision thereof, the recovery of any judgment against
      any
      person or any action to enforce the same, any failure or delay in the
      enforcement of any other obligation of the Borrower to the holder of record,
      or
      any setoff, counterclaim, recoupment, limitation or termination, or any breach
      or alleged breach by the Holder of any obligation to the Borrower, and
      irrespective of any other circumstance which might otherwise limit such
      obligation of the Borrower to the Holder in connection with such
      conversion.  The Conversion Date specified in the Notice of Conversion
      shall be the Conversion Date so long as the Notice of Conversion is received
      by
      the Borrower before 6:00 p.m., New York, New York time, on such
      date.

     

    (f)  Delivery
      of Common Stock by Electronic
      Transfer.  In lieu of delivering
      physical certificates representing the Common Stock issuable upon conversion,
      provided the Borrower’s transfer agent is participating in the Depository Trust
      Company (“DTC”) Fast Automated Securities Transfer
      (“FAST”) program, upon request of the Holder and its compliance
      with the provisions contained in Section 1.1 and in this Section 1.4, the
      Borrower shall use its best efforts to cause its transfer agent to
      electronically transmit the Common Stock issuable upon conversion to the Holder
      by crediting the account of Holder’s Prime Broker with DTC through its Deposit
      Withdrawal Agent Commission (“DWAC”) system.

     

    (g)  Failure
      to Deliver Common Stock Prior to
      Deadline.  Without in any way limiting
      the Holder’s right to pursue other remedies, including actual damages and/or
      equitable relief, the parties agree that if delivery of the Common Stock
      issuable upon conversion of this Note is more than two (2) business days after
      the Deadline (other than a failure due to the circumstances described in Section
      1.3 above, which failure shall be governed by such Section) the Borrower shall
      pay to the Holder $2,000 per day in cash, for each day beyond the Deadline
      that
      the Borrower fails to deliver such Common Stock.  Such cash amount
      shall be paid to Holder by the fifth day of the month following the month in
      which it has accrued or, at the option of the Holder (by written notice to
      the
      Borrower by the first day of the month following the month in which it has
      accrued), shall be added to the principal amount of this Note, in which event
      interest shall accrue thereon in accordance with the terms of this Note and
      such
      additional principal amount shall be convertible into Common Stock in accordance
      with the terms of this Note.

     

    1.5  Concerning
      the Shares.  The shares of Common Stock
      issuable upon conversion of this Note may not be sold or transferred
      unless  (i) such shares are sold pursuant to an effective registration
      statement under the Act or (ii) the Borrower or its transfer agent shall have
      been furnished with an opinion of  counsel (which opinion shall be in
      form, substance and scope customary for opinions of counsel in comparable
      transactions) to the effect that the shares to be sold or transferred may be
      sold or transferred pursuant to an exemption from such registration or
      (iii) such shares are sold or transferred pursuant to Rule 144 under the
      Act (or a successor rule) (“Rule 144”) or (iv) such shares are
      transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
      agrees to sell or otherwise transfer the shares only in accordance with this
      Section 1.5 and who is an Accredited Investor (as defined in the Purchase
      Agreement).  Except as otherwise provided in the Purchase Agreement
      (and subject to the removal provisions set forth below), until such time as
      the
      shares of Common Stock issuable upon conversion of this Note have been
      registered under the Act as contemplated by the Registration Rights Agreement
      or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately sold,
      each certificate for shares of Common Stock issuable upon conversion of this
      Note that has not been so included in an effective registration statement or
      that has not been sold pursuant to an effective registration statement or an
      exemption that permits removal of the legend, shall bear a legend substantially
      in the following form, as appropriate:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
      AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144
      OR
      REGULATION S UNDER SAID ACT.”

     

    The
      legend set forth above shall be removed and the Borrower shall issue to the
      Holder a new certificate therefor free of any transfer legend if (i) the
      Borrower or its transfer agent shall have received an opinion of counsel, in
      form, substance and scope customary for opinions of counsel in comparable
      transactions, to the effect that a public sale or transfer of such Common Stock
      may be made without registration under the Act and the shares are so sold or
      transferred, (ii) such Holder provides the Borrower or its transfer agent with
      reasonable assurances that the Common Stock issuable upon conversion of this
      Note (to the extent such securities are deemed to have been acquired on the
      same
      date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
      issuable upon conversion of this Note, such security is registered for sale
      by
      the Holder under an effective registration statement filed under the Act or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately
      sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
      under the Registration Rights Agreement or (ii) affect in any way the Holder’s
      obligations to comply with applicable prospectus delivery requirements upon
      the
      resale of the securities referred to herein.

     

    1.6  Effect
      of Certain Events.

     

    (a)  Effect
      of Merger, Consolidation, Etc.  At the
      option of the Holder, the sale, conveyance or disposition of all or
      substantially all of the assets of the Borrower, the effectuation by the
      Borrower of a transaction or series of related transactions in which more than
      50% of the voting power of the Borrower is disposed of, or the consolidation,
      merger or other business combination of the Borrower with or into any other
      Person (as defined below) or Persons when the Borrower is not the survivor
      shall
      either:  (i) be deemed to be an Event of Default (as defined in
      Article III) pursuant to which the Borrower shall be required to pay to the
      Holder upon the consummation of and as a condition to such transaction an amount
      equal to the Default Amount (as defined in Article III) or (ii) be treated
      pursuant to Section 1.6(b) hereof.  “Person” shall
      mean any individual, corporation, limited liability company, partnership,
      association, trust or other entity or organization.

     

    (b)  Adjustment
      Due to Merger, Consolidation, Etc.  If,
      at any time when this Note is issued and outstanding and prior to conversion
      of
      all of the Notes, there shall be any merger, consolidation, exchange of shares,
      recapitalization, reorganization, or other similar event, as a result of which
      shares of Common Stock of the Borrower shall be changed into the same or a
      different number of shares of another class or classes of stock or securities
      of
      the Borrower or another entity, or in case of any sale or conveyance of all
      or
      substantially all of the assets of the Borrower other than in connection with
      a
      plan of complete liquidation of the Borrower, then the Holder of this Note
      shall
      thereafter have the right to receive upon conversion of this Note, upon the
      basis and upon the terms and conditions specified herein and in lieu of the
      shares of Common Stock immediately theretofore issuable upon conversion, such
      stock, securities or assets which the Holder would have been entitled to receive
      in such transaction had this Note been converted in full immediately prior
      to
      such transaction (without regard to any limitations on conversion set forth
      herein), and in any such case appropriate provisions shall be made with respect
      to the rights and interests of the Holder of this Note to the end that the
      provisions hereof (including, without limitation, provisions for adjustment
      of
      the Conversion Price and of the number of shares issuable upon conversion of
      the
      Note) shall thereafter be applicable, as nearly as may be practicable in
      relation to any securities or assets thereafter deliverable upon the conversion
      hereof.  The Borrower shall not effect any transaction described in
      this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty
      (30) days prior written notice (but in any event at least fifteen (15) days
      prior written notice) of the record date of the special meeting of shareholders
      to approve, or if there is no such record date, the consummation of, such
      merger, consolidation, exchange of shares, recapitalization, reorganization
      or
      other similar event or sale of assets (during which time the Holder shall be
      entitled to convert this Note) and (b) the resulting successor or acquiring
      entity (if not the Borrower) assumes by written instrument the obligations
      of
      this Section 1.6(b).  The above provisions shall similarly apply to
      successive consolidations, mergers, sales, transfers or share
      exchanges.

     

    (c)  Adjustment
      Due to Distribution.  If the Borrower
      shall declare or make any distribution of its assets (or rights to acquire
      its
      assets) to holders of Common Stock as a dividend, stock repurchase, by way
      of
      return of capital or otherwise (including any dividend or distribution to the
      Borrower’s shareholders in cash or shares (or rights to acquire shares) of
      capital stock of a subsidiary (i.e., a spin-off)) (a
“Distribution”), then the Holder of this Note shall be
      entitled, upon any conversion of this Note after the date of record for
      determining shareholders entitled to such Distribution, to receive the amount
      of
      such assets which would have been payable to the Holder with respect to the
      shares of Common Stock issuable upon such conversion had such Holder been the
      holder of such shares of Common Stock on the record date for the determination
      of shareholders entitled to such Distribution.

     

    (d)  Adjustment
      Due to Dilutive Issuance.  If, at any
      time when any Notes are issued and outstanding, the Borrower issues or sells,
      or
      in accordance with this Section 1.6(d) hereof is deemed to have issued or sold,
      any shares of Common Stock for no consideration or for a consideration per
      share
      (before deduction of reasonable expenses or commissions or underwriting
      discounts or allowances in connection therewith) less than the Fixed Conversion
      Price in effect on the date of such issuance (or deemed issuance) of such shares
      of Common Stock (a “Dilutive Issuance”), then immediately upon
      the Dilutive Issuance, the Variable Conversion Price will be reduced to the
      amount of the consideration per share received by the Borrower in such Dilutive
      Issuance; provided that only one adjustment will be made for each
      Dilutive Issuance.

     

    The
      Borrower shall be deemed to have issued or sold shares of Common Stock if the
      Borrower in any manner issues or grants any warrants, rights or options (not
      including employee stock option plans), whether or not immediately exercisable,
      to subscribe for or to purchase Common Stock or other securities convertible
      into or exchangeable for Common Stock (“Convertible
      Securities”) (such warrants, rights and options to purchase Common
      Stock or Convertible Securities are hereinafter referred to as
“Options”) and the price per share for which Common Stock is
      issuable upon the exercise of such Options is less than the Variable Conversion
      Price then in effect, then the Variable Conversion Price shall be equal to
      such
      price per share.  For purposes of the preceding sentence, the “price
      per share for which Common Stock is issuable upon the exercise of such Options”
is determined by dividing (i) the total amount, if any, received or receivable
      by the Borrower as consideration for the issuance or granting of all such
      Options, plus the minimum aggregate amount of additional consideration, if
      any,
      payable to the Borrower upon the exercise of all such Options, plus, in the
      case
      of Convertible Securities issuable upon the exercise of such Options, the
      minimum aggregate amount of additional consideration payable upon the conversion
      or exchange thereof at the time such Convertible Securities first become
      convertible or exchangeable, by (ii) the maximum total number of shares of
      Common Stock issuable upon the exercise of all such Options (assuming full
      conversion of Convertible Securities, if applicable).  No further
      adjustment to the Conversion Price will be made upon the actual issuance of
      such
      Common Stock upon the exercise of such Options or upon the conversion or
      exchange of Convertible Securities issuable upon exercise of such
      Options.

     

    Additionally,
      the Borrower shall be deemed to have issued or sold shares of Common Stock
      if
      the Borrower in any manner issues or sells any Convertible Securities, whether
      or not immediately convertible (other than where the same are issuable upon
      the
      exercise of Options), and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Variable Conversion Price
      then
      in effect, then the Variable Conversion Price shall be equal to such price
      per
      share.  For the purposes of the preceding sentence, the “price per
      share for which Common Stock is issuable upon such conversion or exchange” is
      determined by dividing (i) the total amount, if any, received or receivable
      by
      the Borrower as consideration for the issuance or sale of all such Convertible
      Securities, plus the minimum aggregate amount of additional consideration,
      if
      any, payable to the Borrower upon the conversion or exchange thereof at the
      time
      such Convertible Securities first become convertible or exchangeable, by (ii)
      the maximum total number of shares of Common Stock issuable upon the conversion
      or exchange of all such Convertible Securities.  No further adjustment
      to the Variable Conversion Price will be made upon the actual issuance of such
      Common Stock upon conversion or exchange of such Convertible
      Securities.

     

    (e)  Purchase
      Rights.  If, at any time when any Notes
      are issued and outstanding, the Borrower issues any convertible securities
      or
      rights to purchase stock, warrants, securities or other property (the
“Purchase Rights”) pro rata to the record holders of any class
      of Common Stock, then the Holder of this Note will be entitled to acquire,
      upon
      the terms applicable to such Purchase Rights, the aggregate Purchase Rights
      which such Holder could have acquired if such Holder had held the number of
      shares of Common Stock acquirable upon complete conversion of this Note (without
      regard to any limitations on conversion contained herein) immediately before
      the
      date on which a record is taken for the grant, issuance or sale of such Purchase
      Rights or, if no such record is taken, the date as of which the record holders
      of Common Stock are to be determined for the grant, issue or sale of such
      Purchase Rights.

     

    (f)  Notice
      of Adjustments.  Upon the occurrence of
      each adjustment or readjustment of the Conversion Price as a result of the
      events described in this Section 1.6, the Borrower, at its expense, shall
      promptly compute such adjustment or readjustment and prepare and furnish to
      the
      Holder of a certificate setting forth such adjustment or readjustment and
      showing in detail the facts upon which such adjustment or readjustment is
      based.  The Borrower shall, upon the written request at any time of
      the Holder, furnish to such Holder a like certificate setting forth (i) such
      adjustment or readjustment, (ii) the Conversion Price at the time in effect
      and
      (iii) the number of shares of Common Stock and the amount, if any, of other
      securities or property which at the time would be received upon conversion
      of
      the Note.

     

    1.7  Trading
      Market Limitations. Unless permitted by the
      applicable rules and regulations of the principal securities market on which
      the
      Common Stock is then listed or traded, in no event shall the Borrower issue
      upon
      conversion of or otherwise pursuant to this Note and the other Notes issued
      pursuant to the Purchase Agreement more than the maximum number of shares of
      Common Stock that the Borrower can issue pursuant to any rule of the principal
      United States securities market on which the Common Stock is then traded (the
      “Maximum Share Amount”), which shall be 19.99% of the total
      shares outstanding on the Closing Date (as defined in the Purchase Agreement),
      subject to equitable adjustment from time to time for stock splits, stock
      dividends, combinations, capital reorganizations and similar events relating
      to
      the Common Stock occurring after the date hereof.  Once the Maximum
      Share Amount has been issued (the date of which is hereinafter referred to
      as
      the “Maximum Conversion Date”), if the Borrower fails to
      eliminate any prohibitions under applicable law or the rules or regulations
      of
      any stock exchange, interdealer quotation system or other self-regulatory
      organization with jurisdiction over the Borrower or any of its securities on
      the
      Borrower’s ability to issue shares of Common Stock in excess of the Maximum
      Share Amount (a “Trading Market Prepayment Event”), in lieu of
      any further right to convert this Note, and in full satisfaction of the
      Borrower’s obligations under this Note, the Borrower shall pay to the Holder,
      within fifteen (15) business days of the Maximum Conversion Date (the
“Trading Market Prepayment Date”), an amount equal to 130%
times the sum of (a) the then outstanding principal amount
      of this
      Note immediately following the Maximum Conversion Date, plus (b) accrued
      and unpaid interest on the unpaid principal amount of this Note to the Trading
      Market Prepayment Date, plus (c) Default Interest, if any, on the amounts
      referred to in clause (a) and/or (b) above, plus (d) any optional amounts
      that may be added thereto at the Maximum Conversion Date by the Holder in
      accordance with the terms hereof (the then outstanding principal amount of
      this
      Note immediately following the Maximum Conversion Date, plus the amounts
      referred to in clauses (b), (c) and (d) above shall collectively be referred
      to
      as the “Remaining Convertible Amount”).  With respect
      to each Holder of Notes, the Maximum Share Amount shall refer to such Holder’s
prorata share thereof determined in accordance with Section 4.8
      below.  In the event that the sum of (x) the aggregate number of
      shares of Common Stock issued upon conversion of this Note and the other Notes
      issued pursuant to the Purchase Agreement plus (y) the aggregate number
      of shares of Common Stock that remain issuable upon conversion of this Note
      and
      the other Notes issued pursuant to the Purchase Agreement, represents at least
      one hundred percent (100%) of the Maximum Share Amount (the “Triggering
      Event”), the Borrower will use its best efforts to seek and obtain
      Shareholder Approval (or obtain such other relief as will allow conversions
      hereunder in excess of the Maximum Share Amount) as soon as practicable
      following the Triggering Event and before the Maximum Conversion
      Date.  As used herein, “Shareholder Approval” means
      approval by the shareholders of the Borrower to authorize the issuance of the
      full number of shares of Common Stock which would be issuable upon full
      conversion of the then outstanding Notes but for the Maximum Share
      Amount.

     

    1.8  Status
      as Shareholder.  Upon submission of a
      Notice of Conversion by a Holder, (i) the shares covered thereby (other than
      the
      shares, if any, which cannot be issued because their issuance would exceed
      such
      Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall
      be deemed converted into shares of Common Stock and (ii) the Holder’s rights as
      a Holder of such converted portion of this Note shall cease and terminate,
      excepting only the right to receive certificates for such shares of Common
      Stock
      and to any remedies provided herein or otherwise available at law or in equity
      to such Holder because of a failure by the Borrower to comply with the
      terms  of this Note.  Notwithstanding the foregoing, if a
      Holder has not received certificates for all shares of Common Stock prior to
      the
      tenth (10th) business day after the expiration of the Deadline with respect
      to a
      conversion of any portion of this Note for any reason, then (unless the Holder
      otherwise elects to retain its status as a holder of Common Stock by so
      notifying the Borrower) the Holder shall regain the rights of a Holder of this
      Note with respect to such unconverted portions of this Note and the Borrower
      shall, as soon as practicable, return such unconverted Note to the Holder or,
      if
      the Note has not been surrendered, adjust its records to reflect that such
      portion of this Note has not been converted.  In all cases, the Holder
      shall retain all of its rights and remedies (including, without limitation,
      (i)
      the right to receive Conversion Default Payments pursuant to Section 1.3 to
      the
      extent required thereby for such Conversion Default and any subsequent
      Conversion Default and (ii) the right to have the Conversion Price with respect
      to subsequent conversions determined in accordance with Section 1.3) for the
      Borrower’s failure to convert this Note.

     

     

    ARTICLE
      II.     CERTAIN COVENANTS

     

    2.1  Distributions
      on Capital Stock.  So long as the
      Borrower shall have any obligation under this Note, the Borrower shall not
      without the Holder’s written consent (a) pay, declare or set apart for such
      payment, any dividend or other distribution (whether in cash, property or other
      securities) on shares of capital stock other than dividends on shares of Common
      Stock solely in the form of additional shares of Common Stock or (b) directly
      or
      indirectly or through any subsidiary make any other payment or distribution
      in
      respect of its capital stock except for distributions pursuant to any
      shareholders’ rights plan which is approved by a majority of the Borrower’s
      disinterested directors.

     

    2.2  Restriction
      on Stock Repurchases.  So long as the
      Borrower shall have any obligation under this Note, the Borrower shall not
      without the Holder’s written consent redeem, repurchase or otherwise acquire
      (whether for cash or in exchange for property or other securities or otherwise)
      in any one transaction or series of related transactions any shares of capital
      stock of the Borrower or any warrants, rights or options to purchase or acquire
      any such shares.

     

    2.3  Borrowings.  So
      long as the Borrower shall have any obligation under this Note, the Borrower
      shall not, without the Holder’s written consent, create, incur, assume or suffer
      to exist any liability for borrowed money, except (a) borrowings in existence
      or
      committed on the date hereof and of which the Borrower has informed Holder
      in
      writing prior to the date hereof, (b) indebtedness to trade creditors or
      financial institutions incurred in the ordinary course of business or (c)
      borrowings, the proceeds of which shall be used to repay this Note.

     

    2.4  Sale
      of Assets.  So long as the Borrower
      shall have any obligation under this Note, the Borrower shall not, without
      the
      Holder’s written consent, sell, lease or otherwise dispose of any significant
      portion of its assets outside the ordinary course of business.  Any
      consent to the disposition of any assets may be conditioned on a specified
      use
      of the proceeds of disposition.

     

    2.5  Advances
      and Loans.  So long as the Borrower
      shall have any obligation under this Note, the Borrower shall not, without
      the
      Holder’s written consent, lend money, give credit or make advances to any
      person, firm, joint venture or corporation, including, without limitation,
      officers, directors, employees, subsidiaries and affiliates of the Borrower,
      except loans, credits or advances (a) in existence or committed on the date
      hereof and which the Borrower has informed Holder in writing prior to the date
      hereof, (b) made in the ordinary course of business or (c) not in excess of
      $50,000.

     

    2.6  Contingent
      Liabilities.  So long as the Borrower
      shall have any obligation under this Note, the Borrower shall not, without
      the
      Holder’s written consent, which shall not be unreasonably withheld, assume,
      guarantee, endorse, contingently agree to purchase or otherwise become liable
      upon the obligation of any person, firm, partnership, joint venture or
      corporation, except by the endorsement of negotiable instruments for deposit
      or
      collection and except assumptions, guarantees, endorsements and contingencies
      (a) in existence or committed on the date hereof and which the Borrower has
      informed Holder in writing prior to the date hereof, and (b) similar
      transactions in the ordinary course of business.

     

     

    ARTICLE
      III.     EVENTS OF DEFAULT

     

    If
      any of
      the following events of default (each, an “Event of Default”)
      shall occur:

     

    3.1  Failure
      to Pay Principal or Interest.  The
      Borrower fails to pay the principal hereof or interest thereon when due on
      this
      Note, whether at maturity, upon a Trading Market Prepayment Event pursuant
      to
      Section 1.7, upon acceleration or otherwise;

     

    3.2  Conversion
      and the Shares.  The Borrower fails to
      issue shares of Common Stock to the Holder (or announces or threatens that
      it
      will not honor its obligation to do so) upon exercise by the Holder of the
      conversion rights of the Holder in accordance with the terms of this Note (for
      a
      period of at least sixty (60) days, if such failure is solely as a result of
      the
      circumstances governed by Section 1.3 and the Borrower is using its best efforts
      to authorize a sufficient number of shares of Common Stock as soon as
      practicable), fails to transfer or cause its transfer agent to transfer
      (electronically or in certificated form) any certificate for shares of Common
      Stock issued to the Holder upon conversion of or otherwise pursuant to this
      Note
      as and when required by this Note or the Registration Rights Agreement, or
      fails
      to remove any restrictive legend (or to withdraw any stop transfer instructions
      in respect thereof) on any certificate for any shares of Common Stock issued
      to
      the Holder upon conversion of or otherwise pursuant to this Note as and when
      required by this Note or the Registration Rights Agreement (or makes any
      announcement, statement or threat that it does not intend to honor the
      obligations described in this paragraph) and any such failure shall continue
      uncured (or any announcement, statement or threat not to honor its obligations
      shall not be rescinded in writing) for ten (10) days after the Borrower shall
      have been notified thereof in writing by the Holder;

     

    3.3  Failure
      to Timely File Registration or Effect
      Registration.Failure to Timely File
      Registration or Effect
      Registration.  The Borrower fails to
      file the Registration Statement within thirty (30) days following an Investor
      Demand (as set forth in the Registration Rights Agreement) or obtain
      effectiveness with the Securities and Exchange Commission of the Registration
      Statement within one hundred twenty (120) days following the Investor Demand
      (as
      defined in the Registration Rights Agreement) or such Registration Statement
      lapses in effect (or sales cannot otherwise be made thereunder effective,
      whether by reason of the Borrower’s failure to amend or supplement the
      prospectus included therein in accordance with the Registration Rights Agreement
      or otherwise) for more than twenty (20) consecutive days or forty (40) days
      in
      any twelve month period after the Registration Statement becomes
      effective;

     

    3.4  Breach
      of Covenants.  The Borrower breaches any
      material covenant or other material term or condition contained in Sections
      1.3,
      1.6 or 1.7 of this Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the
      Purchase Agreement and such breach continues for a period of ten (10) days
      after
      written notice thereof to the Borrower from the Holder;

     

    3.5  Breach
      of Representations and Warranties.  Any
      representation or warranty of the Borrower made herein or in any agreement,
      statement or certificate given in writing pursuant hereto or in connection
      herewith (including, without limitation, the Purchase Agreement and the
      Registration Rights Agreement), shall be false or misleading in any material
      respect when made and the breach of which has (or with the passage of time
      will
      have) a material adverse effect on the rights of the Holder with respect to
      this
      Note, the Purchase Agreement or the Registration Rights Agreement;

     

    3.6  Receiver
      or Trustee.  The Borrower or any
      subsidiary of the Borrower shall make an assignment for the benefit of
      creditors, or apply for or consent to the appointment of a receiver or trustee
      for it or for a substantial part of its property or business, or such a receiver
      or trustee shall otherwise be appointed;

     

    3.7  Judgments.  Any
      money judgment, writ or similar process shall be entered or filed against the
      Borrower or any subsidiary of the Borrower or any of its property or other
      assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
      for a period of twenty (20) days unless otherwise consented to by the Holder,
      which consent will not be unreasonably withheld;

     

    3.8  Bankruptcy.  Bankruptcy,
      insolvency, reorganization or liquidation proceedings or other proceedings
      for
      relief under any bankruptcy law or any law for the relief of debtors shall
      be
      instituted by or against the Borrower or any subsidiary of the Borrower, unless
      such proceeding shall be stayed within thirty (30) days;

     

    3.9  Delisting
      of Common Stock.  The Borrower shall
      fail to maintain the listing of the Common Stock on at least one of the OTCBB
      or
      an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq
      SmallCap Market, the New York Stock Exchange, or the American Stock Exchange;
      or

     

    3.10  Default
      Under Other Notes.  An Event of Default
      has occurred and is continuing under any of the other Notes issued pursuant
      to
      the Purchase Agreement,

     

    then,
      upon the occurrence and during the continuation of any Event of Default
      specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
      of the Holders of a majority of the aggregate principal amount of the
      outstanding Notes issued pursuant to the Purchase Agreement exercisable through
      the delivery of written notice to the Borrower by such Holders (the
“Default Notice”), and upon the occurrence of an Event of
      Default specified in Section 3.6 or 3.8 (unless, under Section 3.8, such
      proceeding shall be stayed within 30 days), the Notes shall become immediately
      due and payable and the Borrower shall pay to the Holder, in full satisfaction
      of its obligations hereunder, an amount equal to the greater of (i) 130%
times the sum of (w) the then outstanding principal amount of this
      Note plus (x) accrued and unpaid interest on the unpaid principal amount
      of this Note to the date of payment (the “Mandatory Prepayment
      Date”) plus (y) Default Interest, if any, on the amounts
      referred to in clauses (w) and/or (x) plus (z) any amounts owed to the
      Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c)
      of
      the Registration Rights Agreement (the then outstanding principal amount of
      this
      Note to the date of payment plus the amounts referred to in clauses (x),
      (y) and (z) shall collectively be known as the “Default Sum”)
      or (ii) the “parity value” of the Default Sum to be prepaid, where parity value
      means (a) the highest number of shares of Common Stock issuable upon conversion
      of or otherwise pursuant to such Default Sum in accordance with Article I,
      treating the Trading Day immediately preceding the Mandatory Prepayment Date
      as
      the “Conversion Date” for purposes of determining the lowest applicable
      Conversion Price, unless the Default Event arises as a result of a breach in
      respect of a specific Conversion Date in which case such Conversion Date shall
      be the Conversion Date), multiplied by (b) the highest Closing Price for
      the Common Stock during the period beginning on the date of first occurrence
      of
      the Event of Default and ending one day prior to the Mandatory Prepayment Date
      (the “Default Amount”) and all other amounts payable hereunder
      shall immediately become due and payable, all without demand, presentment or
      notice, all of which hereby are expressly waived, together with all costs,
      including, without limitation, legal fees and expenses, of collection, and
      the
      Holder shall be entitled to exercise all other rights and remedies available
      at
      law or in equity.  If the Borrower fails to pay the Default Amount
      within five (5) business days of written notice that such amount is due and
      payable, then the Holder shall have the right at any time, so long as the
      Borrower remains in default (and so long and to the extent that there are
      sufficient authorized shares), to require the Borrower, upon written notice,
      to
      immediately issue, in lieu of the Default Amount, the number of shares of Common
      Stock of the Borrower equal to the Default Amount divided by the Conversion
      Price then in effect.

     

     

    ARTICLE
      IV.    MISCELLANEOUS

     

    4.1  Failure
      or Indulgence Not Waiver.  No failure or
      delay on the part of the Holder in the exercise of any power, right or privilege
      hereunder shall operate as a waiver thereof, nor shall any single or partial
      exercise of any such power, right or privilege preclude other or further
      exercise thereof or of any other right, power or privileges.  All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    4.2  Notices.  Any
      notice herein required or permitted to be given shall be in writing and may
      be
      personally served or delivered by courier or sent by United States mail and
      shall be deemed to have been given upon receipt if personally served (which
      shall include telephone line facsimile transmission) or sent by courier or
      three
      (3) days after being deposited in the United States mail, certified, with
      postage pre-paid and properly addressed, if sent by mail.  For the
      purposes hereof, the address of the Holder shall be as shown on the records
      of
      the Borrower; and the address of the Borrower shall be 65 Dan Road, Canton,
      MA
      02021, facsimile number: (781) 821-4458.  Both
      the Holder and the Borrower may change the address for service by service of
      written notice to the other as herein provided.

     

    4.3  Amendments.  This
      Note and any provision hereof may only be amended by an instrument in writing
      signed by the Borrower and the Holder.  The term “Note” and all
      reference thereto, as used throughout this instrument, shall mean this
      instrument (and the other Notes issued pursuant to the Purchase Agreement)
      as
      originally executed, or if later amended or supplemented, then as so amended
      or
      supplemented.

     

    4.4  Assignability.  This
      Note shall be binding upon the Borrower and its successors and assigns, and
      shall inure to be the benefit of the Holder and its successors and
      assigns.  Each transferee of this Note must be an “accredited
      investor” (as defined in Rule 501(a) of the 1933
      Act).  Notwithstanding anything in this Note to the contrary, this
      Note may be pledged as collateral in connection with a bonafide
      margin account or other lending arrangement.

     

    4.5  Cost
      of Collection.  If default is made in
      the payment of this Note, the Borrower shall pay the Holder hereof costs of
      collection, including reasonable attorneys’ fees.

     

    4.6  Governing
      Law.  THIS NOTE SHALL BE ENFORCED,
      GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
      APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
      WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE BORROWER
      HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
      LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
      NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE
      OF AN
      INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
      PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
      PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
      SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    4.7  Certain
      Amounts.  Whenever pursuant to this Note
      the Borrower is required to pay an amount in excess of the outstanding principal
      amount (or the portion thereof required to be paid at that time) plus accrued
      and unpaid interest plus Default Interest on such interest, the Borrower and
      the
      Holder agree that the actual damages to the Holder from the receipt of cash
      payment on this Note may be difficult to determine and the amount to be so
      paid
      by the Borrower represents stipulated damages and not a penalty and is intended
      to compensate the Holder in part for loss of the opportunity to convert this
      Note and to earn a return from the sale of shares of Common Stock acquired
      upon
      conversion of this Note at a price in excess of the price paid for such shares
      pursuant to this Note.  The Borrower and the Holder hereby agree that
      such amount of stipulated damages is not plainly disproportionate to the
      possible loss to the Holder from the receipt of a cash payment without the
      opportunity to convert this Note into shares of Common Stock.

     

    4.8  Allocations
      of Maximum Share Amount and Reserved
      Amount.  The Maximum Share Amount and
      Reserved Amount shall be allocated pro rata among the Holders of Notes based
      on
      the principal amount of such Notes issued to each Holder.  Each
      increase to the Maximum Share Amount and Reserved Amount shall be allocated
      pro
      rata among the Holders of Notes based on the principal amount of such Notes
      held
      by each Holder at the time of the increase in the Maximum Share Amount or
      Reserved Amount.  In the event a Holder shall sell or otherwise
      transfer any of such Holder’s Notes, each transferee shall be allocated a pro
      rata portion of such transferor’s Maximum Share Amount and Reserved
      Amount.  Any portion of the Maximum Share Amount or Reserved Amount
      which remains allocated to any person or entity which does not hold any Notes
      shall be allocated to the remaining Holders of Notes, pro rata based on the
      principal amount of such Notes then held by such Holders.

     

    4.9  Damages
      Shares.  The shares of Common Stock that
      may be issuable to the Holder pursuant to Sections 1.3 and 1.4(g) hereof and
      pursuant to Section 2(c) of the Registration Rights Agreement (“Damages
      Shares”) shall be treated as Common Stock issuable upon conversion of
      this Note for all purposes hereof and shall be subject to all of the limitations
      and afforded all of the rights of the other shares of Common Stock issuable
      hereunder, including without limitation, the right to be included in the
      Registration Statement filed pursuant to the Registration Rights
      Agreement.  For purposes of calculating interest payable on the
      outstanding principal amount hereof, except as otherwise provided herein,
      amounts convertible into Damages Shares (“Damages Amounts”)
      shall not bear interest but must be converted prior to the conversion of any
      outstanding principal amount hereof, until the outstanding Damages Amounts
      is
      zero.

     

    4.10  Denominations.  At
      the request of the Holder, upon surrender of this Note, the Borrower shall
      promptly issue new Notes in the aggregate outstanding principal amount hereof,
      in the form hereof, in such denominations of at least $50,000 as the Holder
      shall request.

     

    4.11  Purchase
      Agreement.  By its acceptance of this
      Note, each Holder agrees to be bound by the applicable terms of the Purchase
      Agreement.

     

    4.12  Notice
      of Corporate Events.  Except as
      otherwise provided below, the Holder of this Note shall have no rights as a
      Holder of Common Stock unless and only to the extent that it converts this
      Note
      into Common Stock.  The Borrower shall provide the Holder with prior
      notification of any meeting of the Borrower’s shareholders (and copies of proxy
      materials and other information sent to shareholders).  In the event
      of any taking by the Borrower of a record of its shareholders for the purpose
      of
      determining shareholders who are entitled to receive payment of any dividend
      or
      other distribution, any right to subscribe for, purchase or otherwise acquire
      (including by way of merger, consolidation, reclassification or
      recapitalization) any share of any class or any other securities or property,
      or
      to receive any other right, or for the purpose of determining shareholders
      who
      are entitled to vote in connection with any proposed sale, lease or conveyance
      of all or substantially all of the assets of the Borrower or any proposed
      liquidation, dissolution or winding up of the Borrower, the Borrower shall
      mail
      a notice to the Holder, at least twenty (20) days prior to the record date
      specified therein (or thirty (30) days prior to the consummation of the
      transaction or event, whichever is earlier), of the date on which any such
      record is to be taken for the purpose of such dividend, distribution, right
      or
      other event, and a brief statement regarding the amount and character of such
      dividend, distribution, right or other event to the extent known at such
      time.  The Borrower shall make a public announcement of any event
      requiring notification to the Holder hereunder substantially simultaneously
      with
      the notification to the Holder in accordance with the terms of this Section
      4.12.

     

    4.13  Remedies.  The
      Borrower acknowledges that a breach by it of its obligations hereunder will
      cause irreparable harm to the Holder, by vitiating the intent and purpose of
      the
      transaction contemplated hereby.  Accordingly, the Borrower
      acknowledges that the remedy at law for a breach of its obligations under this
      Note will be inadequate and agrees, in the event of a breach or threatened
      breach by the Borrower of the provisions of this Note, that the Holder shall
      be
      entitled, in addition to all other available remedies at law or in equity,
      and
      in addition to the penalties assessable herein, to an injunction or injunctions
      restraining, preventing or curing any breach of this Note and to enforce
      specifically the terms and provisions thereof, without the necessity of showing
      economic loss and without any bond or other security being
      required.

     

     

    ARTICLE
      V.    CALL OPTION

     

    5.1  Call
      Option.  Notwithstanding anything to the
      contrary contained in this Article V, so long as (i) no Event of Default or
      Trading Market Prepayment Event shall have occurred and be continuing,
      (ii) the Borrower has a sufficient number of authorized shares of Common
      Stock reserved for issuance upon full conversion of the Notes, then at any
      time
      after the Issue Date, and (iii) the Common Stock is trading at or below
      $.25 per share, the Borrower shall have the right, exercisable on not less
      than
      ten (10) Trading Days prior written notice to the Holders of the Notes (which
      notice may not be sent to the Holders of the Notes until the Borrower is
      permitted to prepay the Notes pursuant to this Section 5.1), to prepay all
      of
      the outstanding Notes in accordance with this Section 5.1.  Any notice
      of prepayment hereunder (an “Optional Prepayment”) shall be
      delivered to the Holders of the Notes at their registered addresses appearing
      on
      the books and records of the Borrower and shall state (1) that the Borrower
      is
      exercising its right to prepay all of the Notes issued on the Issue Date and
      (2)
      the date of prepayment (the “Optional Prepayment
      Notice”).  On the date fixed for prepayment (the
“Optional Prepayment Date”), the Borrower shall make payment of
      the Optional Prepayment Amount (as defined below) to or upon the order of the
      Holders as specified by the Holders in writing to the Borrower at least one
      (1)
      business day prior to the Optional Prepayment Date.  If the Borrower
      exercises its right to prepay the Notes, the Borrower shall make payment to
      the
      holders of an amount in cash (the “Optional Prepayment Amount”)
      equal to either (i) 120% (for prepayments occurring within thirty (30) days
      of the Issue Date), (ii) 125% for prepayments occurring between thirty-one
      (31) and sixty  (60) days of the Issue Date, or (iii) 135% (for
      prepayments occurring after the sixtieth (60th) day following
      the
      Issue Date), multiplied by the sum of (w) the then outstanding principal amount
      of this Note plus (x) accrued and unpaid interest on the unpaid
      principal amount of this Note to the Optional Prepayment Date plus (y)
      Default Interest, if any, on the amounts referred to in clauses (w) and (x)
      plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and
      1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights Agreement
      (the then outstanding principal amount of this Note to the date of payment
      plus the amounts referred to in clauses (x), (y) and (z) shall
      collectively be known as the “Optional Prepayment Sum”).
      Notwithstanding notice of an Optional Prepayment, the Holders shall at all
      times
      prior to the Optional Prepayment Date maintain the right to convert all or
      any
      portion of the Notes in accordance with Article I and any portion of Notes
      so
      converted after receipt of an Optional Prepayment Notice and prior to the
      Optional Prepayment Date set forth in such notice and payment of the aggregate
      Optional Prepayment Amount shall be deducted from the principal amount of Notes
      which are otherwise subject to prepayment pursuant to such notice.  If
      the Borrower delivers an Optional Prepayment Notice and fails to pay the
      Optional Prepayment Amount due to the Holders of the Notes within two (2)
      business days following the Optional Prepayment Date, the Borrower shall forever
      forfeit its right to redeem the Notes pursuant to this Section 5.1.

     

    5.2  Partial
      Call Option.  Notwithstanding anything to the contrary
      contained in this Article V, in the event that the Average Daily Price of the
      Common Stock, as reported by the Reporting Service, for each day of the month
      ending on any Determination Date is below the Initial Market Price, the Borrower
      may, at its option, prepay a portion of the outstanding principal amount of
      the
      Notes equal to 104% of the principal amount hereof divided by thirty-six (36)
      plus one month’s interest.  The term “Initial Market
      Price” means shall mean $.25.

     

    

     

    

     

    

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
      by its duly authorized officer this 14th day of
      November,
      2007.

     

    

    AVITAR
      INC.

    

    

    

    By:           ______________________________

    Peter
      Phildius

    Chief
      Executive Officer

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      A

     

    NOTICE
      OF CONVERSION

     

    (To
      be
      Executed by the Registered Holder

    in
      order
      to Convert the Notes)

     

    The
      undersigned hereby irrevocably elects to convert $__________ principal amount
      of
      the Note (defined below) into shares of common stock, par value $.01 per share
      (“Common Stock”), of Avitar Inc., a Delaware corporation (the
“Borrower”) according to the conditions of the convertible
      Notes of the Borrower dated as of November 14, 2007 (the
“Notes”), as of the date written below.  If
      securities are to be issued in the name of a person other than the undersigned,
      the undersigned will pay all transfer taxes payable with respect thereto and
      is
      delivering herewith such certificates.  No fee will be charged to the
      Holder for any conversion, except for transfer taxes, if any.  A copy
      of each Note is attached hereto (or evidence of loss, theft or destruction
      thereof).

     

    The
      Borrower shall electronically transmit the Common Stock issuable pursuant to
      this Notice of Conversion to the account of the undersigned or its nominee
      with
      DTC through its Deposit Withdrawal Agent Commission system (“DWAC
      Transfer”).

     

    Name
      of
      DTC Prime
      Broker:                                                                                                                     

    Account
      Number:                                                                                                                     

     

    In
      lieu
      of receiving shares of Common Stock issuable pursuant to this Notice of
      Conversion by way of a DWAC Transfer, the undersigned hereby requests that
      the
      Borrower issue a certificate or certificates for the number of shares of Common
      Stock set forth below (which numbers are based on the Holder’s calculation
      attached hereto) in the name(s) specified immediately below or, if additional
      space is necessary, on an attachment hereto:

     

    Name:                                                                                                                     

    Address:                                                                                                                     

     

    The
      undersigned represents and warrants that all offers and sales by the undersigned
      of the securities issuable to the undersigned upon conversion of the Notes
      shall
      be made pursuant to registration of the securities under the Securities Act
      of
      1933, as amended (the “Act”), or pursuant to an exemption from
      registration under the Act.

     

    Date
      of
      Conversion:___________________________

    Applicable
      Conversion Price:____________________

    Number
      of
      Shares of Common Stock to be Issued Pursuant to

    Conversion
      of the Notes:______________

    Signature:___________________________________

    Name:______________________________________

    Address:____________________________________

     

    The
      Borrower shall issue and deliver shares of Common Stock to an overnight courier
      not later than three business days following receipt of the original Note(s)
      to
      be converted, and shall make payments pursuant to the Notes for the number
      of
      business days such issuance and delivery is late.formofwarrant.htm

    EXHIBIT 4.4

     

     

    

     

    THIS
      WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGIS­TERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  EXCEPT
      AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS
      OF
      NOVEMBER 14, 2007, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRA­TION
      STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN
      FORM,
      SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
      TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
      PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.

     

    Right
      to
      Purchase 2,385,000 Shares of Common Stock, par value $.01 per share

     

    STOCK
      PURCHASE WARRANT

     

    THIS
      CERTIFIES THAT, for value received, AJW Partners, LLC or its registered
      assigns, is entitled to purchase from Avitar Inc., a Delaware
      corporation (the “Company”), at any time or from time to time during the period
      specified in Paragraph 2 hereof, 2,385,000 fully paid and nonassessable
      shares of the Company’s Common Stock, par value $.01 per share (the “Common
      Stock”), at an exercise price per share equal to $.01 (the “Exercise
      Price”).  The term “Warrant Shares,” as used herein, refers to the
      shares of Common Stock purchasable hereunder.  The Warrant Shares and
      the Exercise Price are subject to adjustment as provided in Paragraph 4
      hereof.  The term “Warrants” means this Warrant and the other warrants
      issued pursuant to that certain Securities Purchase Agreement, dated November
      14, 2007, by and among the Company and the Buyers listed on the execution page
      thereof (the “Securities Purchase Agreement”).

     

    This
      Warrant is subject to the following terms, provisions, and
      conditions:

     

    1.  Manner
      of Exercise; Issuance of Certificates; Payment for
      Shares.

     

    
      	
                        Subject
                to the
                provisions hereof, this Warrant may be exercised by the holder hereof,
                in
                whole or in part, by the surrender of this Warrant, together with
                a
                completed exercise agreement in the form attached hereto (the “Exercise
                Agreement”), to the Company during normal business hours on any business
                day at the Company’s principal executive offices (or such other office or
                agency of the Company as it may designate by notice to the holder
                hereof),
                and upon (i) payment to the Company in cash, by certified or offi­cial
                bank check or by wire transfer for the account of the Company of
                the
                Exercise Price for the Warrant Shares specified in the Exercise Agreement
                or (ii) if the resale of the Warrant Shares by the holder is not
                then
                registered pursuant to an effective registration statement under
                the
                Securities Act of 1933, as amended (the “Securities Act”), delivery to the
                Company of a written notice of an election to effect a “Cashless Exercise”
                (as defined in Section 11(c) below) for the Warrant Shares specified
                in
                the Exercise Agreement.  The Warrant Shares so purchased shall
                be deemed to be issued to the holder hereof or such holder’s designee, as
                the record owner of such shares, as of the close of business on the
                date
                on which this Warrant shall have been surrendered, the completed
                Exercise
                Agreement shall have been deliv­ered, and payment shall have been made
                for such shares as set forth above.  Certifi­cates for the
                Warrant Shares so purchased, representing the aggregate number of
                shares
                specified in the Exercise Agreement, shall be delivered to the holder
                hereof within a reasonable time, not exceeding five (5) business
                days,
                after this Warrant shall have been so exercised.  The
                certificates so delivered shall be in such denominations as may be
                requested by the holder hereof and shall be registered in the name
                of such
                holder or such other name as shall be designated by such
                holder.  If this Warrant shall have been exercised only in part,
                then, unless this Warrant has expired, the Company shall, at its
                expense,
                at the time of delivery of such certificates, deliver to the holder
                a new
                Warrant representing the number of shares with respect to which this
                Warrant shall not then have been exercised.  In addition to all
                other available remedies at law or in equity, if the Company fails
                to
                deliver certificates for the Warrant Shares within five (5) business
                days
                after this Warrant is exercised, then the Company shall pay to the
                holder
                in cash a penalty (the “Penalty”) equal to 2% of the number of Warrant
                Shares that the holder is entitled to multiplied by the Market Price
                (as
                hereinafter defined) for each day that the Company fails to deliver
                certificates for the Warrant Shares.  For example, if the holder
                is entitled to 100,000 Warrant Shares and the Market Price is $2.00,
                then
                the Company shall pay to the holder $4,000 for each day that the
                Company
                fails to deliver certificates for the Warrant Shares.  The
                Penalty shall be paid to the holder by the fifth day of the month
                following the month in which it has
                accrued.

            

    

     

    Notwithstanding
      anything in this Warrant to the contrary, in no event shall the holder of this
      Warrant be entitled to exercise a number of Warrants (or portions thereof)
      in
      excess of the number of Warrants (or portions thereof) upon exercise of which
      the sum of (i) the number of shares of Common Stock beneficially owned by the
      holder and its affiliates (other than shares of Common Stock which may be deemed
      beneficially owned through the ownership of the unexercised Warrants and the
      unexercised or unconverted portion of any other securities of the Company
      (including the Notes (as defined in the Securities Purchase Agreement)) subject
      to a limitation on conversion or exercise analogous to the limitation contained
      herein) and (ii) the number of shares of Common Stock issuable upon exercise
      of
      the Warrants (or portions thereof) with respect to which the determination
      described herein is being made, would result in beneficial ownership by the
      holder and its affiliates of more than 4.9% of the outstanding shares of Common
      Stock.  For purposes of the immediately preceding sentence, beneficial
      ownership shall be determined in accordance with Section 13(d) of the Securities
      Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
      otherwise provided in clause (i) of the preceding
      sentence.  Notwithstanding anything to the contrary contained herein,
      the limitation on exercise of this Warrant set forth herein may not be amended
      without (i) the written consent of the holder hereof and the Company and (ii)
      the approval of a majority of shareholders of the Company.

     

    2.  Period
      of Exercise.

     

    
      	
                This
                Warrant is exercisable at any time or from time to time on or after
                the
                date on which this Warrant is issued and delivered pursuant to the
                terms
                of the Securities Purchase Agreement and before 6:00 p.m., New York,
                New
                York time on the seventh (7th)
                anniversary
                of the date of issuance (the “Exercise
                Period”).

            

    

     

    3.  Certain
      Agreements of the Company.

     

    
      	
                The
                Company hereby covenants and agrees as
                follows:

            

    

     

    (a)  Shares
      to be Fully Paid.  All Warrant Shares
      will, upon issuance in accordance with the terms of this Warrant, be validly
      issued, fully paid, and nonassessable and free from all taxes, liens, and
      charges with respect to the issue thereof.

     

    (b)  Reservation
      of Shares.  During the Exercise Period,
      the Company shall at all times have authorized, and reserved for the purpose
      of
      issuance upon exercise of this Warrant, a suf­ficient number of shares of
      Common Stock to provide for the exercise of this Warrant.

     

    (c)  Listing.  The
      Company shall promptly secure the listing of the shares of Common Stock issuable
      upon exercise of the Warrant upon each national securities exchange or automated
      quotation system, if any, upon which shares of Common Stock are then listed
      (subject to official notice of issuance upon exercise of this Warrant) and
      shall
      maintain, so long as any other shares of Common Stock shall be so listed, such
      listing of all shares of Common Stock from time to time issuable upon the
      exercise of this Warrant; and the Company shall so list on each national
      securities exchange or automated quotation system, as the case may be, and
      shall
      maintain such listing of, any other shares of capital stock of the Company
      issuable upon the exercise of this Warrant if and so long as any shares of
      the
      same class shall be listed on such national securities exchange or automated
      quotation system.

     

    (d)  Certain
      Actions Prohibited.  The Company will
      not, by amendment of its charter or through any re­organi­zation,
      transfer of assets, consolidation, mer­ger, dissolution, issue or sale of
      securities, or any other voluntary action, avoid or seek to avoid the observance
      or performance of any of the terms to be observed or performed by it hereunder,
      but will at all times in good faith assist in the carrying out of all the
      provisions of this Warrant and in the taking of all such action as may
      reasonably be requested by the holder of this Warrant in order to protect the
      exercise privilege of the holder of this Warrant against dilu­tion or other
      impairment, consistent with the tenor and purpose of this
      Warrant.  Without limiting the general­ity of the foregoing, the
      Company (i) will not increase the par value of any shares of Common Stock
      receivable upon the exercise of this Warrant above the Exercise Price then
      in
      effect, and (ii) will take all such actions as may be necessary or appropriate
      in order that the Company may validly and legally issue fully paid and
      nonassessable shares of Common Stock upon the exercise of this
      Warrant.

     

    (e)  Successors
      and Assigns.  This Warrant will be
      binding upon any entity succeeding to the Company by merger, consolidation,
      or
      acquisition of all or sub­stantially all the Company’s assets.

     

    4.  Antidilution
      Provisions.

     

    During
      the Exercise Period, the Exercise Price and the number of Warrant Shares shall
      be subject to adjustment from time to time as provided in this Paragraph
      4.

     

    In
      the
      event that any adjustment of the Exercise Price as required herein results
      in a
      fraction of a cent, such Exercise Price shall be rounded up to the nearest
      cent.

     

    (a)  Adjustment
      of Exercise Price and Number of Shares upon Issuance of Common
      Stock.  Except as otherwise provided in
      Paragraphs 4(c) and 4(e) hereof, if and whenever on or after the date of
      issuance of this Warrant, the Company issues or sells, or in accordance with
      Paragraph 4(b) hereof is deemed to have issued or sold, any shares of Common
      Stock for no consideration or for a consideration per share (before deduction
      of
      reasonable expenses or commissions or underwriting discounts or allowances
      in
      connection therewith) less than the Market Price on the date of issuance (a
      “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise
      Price will be reduced to a price determined by multiplying the Exercise Price
      in
      effect immediately prior to the Dilutive Issuance by a fraction, (i) the
      numerator of which is an amount equal to the sum of (x) the number of shares
      of
      Common Stock actually outstanding immediately prior to the Dilutive Issuance,
      plus (y) the quotient of the aggregate consideration, calculated as set forth
      in
      Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance
      divided by the Market Price in effect immediately prior to the Dilutive
      Issuance, and (ii) the denominator of which is the total number of shares of
      Common Stock Deemed Outstanding (as defined below) immediately after the
      Dilutive Issuance.

     

    (b)  Effect
      on Exercise Price of Certain
      Events.  For purposes of determining the
      adjusted Exercise Price under Paragraph 4(a) hereof, the following will be
      applicable:

     

    (i)  Issuance
      of Rights or Options.  If the Company in
      any manner issues or grants any warrants, rights or options, whether or not
      immediately exercisable, to subscribe for or to purchase Common Stock or other
      securities convertible into or exchangeable for Common Stock (“Convertible
      Securities”) (such warrants, rights and options to purchase Common Stock or
      Convertible Securities are hereinafter referred to as “Options”) and the price
      per share for which Common Stock is issuable upon the exercise of such Options
      is less than the Market Price on the date of issuance or grant of such Options,
      then the maximum total number of shares of Common Stock issuable upon the
      exercise of all such Options will, as of the date of the issuance or grant
      of
      such Options, be deemed to be outstanding and to have been issued and sold
      by
      the Company for such price per share.  For purposes of the preceding
      sentence, the “price per share for which Common Stock is issuable upon the
      exercise of such Options” is determined by dividing (i) the total amount, if
      any, received or receivable by the Company as consideration for the issuance
      or
      granting of all such Options, plus the minimum aggregate amount of additional
      consideration, if any, payable to the Company upon the exercise of all such
      Options, plus, in the case of Convertible Securities issuable upon the exercise
      of such Options, the minimum aggregate amount of additional consideration
      payable upon the conversion or exchange thereof at the time such Convertible
      Securities first become convertible or exchangeable, by (ii) the maximum total
      number of shares of Common Stock issuable upon the exercise of all such Options
      (assuming full conversion of Convertible Securities, if
      applicable).  No further adjustment to the Exercise Price will be made
      upon the actual issuance of such Common Stock upon the exercise of such Options
      or upon the conversion or exchange of Convertible Securities issuable upon
      exercise of such Options.

     

    (ii)  Issuance
      of Convertible Securities.  If the
      Company in any manner issues or sells any Convertible Securities, whether or
      not
      immediately convertible (other than where the same are issuable upon the
      exercise of Options) and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Market Price on the date
      of
      issuance, then the maximum total number of shares of Common Stock issuable
      upon
      the conversion or exchange of all such Convertible Securities will, as of the
      date of the issuance of such Convertible Securities, be deemed to be outstanding
      and to have been issued and sold by the Company for such price per
      share.  For the purposes of the preceding sentence, the “price per
      share for which Common Stock is issuable upon such conversion or exchange” is
      determined by dividing (i) the total amount, if any, received or receivable
      by
      the Company as consideration for the issuance or sale of all such Convertible
      Securities, plus the minimum aggregate amount of additional consideration,
      if
      any, payable to the Company upon the conversion or exchange thereof at the
      time
      such Convertible Securities first become convertible or exchangeable, by (ii)
      the maximum total number of shares of Common Stock issuable upon the conversion
      or exchange of all such Convertible Securities.  No further adjustment
      to the Exercise Price will be made upon the actual issuance of such Common
      Stock
      upon conversion or exchange of such Convertible Securities.

     

    (iii)  Change
      in Option Price or Conversion Rate.  If
      there is a change at any time in (i) the amount of additional consideration
      payable to the Company upon the exercise of any Options; (ii) the amount of
      additional consideration, if any, payable to the Company upon the conversion
      or
      exchange of any Convertible Securities; or (iii) the rate at which any
      Convertible Securities are convertible into or exchangeable for Common Stock
      (other than under or by reason of provisions designed to protect against
      dilution), the Exercise Price in effect at the time of such change will be
      readjusted to the Exercise Price which would have been in effect at such time
      had such Options or Convertible Securities still outstanding provided for such
      changed additional consideration or changed conversion rate, as the case may
      be,
      at the time initially granted, issued or sold.

     

    (iv)  Treatment
      of Expired Options and Unexercised Convertible
      Securities.  If, in any case, the total
      number of shares of Common Stock issuable upon exercise of any Option or upon
      conversion or exchange of any Convertible Securities is not, in fact, issued
      and
      the rights to exercise such Option or to convert or exchange such Convertible
      Securities shall have expired or terminated, the Exercise Price then in effect
      will be readjusted to the Exercise Price which would have been in effect at
      the
      time of such expiration or termination had such Option or Convertible
      Securities, to the extent outstanding immediately prior to such expiration
      or
      termination (other than in respect of the actual number of shares of Common
      Stock issued upon exercise or conversion thereof), never been
      issued.

     

    (v)  Calculation
      of Consideration Received.  If any
      Common Stock, Options or Convertible Securities are issued, granted or sold
      for
      cash, the consideration received therefor for purposes of this Warrant will
      be
      the amount received by the Company therefor, before deduction of reasonable
      commissions, underwriting discounts or allowances or other reasonable expenses
      paid or incurred by the Company in connection with such issuance, grant or
      sale.  In case any Common Stock, Options or Convertible Securities are
      issued or sold for a consideration part or all of which shall be other than
      cash, the amount of the consideration other than cash received by the Company
      will be the fair value of such consideration, except where such consideration
      consists of securities, in which case the amount of consideration received
      by
      the Company will be the Market Price thereof as of the date of
      receipt.  In case any Common Stock, Options or Convertible Securities
      are issued in connection with any acquisition, merger or consolidation in which
      the Company is the surviving corporation, the amount of consideration therefor
      will be deemed to be the fair value of such portion of the net assets and
      business of the non-surviving corporation as is attributable to such Common
      Stock, Options or Convertible Securities, as the case may be.  The
      fair value of any consideration other than cash or securities will be determined
      in good faith by the Board of Directors of the Company.

     

    (vi)  Exceptions
      to Adjustment of Exercise Price.  No
      adjustment to the Exercise Price will be made (i) upon the exercise of any
      warrants, options or convertible securities granted, issued and outstanding
      on
      the date of issuance of this Warrant; (ii) upon the grant or exercise of any
      stock or options which may hereafter be granted or exercised under any employee
      benefit plan, stock option plan or restricted stock plan of the Company now
      existing or to be implemented in the future, so long as the issuance of such
      stock or options is approved by a majority of the independent members of the
      Board of Directors of the Company or a majority of the members of a committee
      of
      independent directors established for such purpose; or (iii) upon the exercise
      of the Warrants.

     

    (c)  Subdivision
      or Combination of Common Stock.  If the
      Company at any time subdivides (by any stock split, stock dividend,
      recapitalization, reorganization, reclassification or otherwise) the shares
      of
      Common Stock acquirable hereunder into a greater number of shares, then, after
      the date of record for effecting such subdivision, the Exercise Price in effect
      immediately prior to such subdivision will be proportionately
      reduced.  If the Company at any time combines (by reverse stock split,
      recapitalization, reorganization, reclassification or otherwise) the shares
      of
      Common Stock acquirable hereunder into a smaller number of shares, then, after
      the date of record for effecting such combination, the Exercise Price in effect
      immediately prior to such combination will be proportionately
      increased.

     

    (d)  Adjustment
      in Number of Shares.  Upon each
      adjustment of the Exercise Price pursuant to the provisions of this Paragraph
      4,
      the number of shares of Common Stock issuable upon exercise of this Warrant
      shall be adjusted by multiplying a number equal to the Exercise Price in effect
      immediately prior to such adjustment by the number of shares of Common Stock
      issuable upon exercise of this Warrant immediately prior to such adjustment
      and
      dividing the product so obtained by the adjusted Exercise Price.

     

    (e)  Consolidation,
      Merger or Sale.  In case of any
      consolidation of the Company with, or merger of the Company into any other
      corporation, or in case of any sale or conveyance of all or substantially all
      of
      the assets of the Company other than in connection with a plan of complete
      liquidation of the Company, then as a condition of such consolidation, merger
      or
      sale or conveyance, adequate provision will be made whereby the holder of this
      Warrant will have the right to acquire and receive upon exercise of this Warrant
      in lieu of the shares of Common Stock immediately theretofore acquirable upon
      the exercise of this Warrant, such shares of stock, securities or assets as
      may
      be issued or payable with respect to or in exchange for the number of shares
      of
      Common Stock immediately theretofore acquirable and receivable upon exercise
      of
      this Warrant had such consolidation, merger or sale or conveyance not taken
      place.  In any such case, the Company will make appropriate provision
      to insure that the provisions of this Paragraph 4 hereof will thereafter be
      applicable as nearly as may be in relation to any shares of stock or securities
      thereafter deliverable upon the exercise of this Warrant.  The Company
      will not effect any consolidation, merger or sale or conveyance unless prior
      to
      the consummation thereof, the successor corporation (if other than the Company)
      assumes by written instrument the obligations under this Paragraph 4 and the
      obligations to deliver to the holder of this Warrant such shares of stock,
      securities or assets as, in accordance with the foregoing provisions, the holder
      may be entitled to acquire.

     

    (f)  Distribution
      of Assets.  In case the Company shall
      declare or make any distribution of its assets (including cash) to holders
      of
      Common Stock as a partial liquidating dividend, by way of return of capital
      or
      otherwise, then, after the date of record for determining shareholders entitled
      to such distribution, but prior to the date of distribution, the holder of
      this
      Warrant shall be entitled upon exercise of this Warrant for the purchase of
      any
      or all of the shares of Common Stock subject hereto, to receive the amount
      of
      such assets which would have been payable to the holder had such holder been
      the
      holder of such shares of Common Stock on the record date for the determination
      of shareholders entitled to such distribution.

     

    (g)  Notice
      of Adjustment.  Upon the occurrence of
      any event which requires any adjustment of the Exercise Price, then, and in
      each
      such case, the Company shall give notice thereof to the holder of this Warrant,
      which notice shall state the Exercise Price resulting from such adjustment
      and
      the increase or decrease in the number of Warrant Shares purchasable at such
      price upon exercise, setting forth in reasonable detail the method of
      calculation and the facts upon which such calculation is based.  Such
      calculation shall be certified by the Chief Financial Officer of the
      Company.

     

    (h)  Minimum
      Adjustment of Exercise Price.  No
      adjustment of the Exercise Price shall be made in an amount of less than 1%
      of
      the Exercise Price in effect at the time such adjustment is otherwise required
      to be made, but any such lesser adjustment shall be carried forward and shall
      be
      made at the time and together with the next subsequent adjustment which,
      together with any adjustments so carried forward, shall amount to not less
      than
      1% of such Exercise Price.

     

    (i)  No
      Fractional Shares.  No fractional shares
      of Common Stock are to be issued upon the exercise of this Warrant, but the
      Company shall pay a cash adjustment in respect of any fractional share which
      would otherwise be issuable in an amount equal to the same fraction of the
      Market Price of a share of Common Stock on the date of such
      exercise.

     

    (j)  Other
      Notices.  In case at any
      time:

     

    (i)  the
      Company shall declare any dividend upon the Common Stock payable in shares
      of
      stock of any class or make any other distribution (including dividends or
      distributions payable in cash out of retained earnings) to the holders of the
      Common Stock;

     

    (ii)  the
      Company shall offer for subscription pro rata to the holders of the Common
      Stock
      any additional shares of stock of any class or other rights;

     

    (iii)  there
      shall be any capital reorganiza­tion of the Company, or reclassification of
      the Common Stock, or consolidation or merger of the Company with or into, or
      sale of all or substan­tially all its assets to, another corporation or
      entity; or

     

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

     

    then,
      in
      each such case, the Company shall give to the holder of this Warrant (a) notice
      of the date on which the books of the Company shall close or a record shall
      be
      taken for determining the holders of Common Stock entitled to receive any such
      divi­dend, distribution, or subscription rights or for determining the
      holders of Common Stock entitled to vote in respect of any such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation or
      winding-up and (b) in the case of any such reorganization, reclassification,
      consolidation, merger, sale, dissolution, liquidation or winding-up, notice
      of
      the date (or, if not then known, a reasonable approximation thereof by the
      Company) when the same shall take place.  Such notice shall also
      specify the date on which the holders of Common Stock shall be entitled to
      receive such dividend, distribution, or subscription rights or to exchange
      their
      Common Stock for stock or other securities or property deliverable upon such
      reorganization, re­classification, consolidation, merger, sale, dissolution,
      liquidation, or winding-up, as the case may be.  Such notice shall be
      given at least 30 days prior to the record date or the date on which the
      Company’s books are closed in respect thereto.  Failure to give any
      such notice or any defect therein shall not affect the validity of the
      proceedings referred to in clauses (i), (ii), (iii) and (iv) above.

     

    (k)  Certain
      Events.  If any event occurs of the type
      contemplated by the adjustment provisions of this Paragraph 4 but not expressly
      provided for by such provisions, the Company will give notice of such event
      as
      provided in Paragraph 4(g) hereof, and the Company’s Board of Directors will
      make an appropriate adjustment in the Exercise Price and the number of shares
      of
      Common Stock acquirable upon exercise of this Warrant so that the rights of
      the
      holder shall be neither enhanced nor diminished by such event.

     

    (l)  Certain
      Definitions.

     

    (i)  “Common
      Stock Deemed Outstanding” shall mean the number of
      shares of Common Stock actually outstanding (not including shares of Common
      Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
      4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
      upon
      the exercise of Options, as of the date of such issuance or grant of such
      Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
      total number of shares of Common Stock issuable upon conversion or exchange
      of
      Convertible Securities, as of the date of issuance of such Convertible
      Securities, if any.

     

    (ii)  “Market
      Price,” as of any date, (i) means the average of
      the last reported sale prices for the shares of Common Stock on the OTCBB for
      the five (5) Trading Days immediately preceding such date as reported by
      Bloomberg, or (ii) if the OTCBB is not the principal trading market for the
      shares of Common Stock, the average of the last reported sale prices on the
      principal trading market for the Common Stock during the same period as reported
      by Bloomberg, or (iii) if market value cannot be calculated as of such date
      on
      any of the foregoing bases, the Market Price shall be the fair market value
      as
      reasonably determined in good faith by (a) the Board of Directors of the Company
      or, at the option of a majority-in-interest of the holders of the outstanding
      Warrants by (b) an independent investment bank of nationally recognized standing
      in the valuation of businesses similar to the business of the corporation.
      The
      manner of determining the Market Price of the Common Stock set forth in the
      foregoing definition shall apply with respect to any other security in respect
      of which a determination as to market value must be made hereunder.

     

    (iii)  “Common
      Stock,” for purposes of this Paragraph 4, includes
      the Common Stock, par value $.01 per share, and any additional class of stock
      of
      the Company having no preference as to dividends or distributions on
      liquidation, provided that the shares purchasable pursuant to this Warrant
      shall
      include only shares of Common Stock, par value $.01 per share, in respect of
      which this Warrant is exercisable, or shares resulting from any subdivision
      or
      combination of such Common Stock, or in the case of any reorganization,
      reclassification, consolidation, merger, or sale of the character referred
      to in
      Paragraph 4(e) hereof, the stock or other securities or property provided for
      in
      such Paragraph.

     

    5.  Issue
      Tax.

     

    
      	
                The
                issuance of certificates for Warrant Shares upon the exercise of
                this
                Warrant shall be made without charge to the holder of this Warrant
                or such
                shares for any issuance tax or other costs in respect thereof, provided
                that the Company shall not be required to pay any tax which may be
                payable
                in respect of any transfer involved in the issuance and delivery
                of any
                certificate in a name other than the holder of this
                Warrant.

            

    

     

    6.  No
      Rights or Liabilities as a Shareholder.

     

    
      	
                This
                Warrant shall not entitle the holder hereof to any voting rights
                or other
                rights as a shareholder of the Company.  No provision of this
                Warrant, in the absence of affirmative action by the holder hereof
                to
                purchase Warrant Shares, and no mere enumeration herein of the rights
                or
                privileges of the holder hereof, shall give rise to any liability
                of such
                holder for the Exercise Price or as a shareholder of the Company,
                whether
                such liability is asserted by the Company or by creditors of the
                Company.

            

    

     

    7.  Transfer,
      Exchange, and Replacement of Warrant.

     

    (a)  Restriction
      on Transfer.  This Warrant and the
      rights granted to the holder hereof are transferable, in whole or in part,
      upon
      surrender of this Warrant, together with a properly executed assignment in
      the
      form attached hereto, at the office or agency of the Company referred to in
      Paragraph 7(e) below, pro­vided, however, that any transfer or
      assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
      and to the applicable provisions of the Securities Purchase
      Agreement.  Until due presentment for registration of transfer on the
      books of the Company, the Company may treat the registered holder hereof as
      the
      owner and holder hereof for all purposes, and the Company shall not be affected
      by any notice to the con­trary.  Notwithstanding anything to the
      contrary contained herein, the registration rights described in Paragraph 8
      are
      assignable only in accordance with the provisions of that certain Registration
      Rights Agreement, dated November 14, 2007, by and among the Company and the
      other signatories thereto (the “Registration Rights Agreement”).

     

    (b)  Warrant
      Exchangeable for Different
      Denomina­tions.  This Warrant is
      exchange­able, upon the surrender hereof by the holder hereof at the office
      or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
      of like tenor representing in the aggregate the right to purchase the number
      of
      shares of Common Stock which may be purchased hereunder, each of such new
      Warrants to represent the right to purchase such number of shares as shall
      be
      designated by the holder hereof at the time of such surrender.

     

    (c)  Replacement
      of Warrant.  Upon receipt of
      evi­dence reasonably satisfactory to the Company of the loss, theft,
      destruction, or mutilation of this Warrant and, in the case of any such loss,
      theft, or destruc­tion, upon delivery of an indemnity agreement
      reason­ably satisfactory in form and amount to the Company, or, in the case
      of any such mutilation, upon surrender and cancellation of this Warrant, the
      Company, at its expense, will execute and deliver, in lieu thereof, a new
      Warrant of like tenor.

     

    (d)  Cancellation;
      Payment of Expenses.  Upon the surrender
      of this Warrant in connection with any trans­fer, exchange, or replacement
      as provided in this Paragraph 7, this Warrant shall be promptly canceled by
      the
      Company.  The Company shall pay all taxes (other than securities
      transfer taxes) and all other expenses (other than legal expenses, if any,
      incurred by the holder or transferees) and charges payable in connection with
      the preparation, execution, and delivery of Warrants pursuant to this Paragraph
      7.

     

    (e)  Register.  The
      Company shall maintain, at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to the holder hereof),
      a
      register for this Warrant, in which the Company shall record the name and
      address of the person in whose name this Warrant has been issued, as well as
      the
      name and address of each transferee and each prior owner of this
      Warrant.

     

    (f)  Exercise
      or Transfer Without Registration.  If,
      at the time of the surrender of this Warrant in connection with any exercise,
      transfer, or exchange of this Warrant, this Warrant (or, in the case of any
      exercise, the Warrant Shares issuable hereunder), shall not be registered under
      the Securities Act of 1933, as amended (the “Securities Act”) and under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such exercise, transfer, or exchange, (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 and counsel are acceptable to the
      Company, to the effect that such exercise, transfer, or exchange may be made
      without registration under said 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)
      promulgated under the Securities Act; provided that no such opinion, letter
      or
      status as an “accredited investor” shall be required in connection with a
      transfer pursuant to Rule 144 under the Securities Act.  The first
      holder of this Warrant, by taking and holding the same, represents to the
      Company that such holder is acquiring this Warrant for investment and not with
      a
      view to the distribution thereof.

     

    8.  Registration
      Rights.

     

    
      	
              The
                initial holder of this Warrant (and certain assignees thereof) is
                entitled
                to the benefit of such registration rights in respect of the Warrant
                Shares as are set forth in Section 2 of the Registration Rights
                Agreement.

            

    

     

    9.  Notices.

     

    
      	
                All
                notices, requests, and other communications required or permitted
                to be
                given or delivered hereunder to the holder of this Warrant shall
                be in
                writing, and shall be personally delivered, or shall be sent by certified
                or registered mail or by recognized overnight mail courier, postage
                prepaid and addressed, to such holder at the address shown for such
                holder
                on the books of the Company, or at such other address as shall have
                been
                furnished to the Company by notice from such holder.  All
                notices, requests, and other communications required or permitted
                to be
                given or delivered hereunder to the Company shall be in writing,
                and shall
                be personally delivered, or shall be sent by certified or registered
                mail
                or by recognized overnight mail courier, postage prepaid and addressed,
                to
                the office of the Company at 65 Dan Road, Canton, MA 02021, Attention:
                Chief Executive Officer, or at such other address as shall have been
                furnished to the holder of this Warrant by notice from the
                Company.  Any such notice, request, or other communication may
                be sent by facsimile, but shall in such case be subsequently confirmed
                by
                a writing personally delivered or sent by certified or registered
                mail or
                by recognized overnight mail courier as provided above.  All
                notices, requests, and other communications shall be deemed to have
                been
                given either at the time of the receipt thereof by the person entitled
                to
                re­ceive such notice at the address of such person for purposes of
                this Paragraph 9, or, if mailed by registered or certified mail or
                with a
                recognized overnight mail courier upon deposit with the United States
                Post
                Office or such overnight mail courier, if postage is prepaid and
                the
                mailing is properly addressed, as the case may
                be.

            

    

     

    10.  Governing
      Law.

     

    
      	
                THIS
                WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE
                WITH
                THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
                TO BE
                PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
                OF
                CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE
                EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
                IN NEW
                YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT,
                THE
                AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
                CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
                DEFENSE
                OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
                PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
                UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
                RESPECT
                EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
                PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO
                SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH
                PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT
                OR
                PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
                BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER.  THE
                PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS WARRANT
                SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES,
                INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
                DISPUTE.

            

    

     

    11.  Miscellaneous.

     

    (a)  Amendments.  This
      Warrant and any provision hereof may only be amended by an instrument in writing
      signed by the Company and the holder hereof.

     

    (b)  Descriptive
      Headings.  The descriptive headings of
      the several paragraphs of this Warrant are in­serted for purposes of
      reference only, and shall not affect the meaning or construction of any of
      the
      provisions hereof.

     

    (c)  Cashless
      Exercise.  Notwithstanding anything to
      the contrary contained in this Warrant, if the resale of the Warrant Shares
      by
      the holder is not then registered pursuant to an effective registration
      statement under the Securities Act, this Warrant may be exercised by
      presentation and surrender of this Warrant to the Company at its principal
      executive offices with a written notice of the holder’s intention to effect a
      cashless exercise, including a calculation of the number of shares of Common
      Stock to be issued upon such exercise in accordance with the terms hereof (a
      “Cashless Exercise”).  In the event of a Cashless Exercise, in lieu of
      paying the Exercise Price in cash, the holder shall surrender this Warrant
      for
      that number of shares of Common Stock determined by multiplying the number
      of
      Warrant Shares to which it would otherwise be entitled by a fraction, the
      numerator of which shall be the difference between the then current Market
      Price
      per share of the Common Stock and the Exercise Price,  and the
      denominator of which shall be the then current Market Price per share of Common
      Stock.  For example, if the holder is exercising 100,000 Warrants with
      a per Warrant exercise price of $0.75 per share through a cashless exercise
      when
      the Common Stock’s current Market Price per share is $2.00 per share, then upon
      such Cashless Exercise the holder will receive 62,500 shares of Common
      Stock.

     

    (d)  Remedies.  The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the holder, by vitiating the intent and purpose of the
      transaction contemplated hereby.  Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Warrant will be inadequate and agrees, in the event of a breach or threatened
      breach by the Company of the provisions of this Warrant, that the holder shall
      be entitled, in addition to all other available remedies at law or in equity,
      and in addition to the penalties assessable herein, to an injunction or
      injunctions restraining, preventing or curing any breach of this Warrant and
      to
      enforce specifically the terms and provisions thereof, without the necessity
      of
      showing economic loss and without any bond or other security being
      required.

     

    

     

    

     

    

     

    

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    AVITAR
      INC.

    

    

    

    By:
      _______________________________

     Peter
      Phildius

     Chief
      Executive Officer

    

     

    Dated
      as
      of November 14, 2007

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FORM
      OF EXERCISE AGREEMENT

     

    

     

    Dated:  ________
      __,
      200_

     

    

     

    To:           ______________________

     

    

     

    

     

    The
      undersigned, pursuant to the provisions set forth in the within Warrant, hereby
      agrees to purchase ________ shares of Common Stock covered by such Warrant,
      and
      makes pay­ment herewith in full therefor at the price per share provided by
      such Warrant in cash or by certified or official bank check in the amount of,
      or, if the resale of such Common Stock by the undersigned is not currently
      registered pursuant to an effective registration statement under the Securities
      Act of 1933, as amended, by surrender of securities issued by the Company
      (including a portion of the Warrant) having a market value (in the case of
      a
      portion of this Warrant, determined in accordance with Section 11(c) of the
      Warrant) equal to $_________.  Please issue a certificate or
      certifi­cates for such shares of Common Stock in the name of and pay any
      cash for any fractional share to:

     

    

     

    Name:                      ______________________________

    

    

    Signature:

    Address:____________________________

    _____________________________

    

    

    
      	
               

            	
              Note:

            	
              The
                above signature should correspond exactly with the name on the face
                of the
                within Warrant, if applicable.

            

    

    

     

    and,
      if
      said number of shares of Common Stock shall not be all the shares purchasable
      under the within Warrant, a new Warrant is to be issued in the name of said
      undersigned covering the balance of the shares purchasable thereunder less
      any
      frac­tion of a share paid in cash.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FORM
      OF ASSIGNMENT

     

    

     

    

     

    FOR
      VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
      all the rights of the undersigned under the within Warrant, with respect to
      the
      number of shares of Common Stock covered thereby set forth hereinbelow,
      to:

    

     

    Name
      of
      Assignee                                                                Address                                                                No
      of Shares

     

    

     

    

     

    

     

    ,
      and
      hereby irrevocably constitutes and appoints ___________________________________
      as agent and attorney-in-fact to trans­fer said Warrant on the books of the
      within-named corporation, with full power of substitution in the
      premises.

     

    

     

    Dated:                      ________
      __, 200_

     

    

     

    In
      the
      presence
      of:                                                                                    ______________________________

     

    Name:______________________________

    

     

    Signature:_________________________

    Title
      of
      Signing Officer or Agent (if any):

    ______________________________

    Address:                      ______________________________

    ______________________________

    

    

    
      	
               

            	
              Note:

            	
              The
                above signature should correspond exactly with the name on the face
                of the
                within Warrant, if
                applicable.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]