Document:

REGISTRATION RIGHTS AGREEMENT

                  This Registration  Rights Agreement (this "Agreement") is made
and entered  into as of June 24, 2004,  by and among AXM Pharma,  Inc., a Nevada
corporation (the "Company"), and the purchasers listed on Schedule I hereto (the
"Purchasers").

                  This   Agreement  is  being   entered  into  pursuant  to  the
Securities  Purchase Agreement dated as of the date hereof among the Company and
the Purchasers (the "Purchase Agreement").

                  The Company and the Purchasers hereby agree as follows:

          1.      Definitions.

                  Capitalized  terms used and not otherwise defined herein shall
have the meanings  given such terms in the Purchase  Agreement.  As used in this
Agreement, the following terms shall have the following meanings:

                  "Advice" shall have meaning set forth in Section 3(m).

                  "Affiliate"  means,  with  respect  to any  Person,  any other
Person that directly or indirectly  controls or is controlled by or under common
control with such Person.  For the purposes of this definition,  "control," when
used with respect to any Person,  means the possession,  direct or indirect,  of
the power to direct or cause the  direction  of the  management  and policies of
such Person, whether through the ownership of voting securities,  by contract or
otherwise;  and the terms of "affiliated,"  "controlling"  and "controlled" have
meanings correlative to the foregoing.

                  "Board" shall have meaning set forth in Section 3(n).

                  "Business Day" means any day except  Saturday,  Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state  of New  York  generally  are  authorized  or  required  by  law or  other
government actions to close.

                  "Closing  Date"  means  the date of the final  closing  of the
purchase and sale of the Preferred  Stock and Warrants  pursuant to the Purchase
Agreement.

                  "Commission" means the Securities and Exchange Commission.

                  "Common  Stock" means the Company's  Common  Stock,  par value
$.001 per share.

                  "Effectiveness  Date" means with  respect to the  Registration
Statement the earlier of the  ninetieth  (90th) day following the Filing Date or
the date  which is  within  five  (5) days of the date on which  the  Commission
informs the Company  that the  Commission  (i) will not review the  Registration
Statement  or  (ii)  that  the  Company  may  request  the  acceleration  of the
effectiveness of the Registration Statement and the Company makes such request.

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                  "Effectiveness  Period"  shall have the  meaning  set forth in
Section 2.

                  "Event" shall have the meaning set forth in Section 7(e).

                  "Event Date" shall have the meaning set forth in Section 7(e).

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended.

                  "Filing Date" means July 15, 2004.

                  "Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.

                  "Indemnified  Party"  shall  have  the  meaning  set  forth in
Section 5(c).

                  "Indemnifying  Party"  shall  have the  meaning  set  forth in
Section 5(c).

                  "Losses" shall have the meaning set forth in Section 5(a).

                  "Person"  means an individual or a  corporation,  partnership,
trust,  incorporated  or  unincorporated  association,  joint  venture,  limited
liability  company,  joint stock company,  government (or an agency or political
subdivision thereof) or other entity of any kind.

                  "Preferred  Stock"  means the Series C  Convertible  Preferred
Stock,  par value $.001 per share and stated value  $100,000  per share,  of the
Company issued to the Purchasers pursuant to the Purchase Agreement.

                  "Proceeding" means an action,  claim,  suit,  investigation or
proceeding   (including,   without  limitation,   an  investigation  or  partial
proceeding, such as a deposition), whether commenced or threatened.

                  "Prospectus" means the prospectus included in the Registration
Statement  (including,  without  limitation,  a  prospectus  that  includes  any
information  previously  omitted from a prospectus filed as part of an effective
registration  statement  in  reliance  upon  Rule  430A  promulgated  under  the
Securities Act), as amended or supplemented by any prospectus  supplement,  with
respect  to  the  terms  of  the  offering  of any  portion  of the  Registrable
Securities covered by the Registration  Statement,  and all other amendments and
supplements to the  Prospectus,  including  post-effective  amendments,  and all
material incorporated by reference in such Prospectus.

                  "Registrable  Securities  means the  shares  of  Common  Stock
issuable upon  conversion of the Preferred  Stock and the shares of Common Stock
issuable upon exercise of the Warrants.

                  "Registration Statement" means the registration statements and
any additional  registration statements contemplated by Section 2, including (in
each case) the  Prospectus,  amendments  and  supplements  to such  registration

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statement or  Prospectus,  including  pre- and  post-effective  amendments,  all
exhibits   thereto,   and  all  material   incorporated  by  reference  in  such
registration statement.

                  "Rule  144"  means  Rule  144  promulgated  by the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                  "Rule  158"  means  Rule  158  promulgated  by the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                  "Rule  415"  means  Rule  415  promulgated  by the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                  "Rule  424"  means  Rule  424  promulgated  by the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Special  Counsel"  means one special  counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.

                  "Warrants"  means the  warrants to  purchase  shares of Common
Stock issued to the Purchasers pursuant to the Purchase Agreement.

          2.      Resale Registration.

                  On or prior to the Filing Date the Company  shall  prepare and
file  with  the  Commission  a  "resale"  Registration  Statement  covering  all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415.  The  Registration  Statement  shall be on Form SB-2 (except if the
Company is not then eligible to register for resale the  Registrable  Securities
on Form SB-2, in which case such  registration  shall be on another  appropriate
form in accordance  herewith).  The Company shall (i) not permit any  securities
other than the Registrable  Securities and the securities  listed on Schedule II
hereto  to be  included  in the  Registration  Statement  and  (ii) use its best
efforts to cause the Registration  Statement to be declared  effective under the
Securities  Act as  promptly as possible  after the filing  thereof,  but in any
event prior to the Effectiveness  Date, and to keep such Registration  Statement
continuously  effective  under  the  Securities  Act  until  such date as is the
earlier  of (x)  the  date  when  all  Registrable  Securities  covered  by such
Registration  Statement have been sold or (y) the date on which the  Registrable
Securities  may  be  sold  without  any  restriction  pursuant  to  Rule  144 as
determined by the counsel to the Company  pursuant to a written  opinion letter,
addressed to the  Company's  transfer  agent to such effect (the  "Effectiveness
Period").  If at any  time  and  for  any  reason,  an  additional  Registration
Statement  is  required  to be filed  because at such time the actual  number of
shares of Common Stock into which the  Preferred  Stock is  convertible  and the
Warrants are exercisable exceeds the number of shares of Registrable  Securities
remaining under the Registration  Statement,  the Company shall have twenty (20)

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Business Days to file such additional  Registration  Statement,  and the Company
shall use its best efforts to cause such additional Registration Statement to be
declared effective by the Commission as soon as possible,  but in no event later
than sixty (60) days after filing.

          3.      Registration Procedures.

                  In  connection  with the  Company's  registration  obligations
hereunder, the Company shall:

                  (a) Prepare and file with the  Commission,  on or prior to the
Filing  Date,  a  Registration  Statement on Form SB-2 (or if the Company is not
then  eligible to register for resale the  Registrable  Securities  on Form SB-2
such registration shall be on another  appropriate form in accordance  herewith)
in accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders) and in accordance with
applicable  law, and cause the  Registration  Statement to become  effective and
remain effective as provided herein; provided, however, that not less than three
(3)  Business  Days prior to the  filing of the  Registration  Statement  or any
related Prospectus or any amendment or supplement thereto, the Company shall (i)
furnish to the  Holders and any Special  Counsel,  copies of all such  documents
proposed  to be filed,  which  documents  will be  subject to the review of such
Holders and such Special  Counsel,  and (ii) cause its  officers and  directors,
counsel  and  independent  certified  public  accountants  to  respond  to  such
inquiries as shall be necessary,  in the reasonable  opinion of Special Counsel,
to conduct a reasonable review of such documents. The Company shall not file the
Registration  Statement or any such  Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable  Securities or any
Special  Counsel shall  reasonably  object in writing  within three (3) Business
Days of their receipt thereof.

                  (b) (i) Prepare and file with the Commission such  amendments,
including  post-effective  amendments,  to the Registration  Statement as may be
necessary to keep the Registration  Statement  continuously  effective as to the
applicable  Registrable  Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements as necessary in
order to register for resale  under the  Securities  Act all of the  Registrable
Securities;  (ii) cause the related  Prospectus to be amended or supplemented by
any required  Prospectus  supplement,  and as so  supplemented  or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; (iii) respond as promptly as possible, but in no event
later than  fifteen  (15)  business  days,  to any  comments  received  from the
Commission with respect to the Registration  Statement or any amendment  thereto
and as promptly as possible  provide the Holders true and complete copies of all
correspondence   from  and  to  the  Commission  relating  to  the  Registration
Statement;  and (iv) comply in all material  respects with the provisions of the
Securities  Act and the  Exchange  Act with  respect to the  disposition  of all
Registrable   Securities  covered  by  the  Registration  Statement  during  the
applicable  period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

                  (c)  Notify  the  Holders of  Registrable  Securities  and any
Special  Counsel as promptly as possible (and, in the case of (i)(A) below,  not
less than three (3) days prior to such  filing)  and (if  requested  by any such
Person)  confirm  such  notice in writing no later  than two (2)  Business  Days

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following  the day (i)(A) when a  Prospectus  or any  Prospectus  supplement  or
post-effective  amendment to the  Registration  Statement is filed; (B) when the
Commission  notifies  the  Company  whether  there  will be a  "review"  of such
Registration  Statement and whenever the Commission  comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or any
post-effective  amendment,  when  the  same has  become  effective;  (ii) of any
request by the Commission or any other Federal or state  governmental  authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional  information;  (iii) of the  issuance by the  Commission  of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the  Registrable  Securities  or the  initiation  or  threatening  of any
Proceedings for that purpose; (iv) if at any time any of the representations and
warranties of the Company contained in any agreement  contemplated hereby ceases
to be true and  correct  in all  material  respects;  (v) of the  receipt by the
Company of any notification  with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation of any Proceeding for such purpose; and (vi)
of the occurrence of any event that makes any statement made in the Registration
Statement  or  Prospectus  or  any  document   incorporated   or  deemed  to  be
incorporated  therein  by  reference  untrue  in any  material  respect  or that
requires  any  revisions  to the  Registration  Statement,  Prospectus  or other
documents so that, in the case of the Registration  Statement or the Prospectus,
as the case may be, it will not contain any untrue  statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements  therein, in the light of the circumstances under which they
were made, not misleading.

                  (d) Use its best  efforts  to avoid the  issuance  of,  or, if
issued,  obtain  the  withdrawal  of, as  promptly  as  possible,  (i) any order
suspending  the  effectiveness  of  the  Registration   Statement  or  (ii)  any
suspension of the qualification (or exemption from  qualification) of any of the
Registrable Securities for sale in any jurisdiction.

                  (e) If  requested  by the Holders of a majority in interest of
the Registrable Securities,  (i) promptly incorporate in a Prospectus supplement
or  post-effective  amendment to the Registration  Statement such information as
the  Company  reasonably  agrees  should be  included  therein and (ii) make all
required filings of such Prospectus supplement or such post-effective  amendment
as soon as  practicable  after the  Company  has  received  notification  of the
matters to be  incorporated  in such  Prospectus  supplement  or  post-effective
amendment.

                  (f) If requested by any Holder, furnish to such Holder and any
Special  Counsel,   without  charge,   at  least  one  conformed  copy  of  each
Registration   Statement  and  each  amendment  thereto,   including   financial
statements  and  schedules,   all  documents   incorporated   or  deemed  to  be
incorporated  therein by reference,  and all exhibits to the extent requested by
such Person (including those previously  furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.

                  (g)  Promptly deliver to each Holder and any  Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably  request;  and subject to the provisions of Section 3(n), the Company
hereby  consents to the use of such  Prospectus and each amendment or supplement
thereto by each of the selling  Holders in connection with the offering and sale

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of the  Registrable  Securities  covered by such Prospectus and any amendment or
supplement thereto.

                  (h)  Prior to any  public offering  of Registrable Securities,
use its best  efforts  to  register  or qualify or  cooperate  with the  selling
Holders  and  any  Special  Counsel  in  connection  with  the  registration  or
qualification  (or exemption from such  registration or  qualification)  of such
Registrable  Securities for offer and sale under the securities or Blue Sky laws
of such  jurisdictions  within  the  United  States as any  Holder  requests  in
writing,   to  keep  each  such  registration  or  qualification  (or  exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or  things  necessary  or  advisable  to  enable  the  disposition  in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided,  however,  that the Company shall not be required to qualify generally
to do business in any jurisdiction  where it is not then so qualified or to take
any  action  that would  subject  it to  general  service of process in any such
jurisdiction  where it is not then so  subject  or  subject  the  Company to any
material tax in any such jurisdiction where it is not then so subject.

                  (i)  Cooperate  with the  Holders  to  facilitate  the  timely
preparation and delivery of certificates  representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates,  to the extent
permitted by the Purchase  Agreement and applicable federal and state securities
laws, shall be free of all restrictive  legends,  and to enable such Registrable
Securities  to be in such  denominations  and  registered  in such  names as any
Holder may request in connection with any sale of Registrable Securities.

                  (j) Upon the occurrence of any event  contemplated  by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment,  including
a post-effective amendment, to the Registration Statement or a supplement to the
related  Prospectus or any document  incorporated  or deemed to be  incorporated
therein  by  reference,  and file  any  other  required  document  so  that,  as
thereafter  delivered,  neither the  Registration  Statement nor such Prospectus
will contain an untrue  statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in the light of the circumstances under which they were made, not misleading.

                  (k) Use its best efforts to cause all  Registrable  Securities
relating  to the  Registration  Statement  to be  listed on the  American  Stock
Exchange or any other securities  exchange,  quotation system or market, if any,
on which  similar  securities  issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.

                  (l) Comply in all material  respects with all applicable rules
and  regulations of the Commission and make generally  available to its security
holders  earning  statements  satisfying  the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period  (or 90 days  after the end of any  12-month  period if such  period is a
fiscal  year)  commencing  on the first day of the first  fiscal  quarter of the
Company after the effective date of the Registration Statement,  which statement
shall conform to the requirements of Rule 158.

                  (m) The Company may require each selling  Holder to furnish to
the  Company  information  regarding  such Holder and the  distribution  of such
Registrable Securities as is required by law to be disclosed in the Registration

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Statement,  Prospectus,  or any amendment or supplement thereto, and the Company
may exclude from such registration the Registrable Securities of any such Holder
who  unreasonably  fails to furnish such  information  within a reasonable  time
after receiving such request.

                  Each Holder covenants and agrees that (i) it will not sell any
Registrable  Securities under the  Registration  Statement until it has received
copies of the  Prospectus as then amended or  supplemented  as  contemplated  in
Section 3(g) and notice from the Company that such  Registration  Statement  and
any  post-effective  amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply  with the  prospectus  delivery  requirements  of the  Securities  Act as
applicable to them in connection with sales of Registrable  Securities  pursuant
to the Registration Statement.

                  Each  Holder  agrees by its  acquisition  of such  Registrable
Securities  that, upon receipt of a notice from the Company of the occurrence of
any  event of the kind  described  in  Section  3(c)(ii),  3(c)(iii),  3(c)(iv),
3(c)(v), 3(c)(vi) or 3(n), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement  contemplated  by Section 3(j), or until it is advised in writing (the
"Advice")  by the  Company  that  the use of the  applicable  Prospectus  may be
resumed,  and,  in  either  case,  has  received  copies  of any  additional  or
supplemental  filings  that are  incorporated  or deemed to be  incorporated  by
reference in such Prospectus or Registration Statement.

                  (n) If (i) there is material non-public  information regarding
the Company which the  Company's  Board of Directors  (the  "Board")  reasonably
determines  not to be in the  Company's  best interest to disclose and which the
Company is not  otherwise  required to disclose,  or (ii) there is a significant
business  opportunity  (including,  but  not  limited  to,  the  acquisition  or
disposition  of assets  (other than in the  ordinary  course of business) or any
merger,  consolidation,  tender offer or other similar transaction) available to
the Company  which the Board  reasonably  determines  not to be in the Company's
best  interest to disclose,  then the Company may postpone or suspend  filing or
effectiveness  of a  registration  statement  for a  period  not  to  exceed  20
consecutive  days,  provided  that the Company  may not  postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 360 day period;  provided,  however, that no such postponement or suspension
shall be permitted for  consecutive 20 day periods,  arising out of the same set
of facts, circumstances or transactions.

          4.      Registration Expenses.

                  All  fees  and  expenses  incident  to the  performance  of or
compliance  with this  Agreement  by the  Company,  except as and to the  extent
specified  in  Section  4,  shall  be borne by the  Company  whether  or not the
Registration  Statement  is filed or becomes  effective  and  whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and  expenses  referred to in the  foregoing  sentence  shall  include,  without
limitation, (i) all registration and filing fees (including, without limitation,
fees and  expenses  (A) with  respect to filings  required  to be made with each
securities  exchange  or market on which  Registrable  Securities  are  required
hereunder to be listed,  (B) with respect to filing fees  required to be paid to
the National  Association of Securities  Dealers,  Inc. and the NASD Regulation,
Inc. and (C) in compliance  with state  securities or Blue Sky laws  (including,
without  limitation,  fees and  disbursements  of  counsel  for the  Holders  in
connection  with  Blue Sky  qualifications  of the  Registrable  Securities  and

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determination  of the eligibility of the  Registrable  Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities  may  designate)),   (ii)  printing  expenses   (including,   without
limitation,  expenses of printing certificates for Registrable Securities and of
printing  prospectuses  if the  printing of  prospectuses  is  requested  by the
holders of a majority of the Registrable Securities included in the Registration
Statement),  (iii)  messenger,  telephone and delivery  expenses,  (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders, in
the case of the Special Counsel,  to a maximum amount of $7,500,  (v) Securities
Act liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the  transactions  contemplated  by this  Agreement,  including,
without limitation,  the Company's independent public accountants (including the
expenses  of any  comfort  letters  or costs  associated  with the  delivery  by
independent  public  accountants  of a comfort  letter or comfort  letters).  In
addition,  the Company  shall be  responsible  for all of its internal  expenses
incurred in connection with the consummation of the transactions contemplated by
this Agreement (including,  without limitation, all salaries and expenses of its
officers and employees  performing legal or accounting  duties),  the expense of
any annual audit, the fees and expenses  incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.

          5.      Indemnification.

                  (a)  Indemnification  by  the  Company.   The  Company  shall,
notwithstanding  any termination of this Agreement,  indemnify and hold harmless
each Holder,  the officers,  directors,  agents,  brokers (including brokers who
offer and sell  Registrable  Securities  as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them,  each Person who controls any such Holder (within
the meaning of Section 15 of the  Securities  Act or Section 20 of the  Exchange
Act) and the officers,  directors, agents and employees of each such controlling
Person,  to the fullest extent permitted by applicable law, from and against any
and  all  losses,  claims,  damages,  liabilities,   costs  (including,  without
limitation,   costs  of   preparation   and   attorneys'   fees)  and   expenses
(collectively,  "Losses"), as incurred,  arising out of or based upon any untrue
or alleged  untrue  statement of a material fact  contained in the  Registration
Statement,  any  Prospectus  or any form of  prospectus  or in any  amendment or
supplement thereto or in any preliminary prospectus,  or arising out of or based
upon any omission or alleged  omission of a material  fact required to be stated
therein  or  necessary  to make  the  statements  therein  (in  the  case of any
Prospectus or form of prospectus  or  supplement  thereto),  in the light of the
circumstances under which they were made, not misleading,  except to the extent,
but only to the extent, that such untrue statements or omissions arise out of or
are based upon information regarding the Holders or such other Indemnified Party
furnished in writing to the Company by a Holder expressly for use therein, which
information  was  reasonably  relied on by the Company for use therein or to the
extent  that such  information  relates  to a Holder or such  Holder's  proposed
method of distribution of Registrable  Securities and was reviewed and expressly
approved in writing by a Holder expressly for use in the Registration Statement,
such  Prospectus  or such form of  Prospectus  or in any amendment or supplement
thereto.  The  Company  shall  notify the Holders  promptly of the  institution,
threat  or  assertion  of any  Proceeding  of  which  the  Company  is  aware in
connection with the transactions contemplated by this Agreement.

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                  (b) Indemnification by Holders.  Each Holder shall,  severally
and not  jointly,  indemnify  and hold  harmless  the  Company,  its  directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses,  as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in the Registration Statement, any Prospectus,  or any
form  of  prospectus,  or in  any  amendment  or  supplement  thereto  or in any
preliminary prospectus,  or arising out of or based upon any omission or alleged
omission of a material fact  required to be stated  therein or necessary to make
the  statements  therein (in the case of any Prospectus or form of prospectus or
supplement  thereto),  in the light of the  circumstances  under which they were
made, not misleading,  to the extent,  but only to the extent,  that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder or other  Indemnified Party to the Company expressly for use therein
and that such  information  was  reasonably  relied  upon by the Company for use
therein,  or to the extent that such information  relates to such Holder or such
Holder's  proposed  method of  distribution  of  Registrable  Securities and was
reviewed and expressly  approved in writing by such Holder  expressly for use in
the  Registration  Statement,  such Prospectus or such form of Prospectus or any
amendment  or  supplement  thereto.  Notwithstanding  anything  to the  contrary
contained  herein,  the Holders shall be liable under this Section 5(b) for only
that  amount as does not exceed the net  proceeds  to such Holder as a result of
the sale of Registrable Securities pursuant to such Registration Statement.

                  (c) Conduct of Indemnification  Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity  hereunder
(an  "Indemnified  Party"),  such  Indemnified  Party  promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying  Party) in writing,  and
the  Indemnifying  Party  shall be  entitled  to  assume  the  defense  thereof,
including the employment of counsel  reasonably  satisfactory to the Indemnified
Party and the  payment of all fees and  expenses  incurred  in  connection  with
defense  thereof;  provided,  that the failure of any Indemnified  Party to give
such notice  shall not  relieve the  Indemnifying  Party of its  obligations  or
liabilities pursuant to this Agreement,  except (and only) to the extent that it
shall  be  finally  determined  by a  court  of  competent  jurisdiction  (which
determination  is not  subject to appeal or further  review)  that such  failure
shall have  proximately  and materially  adversely  prejudiced the  Indemnifying
Party.

                  An Indemnified  Party shall have the right to employ  separate
counsel in any such  Proceeding and to participate in the defense  thereof,  but
the  fees  and  expenses  of  such  counsel  shall  be at the  expense  of  such
Indemnified  Party or Parties unless:  (1) the Indemnifying  Party has agreed in
writing to pay such fees and expenses;  or (2) the Indemnifying Party shall have
failed  promptly to assume the defense of such  Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named  parties to any such  Proceeding  (including  any  impleaded  parties)
include both such Indemnified Party and the Indemnifying Party, and such parties
shall have been  advised by counsel  that a conflict  of  interest  is likely to
exist if the same  counsel  were to  represent  such  Indemnified  Party and the
Indemnifying  Party (in which  case,  if such  Indemnified  Party  notifies  the
Indemnifying  Party in writing that it elects to employ separate  counsel at the
expense of the Indemnifying  Party,  the  Indemnifying  Party shall not have the
right to assume the defense  thereof and such counsel shall be at the expense of
the  Indemnifying  Party).  The  Indemnifying  Party shall not be liable for any
settlement of any such Proceeding  effected without its written  consent,  which

                                      -9-
<PAGE>

consent shall not be unreasonably  withheld or delayed.  No  Indemnifying  Party
shall,  without the prior written consent of the Indemnified  Party,  effect any
settlement  of any  pending  or  threatened  Proceeding  in respect of which any
Indemnified  Party is a party and  indemnity has been sought  hereunder,  unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.

                  All fees and expenses of  the  Indemnified   Party  (including
reasonable  fees  and  expenses  to  the  extent  incurred  in  connection  with
investigating   or  preparing  to  defend  such   Proceeding  in  a  manner  not
inconsistent  with this  Section)  shall be paid to the  Indemnified  Party,  as
incurred,  within  ten (10)  Business  Days of  written  notice  thereof  to the
Indemnifying  Party  (regardless of whether it is ultimately  determined that an
Indemnified Party is not entitled to indemnification  hereunder;  provided, that
the  Indemnified  Party shall reimburse all such fees and expenses to the extent
it is finally judicially  determined that such Indemnified Party is not entitled
to indemnification hereunder).

                  (d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is due but unavailable to an Indemnified Party because of a failure
or refusal  of a  governmental  authority  to enforce  such  indemnification  in
accordance  with its terms (by reason of public policy or otherwise),  then each
Indemnifying  Party,  in lieu of  indemnifying  such  Indemnified  Party,  shall
contribute to the amount paid or payable by such  Indemnified  Party as a result
of such Losses,  in such  proportion as is  appropriate  to reflect the relative
fault of the  Indemnifying  Party and  Indemnified  Party in connection with the
actions,  statements  or omissions  that  resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and  Indemnified  Party shall be  determined  by reference to, among other
things,  whether any action in question,  including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been  taken  or made  by,  or  relates  to  information  supplied  by,  such
Indemnifying,  Party or Indemnified  Party,  and the parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include,  subject to the  limitations set forth
in Section 5(c), any reasonable  attorneys' or other reasonable fees or expenses
incurred  by such party in  connection  with any  Proceeding  to the extent such
party   would  have  been   indemnified   for  such  fees  or  expenses  if  the
indemnification  provided  for in this  Section was  available  to such party in
accordance with its terms.

                  The  parties  hereto  agree  that  it would  not  be  just and
equitable if  contribution  pursuant to this Section 5(d) were determined by pro
rata  allocation  or by any other method of  allocation  that does not take into
account the equitable  considerations  referred to in the immediately  preceding
paragraph. No Person guilty of fraudulent  misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to  contribution  from
any Person who was not guilty of such fraudulent misrepresentation.

                  The indemnity and contribution agreements  contained  in  this
Section are in addition to any liability that the Indemnifying  Parties may have
to the Indemnified Parties pursuant to the law.

          6.      Rule 144.

                                      -10-
<PAGE>

                  As long as any Holder owns Shares, Conversion Shares, Warrants
or Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the Company  after the date hereof  pursuant to Section
13(a)  or  15(d)  of the  Exchange  Act.  As long  as any  Holder  owns  Shares,
Conversion Shares, Warrants or Warrant Shares, if the Company is not required to
file reports  pursuant to Section  13(a) or 15(d) of the  Exchange  Act, it will
prepare and furnish to the Holders and make  publicly  available  in  accordance
with Rule  144(c)  promulgated  under the  Securities  Act annual and  quarterly
financial statements,  together with a discussion and analysis of such financial
statements  in form and  substance  substantially  similar  to those  that would
otherwise  be required to be  included in reports  required by Section  13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period  that such  filings  would have been  required to have been made
under the Exchange  Act. The Company  further  covenants  that it will take such
further action as any Holder may reasonably request,  all to the extent required
from time to time to enable  such Person to sell  Conversion  Shares and Warrant
Shares  without  registration  under the Securities Act within the limitation of
the  exemptions  provided  by Rule 144  promulgated  under the  Securities  Act,
including  providing any legal  opinions  relating to such sale pursuant to Rule
144. Upon the request of any Holder,  the Company shall deliver to such Holder a
written certification of a duly authorized officer as to whether it has complied
with such requirements.

          7.      Miscellaneous.

                  (a) Remedies.  In the event of a breach by the Company or by a
Holder,  of any of their  obligations  under this Agreement,  such Holder or the
Company,  as the case may be, in  addition to being  entitled  to  exercise  all
rights granted by law and under this Agreement,  including  recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary  damages would not provide  adequate
compensation  for any losses  incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific  performance  in respect of such breach,  it shall waive the
defense that a remedy at law would be adequate.

                  (b) No Inconsistent Agreements. Neither the Company nor any of
its  subsidiaries  has,  as of the date hereof  entered  into and  currently  in
effect,  nor shall the Company or any of its subsidiaries,  on or after the date
of this Agreement,  enter into any agreement with respect to its securities that
is  inconsistent  with the rights  granted to the Holders in this  Agreement  or
otherwise conflicts with the provisions hereof.  Except as disclosed in Schedule
2.1(c)  of  the  Purchase  Agreement,   neither  the  Company  nor  any  of  its
subsidiaries  has  previously  entered  into any  agreement  currently in effect
granting any  registration  rights with respect to any of its  securities to any
Person.  Without  limiting the generality of the foregoing,  without the written
consent  of the  Holders  of a  majority  of the  then  outstanding  Registrable
Securities,  the Company  shall not grant to any Person the right to request the
Company to register  any  securities  of the Company  under the  Securities  Act
unless the rights so granted are subject in all  respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.

                  (c) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant hereto

                                      -11-
<PAGE>

or as  disclosed  in Schedule  2.1(c) of the  Purchase  Agreement or Schedule II
attached  hereto) may  include  securities  of the  Company in the  Registration
Statement,  and the  Company  shall  not after the date  hereof  enter  into any
agreement providing such right to any of its  securityholders,  unless the right
so granted is subject in all respects to the prior rights in full of the Holders
set forth herein,  and is not otherwise in conflict with the  provisions of this
Agreement.

                  (d) Piggy-Back Registrations. If at any time when there is not
an  effective  Registration  Statement  covering (i)  Conversion  Shares or (ii)
Warrant  Shares,  the  Company  shall  determine  to  prepare  and file with the
Commission a registration  statement relating to an offering for its own account
or the  account  of  others  under  the  Securities  Act  of  any of its  equity
securities,  other than on Form S-4 or Form S-8 (each as  promulgated  under the
Securities Act) or their then  equivalents  relating to equity  securities to be
issued solely in connection  with any  acquisition  of any entity or business or
equity  securities  issuable in connection  with stock option or other  employee
benefit plans,  the Company shall send to each holder of Registrable  Securities
written  notice of such  determination  and,  if within  thirty  (30) days after
receipt  of  such  notice,  or  within  such  shorter  period  of time as may be
specified  by the Company in such  written  notice as may be  necessary  for the
Company to comply with its obligations  with respect to the timing of the filing
of such  registration  statement,  any such holder  shall so request in writing,
(which request shall specify the Registrable  Securities intended to be disposed
of by the  Purchasers),  the  Company  will  cause  the  registration  under the
Securities  Act of all  Registrable  Securities  which the  Company  has been so
requested  to  register  by the holder,  to the extent  requisite  to permit the
disposition of the Registrable Securities so to be registered,  provided that if
at any time  after  giving  written  notice of its  intention  to  register  any
securities and prior to the effective date of the  registration  statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its  election,  give written  notice of such  determination  to such holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration  (but not from its  obligation to pay expenses in  accordance  with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be  permitted  to  delay  registering  any  Registrable  Securities  being
registered  pursuant  to this  Section  7(d) for the same period as the delay in
registering   such  other   securities.   The  Company  shall  include  in  such
registration  statement  all or any  part of such  Registrable  Securities  such
holder requests to be registered;  provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 7(d)
that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the
case of an  underwritten  public  offering,  if the managing  underwriter(s)  or
underwriter(s)  should  reasonably  object to the  inclusion of the  Registrable
Securities  in  such   registration   statement,   then  if  the  Company  after
consultation with the managing  underwriter should reasonably determine that the
inclusion of such Registrable  Securities would materially  adversely affect the
offering  contemplated  in  such  registration  statement,  and  based  on  such
determination  recommends  inclusion in such registration  statement of fewer or
none of the  Registrable  Securities  of the  Holders,  then (x) the  number  of
Registrable  Securities of the Holders included in such  registration  statement
shall  be  reduced  pro-rata  among  such  Holders  (based  upon the  number  of
Registrable  Securities  requested to be included in the  registration),  if the
Company after consultation with the  underwriter(s)  recommends the inclusion of
fewer Registrable  Securities,  or (y) none of the Registrable Securities of the
Holders shall be included in such registration  statement,  if the Company after
consultation  with the  underwriter(s)  recommends the inclusion of none of such
Registrable Securities;  provided, however, that if Securities are being offered
for the  account  of other  persons or  entities  as well as the  Company,  such

                                      -12-
<PAGE>

reduction  shall not represent a greater  fraction of the number of  Registrable
securities  intended to be offered by the Holders  than the  fraction of similar
reductions imposed on such other persons or entities (other than the Company).

                  (e) Failure to File  Registration  Statement and Other Events.
The Company and the Purchasers agree that the Holders will suffer damages if the
Registration  Statement  is not  filed on or prior  to the  Filing  Date and not
declared  effective by the Commission on or prior to the Effectiveness  Date and
maintained in the manner contemplated herein during the Effectiveness Time or if
certain  other events occur.  The Company and the Holders  further agree that it
would not be feasible to ascertain  the extent of such  damages with  precision.
Accordingly,  if,  except as set forth in  Section  3(n),  (A) the  Registration
Statement is not filed on or prior to the Filing Date,  or (B) the  Registration
Statement is not declared effective by the Commission on or prior to October 15,
2004 (or in the event an additional  Registration Statement is filed because the
actual  number of  shares of Common  Stock  into  which the  Preferred  Stock is
convertible  and the  Warrants are  exercisable  exceeds the number of shares of
Common Stock initially  registered is not filed and declared  effective with the
time periods set forth in Section 2), or (C) the Company  fails to file with the
Commission a request for  acceleration  in accordance  with Rule 461 promulgated
under the  Securities  Act within  five (5)  Business  Days of the date that the
Company  is  notified  (orally  or in  writing,  whichever  is  earlier)  by the
Commission  that a  Registration  Statement  will not be  "reviewed,"  or is not
subject to further review,  or (D) the Registration  Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all  Registrable  Securities  at  any  time  prior  to  the  expiration  of  the
Effectiveness  Period,  without  being  succeeded by a  subsequent  Registration
Statement filed with and declared effective by the Commission in accordance with
Section 2 hereof or (E) the Company has breached Section 3(n), or (F) trading in
the Common Stock shall be suspended or if the Common Stock is delisted  from the
American  Stock Exchange for any reason for more than three Business Days in the
aggregate  (any such failure or breach being  referred to as an "Event," and for
purposes  of clauses  (A) and (B) the date on which such  Event  occurs,  or for
purposes  of clause  (C) the date on which  such  five  Business  Day  period is
exceeded, or for purposes of clause (D) after more than twenty Business Days, or
for  purposes of clause (F) the date on which such three  Business Day period is
exceeded, being referred to as "Event Date"), the Company shall pay an amount as
liquidated  damages to each Holder equal to 1.0% for the first calendar month or
portion  thereof and 0.5% for each calendar month  thereafter or portion thereof
of the Holder's  initial  investment in the Preferred Stock from the Event Date,
less any amount of Preferred Stock that has been converted by such Holder, until
the applicable Event is cured.  Notwithstanding anything to the contrary in this
paragraph  (e), if (I) any of the Events  described  in clauses  (A), (B) or (C)
shall have occurred,  (II) on or prior to the applicable Event Date, the Company
shall  have  exercised  its  rights  under  Section  3(n)  hereof  and (III) the
postponement or suspension  permitted pursuant to such Section 3(n) shall remain
effective as of such applicable Event Date, then the applicable Event Date shall
be deemed instead to occur on the second  Business Day following the termination
of such postponement or suspension. Notwithstanding anything contained herein to
the contrary,  in no event shall the liquidated  damages amount exceed  eighteen
percent (18%) of the Holder's initial investment in the Preferred Stock.

                  (f) Amendments and Waivers.  The provisions of this Agreement,
including  the  provisions  of this  sentence,  may not be amended,  modified or
supplemented,  and waivers or consents to departures from the provisions  hereof

                                      -13-
<PAGE>

may not be given,  unless the same shall be in writing and signed by the Company
and  the  Holders  of   three-fourths   (3/4)  of  the  Registrable   Securities
outstanding.

                  (g)  Notices.  Any notice,  demand,  request,  waiver or other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received),  telecopy or facsimile at the address or number  designated below (if
delivered on a business day during normal business hours where such notice is to
be received),  or the first  business day following  such delivery (if delivered
other than on a business day during normal  business  hours where such notice is
to be received) or (b) on the second  business day following the date of mailing
by express courier service,  fully prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such  communications  shall be with  respect to each  Holder at its  address set
forth  under its name on  Schedule I  attached  hereto,  or with  respect to the
Company, addressed to:

                                    AXM Pharma, Inc.
                                    3960 Howard Hughes Parkway
                                    Suite 500
                                    Las Vegas, Nevada 89109
                                    Attention: Chet Howard, CFO
                                    Tel. No.: (702) 990-3659
                                    Fax No.:  (702) 990-3501

With a copy, which shall
 not constitute notice to:          Law Offices of Louis E. Taubman, P.C.
                                    225 Broadway, Suite 1200
                                    New York, New York  10007
                                    Attention:  Louis E. Taubman, Esq.
                                    Tel No.:  (212) 732-7184
                                    Fax No.:  (212) 202-6380

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have  designated in writing to the other parties  hereto
by such notice.

                  (h)  Successors and Assigns.  This Agreement  shall be binding
upon and inure to the benefit of the parties and their  successors and permitted
assigns and shall inure to the  benefit of each  Holder and its  successors  and
assigns.  The  Company  may not assign  this  Agreement  or any of its rights or
obligations  hereunder  without the prior written  consent of each Holder.  Each
Purchaser  may assign its rights  hereunder  in the manner and to the Persons as
permitted under the Purchase Agreement.

                  (i)  Assignment  of  Registration  Rights.  The rights of each
Holder  hereunder,  including the right to have the Company  register for resale
Registrable Securities in accordance with the terms of this Agreement,  shall be
automatically  assignable  by each Holder to any Affiliate of such Holder or any
other  Holder  or  Affiliate  of any other  Holder  of all or a  portion  of the
Preferred  Stock or the  Registrable  Securities  if: (i) the  Holder  agrees in
writing with the  transferee  or assignee to assign such  rights,  and a copy of
such agreement is furnished to the Company  within a reasonable  time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or

                                      -14-
<PAGE>

assignment,  furnished  with written  notice of (a) the name and address of such
transferee  or  assignee,  and (b) the  securities  with  respect  to which such
registration  rights are being  transferred  or assigned,  (iii)  following such
transfer  or  assignment  the  further  disposition  of such  securities  by the
transferee or assignees is restricted  under the  Securities  Act and applicable
state  securities  laws,  (iv) at or before the time the  Company  receives  the
written notice  contemplated  by clause (ii) of this Section,  the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable  requirements of the Purchase Agreement. In addition, each Holder
shall have the right to assign its rights hereunder to any other Person with the
prior written  consent of the Company,  which consent shall not be  unreasonably
withheld  provided that such  assignment  shall be in accordance with applicable
securities  laws.  The rights to  assignment  shall apply to the Holders (and to
subsequent) successors and assigns.

                  (j) Counterparts. This Agreement may be executed in any number
of  counterparts,  each of  which  when so  executed  shall be  deemed  to be an
original  and, all of which taken  together  shall  constitute  one and the same
Agreement.   In  the  event  that  any   signature  is  delivered  by  facsimile
transmission,  such  signature  shall create a valid  binding  obligation of the
party  executing  (or on whose behalf such  signature is executed) the same with
the same  force and  effect as if such  facsimile  signature  were the  original
thereof.

                  (k)  Governing  Law. This  Agreement  shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving  effect to any of the conflicts of law  principles  which would result in
the application of the substantive law of another  jurisdiction.  This Agreement
shall not  interpreted  or  construed  with any  presumption  against  the party
causing this Agreement to be drafted.

                  (l)  Cumulative  Remedies.  The remedies  provided  herein are
cumulative and not exclusive of any remedies provided by law.

                  (m)  Severability.   If  any  term,  provision,   covenant  or
restriction  of  this  Agreement  is  held  to  be  invalid,  illegal,  void  or
unenforceable in any respect, the remainder of the terms, provisions,  covenants
and  restrictions  set forth  herein  shall  remain in full force and effect and
shall in no way be affected,  impaired or  invalidated,  and the parties  hereto
shall use their  reasonable  efforts to find and employ an alternative  means to
achieve the same or substantially  the same result as that  contemplated by such
term, provision,  covenant or restriction.  It is hereby stipulated and declared
to be the  intention of the parties that they would have  executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

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

                  (o) Shares Held by the Company  and its  Affiliates.  Whenever
the  consent or approval of Holders of a  specified  percentage  of  Registrable
Securities is required hereunder,  Registrable Securities held by the Company or
its  Affiliates  (other than any Holder or  transferees or successors or assigns

                                      -15-
<PAGE>

thereof  if such  Holder is deemed  to be an  Affiliate  solely by reason of its
holdings of such  Registrable  Securities)  shall not be counted in  determining
whether  such  consent or  approval  was given by the  Holders of such  required
percentage.

                  (p) Independent Nature of Purchasers. The Company acknowledges
that the  obligations  of each  Purchaser  under the  Transaction  Documents are
several  and not  joint  with the  obligations  of any other  Purchaser,  and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under the Transaction Documents. The Company acknowledges
that the  decision  of each  Purchaser  to purchase  securities  pursuant to the
Purchase  Agreement has been made by such Purchaser  independently  of any other
purchase and independently of any information, materials, statements or opinions
as to  the  business,  affairs,  operations,  assets,  properties,  liabilities,
results of  operations,  condition  (financial or otherwise) or prospects of the
Company  or of its  Subsidiaries  which  may have  made or  given  by any  other
Purchaser or by any agent or employee of any other  Purchaser,  and no Purchaser
or any of its agents or employees  shall have any liability to any Purchaser (or
any other person) relating to or arising from any such  information,  materials,
statements or opinions.  The Company acknowledges that nothing contained herein,
or in any Transaction  Document,  and no action taken by any Purchaser  pursuant
hereto or  thereto  (including,  but not  limited  to,  the (i)  inclusion  of a
Purchaser in the Registration Statement and (ii) review by, and consent to, such
Registration  Statement  by a  Purchaser)  shall be  deemed  to  constitute  the
Purchasers as a partnership,  an association,  a joint venture or any other kind
of entity,  or create a presumption that the Purchasers are in any way acting in
concert  or as a group  with  respect to such  obligations  or the  transactions
contemplated by the Transaction  Documents.  The Company  acknowledges that each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose. The Company acknowledges that for reasons of administrative convenience
only,  the  Transaction  Documents  have been prepared by counsel for one of the
Purchasers  and such counsel does not represent all of the  Purchasers  but only
such  Purchaser  and the other  Purchasers  have retained  their own  individual
counsel  with  respect to the  transactions  contemplated  hereby.  The  Company
acknowledges  that it has elected to provide all Purchasers  with the same terms
and Transaction  Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.  The Company  acknowledges
that such procedure with respect to the Transaction  Documents in no way creates
a presumption that the Purchasers are in any way acting in concert or as a group
with  respect to the  Transaction  Documents  or the  transactions  contemplated
hereby or thereby.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -16-
<PAGE>

         IN WITNESS  WHEREOF,  the parties hereto have caused this  Registration
Rights Agreement to be duly executed by their respective  authorized  persons as
of the date first indicated above.

                                      AXM PHARMA, INC.

                                      By:_____________________________________
                                         Name:
                                         Title:

                                      PURCHASER:

                                      By:_____________________________________
                                         Name:
                                         Title:

                                      -17-
<PAGE>

                                   Schedule I
                                   ----------
                                   Purchasers
                                   ----------

Excalibaur Limited Partnership
33 Prince Arthur Avenue
Toronto, ON M5R 1B2

SRG Capital, LLC
120 Broadway, 40th Floor
New York, New York 10271

Greenwich Growth Fund Limited
14 Par-La-Wille Road
PO  Box HM
2257, Hamilton, Bermuda HM08

Whalehaven Fund Limited
14 Par-La-Wille Road
PO Box HM 2257
Hamilton, Bermuda HM08

Cranshire Capital LP

Iroquois Capital, LP

Omicron Master Trust
810 Seventh Avenue 39th Floor
New York, New York 10019

Stonestreet

Enable Growth Partners
One Sansome, Suite 2900
San Francisco, CA 94105

Crescent International LTD
c/o Greenlight (Switzerland) SA
84 Av. Louis-Casai, CH 1216 Cointrin
Geneva, Switzerland

Richard Mollinsky

                                      -18-
<PAGE>

                                   Schedule II
        Securities Permitted to be Included on the Registration Statement

1.   Shares of Common Stock underlying warrants issued to the placement agent in
     connection with the offering.

2.   Shares of Common Stock  underlying  the Shares of Series B Preferred  Stock
     and  Warrants  held by Banyan Mac 24,  Ltd.,  Banyan  Asia  Limited,  Terra
     Capital  Partners,  as placement  agent of the Series B Preferred Stock and
     Warrants and their heirs and assigns.

3.   Aston Organization 300,000 shares of Common Stock

4.   XCL Partners,  Inc.  120,000 shares of Common Stock Common Stock underlying
     200,000 warrants

5.   Madden Consulting, Inc. 300,000 shares of Common Stock

6.   Great Eastern Securities,  Inc. 100,000 shares of Common Stock Common Stock
     underlying 50,000 warrants

7.   Gryphon Master Fund, L.P. Common Stock underlying 100,000 warrants

8.   SF Capital Partners, Ltd. Common Stock underlying 100,000 warrants

9.   Banyan  Asia  Ltd.  and Mac 24  Limited  Common  Stock  underlying  100,000
     warrants (total between the two)

                                      -19-THIS WARRANT AND THE SHARES OF COMMON STOCK  ISSUABLE UPON EXERCISE  HEREOF HAVE
NOT  BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,  TRANSFERRED
OR OTHERWISE  DISPOSED OF UNLESS  REGISTERED  UNDER THE SECURITIES ACT AND UNDER
APPLICABLE  STATE  SECURITIES  LAWS OR AXM PHARMA,  INC.  SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXM PHARMA, INC. THAT REGISTRATION
OF SUCH  SECURITIES  UNDER  THE  SECURITIES  ACT AND  UNDER  THE  PROVISIONS  OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

                               WARRANT TO PURCHASE

                             SHARES OF COMMON STOCK

                                       OF

                                AXM PHARMA, INC.

                              Expires June 24, 2007

No.: W-04-__                                       Number of Shares: ___________
Date of Issuance: June 24, 2004

         FOR VALUE  RECEIVED,  subject to the provisions  hereinafter set forth,
the  undersigned,  AXM Pharma,  Inc., a Nevada  corporation  (together  with its
successors    and   assigns,    the    "Issuer"),    hereby    certifies    that
_______________________________   or  its  registered  assigns  is  entitled  to
subscribe  for and purchase,  during the Term (as  hereinafter  defined),  up to
____________________________________    (_____________)   shares   (subject   to
adjustment as  hereinafter  provided) of the duly  authorized,  validly  issued,
fully paid and  non-assessable  Common Stock of the Issuer, at an exercise price
per share equal to the Warrant Price then in effect,  subject,  however,  to the
provisions and upon the terms and conditions hereinafter set forth.  Capitalized
terms used in this  Warrant  and not  otherwise  defined  herein  shall have the
respective meanings specified in Section 9 hereof.

         1.  Term.  The term of this Warrant shall commence on June 24, 2004 and
shall expire at 5:00 p.m., eastern time, on June 24, 2007 (such period being the
"Term").

         2.  Method of Exercise Payment;  Issuance of New Warrant;  Transfer and
Exchange.

         (a)  Time of Exercise.  The purchase rights represented by this Warrant
may be exercised in whole or in part during the Term commencing on June 24, 2004
and expiring on June 24, 2007.

<PAGE>

         (b)  Method of Exercise.  The Holder hereof may exercise  this Warrant,
in whole or in part,  by the  surrender of this Warrant  (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment  to the  Issuer  of an  amount of  consideration  therefor  equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of  Warrant  Stock  with  respect  to which  this  Warrant  is then being
exercised, payable by certified or official bank check or by wire transfer to an
account designated by the Issuer.

         (c)  Issuance of Stock Certificates.  In the event of any  exercise  of
the rights  represented  by this Warrant in  accordance  with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased  shall be dated the date of such  exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise  or,  at  the  request  of the  Holder  (provided  that a  registration
statement under the Securities Act providing for the resale of the Warrant Stock
is then in effect), issued and delivered to the Depository Trust Company ("DTC")
account on the  Holder's  behalf via the  Deposit  Withdrawal  Agent  Commission
System ("DWAC")  within a reasonable  time, not exceeding three (3) Trading Days
after such  exercise,  and the Holder hereof shall be deemed for all purposes to
be the holder of the shares of Warrant Stock so purchased as of the date of such
exercise and (ii) unless this Warrant has  expired,  a new Warrant  representing
the  number of shares of  Warrant  Stock,  if any,  with  respect  to which this
Warrant  shall not then have been  exercised  shall also be issued to the Holder
hereof at the Issuer's expense within such time.

         (d)  Transferability of Warrant.  Subject to Section 2(f), this Warrant
may be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this  paragraph and subject to the  provisions of subsection  (f) of
this  Section 2, this Warrant may be  transferred  on the books of the Issuer by
the Holder hereof in person or by duly  authorized  attorney,  upon surrender of
this Warrant at the principal  office of the Issuer,  properly  endorsed (by the
Holder  executing an assignment in the form attached hereto) and upon payment of
any  necessary  transfer  tax or other  governmental  charge  imposed  upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants  for the  purchase  of the same  aggregate  number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of  Warrant  Stock as the  Holder  hereof  shall  designate  at the time of such
exchange.  All Warrants  issued on  transfers  or  exchanges  shall be dated the
Original  Issue Date and shall be identical  with this Warrant  except as to the
number of shares of Warrant Stock issuable pursuant thereto.

         (e)  Continuing Rights of Holder.  The  Issuer will, at the time  of or
at any time after each exercise of this Warrant,  upon the request of the Holder
hereof,  acknowledge in writing the extent, if any, of its continuing obligation
to afford to such  Holder all rights to which such Holder  shall  continue to be
entitled  after such  exercise  in  accordance  with the terms of this  Warrant,
provided  that if any such  Holder  shall  fail to make any  such  request,  the
failure shall not affect the continuing  obligation of the Issuer to afford such
rights to such Holder.

         (f)  Compliance with Securities Laws.

                                       2
<PAGE>

                  (i)  The  Holder  of  this  Warrant,   by  acceptance  hereof,
         acknowledges  that this  Warrant or the  shares of Warrant  Stock to be
         issued upon exercise  hereof are being acquired solely for the Holder's
         own  account  and  not as a  nominee  for  any  other  party,  and  for
         investment,  and that the  Holder  will not  offer,  sell or  otherwise
         dispose of this  Warrant  or any  shares of Warrant  Stock to be issued
         upon  exercise  hereof  except  pursuant to an  effective  registration
         statement, or an exemption from registration,  under the Securities Act
         and any applicable state securities laws.

                  (ii) Except as provided in paragraph (iii) below, this Warrant
         and all certificates  representing  shares of Warrant Stock issued upon
         exercise  hereof  shall  be  stamped  or  imprinted  with a  legend  in
         substantially the following form:

                  THIS  WARRANT  AND THE SHARES OF COMMON  STOCK  ISSUABLE  UPON
                  EXERCISE HEREOF HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES
                  ACT OF 1933,  AS AMENDED (THE  "SECURITIES  ACT") OR ANY STATE
                  SECURITIES LAWS AND MAY NOT BE SOLD,  TRANSFERRED OR OTHERWISE
                  DISPOSED OF UNLESS  REGISTERED  UNDER THE  SECURITIES  ACT AND
                  UNDER  APPLICABLE  STATE  SECURITIES LAWS OR AXM PHARMA,  INC.
                  SHALL  HAVE   RECEIVED   AN  OPINION  OF  COUNSEL   REASONABLY
                  SATISFACTORY  TO AXM PHARMA,  INC. THAT  REGISTRATION  OF SUCH
                  SECURITIES  UNDER THE  SECURITIES ACT AND UNDER THE PROVISIONS
                  OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

                  (iii)  The   Issuer   agrees  to  reissue   this   Warrant  or
         certificates  representing any of the Warrant Stock, without the legend
         set forth  above if at such time,  prior to making any  transfer of any
         such  securities,  the Holder shall give  written  notice to the Issuer
         describing  the manner and terms of such  transfer  and  removal as the
         Issuer may reasonably request.  Such proposed transfer and removal will
         not be  effected  until:  (a) either (i) the  Issuer  has  received  an
         opinion of counsel reasonably satisfactory to the Issuer, to the effect
         that the  registration of such  securities  under the Securities Act is
         not  required  in  connection  with  such  proposed  transfer,  (ii)  a
         registration  statement under the Securities Act covering such proposed
         disposition  has been  filed by the  Issuer  with  the  Securities  and
         Exchange  Commission and has become effective under the Securities Act,
         (iii) the Issuer has received other evidence reasonably satisfactory to
         the  Issuer  that  such  registration  and   qualification   under  the
         Securities Act and state securities laws are not required,  or (iv) the
         Holder  provides  the  Issuer  with  reasonable  assurances  that  such
         security can be sold pursuant to Rule 144 under the Securities Act; and
         (b) either (i) the Issuer has received an opinion of counsel reasonably
         satisfactory  to  the  Issuer,  to  the  effect  that  registration  or
         qualification  under the  securities or "blue sky" laws of any state is
         not required in  connection  with such  proposed  disposition,  or (ii)
         compliance with applicable state securities or "blue sky" laws has been
         effected or a valid exemption exists with respect  thereto.  The Issuer
         will respond to any such notice from a holder  within five (5) business

                                       3
<PAGE>

         days. In the case of any proposed transfer under this Section 2(f), the
         Issuer will use reasonable  efforts to comply with any such  applicable
         state securities or "blue sky" laws, but shall in no event be required,
         (x) to  qualify  to do  business  in any  state  where  it is not  then
         qualified,  (y) to take any action  that would  subject it to tax or to
         the  general  service  of  process  in any  state  where it is not then
         subject,  or (z) to comply with state  securities or "blue sky" laws of
         any state for which  registration by coordination is unavailable to the
         Issuer.  The  restrictions  on transfer  contained in this Section 2(f)
         shall be in  addition  to, and not by way of  limitation  of, any other
         restrictions  on  transfer  contained  in any  other  section  of  this
         Warrant.  Whenever a  certificate  representing  the  Warrant  Stock is
         required  to be issued  to a the  Holder  without a legend,  in lieu of
         delivering  physical  certificates   representing  the  Warrant  Stock,
         provided the Issuer's  transfer agent is  participating in the DTC Fast
         Automated  Securities  Transfer  program,  the  Issuer  shall  use  its
         reasonable  best efforts to cause its transfer agent to  electronically
         transmit the Warrant  Stock to the Holder by  crediting  the account of
         the  Holder's  Prime  Broker  with DTC  through its DWAC system (to the
         extent not  inconsistent  with any  provisions  of this  Warrant or the
         Purchase Agreement).

         (g) In no event may the  Holder  exercise  this  Warrant in whole or in
part unless the Holder is an  "accredited  investor" as defined in  Regulation D
under the Securities Act.

         3.  Stock Fully Paid; Reservation and Listing of Shares; Covenants.

         (a) Stock Fully Paid. The Issuer  represents,  warrants,  covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise  hereunder  will,  when issued in accordance  with the
terms of this  Warrant,  be duly  authorized,  validly  issued,  fully  paid and
non-assessable  and free from all taxes, liens and charges created by or through
the  Issuer.  The Issuer  further  covenants  and agrees  that during the period
within  which this Warrant may be  exercised,  the Issuer will at all times have
authorized  and  reserved  for the  purpose of the issue upon  exercise  of this
Warrant  a  sufficient  number of shares  of  Common  Stock to  provide  for the
exercise of this Warrant.

         (b) Reservation.  If any shares of Common Stock required to be reserved
for issuance  upon exercise of this Warrant or as otherwise  provided  hereunder
require registration or qualification with any governmental  authority under any
federal or state law before  such  shares may be so issued,  the Issuer  will in
good faith use its reasonable best efforts as  expeditiously  as possible at its
expense to cause such shares to be duly  registered or qualified.  If the Issuer
shall list any shares of Common  Stock on any  securities  exchange or market it
will, at its expense,  list thereon,  maintain and increase when  necessary such
listing,  of, all shares of Warrant Stock from time to time issued upon exercise
of this Warrant or as otherwise provided  hereunder  (provided that such Warrant
Stock  has been  registered  pursuant  to a  registration  statement  under  the
Securities  Act then in  effect),  and,  to the  extent  permissible  under  the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder,  so long as any shares of Common Stock shall
be so  listed.  The  Issuer  will also so list on each  securities  exchange  or
market, and will maintain such listing of, any other securities which the Holder
of this  Warrant  shall be entitled to receive upon the exercise of this Warrant
if at the time  any  securities  of the  same  class  shall  be  listed  on such
securities exchange or market by the Issuer.

                                       4
<PAGE>

         (c) Covenants.  The Issuer shall not by any action  including,  without
limitation, amending the Articles of Incorporation or the by-laws of the Issuer,
or  through  any  reorganization,  transfer  of assets,  consolidation,  merger,
dissolution,  issue or sale of securities or any other action,  avoid or seek to
avoid the  observance or  performance  of any of the terms of this Warrant,  but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or  appropriate to protect
the rights of the Holder  hereof  against  dilution (to the extent  specifically
provided  herein)  or  impairment.   Without  limiting  the  generality  of  the
foregoing,  the Issuer will (i) not permit the par value,  if any, of its Common
Stock to exceed the then effective  Warrant Price,  (ii) not amend or modify any
provision  of the  Articles  of  Incorporation  or  by-laws of the Issuer in any
manner that would adversely  affect the rights of the Holders of the Warrants in
their capacity as Holders of the Warrants,  (iii) take all such action as may be
reasonably  necessary  in order that the Issuer may validly  and  legally  issue
fully  paid and  nonassessable  shares  of Common  Stock,  free and clear of any
liens,  claims,  encumbrances and  restrictions  (other than as provided herein)
upon the exercise of this Warrant,  and (iv) use its reasonable  best efforts to
obtain  all  such  authorizations,   exemptions  or  consents  from  any  public
regulatory body having  jurisdiction  thereof as may be reasonably  necessary to
enable the Issuer to perform its obligations under this Warrant.

         (d) Loss,  Theft,  Destruction  of  Warrants.  Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft,  destruction
or  mutilation  of any  Warrant  and,  in the  case of any such  loss,  theft or
destruction,  upon receipt of indemnity or security  satisfactory  to the Issuer
or, in the case of any such mutilation,  upon surrender and cancellation of such
Warrant,  the  Issuer  will  make and  deliver,  in lieu of such  lost,  stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.

         4.  Adjustment of Warrant Price.  The price at which such shares may be
purchased upon exercise of this Warrant shall be subject to adjustment from time
to time as set forth in this Section 4. The Issuer shall give the Holder  notice
of any event  described  below  which  requires an  adjustment  pursuant to this
Section 4 in accordance with Section 5.

         (a) Recapitalization,  Reorganization, Reclassification, Consolidation,
Merger or Sale.

                  (i) In case the Issuer after the Original  Issue Date shall do
         any of the following (each, a "Triggering  Event"):  (a) consolidate or
         merge with or into another corporation where the holders of outstanding
         Voting Stock prior to such merger or  consolidation do not own over 50%
         of the outstanding  Voting Stock of the merged or  consolidated  entity
         immediately  after  such  merger or  consolidation,  or (b) sell all or
         substantially  all of its properties or assets to any other Person,  or
         (c) change the Common Stock to the same or  different  number of shares
         of  any  class  or  classes  of  stock,  whether  by  reclassification,
         exchange, substitution or otherwise (other than by way of a stock split
         or combination of shares or stock dividends or  distributions  provided
         for in  Section  4(b)  or  Section  4(c)),  or  (d)  effect  a  capital
         reorganization  (other than by way of a stock split or  combination  of
         shares or stock dividends or distributions provided for in Section 4(b)
         or Section 4(c)),  then, and in the case of each such Triggering Event,
         proper  provision  shall be made so that,  upon the basis and the terms
         and in the manner provided in this Warrant,  the Holder of this Warrant
         shall be  entitled  upon the  exercise  hereof  at any time  after  the

                                       5
<PAGE>

         consummation  of such  Triggering  Event, to the extent this Warrant is
         not exercised prior to such Triggering Event, to receive at the Warrant
         Price in effect at the time  immediately  prior to the  consummation of
         such  Triggering  Event in lieu of the Common Stock  issuable upon such
         exercise  of  this  Warrant  prior  to  such  Triggering   Event,   the
         securities,  cash and  property  to which such  Holder  would have been
         entitled upon the  consummation of such Triggering Event if such Holder
         had exercised the rights represented by this Warrant  immediately prior
         thereto,  subject to adjustments  (subsequent to such corporate action)
         as nearly  equivalent  as  possible  to the  adjustments  provided  for
         elsewhere in this Section 4.

                  (ii) Notwithstanding anything contained in this Warrant to the
         contrary,  a Triggering  Event shall not be deemed to have occurred if,
         prior to the consummation  thereof, each Person (other than the Issuer)
         which may be required to deliver any securities,  cash or property upon
         the  exercise  of this  Warrant as provided  herein  shall  assume,  by
         written  instrument  delivered to, and reasonably  satisfactory to, the
         Holder of this Warrant,  (A) the  obligations  of the Issuer under this
         Warrant  (and if the Issuer  shall  survive  the  consummation  of such
         Triggering  Event,  such assumption  shall be in addition to, and shall
         not release the Issuer from, any  continuing  obligations of the Issuer
         under this  Warrant) and (B) the  obligation  to deliver to such Holder
         such shares of securities,  cash or property as, in accordance with the
         foregoing  provisions  of this  subsection  (a),  such Holder  shall be
         entitled to receive,  and such Person shall have similarly delivered to
         such  Holder a written  acknowledgement  executed by the  President  or
         Chief Financial Officer of the Company, stating that this Warrant shall
         thereafter  continue  in full  force and  effect  and the terms  hereof
         (including,   without  limitation,   all  of  the  provisions  of  this
         subsection (a)) shall be applicable to the securities, cash or property
         which such Person may be required to deliver  upon any exercise of this
         Warrant or the exercise of any rights pursuant hereto.

                  (b) Stock Dividends,  Subdivisions and Combinations. If at any
time the Issuer shall:

                           (i)  make  or  issue  or set a  record  date  for the
         holders  of its  Common  Stock for the  purpose  of  entitling  them to
         receive a dividend  payable  in, or other  distribution  of,  shares of
         Common Stock,

                           (ii) subdivide its outstanding shares of Common Stock
         into a larger number of shares of Common Stock, or

                           (iii) combine its outstanding  shares of Common Stock
         into a smaller number of shares of Common Stock,

then (1) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  occurrence  of such event would own or be entitled to
receive  after the  happening of such event,  and (2) the Warrant  Price then in
effect  shall  be  adjusted  to  equal  (A) the  Warrant  Price  then in  effect

                                       6
<PAGE>

multiplied  by the number of shares of Common  Stock for which  this  Warrant is
exercisable  immediately  prior to the  adjustment  divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable  immediately  after
such adjustment.

Notwithstanding  the  foregoing,  if such  record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed  therefor,  the  Warrant  Price  shall be  adjusted  pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.

         (c) Certain Other  Distributions.  If at any time the Issuer shall make
or issue or set a record date for the determination of the holders of its Common
Stock for the  purpose  of  entitling  them to  receive  any  dividend  or other
distribution of:

                           (i) cash (other than a cash  dividend  payable out of
         earnings  or  earned  surplus  legally  available  for the  payment  of
         dividends under the laws of the  jurisdiction of  incorporation  of the
         Issuer),

                           (ii) any evidences of its indebtedness, any shares of
         stock of any class or any other  securities  or  property of any nature
         whatsoever  (other  than cash,  Convertible  Securities  or  Additional
         Shares of Common Stock), or

                           (iii) any warrants or other  rights to subscribe  for
         or purchase any evidences of its  indebtedness,  any shares of stock of
         any class or any other securities or property of any nature  whatsoever
         (other than cash, Convertible Securities or Additional Shares of Common
         Stock),

then (1) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  shall be  adjusted  to equal the product of the number of shares of
Common Stock for which this  Warrant is  exercisable  immediately  prior to such
adjustment  multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator  of which  shall be such Per Share  Market  Value  minus the  amount
allocable to one share of Common Stock of any such cash so distributable  and of
the fair value (as  determined  in good faith by the Board of  Directors  of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any and
all such  evidences  of  indebtedness,  shares of  stock,  other  securities  or
property or warrants or other  subscription or purchase rights so distributable,
and (2) the  Warrant  Price then in effect  shall be  adjusted  to equal (A) the
Warrant Price then in effect  multiplied by the number of shares of Common Stock
for which  this  Warrant  is  exercisable  immediately  prior to the  adjustment
divided  by (B) the number of shares of Common  Stock for which this  Warrant is
exercisable immediately after such adjustment.  A reclassification of the Common
Stock  (other  than a change in par value,  or from par value to no par value or
from no par value to par value)  into  shares of Common  Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its  Common  Stock of such  shares of such  other  class of stock  within the
meaning of this  Section  4(c) and, if the  outstanding  shares of Common  Stock
shall be changed into a larger or smaller  number of shares of Common Stock as a
part of such  reclassification,  such change  shall be deemed a  subdivision  or
combination,  as the case may be, of the  outstanding  shares  of  Common  Stock
within the meaning of Section 4(b).

                                       7
<PAGE>

Notwithstanding  the  foregoing,  if such  record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed  therefor,  the  Warrant  Price  shall be  adjusted  pursuant to this
Section  4(c)  as  of  the  time  of  actual   payment  of  such   dividends  or
distributions.

         (d) Issuance of Additional Shares of Common Stock.

                  (i) In the event the Issuer  shall at any time  following  the
Original Issue Date issue any Additional  Shares of Common Stock (otherwise than
as provided in the foregoing  subsections (a) through (c) of this Section 4), at
a price  per share  less  than the  Warrant  Price  then in  effect  or  without
consideration,  then the Warrant Price upon each such issuance shall be adjusted
to that price  determined by  multiplying  the Warrant Price then in effect by a
fraction:

                           (A) the  numerator of which shall be equal to the sum
                  of (x) the  number  of  shares  of  Outstanding  Common  Stock
                  immediately prior to the issuance of such Additional Shares of
                  Common  Stock  plus (y) the  number of shares of Common  Stock
                  (rounded  to the  nearest  whole  share)  which the  aggregate
                  consideration  for the total number of such Additional  Shares
                  of Common Stock so issued would  purchase at a price per share
                  equal to the Warrant Price then in effect, and

                           (B) the  denominator  of which  shall be equal to the
                  number of shares of Outstanding Common Stock immediately after
                  the issuance of such Additional Shares of Common Stock.

                  (ii) No adjustment of the number of shares of Common Stock for
which this Warrant  shall be  exercisable  shall be made under  paragraph (i) of
Section  4(d) upon the issuance of any  Additional  Shares of Common Stock which
are issued pursuant to the exercise of any Common Stock Equivalents, if any such
adjustment  shall  previously  have been made upon the  issuance  of such Common
Stock Equivalents (or upon the issuance of any warrant or other rights therefor)
pursuant to Section 4(e).

         (e)  Issuance of Common  Stock  Equivalents.  If at any time the Issuer
shall issue or sell any Common Stock  Equivalents,  whether or not the rights to
exchange or convert  thereunder are immediately  exercisable,  and the aggregate
price per share for which  Common  Stock is  issuable  upon such  conversion  or
exchange  plus the  consideration  received  by the Issuer for  issuance of such
Common Stock Equivalent divided by the number of shares of Common Stock issuable
pursuant to such Common Stock Equivalent shall be less than the Warrant Price in
effect  immediately  prior to the time of such issue or sale, then the number of
shares of Common  Stock for which this  Warrant is  exercisable  and the Warrant
Price then in effect  shall be adjusted as provided in Section 4(d) on the basis
that the maximum number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Common Stock  Equivalents shall be deemed
to have been issued and  outstanding  and the Issuer shall have  received all of
the consideration payable therefor, if any, as of the date of actual issuance of
such Common Stock Equivalents.  No further adjustment of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Price then in
effect  shall be made under this  Section  4(e) upon the  issuance of any Common

                                       8
<PAGE>

Stock  Equivalents  which are issued pursuant to the exercise of any warrants or
other  subscription or purchase rights  therefor,  if any such adjustment  shall
previously  have been made upon the  issuance of such  warrants or other  rights
pursuant to this Section 4(e). No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Price then in
effect shall be made upon the actual issue of such Common Stock upon  conversion
or exchange of such Common Stock Equivalents.

         (f) Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is  exercisable  and the
Warrant  Price then in effect  shall have been made  pursuant to Section 4(e) as
the result of any  issuance  of Common  Stock  Equivalents,  and (i) such Common
Stock  Equivalents,  or the right of conversion or exchange in such Common Stock
Equivalents,  shall  expire,  and  all or a  portion  of such  or the  right  of
conversion  or exchange  with  respect to all or a portion of such Common  Stock
Equivalents,  as the case may be,  shall  not have been  exercised,  or (ii) the
consideration  per share for which shares of Common Stock are issuable  pursuant
to such  Common  Stock  Equivalents  shall  be  increased,  then  such  previous
adjustment  shall be rescinded and annulled and the Additional  Shares of Common
Stock which were deemed to have been issued by virtue of the computation made in
connection  with the  adjustment  so rescinded  and annulled  shall no longer be
deemed to have been issued by virtue of such computation. Upon the occurrence of
an event set forth in this  Section 4(f) above,  there shall be a  recomputation
made of the  effect of such  Common  Stock  Equivalents  on the  basis  of:  (i)
treating the number of Additional  Shares of Common Stock  theretofore  actually
issued or issuable pursuant to the previous exercise of Common Stock Equivalents
or any such right of conversion  or exchange,  as having been issued on the date
or dates of any such exercise and for the  consideration  actually  received and
receivable  therefor,  and (ii) treating any such Common Stock Equivalents which
then remain  outstanding as having been granted or issued  immediately after the
time of such increase of the consideration per share for which Additional Shares
of Common Stock are issuable  under such Common Stock  Equivalents;  whereupon a
new adjustment of the number of shares of Common Stock for which this Warrant is
exercisable  and the  Warrant  Price  then in  effect  shall be made,  which new
adjustment shall supersede the previous adjustment so rescinded and annulled.

         (h) Purchase of Common  Stock by the Issuer.  If the Issuer at any time
while this  Warrant is  outstanding  shall,  directly  or  indirectly  through a
Subsidiary or  otherwise,  purchase,  redeem or otherwise  acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value,  then
the Warrant Price upon each such purchase,  redemption or  acquisition  shall be
adjusted  to that  price  determined  by  multiplying  such  Warrant  Price by a
fraction (i) the numerator of which shall be the number of shares of Outstanding
Common Stock immediately prior to such purchase, redemption or acquisition minus
the number of shares of Common Stock which the aggregate  consideration  for the
total number of such shares of Common Stock so  purchased,  redeemed or acquired
would purchase at the Per Share Market Value;  and (ii) the denominator of which
shall be the number of shares of Outstanding Common Stock immediately after such
purchase,  redemption or  acquisition.  For the purposes of this subsection (h),
the date as of which the Per Share Market  Price shall be computed  shall be the
earlier of (x) the date on which the Issuer shall enter into a firm contract for
the purchase, redemption or acquisition of such Common Stock, or (y) the date of
actual  purchase,  redemption  or  acquisition  of such  Common  Stock.  For the
purposes of this  subsection  (h), a purchase,  redemption or  acquisition  of a
Common  Stock  Equivalent  shall be deemed to be a  purchase  of the  underlying

                                       9
<PAGE>

Common Stock, and the computation  herein required shall be made on the basis of
the full exercise, conversion or exchange of such Common Stock Equivalent on the
date as of which such computation is required hereby to be made,  whether or not
such  Common  Stock   Equivalent  is  actually   exercisable,   convertible   or
exchangeable on such date.

         (i) Other Provisions  applicable to Adjustments under this Section. The
following  provisions  shall be applicable to the making of  adjustments  of the
number of shares of Common Stock for which this Warrant is  exercisable  and the
Warrant Price then in effect provided for in this Section 4:

                  (i)  Computation  of  Consideration.  To the  extent  that any
Additional  Shares of  Common  Stock or any  Common  Stock  Equivalents  (or any
warrants or other rights therefor) shall be issued for cash  consideration,  the
consideration  received by the Issuer  therefor  shall be the amount of the cash
received by the Issuer therefor,  or, if such Additional  Shares of Common Stock
or Common  Stock  Equivalents  are offered by the Issuer for  subscription,  the
subscription  price,  or, if such  Additional  Shares of Common  Stock or Common
Stock  Equivalents  are sold to  underwriters  or dealers  for  public  offering
without a subscription  offering, the initial public offering price (in any such
case  subtracting any amounts paid or receivable for accrued interest or accrued
dividends  and  without  taking  into  account any  compensation,  discounts  or
expenses  paid or  incurred  by the  Issuer for and in the  underwriting  of, or
otherwise in connection  with,  the issuance  thereof).  In connection  with any
merger or consolidation in which the Issuer is the surviving  corporation (other
than any consolidation or merger in which the previously  outstanding  shares of
Common  Stock of the Issuer  shall be changed to or  exchanged  for the stock or
other securities of another corporation),  the amount of consideration therefore
shall be,  deemed to be the fair value,  as  determined  reasonably  and in good
faith  by  the  Board,  of  such  portion  of the  assets  and  business  of the
nonsurviving  corporation as the Board may determine to be  attributable to such
shares of Common  Stock or Common  Stock  Equivalents,  as the case may be.  The
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants or other  rights to  subscribe  for or  purchase  the same shall be the
consideration  received by the Issuer for issuing such  warrants or other rights
plus the  additional  consideration  payable to the Issuer upon exercise of such
warrants or other rights.  The consideration for any Additional Shares of Common
Stock issuable  pursuant to the terms of any Common Stock  Equivalents  shall be
the consideration received by the Issuer for issuing warrants or other rights to
subscribe for or purchase such Common Stock Equivalents,  plus the consideration
paid or payable to the Issuer in respect of the  subscription for or purchase of
such  Common  Stock  Equivalents,  plus the  additional  consideration,  if any,
payable to the Issuer upon the exercise of the right of  conversion  or exchange
in such Common Stock Equivalents. In the event of any consolidation or merger of
the Issuer in which the Issuer is not the surviving  corporation or in which the
previously  outstanding  shares of Common  Stock of the Issuer  shall be changed
into or exchanged for the stock or other securities of another  corporation,  or
in the event of any sale of all or substantially all of the assets of the Issuer
for stock or other securities of any corporation,  the Issuer shall be deemed to
have issued a number of shares of its Common  Stock for stock or  securities  or
other  property  of the other  corporation  computed  on the basis of the actual
exchange ratio on which the transaction was predicated,  and for a consideration
equal to the fair market value on the date of such transaction of all such stock
or  securities  or other  property  of the other  corporation.  In the event any
consideration  received  by the Issuer for any  securities  consists of property
other than cash,  the fair  market  value  thereof at the time of issuance or as

                                       10
<PAGE>

otherwise  applicable  shall be as determined in good faith by the Board. In the
event Common Stock is issued with other shares or  securities or other assets of
the Issuer for consideration  which covers both, the  consideration  computed as
provided in this Section  4(i)(i) shall be allocated  among such  securities and
assets as determined in good faith by the Board.

                  (ii) When Adjustments to Be Made. The adjustments  required by
this  Section  4 shall be made  whenever  and as often  as any  specified  event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common  Stock  for  which  this  Warrant  is  exercisable  that  would
otherwise be required may be postponed  (except in the case of a subdivision  or
combination  of shares of the Common Stock,  as provided for in Section 4(b)) up
to, but not beyond the date of exercise if such  adjustment  either by itself or
with other  adjustments  not  previously  made adds or  subtracts  less than one
percent (1%) of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment.  Any adjustment representing
a change  of less  than such  minimum  amount  (except  as  aforesaid)  which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum  adjustment  or on the date of exercise.  For the purpose of
any  adjustment,  any  specified  event shall be deemed to have  occurred at the
close of business on the date of its occurrence.

                  (iii) Fractional  Interests.  In computing  adjustments  under
this Section 4, fractional interests in Common Stock shall be taken into account
to the nearest one one-hundredth (1/100th) of a share.

                  (iv) When Adjustment Not Required.  If the Issuer shall take a
record of the holders of its Common Stock for the purpose of  entitling  them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof,  legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights,  then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment  previously made in respect thereof shall
be rescinded and annulled.

         (j) Form of Warrant  after  Adjustments.  The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.

         (k)  Escrow  of  Warrant   Stock.   If  after  any   property   becomes
distributable  pursuant to this  Section 4 by reason of the taking of any record
of the holders of Common  Stock,  but prior to the  occurrence  of the event for
which such record is taken, and the Holder exercises this Warrant, any shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the  last  shares  of  Common   Stock  for  which  this   Warrant  is  exercised
(notwithstanding  any other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by the Issuer to be issued
to the Holder upon and to the extent that the event actually  takes place,  upon
payment of the current Warrant Price. Notwithstanding any other provision to the
contrary herein,  if the event for which such record was taken fails to occur or
is  rescinded,  then such  escrowed  shares shall be cancelled by the Issuer and
escrowed property returned.

                                       11
<PAGE>

         5. Notice of  Adjustments.  Whenever the Warrant Price or Warrant Share
Number  shall be adjusted  pursuant  to Section 4 hereof  (for  purposes of this
Section 5, each an  "adjustment"),  the Issuer  shall cause its Chief  Financial
Officer to prepare  and  execute a  certificate  setting  forth,  in  reasonable
detail,  the event requiring the adjustment,  the amount of the adjustment,  the
method by which such  adjustment was calculated  (including a description of the
basis on which the Board  made any  determination  hereunder),  and the  Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such  certificate  to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with  respect to the matters set forth in such  certificate  may at
the option of the Holder of this  Warrant be  submitted  to one of the  national
accounting  firms  currently  known as the "big four"  selected  by the  Holder,
provided  that the Issuer shall have ten (10) days after  receipt of notice from
such Holder of its selection of such firm to object thereto,  in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection.  The firm  selected by the Holder of this  Warrant as provided in the
preceding  sentence shall be instructed to deliver a written  opinion as to such
matters to the Issuer and such Holder within  thirty (30) days after  submission
to it of such  dispute.  Such opinion  shall be final and binding on the parties
hereto.

         6.  Fractional  Shares.  No fractional  shares of Warrant Stock will be
issued in connection  with any exercise  hereof,  but in lieu of such fractional
shares,  the Issuer  shall make a cash payment  therefor  equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.

         7. Ownership Cap and Certain Exercise Restrictions. (a) Notwithstanding
anything to the contrary set forth in this  Warrant,  at no time may a Holder of
this Warrant exercise this Warrant if the number of shares of Common Stock to be
issued  pursuant to such exercise would exceed,  when  aggregated with all other
shares of Common  Stock owned by such Holder at such time,  the number of shares
of Common  Stock  which  would  result in such  Holder  beneficially  owning (as
determined  in  accordance  with Section 13(d) of the Exchange Act and the rules
thereunder)  in  excess of 4.9% of the then  issued  and  outstanding  shares of
Common Stock;  provided,  however,  that upon a holder of this Warrant providing
the Issuer with sixty-one (61) days notice  (pursuant to Section 13 hereof) (the
"Waiver  Notice")  that such Holder  would like to waive this  Section 7(a) with
regard to any or all  shares of Common  Stock  issuable  upon  exercise  of this
Warrant, this Section 7(a) will be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice; provided,  further, that
this provision  shall be of no further force or effect during the sixty-one (61)
days immediately preceding the expiration of the term of this Warrant.

                  (b) The Holder may not exercise  the Warrant  hereunder to the
extent  such  exercise  would  result  in the  Holder  beneficially  owning  (as
determined  in  accordance  with Section 13(d) of the Exchange Act and the rules
thereunder)  in  excess of 9.9% of the then  issued  and  outstanding  shares of
Common Stock, including shares issuable upon exercise of the Warrant held by the
Holder after application of this Section; provided,  however, that upon a holder
of this  Warrant  providing  the Company  with a Waiver  Notice that such holder
would like to waive this Section 7(b) with regard to any or all shares of Common
Stock  issuable upon exercise of this Warrant,  this Section 7(b) shall be of no

                                       12
<PAGE>

force or effect with regard to those shares of Warrant  Stock  referenced in the
Waiver Notice;  provided,  further,  that this provision  shall be of no further
force or effect  during  the  sixty-one  (61)  days  immediately  preceding  the
expiration of the term of this Warrant.

         8.  Definitions.  For the purposes of this Warrant, the following terms
have the following meanings:

                  "Additional Shares of Common Stock" means all shares of Common
         Stock  issued by the Issuer  after the  Original  Issue  Date,  and all
         shares of Other Common, if any, issued by the Issuer after the Original
         Issue Date,  except:  (i)  securities  issued  (other than for cash) in
         connection  with  a  merger,   acquisition,   or  consolidation,   (ii)
         securities  issued  pursuant  to a bona fide firm  underwritten  public
         offering of the Issuer's  securities,  (iii) securities issued pursuant
         to the conversion or exercise of convertible or excercisable securities
         issued or outstanding on or prior to the date hereof or issued pursuant
         to the  Purchase  Agreement,  (iv) the Warrant  Stock,  (v)  securities
         issued in connection with strategic license  agreements so long as such
         issuances are not for the purpose of raising capital, (vi) Common Stock
         issued or options to purchase  Common Stock granted or issued  pursuant
         to the Issuer's stock option plans and employee stock purchase plans as
         they now exist,  (vii) any warrants  issued to the placement  agent for
         the transactions contemplated by the Purchase Agreement, and (viii) the
         payment of any dividend on the Series C Convertible  Preferred Stock of
         the Issuer.

                  "Articles   of   Incorporation"    means   the   Articles   of
         Incorporation  of the Issuer as in effect on the  Original  Issue Date,
         and as hereafter from time to time amended,  modified,  supplemented or
         restated in  accordance  with the terms hereof and thereof and pursuant
         to applicable law.

                  "Board" shall mean the Board of Directors of the Issuer.

                  "Capital  Stock"  means and  includes  (i) any and all shares,
         interests,  participations  or other  equivalents  of or  interests  in
         (however designated)  corporate stock,  including,  without limitation,
         shares of preferred or preference stock, (ii) all partnership interests
         (whether  general or  limited)  in any Person  which is a  partnership,
         (iii) all membership  interests or limited  liability company interests
         in any  limited  liability  company,  and (iv) all equity or  ownership
         interests in any Person of any other type.

                  "Common  Stock"  means the Common  Stock,  par value $.001 per
         share,  of the Issuer and any other Capital Stock into which such stock
         may hereafter be changed.

                  "Common Stock  Equivalent"  means any Convertible  Security or
         warrant,  option  or  other  right to  subscribe  for or  purchase  any
         Additional Shares of Common Stock or any Convertible Security.

                  "Convertible  Securities"  means  evidences  of  Indebtedness,
         shares of Capital Stock or other  Securities which are or may be at any
         time convertible  into or exchangeable for Additional  Shares of Common
         Stock.  The term  "Convertible  Security"  means one of the Convertible
         Securities.

                                       13
<PAGE>

                  "Governmental Authority" means any governmental, regulatory or
         self-regulatory   entity,   department,   body,  official,   authority,
         commission, board, agency or instrumentality, whether federal, state or
         local, and whether domestic or foreign.

                  "Holders" mean the Persons who shall from time to time own any
         Warrant. The term "Holder" means one of the Holders.

                  "Independent Appraiser" means a nationally recognized or major
         regional  investment  banking  firm or firm  of  independent  certified
         public  accountants of recognized  standing (which may be the firm that
         regularly  examines  the  financial  statements  of the Issuer) that is
         regularly  engaged in the business of  appraising  the Capital Stock or
         assets of corporations  or other entities as going concerns,  and which
         is not affiliated with either the Issuer or the Holder of any Warrant.

                  "Issuer" means AXM Pharma, Inc., a Nevada corporation, and its
         successors.

                  "Majority  Holders"  means at any time the Holders of Warrants
         exercisable  for a majority  of the shares of  Warrant  Stock  issuable
         under the Warrants at the time outstanding.

                  "Original Issue Date" means June __, 2004.

                  "OTC  Bulletin  Board" means the  over-the-counter  electronic
         bulletin board.

                  "Other  Common" means any other Capital Stock of the Issuer of
         any class which shall be  authorized at any time after the date of this
         Warrant  (other  than  Common  Stock) and which shall have the right to
         participate  in the  distribution  of earnings and assets of the Issuer
         without limitation as to amount.

                  "Outstanding  Common  Stock"  means,  at any given  time,  the
         aggregate amount of outstanding  shares of Common Stock,  assuming full
         exercise,  conversion  or  exchange  (as  applicable)  of all  options,
         warrants and other Securities which are convertible into or exercisable
         or  exchangeable  for, and any right to subscribe for, shares of Common
         Stock that are outstanding at such time.

                  "Person" means an individual,  corporation,  limited liability
         company,  partnership,   joint  stock  company,  trust,  unincorporated
         organization,  joint venture, Governmental Authority or other entity of
         whatever nature.

                  "Per Share Market Value" means on any particular  date (a) the
         average of the closing bid price per share of the Common  Stock on such
         date on the  American  Stock  Exchange or another  registered  national
         stock exchange on which the Common Stock is then listed, or if there is
         no such price on such date,  then the  average of the closing bid price
         on such exchange or quotation system on the date nearest preceding such
         date,  or (b) if the Common  Stock is not listed  then on the  American
         Stock Exchange or any registered  national stock exchange,  the closing
         bid price for a share of Common Stock in the  over-the-counter  market,

                                       14
<PAGE>

         as  reported by the OTC  Bulletin  Board or in the  National  Quotation
         Bureau Incorporated or similar organization or agency succeeding to its
         functions of  reporting  prices) at the close of business on such date,
         or (c) if the Common  Stock is not then  reported  by the OTC  Bulletin
         Board  or  the  National  Quotation  Bureau  Incorporated  (or  similar
         organization  or  agency  succeeding  to  its  functions  of  reporting
         prices),  then the average of the "Pink Sheet"  quotes for the relevant
         conversion period, as determined in good faith by the holder, or (d) if
         the Common Stock is not then publicly traded the fair market value of a
         share  of  Common  Stock  as  determined  by an  Independent  Appraiser
         selected in good faith by the Majority  Holders.  The  determination of
         fair market value by an Independent  Appraiser  shall be based upon the
         fair market value of the Issuer  determined on a going concern basis as
         between a willing  buyer and a willing  seller and taking into  account
         all relevant  factors  determinative  of value,  and shall be final and
         binding on all  parties.  In  determining  the fair market value of any
         shares  of  Common  Stock,  no  consideration  shall  be  given  to any
         restrictions on transfer of the Common Stock imposed by agreement or by
         federal or state securities laws, or to the existence or absence of, or
         any limitations on, voting rights.

                  "Purchase  Agreement" means the Securities  Purchase Agreement
         dated as of June 24,  2004 among the Issuer and the  investors  a party
         thereto.

                  "Securities"  means  any  debt  or  equity  securities  of the
         Issuer, whether now or hereafter authorized, any instrument convertible
         into or  exchangeable  for  Securities  or a Security,  and any option,
         warrant or other right to purchase or acquire any Security.  "Security"
         means one of the Securities.

                  "Securities Act" means the Securities Act of 1933, as amended,
         or any similar federal statute then in effect.

                  "Subsidiary"  means  any  corporation  at  least  50% of whose
         outstanding  Voting  Stock  shall  at the  time be  owned  directly  or
         indirectly by the Issuer or by one or more of its  Subsidiaries,  or by
         the Issuer and one or more of its Subsidiaries.

                  "Term" has the meaning specified in Section 1 hereof.

                  "Trading  Day"  means (a) a day on which the  Common  Stock is
         traded on the American  Stock  Exchange,  or (b) if the Common Stock is
         not listed on the American  Stock  Exchange,  a day on which the Common
         Stock is traded on any other registered national stock exchange, or (c)
         if the  Common  Stock is not  traded on any other  registered  national
         stock  exchange,  a day on which the Common  Stock is traded on the OTC
         Bulletin  Board,  or (d) if the  Common  Stock is not traded on the OTC
         Bulletin  Board,  a day on which  the  Common  Stock is  quoted  in the
         over-the-counter  market as reported by the National  Quotation  Bureau
         Incorporated  (or any similar  organization  or agency  succeeding  its
         functions of reporting prices);  provided,  however,  that in the event
         that the Common  Stock is not listed or quoted as set forth in (a), (b)
         or (c) hereof,  then  Trading  Day shall mean any day except  Saturday,
         Sunday  and any day which  shall be a legal  holiday  or a day on which
         banking  institutions  in the  State  of New  York  are  authorized  or
         required by law or other government action to close.

                                       15
<PAGE>

                  "Voting  Stock" means,  as applied to the Capital Stock of any
         corporation, Capital Stock of any class or classes (however designated)
         having  ordinary  voting  power for the  election  of a majority of the
         members of the Board of  Directors  (or other  governing  body) of such
         corporation,  other than Capital Stock having such power only by reason
         of the happening of a contingency.

                  "Warrants"  means the Warrants issued and sold pursuant to the
         Purchase Agreement,  including,  without limitation,  this Warrant, and
         any other warrants of like tenor issued in substitution or exchange for
         any thereof  pursuant to the  provisions of Section 2(c),  2(d) or 2(e)
         hereof or of any of such other Warrants.

                  "Warrant  Price"  initially  means U.S. $5.50, as such Warrant
         Price  may be  adjusted  from  time to time as  shall  result  from the
         adjustments specified in this Warrant, including Section 4 hereto.

                  "Warrant Share Number" means at any time the aggregate  number
         of shares of Warrant  Stock  which may at such time be  purchased  upon
         exercise of this Warrant,  after giving effect to all prior adjustments
         and  increases  to such  number  made or  required to be made under the
         terms hereof.

                  "Warrant  Stock" means Common Stock  issuable upon exercise of
         any Warrant or Warrants or otherwise  issuable  pursuant to any Warrant
         or Warrants.

         10. Other Notices. In case at any time:

                           (A)      the Issuer shall make any  distributions  to
                                    the holders of Common Stock; or

                           (B)      the Issuer shall  authorize  the granting to
                                    all holders of its Common Stock of rights to
                                    subscribe  for or  purchase  any  shares  of
                                    Capital  Stock of any class or other rights;
                                    or

                           (C)      there shall be any  reclassification  of the
                                    Capital Stock of the Issuer; or

                           (D)      there shall be any capital reorganization by
                                    the Issuer; or

                           (E)      there  shall  be any  (i)  consolidation  or
                                    merger  involving  the  Issuer or (ii) sale,
                                    transfer  or  other  disposition  of  all or
                                    substantially all of the Issuer's  property,
                                    assets or business (except a merger or other
                                    reorganization  in which the Issuer shall be
                                    the surviving  corporation and its shares of
                                    Capital   Stock   shall   continue   to   be
                                    outstanding   and  unchanged  and  except  a
                                    consolidation,  merger,  sale,  transfer  or
                                    other  disposition  involving a wholly-owned
                                    Subsidiary); or

                                       16
<PAGE>

                           (F)      there  shall be a voluntary  or  involuntary
                                    dissolution,  liquidation  or  winding-up of
                                    the Issuer or any partial liquidation of the
                                    Issuer or  distribution to holders of Common
                                    Stock;

then, in each of such cases,  the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer  shall close or a record  shall
be taken for such dividend,  distribution  or  subscription  rights or (ii) such
reorganization,    reclassification,    consolidation,    merger,   disposition,
dissolution,  liquidation or  winding-up,  as the case may be, shall take place.
Such notice also shall  specify the date as of which the holders of Common Stock
of record shall  participate  in such  dividend,  distribution  or  subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities   or   other   property   deliverable   upon   such   reorganization,
reclassification,  consolidation, merger, disposition,  dissolution, liquidation
or  winding-up,  as the case may be. Such notice  shall be given at least twenty
(20) days prior to the record date or effective date for the event  specified in
such notice.

         11.  Amendment and Waiver.  Any term, covenant, agreement  or condition
in this Warrant may be amended,  or compliance  therewith may be waived  (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  by a written instrument or written instruments  executed by the
Issuer and the Majority Holders;  provided,  however,  that no such amendment or
waiver  shall  reduce the Warrant  Share  Number,  increase  the Warrant  Price,
shorten the period  during  which this  Warrant may be  exercised  or modify any
provision of this Section 11 without the consent of the Holder of this Warrant.

         12.  Governing  Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW  YORK,  WITHOUT  GIVING  EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

         13. Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and  effective on the earlier of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified  for notice prior to 5:00 p.m.,  eastern time, on a
Trading Day, (ii) the Trading Day after the date of transmission, if such notice
or  communication  is delivered via facsimile at the facsimile  telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the
date  of  mailing,  if sent  by  overnight  delivery  by  nationally  recognized
overnight  courier  service  or (iv)  actual  receipt  by the party to whom such
notice is required to be given. The addresses for such  communications  shall be
with respect to the Holder of this Warrant or of Warrant  Stock issued  pursuant
hereto,  addressed to such Holder at its last known address or facsimile  number
appearing  on the books of the  Issuer  maintained  for such  purposes,  or with
respect to the Issuer, addressed to:

                                       17
<PAGE>

                                    AXM Pharma, Inc.
                                    3960 Howard Hughes Parkway
                                    Suite 500
                                    Las Vegas, Nevada 89109
                                    Attention:  Chet Howard, CFO
                                    Telecopier:  (702) 990-3501
                                    Telephone:  (702) 990-3659

Copies  of  notices  to the  Issuer  shall  be sent to Law  Offices  of Louis E.
Taubman,  P.C., 225 Broadway,  Suite 1200, New York, New York 10007,  Attention:
Louis E. Taubman, Esq., Telecopier:  (212) 202-6380,  Telephone: (212) 732-7184.
Copies of  notices to the Holder  shall be sent to  Jenkens &  Gilchrist  Parker
Chapin  LLP,  405  Lexington  Avenue,  New  York,  New  York  10174,  Attention:
Christopher S. Auguste, Telecopier:  (212) 704-6288,  Telephone: (212) 704-6000.
Any party  hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.  Copies sent to counsel shall not constitute notice for purposes of this
Agreement.

         14. Warrant Agent.  The Issuer may, by written notice to each Holder of
this  Warrant,  appoint an agent for the  purpose  of issuing  shares of Warrant
Stock on the exercise of this Warrant  pursuant to  subsection  (b) of Section 2
hereof,  exchanging this Warrant  pursuant to subsection (d) of Section 2 hereof
or replacing this Warrant pursuant to subsection (d) of Section 3 hereof, or any
of the foregoing, and thereafter any such issuance,  exchange or replacement, as
the case may be, shall be made at such office by such agent.

         15.  Remedies.  The Issuer  stipulates  that the remedies at law of the
Holder of this Warrant in the event of any default or threatened  default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that,  to the fullest  extent  permitted by
law,  such  terms may be  specifically  enforced  by a decree  for the  specific
performance  of any agreement  contained  herein or by an  injunction  against a
violation of any of the terms hereof or otherwise.

         16.  Successors  and  Assigns.  This  Warrant and the rights  evidenced
hereby  shall inure to the  benefit of and be binding  upon the  successors  and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.

         17.  Modification and Severability.  If, in any action before any court
or agency  legally  empowered to enforce any  provision  contained  herein,  any
provision  hereof is found to be  unenforceable,  then such  provision  shall be
deemed modified to the extent  necessary to make it enforceable by such court or
agency.  If any such provision is not  enforceable as set forth in the preceding
sentence,  the  unenforceability  of such  provision  shall not affect the other
provisions  of this  Warrant,  but this  Warrant  shall be  construed as if such
unenforceable provision had never been contained herein.

         18.  Headings.  The  headings of the  Sections of this  Warrant are for
convenience of reference  only and shall not, for any purpose,  be deemed a part
of this Warrant.

                                       18
<PAGE>

         IN WITNESS WHEREOF,  the Issuer has executed this Warrant as of the day
and year first above written.

                                     AXM PHARMA, INC.

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

                                       19
<PAGE>

                                  EXERCISE FORM

                                AXM PHARMA, INC.

The  undersigned  _______________,  pursuant  to the  provisions  of the  within
Warrant,  hereby elects to purchase  _____ shares of Common Stock of AXM Pharma,
Inc. covered by the within Warrant.

Dated: _________________            Signature    ___________________________

                                    Address      ___________________________

                                                 ___________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________

                                   ASSIGNMENT

FOR VALUE RECEIVED,  _________________  hereby sells, assigns and transfers unto
__________________  the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.

Dated: _________________            Signature    ___________________________

                                    Address      ___________________________

                                                 ___________________________

                               PARTIAL ASSIGNMENT

FOR VALUE RECEIVED,  _________________  hereby sells, assigns and transfers unto
__________________  the right to  purchase  _________  shares of  Warrant  Stock
evidenced  by the within  Warrant  together  with all rights  therein,  and does
irrevocably  constitute and appoint  ___________________,  attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

Dated: _________________            Signature    ___________________________

                                    Address      ___________________________

                                                 ___________________________

                           FOR USE BY THE ISSUER ONLY:

                                       20
<PAGE>

This Warrant No. W-___ canceled (or  transferred or exchanged) this _____ day of
___________,  _____,  shares  of Common  Stock  issued  therefor  in the name of
_______________,  Warrant No.  W-_____ issued for ____ shares of Common Stock in
the name of _______________.

                                       21

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