8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 29, 2004 (March 26, 2004)

SPECTRX, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation) 0-22179
(Commission File Numbers) 58-2029543
(I.R.S. Employer Identification No.)

6025A Unity Drive
Norcross, Georgia
(Address of Principal Executive Offices) 30071
(Zip Code)

Registrants' Telephone Number, Including Area Code:     (770) 242-8723

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

	Item 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
	Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
SIGNATURES
EXHIBIT INDEX
Press Release, Dated March 26, 2004
Securities Purchase Agreement
Registration Rights Agreement
Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock
Form of Warrant (Exhibit B-1)
Form of Warrant (Exhibit B-2)

Item 5.          Other Events and Regulation FD Disclosure.

On March 26, 2004, SpectRx, Inc. announced the completion of a private placement to institutional and private investors of a new series of its preferred stock and warrants to purchase shares of its common stock as more fully described in the press release, a copy of which is filed as Exhibit 99.1 hereto and which information is incorporated herein by reference.

Item 7.         Financial Statements and Exhibits.

                    (c)      Exhibits.

     The following exhibits are filed with this report:

Exhibit No.	Exhibit Description
99.1	Press Release, Dated March 26, 2004
99.2	Securities Purchase Agreement
99.3	Registration Rights Agreement
99.4	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock
99.5	Form of Warrant (Exhibit B-1)
99.6	Form of Warrant (Exhibit B-2)

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SPECTRX, INC.
	/S/ THOMAS H. MULLER, JR.
	By:	Thomas H. Muller, Jr.
		Executive Vice President and Chief Financial Officer
Date: March 29, 2004.

EXHIBIT INDEX

Exhibit No.	Exhibit Description
99.1	Press Release, Dated March 26, 2004
99.2	Securities Purchase Agreement
99.3	Registration Rights Agreement
99.4	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock
99.5	Form of Warrant (Exhibit B-1)
99.6	Form of Warrant (Exhibit B-2)

EX-99.1

EXHIBIT 99.1

Contacts
Bill Wells - Media
Thomas H. Muller, Jr. - Financial
770-242-8723

SpectRx, Inc. Completes $7.3 Million Private Placement

NORCROSS, Ga., (March 26, 2004) -- SpectRx, Inc. (OTCBB: SPRX) today announced the completion of a private placement to institutional and private investors of a new series of its preferred stock and of warrants to purchase shares of its common stock. Proceeds to the company were approximately $7.3 million, prior to the payment of placement agent fees and expenses.

Subject to customary adjustments, the preferred stock is convertible into, and the warrants are exercisable for, 4,886,690 and 4,886,690 shares of common stock, respectively. The warrants are currently exercisable. One-half of the warrants permit the holders to purchase shares of SpectRx common stock at a price of $1.65 per share, and the other half, at $2.25 per share. The placement also included a registration rights agreement between the company and the purchasers, requiring registration of the underlying common shares.

Of the proceeds, approximately $1.0 million represents the conversion of debt into securities issued in the financing. The remaining funds are intended for use in product development, working capital and other corporate purposes.

Neither the shares of SpectRx preferred stock, nor the warrants to purchase shares of SpectRx's common stock, nor shares of common stock issuable upon conversion of the preferred stock or exercise of the warrants, have been registered under the Securities Act of 1933, as amended, and neither may be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any jurisdiction where such offer, solicitation or jurisdiction would be unlawful.

About SpectRx

SpectRx, Inc. (OTCBB: SPRX) is a diabetes management company developing and providing innovative solutions for insulin delivery and glucose monitoring.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. A number of the matters and subject areas discussed in this report that are not historical or current facts deal with potential future circumstances and developments. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally and also may materially differ from SpectRx's actual future experience involving any of or more of such matters and subject areas. SpectRx has attempted to identify, in context, certain of the factors that it currently believes may cause actual future experience and results to differ from SpectRx's current expectations regarding the relevant matter or subject area. Such risks and uncertainties include: the ability of SpectRx to continue as a going concern, the early stage of products in development, the uncertainty of market acceptance of products, the uncertainty of developmen t or effectiveness of distribution channels, the intense competition in the medical device industry, the uncertainty of capital to develop products, the uncertainty of regulatory approval of products, dependence on licensed intellectual property, as well as those that are more fully described from time to time in SpectRx's reports under the heading "Risk Factors" filed with the SEC, including SpectRx's Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and subsequent quarterly reports.

###END###

EX-99.2

EXHIBIT 99.2

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of March 26, 2004 by and among SPECTRX, INC., a Delaware corporation located at 6025A Unity Drive, Norcross, Georgia 30071 (the "Company"), and the various purchasers identified and listed on Schedule 1 attached hereto (each referred to herein as a "Purchaser", and collectively as the "Purchasers").

SECTION 1.

Sale of Preferred Stock and Warrants

The Company and Purchasers covenant and agree as follows:

1.1. Authorization of Preferred Shares. The Company will, prior to the Closing (as defined below), authorize the sale and issuance of up to 510,000 shares of its Series A Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock"), having the rights, privileges and preferences as set forth in the Certificate of Designations (the "Designations") in the form attached to this Agreement as Exhibit A

1.2. Sale and Issuance of Preferred Shares. Subject to the terms and conditions hereof, the Company will issue and sell to the Purchasers, and the Purchasers will buy from the Company, a total of 488,504 shares of Preferred Stock for the purchase price of $15.00 per share, with each Purchaser purchasing the number of shares of Common Stock for the aggregate purchase price indicated opposite such Purchaser's name on Schedule 1 attached hereto (the "Purchase Price"). The shares of Preferred Stock to be issued and sold by the Company and purchased by the Purchasers pursuant to this Agreement are herein referred to as the "Preferred Shares." The Purchase Price shall be paid in cash by wire transfer of immediately available funds as directed by the Company, or in the case of any Purchaser who holds one of the Company's Bridge Notes issued February 6, 2004, such Purchaser will pay such Purchaser's Purchase Price by the delivery to the Company of such Purchaser's Br idge Note and the reduction of the principal sum due thereunder by such Purchase Price constituting a prepayment of such note (the holders of Bridge Notes are indicated on Schedule 1 and the balance of the principal due under such notes (after such reduction), and all accrued interest shall be paid at Closing in cash by check or wire transfer by the Company).

1.3. Warrants. As an inducement for the Purchasers to purchase the Preferred Shares, subject to the terms and conditions hereof, the Company will issue to each Purchaser (a) a warrant in the form attached hereto as Exhibit B-1 and (b) a warrant in the form attached hereto as Exhibit B-2, in each case, providing such Purchaser with the right to purchase a number of shares of Common Stock indicated on Schedule 1 for such Purchaser (collectively the "Warrants").

1.4. Private Offering. The Preferred Shares will be offered and sold, and each Warrant will be issued, to the Purchasers without registration under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act.

1.5. Registration Rights. The Purchasers will be entitled to the benefits of a Registration Rights Agreement, to be dated as of the date of the Closing (as attached hereto as Exhibit C, the "Registration Rights Agreement"), by and among the Company and the Purchasers. Pursuant to the Registration Rights Agreement, the Company will file with the Securities and Exchange Commission (the "SEC" or the "Commission") a shelf registration statement pursuant to Rule 415 under the Securities Act relating to the resale by the Purchasers of the shares of Common Stock (i) issuable upon conversion of the Preferred Shares by the Holders thereof in accordance with the terms of the Designations (such shares, the "Conversion Shares"), (ii) issuable as dividends payable in respect of the Preferred Shares, and (iii) issuable upon exercise of the Warrants (such shares, the "Warrant Shares").

SECTION 2.

Closing; Delivery

2.1. Closing. The closing of the purchase and sale of the Preferred Shares and issuance of the Warrants hereunder (the "Closing") shall be held at the executive offices of the Company, or at such other place upon which the Company and the Purchasers shall agree. The Closing shall occur simultaneously with or immediately after the execution and delivery of this Agreement by the Purchasers and the Company, or on such later date as the Company and the Purchasers may agree.

2.2. Delivery. At the Closing, the Company will deliver to each Purchaser (i) a certificate or certificates registered in the name of such Purchaser for the number of Preferred Shares to be purchased by such Purchaser as indicated on Schedule 1 against payment of the purchase price therefor by wire transfer per the Company's wiring instructions and (ii) Warrants as described in Section 1.3 herein. In addition, at the Closing, the Company and the Purchasers shall execute and deliver the Registration Rights Agreement.

SECTION 3.

Representations and Warranties of the Company

The Company represents and warrants to each Purchaser as follows:

3.1. Organization and Standing; Articles and By-Laws. The Company is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Company has requisite power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted. The Company is not presently qualified to do business as a foreign corporation in any jurisdiction other than Georgia, and the failure to be so qualified does not and will not have a material adverse effect on the Company's business as now conducted. The Company has furnished to each of the Purchasers true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of Incorporation"), and the Company's Bylaws, as in effect on the date hereof (the "Bylaws"), and true, complete and accurate copies of all do cuments evidencing all classes of securities convertible into or exchangeable or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.

3.2. Corporate Power. The Company has all requisite legal and corporate power and authority to execute and deliver this Agreement, the Registration Rights Agreement and the Warrants (collectively, the "Transaction Documents"), to sell and issue the Preferred Shares and issue the Warrants, to issue the Warrant Shares and the Conversion Shares, and to carry out and perform its obligations under the terms of the Transaction Documents.

3.3. Subsidiaries. Except as indicated on Schedule 3.3, the Company has no subsidiaries or affiliated companies and does not otherwise own or control, directly or indirectly, any equity interest in any corporation, association or business entity.

3.4. Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, of which 525,000 shares of Preferred Stock has been designated as Redeemable Convertible Preferred Stock (the "Abbott Preferred Stock") and 510,000 shares of which has been designated as the Preferred Stock. As of February 29, 2004, there are 11,417,214 shares of Common Stock issued and outstanding and 525,000 shares of Abbott Preferred Stock issued and outstanding and no other shares of capital stock which are issued and outstanding. As of February 29, 2004, there are options outstanding issued by the Company to purchase an aggregate of 1,531,879 shares of Common Stock and warrants (the "Existing Warrants") outstanding issued by the Company to purchase an aggregate of 1,207,127 shares of Common Stock. All of the outstanding shares of Common Stock and Abbott Preferred Stock are duly authori zed, validly issued, fully paid and nonassessable, and were issued in material compliance with applicable federal and state securities laws, including exemptions therefrom, and none of such issuances were made in violation of any pre-emptive or other rights. The Company has reserved 138,754 shares of the Common Stock for issuance upon conversion of the Abbott Preferred Stock, 1,644,741 shares of the Common Stock for issuance pursuant to its stock option plans, 123,939 shares of the Common Stock for issuance pursuant to the Company's 1997 Employee Stock Purchase Plan, and 1,207,127 shares of the Common Stock for issuance upon exercise of the Existing Warrants. Except as set forth above, there are no options, warrants or other rights (including conversion or pre-emptive rights) or agreements outstanding to purchase any of the Company's authorized and unissued capital stock. Since February 29, 2004, there have been no changes in the capitalization of the Company as set forth in this Section 3.4, other than c hanges in the number of shares of Common Stock outstanding and options to purchase Common Stock outstanding occurring solely by virtue of exercise or cancellation of options to purchase Common Stock held by employees of the Company occurring after such date.

3.5. Authorization. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution, delivery and performance of the Transaction Documents by the Company, the sale and issuance of the Preferred Shares and the Warrants, upon conversion of the Preferred Shares in accordance with the Designations, the authorization, issuance and delivery of the Conversion Shares, and, upon exercise of the Warrants in accordance with their terms, the authorization, issuance and delivery of the Warrant Shares, and the performance of all of the Company's obligations under the Transaction Documents has been taken or will be taken prior to the Closing. Each of the Transaction Documents, when executed and delivered by the Company, shall constitute valid and binding obligations of the Company, enforceable in accordance with their terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debto rs and rules of law governing specific performance, injunctive relief or other equitable remedies (the "Enforceability Limitations"). The Preferred Shares, when issued as contemplated hereby, will be validly issued, fully paid, nonassessable and free and clear of all pledges, liens, encumbrances and restrictions created by the Company. The Conversion Shares and the Warrant Shares, when issued in compliance with the provisions of the Designations or the Warrants, as applicable, will be validly issued, fully paid, nonassessable and free and clear of all pledges, liens, encumbrances and restrictions created by the Company. The Company has (or will have prior to the Closing) reserved 5,100,000 shares of Common Stock for issuance upon exercise of the Warrants, and such shares shall remain so reserved as long as the Warrants are exercisable. The Company has (or will have prior to the Closing) reserved 5,100,000 shares of Common Stock for issuance upon conversion of the Preferred Stock, and such shares s hall remain so reserved as long as any shares of the Preferred Stock remain outstanding.

3.6. Reports and Financial Statements. Each of (a) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003, (b) the Company's Annual Report on Form 10-K for the year ended December 31, 2002, (c) the definitive proxy statement for the Company's 2003 annual meeting of stockholders and (d) any Current Reports on Form 8-K filed with the Commission by the Company since January 1, 2003 (as such documents have since the time of their filing been amended or supplemented, the "SEC Reports") (i) was timely filed and complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, at the time of filing (or the time of subsequent amendment or supplement, in the case of any SEC Reports that have been subsequently amended or supplemented). The audited consolidated financial statements and unaudited interim consolidated financial statements (including, in each case, the notes, if any, thereto) included in the SEC Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements, to year-end audit adjustments and the absence of notes thereto) the consolidated financial position of the Company as at the respective dates thereof and the consolidated results of its operations a nd cash flow for the respective periods then ended.

3.7. Integration. Neither the Company nor anyone acting on its behalf has, directly or through any agent during the six-month period ending on the date of this Agreement, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) in a manner that would cause the offer and sale of the Preferred Shares and issuance of the Warrants, or issuance of Warrant Shares or Conversion Shares, not to be entitled to the exemption afforded by Rule 506 of Regulation D, or under Section 4(2) of the Securities Act.

3.8. Public Offering. Neither the Company nor anyone acting on its behalf has engaged, in connection with the sale of the Preferred Shares or issuance of the Warrants, the Conversion Shares or the Warrant Shares, (i) in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (ii) in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act.

3.9. Enforceability of Registration Rights. The Registration Rights Agreement has been duly authorized by the Company and, when duly executed and delivered by the Company (assuming the due authorization, execution and delivery thereof by the other parties thereto), will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with the terms thereof, except as such enforceability may be limited by (i) the Enforceability Limitations, and (ii) as to rights of indemnification and contribution, by principles of public policy or federal or state securities laws relating thereto.

3.10. No Material Adverse Changes. Since September 30, 2003, there has been no (i) material adverse change in the business, results of operations, assets, prospects, or financial condition of the Company, taken as a whole, whether or not arising in the ordinary course of business, or (ii) dividend or distribution of any kind declared, paid or made by the Company on its capital stock.

3.11. No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated in the Transaction Documents do not and will not (i) conflict with or violate any provision of the Certificate of Incorporation or Bylaws of the Company, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to other Persons (as defined in Section 3.12) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, license or instrument (evidencing a Company debt or otherwise) to which the Company is a party or by which any property or asset of the Company is bound or affected or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject or by which any materi al property or asset of the Company is bound or affected.

3.12. Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, regulatory or self regulatory agency, individual, partnership, corporation, limited liability company, joint stock company, association, trust, or unincorporated organization (each a "Person") in connection with the execution, delivery and performance by the Company of the Transaction Documents other than (i) the filing of a registration statement with the Commission, which shall be filed in accordance with and in the time periods set forth in the Registration Rights Agreement and (ii) any filings, notices or registrations under applicable state securities laws (collectively, the "Required Approvals").

3.13. Litigation; Proceedings. There is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its assets or properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) or any arbitrator, which (i) adversely affects or challenges the legality, validity or enforceability of the Agreement, (ii) could reasonably be expected to, individually or in the aggregate, have or result in a material adverse effect on the business, results of operations, assets, prospects, or financial condition of the Company, taken as a whole (a "Material Adverse Effect") or (iii) if adversely decided, could reasonably be expected to have a material adverse effect on the issuance of the Preferred Shares, the Warrants, the Conversion Shares or the Warrant Shares, or the consummation of the transactions contemplated by the Transaction Documents.

3.14. No Default or Violation. Except for those that would not, individually or in the aggregate, result in a Material Adverse Effect or have a material adverse effect on the execution and delivery of, and the performance and compliance with the Transaction Documents, the Company is not in (i) default under or in violation of any indenture, loan or other credit agreement or any other agreement or instrument to which it is a party or by which it or any of its assets or properties is bound, (ii) violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court, arbitrator or governmental authority applicable to it, or (iii) violation of any law, statute, ordinance, rule or regulation of any governmental authority to which it is subject. The Company is not in default under or in violation of its certificate of incorporation or bylaws. The business of the Company is not being conducted, and shall not be conducted, in violation of any law , statute, ordinance, rule or regulation of any governmental authority, except where such violations have not resulted or are not reasonably likely to result, individually or in the aggregate, in a Material Adverse Effect or a material adverse effect on the execution and delivery of, and the performance and compliance with the Transaction Documents. The Company is not in breach of any agreement where such breach, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect or have a material adverse effect on the execution and delivery of, and the performance and compliance with the Transaction Documents.

3.15. Broker's Fees. Except as set forth on Schedule 3.15, no fees or commissions or similar payments with respect to the transactions contemplated by the Transaction Documents have been paid or will be payable by the Company to any broker, financial advisor, finder, investment banker or bank. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.15 that may be due in connection with the transactions contemplated by the Transaction Documents.

3.16. Intellectual Property Rights. The Company owns or possesses adequate rights or licenses to use all trademarks, trademark applications, trade names and service marks, whether or not registered, and all patents, patent applications, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and intellectual property rights (collectively, "Intellectual Property Rights") which are material to the business of the Company, as now conducted or as proposed to be conducted and as described in the SEC Reports. To the knowledge of the Company, it has not infringed and is not infringing on any of the Intellectual Property Rights of any Person and, except as disclosed in the Company's SEC Reports, there is no claim, action or proceeding which has been made or brought, or to the Company's knowledge, is being made, brought or threatened, which involves any Intellectual Property Rights of the Company or infringement or alleged infringement by the Compa ny of any Intellectual Property Rights of any Person. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its Intellectual Property Rights. The Intellectual Property Rights of the Company are valid and enforceable.

3.17. Registration Rights; Rights of Participation. Except as described on Schedule 3.17, (i) the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which have not expired or been satisfied or terminated and (ii) no Person, including, but not limited to, current or former stockholders of the Company, underwriters, brokers or agents, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.

3.18. Title. The Company has good and marketable title in fee simple to all real property and personal property owned by it which is material to the business of the Company, in each case free and clear of all liens and encumbrances, except for liens that do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company. Any real property and facilities held under lease by the Company are held by it under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company.

3.19. Permits. The Company possesses all certificates, authorizations, licenses, easements, consents, approvals, orders and permits necessary to own, lease and operate its properties and to conduct its business as currently conducted, except where the failure to possess such permits could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect (collectively, "Material Permits"), and there is no claim, action or proceeding pending, or, to the knowledge of the Company, threatened relating to the revocation, modification, suspension or cancellation of any Material Permit. The Company is not in conflict with, in default under, or in violation of, any Material Permit.

3.20. Environmental. Except as described in the SEC Reports or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (i) the Company is in compliance with and not subject to any known liability under applicable Environmental Laws (as defined below), (ii) the Company has made all filings and provided all notices required under any applicable Environmental Law, and has, and is in compliance with, all permits required under any applicable Environmental Laws and each of them is in full force and effect, (iii) (a) there is no pending civil, criminal or administrative action, or pending hearing or suit, (b)  the Company has not received any demand, claim, or notice of violation and (c) to the knowledge of the Company, there is no investigation, proceeding, notice or demand letter or request for information threatened against the Company in the case of (a), (b) and (c), under any Environmental Law, (iv) no lien, cha rge, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by the Company, (v) the Company has not received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or any comparable state law, (vi) no property or facility of the Company is (a) listed or, to the knowledge of the Company, proposed for listing on the National Priorities List under CERCLA or is (b) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority.

For purposes of this Agreement, "Environmental Laws" means all applicable federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of Hazardous Materials (as defined below) into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials, and (iii) underground and above ground storage tanks and related piping, and emissions, discharges, releases or threatened releases therefrom. The term "Hazardous Material" means (a) any "hazardous substance," as defined in the Comprehe nsive Environmental Response, the Resource Conservation and Recovery Act, as amended, (b) any "hazardous waste," as defined by the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance.

3.21. Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the business in which the Company is engaged. The Company has no reason to believe that it will not be able to renew its existing insurance coverages as and when such coverages expire or to obtain similar coverage from similar insurers as may be necessary to continue its business, at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company, taken as a whole.

3.22. Tax Status. The Company has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith. There are no unpaid taxes in any material amount claimed to be due from the Company by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim

3.23. Accounting Controls. The Company and its subsidiaries maintain systems of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

3.24. Sarbanes-Oxley Act. The Company is in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated in connection therewith, including Section 402 related to loans.

3.25. Eligibility for Form S-2. The Company is eligible to register on Form S-2, or a successor form, the offer and resale of the Conversion Shares and the Warrant Shares.

3.26. Investment Company Status. The Company is not and upon consummation of the sale of the Preferred Stock and Warrant Shares will not be an "investment Company," a company controlled by an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended.

SECTION 4.

Covenants of the Company

The Company hereby covenants with the Purchasers as follows:

4.1. Integration. Neither the Company nor anyone acting on its behalf will offer, sell or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) in a manner that would cause the offer and sale of the Preferred Shares and the issuance of the Warrants contemplated hereby (or issuance of the Conversion Shares or the Warrant Shares) to fail to be entitled to the exemption afforded by Rule 506 of Regulation D, or under Section 4(2) of the Securities Act.

4.2. Board Rights. By execution of this Agreement, each of the Purchasers (other than SF Capital Partners) hereby irrevocably appoints Easton Hunt Capital Partners, LP ("Easton") and ProMed Asset Management, LLC ("ProMed"; Easton and ProMed, together with their respective affiliates, being referred to herein as the "Co-Lead Investors") as its joint proxy to vote its respective shares of the Preferred Stock as set forth in the next succeeding sentence in any and all elections of the two (2) directors that the holders of the Preferred Stock, voting together as a single class, may be entitled to elect in accordance with Section (d) of the Designations (it being understood that the request required by such Section (d) as a pre-condition to the right of the holders of Preferred Stock to elect two directors, as expressly provided for therein, shall be made or not made in the sole discretion of the Co-Lead Investors). Such proxy is hereby acknowledged by each of t he Purchasers to be deemed coupled with an interest and irrevocable, and is given on the condition that each of Easton and ProMed, in all such elections of directors, vote all of the shares of Preferred Stock held by each of them, and all of the shares over which they have a proxy, for one nominee to be designated by Easton and one nominee to be designated by ProMed and that, if elected as provided herein, Easton or ProMed, as the case may be, shall use its reasonable best efforts to cause its respective nominee to resign from the Company's Board of Directors promptly following such individual's ceasing to be employed by Easton or ProMed, as the case may be (in which case, the applicable Co-Lead Investor may designate another nominee). SF Capital Partners hereby agrees that in any election of directors selected by the holders of Preferred Stock in accordance with the right of holders of Preferred Stock as a class to elect two directors pursuant to Section (d) of the Designations (should the request required by such Section (d) be made so as to make such right operative), to not oppose any nominees of the Co-Lead Investors, and as to any such vote relative to a board seat for which a nominee of a Co-Lead Investor stands for election by the holders of Preferred Stock as a class, to abstain from voting thereon. Prior to election of a Co-Lead Investor's nominee to the Board of Directors and not in addition to any such election, the Co-Lead Investors shall each be entitled to designate one individual, who shall initially be Frank Garcia for Easton and David Musket for ProMed for so long as such individuals are employed by their respective Co-Lead Investor and, in the event Mr. Garcia or Mr. Musket shall no longer be employed by his respective Co-Lead Investor for any reason, such other employee of the applicable Co-Lead Investor as the applicable Co-Lead Investor shall specify in writing to the Company, to attend and observe all regular and special meetings of the Board of Directors of the Company (and all Committ ees thereof), to receive notice of such regular and special meetings in the same manner as members of the Board of Directors of the Company, and to receive copies of any materials sent by the Company to members of the Board of Directors of the Company (or Committees thereof) in connection with such meetings. A Co-Lead Investor's respective rights provided for in the immediately preceding sentence shall terminate on the earliest date that such Co-Lead Investor ceases to own (assuming conversion of all shares of Preferred Stock held by such Co-Lead Investor as of any date of determination into Common Stock in accordance with Section (c) of the Designations) a number of shares of Common Stock equal to at least one-half (1/2) of the number of shares of Common Stock that could be obtained by such Co-Lead Investor immediately following the Closing upon conversion in full of all Preferred Stock owned by such Holder immediately following the Closing (such number subject to proportionate adjustment for stock splits, stock dividends and the like occurring subsequent to the Closing). The respective rights of the Co-Lead Investors and their respective designees set forth in this Section 4.2 are subject to the Co-Lead Investors and any designees of the Co-Lead Investors executing a Confidentiality and Non-Disclosure Agreement, in form and substance satisfactory to the Company, in which the Co-Lead Investors and any of their respective designees agree not to disclose or use for their own benefit non-public information regarding the Company.

SECTION 5.

Representations and Warranties of the Purchasers

Each Purchaser, severally and not jointly, hereby represents and warrants to the Company with respect to the purchase of Preferred Shares by such Purchaser and issuance of Warrants, Conversion Shares and Warrant Shares to such Purchaser as follows:

5.1. Experience. Such Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that such Purchaser is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.

5.2. Investment Intent. Such Purchaser is acquiring the Preferred Shares, the Warrants, the Warrant Shares and the Conversion Shares to be acquired by it hereunder for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. Such Purchaser understands that the Preferred Shares to be purchased by it and the Warrants to be issued to it (and any Conversion Shares or Warrant Shares that may be issued to it pursuant to the Preferred Shares or the Warrants) have not been registered under the Securities Act by reason of the exemption from the registration provisions of the Securities Act contained in Rule 506 of Regulation D and Section 4(2) of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser's representations as expressed herein. The Company will rely upon the accuracy and truthfulness of, the representations made by each Purchaser set forth in this Section 5 and each Purchaser hereby consents to such reliance on the representations made by it hereunder.

5.3. Accredited Investor. Such Purchaser is a "qualified institutional buyer," as that term is defined in Rule 144A of the Securities Act, or an "accredited investor," as that term is defined in Regulation D promulgated pursuant to the Securities Act.

5.4. Rule 144. Such Purchaser acknowledges that the Preferred Shares and the Warrants, and the Conversion Shares and the Warrant Shares, must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from such registration is available. Such Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the securities, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and fully paid for the security to be sold, the sale being effected through a "broker's transaction" or in transaction directly with a "market maker" and the number of shares being sold during any three-month period not exceeding specified limitations.

5.5. Access to Information. Such Purchaser has had an opportunity to discuss the Company's business, management and financial affairs with its management. It has also had an opportunity to ask questions of officers of the Company, which questions were answered to its satisfaction. Such Purchaser understands that such discussions, as well as any written information issued by the Company, were intended to describe certain aspects of the Company's business and prospects. Such Purchaser acknowledges and understands that, in the course of such discussions, it may have been provided access to material, non-public information concerning the Company. Further, such Purchaser acknowledges and understands the fact that the Company is seeking to effect the private placement of the Preferred Shares and the Warrants is material non-public information and disclosure of such information or use of such information by the Purchasers or anyone receiving such information from the Purchasers in connection with the purchase, sale or trade of the Company's securities (other than use by the Purchasers in acquiring the Preferred Shares and the Warrants), or any hedging, derivative or similar transactions or activities involving the Company's securities, is unlawful and constitutes a violation of securities laws. Nothing contained in this Section 5.5 modifies, amends or affects each Purchaser's right to rely on the Company's representations and warranties contained in Section 3 above.

5.6. Organization; Authorization. Such Purchaser is a corporation or a limited duration company or a limited liability company or limited partnership or a business trust or other entity duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, as the case may be, with the requisite power and authority, corporate or otherwise, to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations under this Agreement and the Registration Rights Agreement. The purchase by such Purchaser of the Preferred Shares and the acquisition of the Warrants hereunder has been duly authorized by all necessary action on the part of such Purchaser. This Agreement and the Registration Rights Agreement when executed and delivered by such Purchaser will each constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.

5.7. Brokers or Finders. The Company has not, and will not, incur, directly or indirectly, as a result of any action taken alone by such Purchaser, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement.

5.8. Legend. Such Purchaser understands that each of the Preferred Shares, the Warrants and the certificates evidencing any Conversion Shares or Warrant Shares, will bear the following legend until such time as such securities are registered under the Securities Act and sold pursuant to such registration: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."

In addition, the Purchasers acknowledge that each Preferred Share, each Warrant and each certificate for Conversion Shares or Warrant Shares, shall bear any additional legend required by any other applicable state securities or "blue sky" laws.

The Company's transfer agent and registrar will maintain stop transfer instructions on record for the shares of Common Stock to be issued upon conversion of Preferred Shares or exercise of Warrants, until it has been notified by the Company, upon the advice of counsel, that such instructions may be waived. Such stop transfer instructions will limit the method of sale of such shares of Common Stock, consistent with Rule 144 or other available exemptions from registration under the Securities Act. Any transfers other than pursuant to Rule 144 will require an opinion of counsel satisfactory to the Company and its counsel prior to such transfers.

5.9. Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental agency or authority has passed upon or made any recommendation or endorsement of the Preferred Shares, the Warrants, the Conversion Shares or the Warrant Shares

5.10. No Intent to Effect a Change of Control. Such Purchaser has no present intent to change or influence the control of the Company within the meaning of Rule 13d-1 of the Securities Exchange Act of 1934, as amended.

5.11. Residency. Such Purchaser is a resident of the jurisdiction set forth in the address below such Purchaser's name on Schedule 1 hereto.

SECTION 6.

Conditions to Closing of Purchasers

The obligations of the Purchasers to purchase the Preferred Shares at the Closing is, at the option of the Purchasers, subject to the fulfillment of the following conditions:

6.1. Representations and Warranties Correct. The representations and warranties made by the Company herein shall be true and correct in all material respects as of the date when made and as of the Closing.

6.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing shall have been performed or complied with in all material respects.

6.3. No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated, endorsed or threatened or is pending by or before any court or governmental authority of competent jurisdiction which prohibits or threatens to prohibit the consummation of any of the transactions contemplated by the Transaction Documents.

6.4. Adverse Changes. Since the date of the financial statements included in the Company's Quarterly Report on Form 10-Q, Annual Report on Form 10-K, or latest Current Report on Form 8-K, whichever is more recent, last filed prior to the date of this Agreement, no event which has had or could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the execution and delivery of, and the performance and compliance with, the Transaction Documents shall have occurred.

6.5. Litigation. No action, proceeding or litigation shall have been instituted or threatened against the Company which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect or a material adverse effect on the execution and delivery of, and the performance and compliance with, the Transaction Documents.

6.6. Change of Control. No Change of Control shall have occurred between the date hereof and the Closing. As used herein, "Change of Control" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or any of their affiliates, of in excess of 50% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company's Board of Directors that is not approved by a majority of those individuals who are members of the Board of Directors on the date hereof, or their duly elected successors who are directors immediately prior to such transaction, in one or a series of related transactions, (iii) the merger of the Company with or into another Person, unless the holders of the Company's securities immediately prior to the merger continue to hold at least 51% of such securities followin g such transaction, (iv) the consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in clauses (i), (ii), (iii) or (iv).

6.7. Certificate of Incorporation. The Company shall have delivered to each of the Purchasers a copy of a certificate evidencing the incorporation and good standing of the Company in Delaware issued by the Secretary of State of Delaware as of a date within five (5) business days of the Closing. The Company shall have delivered to each of the Purchasers a copy of its Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within five (5) business days of the Closing (which shall include an amendment adding thereto the Certificate of Designations for the Series A Convertible Preferred Stock). The Company shall have delivered to each of the Purchasers a copy of a certificate evidencing the qualification and good standing of the Company in the State of Georgia as a foreign corporation within ten (10) days of the Closing.

6.8. Compliance Certificate. Should the Closing occur as of a date other than the date of this Agreement, the Company shall have delivered to the Purchaser a certificate of the Company executed by the President of the Company, dated as of the Closing certifying to the fulfillment of the conditions specified in Section 6 of this Agreement.

6.9. Secretary's Certificate. The Company shall have delivered to the Purchaser a certificate of the Company executed by the Secretary of the Company, dated as of the Closing, certifying (i) resolutions adopted by the Board of Directors of the Company authorizing the execution of the Transaction Documents and the transactions contemplated hereby; (ii) the Certificate of Incorporation and Bylaws of the Company, each as amended, and copies of the third party consents, approvals and filings, if any, required in connection with the consummation of the transactions contemplated by the Transaction Documents; and (iii) such other documents relating to the transactions contemplated by the Transaction Documents.

6.10. Registration Rights Agreement. The Company shall have executed, entered into and delivered the Registration Rights Agreement, a form of which is attached hereto as Exhibit C.

6.11. Opinion of Company Counsel. The Purchasers shall have received an opinion from legal counsel for the Company, dated as of the Closing Date, in customary form.

6.12. Execution and Delivery of the Warrants. The Company shall have executed and delivered to the Purchasers the Warrants to be issued by the Company pursuant to Section 1.3 of this Agreement.

6.13. Small Business Administration Forms. The Company shall have delivered to each Purchaser who is a Small Business Administration ("SBA") licensee a Size Status Declaration on SBA Form 480, an Assurance of Compliance on SBA Form 652, and such information as is necessary for the preparation of Parts A and B of a Portfolio Financing Report on SBA Form 1031.

6.14. Minimum Purchase Condition. The Purchasers shall have collectively subscribed for shares of Preferred Stock hereunder having an aggregate Purchase Price of not less than Seven Million Dollars ($7,000,000.00).

SECTION 7.

Conditions to Closing of Company

The Company's obligation to sell and issue the Preferred Shares, and to issue the Warrants, at the Closing is, at the option of the Company, subject to the fulfillment as of the Closing of the following conditions:

7.1. Representations and Warranties Correct. The representations and warranties made by the Purchasers herein shall be true and correct when made, and shall be true and correct on the date made and on the Closing.

7.2. Certificate of Designations. The Designations shall have been filed with the Delaware Secretary of State.

7.3. Legal Matters. All material matters of a legal nature which pertain to this Agreement, and the transactions contemplated hereby, shall have been reasonably approved by counsel to the Company.

7.4. Covenants. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by such Purchaser at or before the Closing.

7.5. Litigation. No action, proceeding or litigation shall have been instituted or threatened against the Company which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect or a material adverse effect on the execution and delivery of, and the performance and compliance with, the Transaction Documents.

7.6. Change of Control. No Change of Control of the Company shall have occurred between the date hereof and the Closing.

7.7. No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated, endorsed, threatened or pending by or before any court or governmental authority of competent jurisdiction which prohibits or threatens to prohibit the consummation of any of the transactions contemplated by the Transaction Documents.

SECTION 8.

Miscellaneous

8.1. Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of Georgia as applied to agreements entered into among Georgia residents to be performed entirely within Georgia, without reference to the principles of conflict of laws under Georgia law.

8.2. Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by the Purchasers and the closing of the transactions contemplated hereby.

8.3. Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto, provided, however, that the rights of the Purchasers to purchase the Preferred Shares and Warrants shall not be assignable without the consent of the Company.

8.4. Entire Agreement; Amendment. This Agreement, the Preferred Shares, the Warrants and the Registration Rights Agreement constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that holders of a majority in aggregate principal amount of the Preferred Shares issued or purchasable hereunder may, with the Company's prior written consent, waive, modify or amend on behalf of the Purchasers, any provision hereof; provided, further, however, th at no waiver, modification or amendment of either Easton's or ProMed's rights set forth in Section 4.2 hereof shall be effective without the prior written consent of Easton or ProMed, as the case may be.

8.5. Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or by facsimile transmission, or otherwise delivered by hand or by messenger, addressed (a) if to any Purchaser, at the Purchaser's address set forth on Schedule 1, or at such other address as such Purchaser shall have furnished to the Company in writing, or (b) if to any other holder of any Preferred Shares, at such address as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address to the Company, then to and at the address of the last holder of such Preferred Shares who has so furnished an address to the Company, or (c) if to the Company, one copy should be sent to its address set forth on the cover page of this Agreement and addressed to the attention of the Corporate Secretary, or at such other address as the Company shall have furnished to th e Purchasers.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or if by facsimile transmission, as indicated by the facsimile imprint date.

8.6. Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any Purchaser, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Purchaser nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Purchaser of any breach or default under this Agreement, or any waiver on the part of any Purchaser of any provisions or conditions of this agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Purchaser, shall be cumulative and not alternative.

8.7. Georgia Legend. Each Purchaser acknowledges that each certificate shall bear the following legend: THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH 13 OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.

8.8. Further Legend. Each Purchaser acknowledges that each certificate shall bear the following legend: "THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS A STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO EACH CLASS, AND SERIES WITHIN A CLASS, OF CAPITAL STOCK OF THE CORPORATION AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO EACH SERIES (AND THE AUTHORITY OF THE CORPORATION'S BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES)."

8.9. Expenses. The Company and each of the Purchasers shall each bear their own legal and other expenses with respect to this Agreement. Notwithstanding the foregoing, at the Closing, the Company shall reimburse Easton for its expenses actually and reasonably incurred in connection with the transactions contemplated hereby, in an aggregate amount not to exceed $7,000.

8.10. Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and 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 page were an original thereof.

8.11. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party.

8.12. Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.

8.13. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto, and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

8.14. Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser hereunder are several and not joint with the obligations of the other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at the Closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of Person, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of the 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.

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

IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have executed this Agreement as of the date first set forth above.

SPECTRX, INC.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PURCHASERS:  ___________________________________

OTAPE INVESTMENTS, LLC

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

DOLPHIN OFFSHORE PARTNERS, LP

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

Pamela Kaweske

BAFFLES S.A.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

HYTEK INTERNATIONAL, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

SEGOES TRUST

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

SF CAPITAL PARTNERS

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

BRISTOL INVESTMENT FUND, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

EASTON HUNT CAPITAL PARTNERS

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PROMED PARTNERS, LP

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PROMED PARTNERS II, LP

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PROMED OFFSHORE FUND, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

SAGAMORE HILL HUB FUND, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

ALPHA CAPITAL AG

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

___________________________________
Paul Scharfer

___________________________________
David Musket

___________________________________
John Imhoff

___________________________________
Susan Imhoff

___________________________________
Dolores Maloof

___________________________________
Keith Ignotz

___________________________________
Mark Samuels

KENSINGTON PARTNERS, L.P.

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

BALD EAGLE FUND, LTD.

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

___________________________________
Douglas Schmidt

NORTH SOUND LEGACY FUND, LLC

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

NORTH SOUND LEGACY INSTITUTIONAL FUND, LLC

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

NORTH SOUND LEGACY INTERNATIONAL LTD.

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

SDS CAPITAL GROUP SPC, LTD

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

Schedule 1

to Securities Purchase Agreement
dated March 26, 2004

Purchaser	Purchase Price	Preferred Shares	Warrants
			@$1.65	@$2.25
Dolphin Offshore Partners, LP 129 E. 17th Street, 2nd Fl. New York, NY 10003 Ph: (212) 982-5071 Fax: (212) 202-3817	$1,000,005	66,667	333,335	333,335
ProMed Partners, LP 125 Cambridgepark Dr. Cambridge, MA 02140 Ph: (617) 441-0259 Fax: (617) 441-0855	634,110	42,274	211,370	211,370
ProMed Partners II, LP 125 Cambridgepark Dr. Cambridge, MA 02140 Ph: (617) 441-0259 Fax: (617) 441-0855	113,910	7,594	37,970	37,970
ProMed Offshore Fund, Ltd. 125 Cambridgepark Dr. Cambridge, MA 02140 Ph: (617) 441-0259 Fax: (617) 441-0855	102,000	6,800	34,000	34,000
Bristol Investment Fund, Ltd. 6363 Sunset Blvd., 5th Floor Hollywood, CA 90028 Ph: (323) 769-2493 Fax: (323) 468-8307	400,005	26,667	133,335	133,335
Pamela Kaweske Whitehall House, 3rd Fl. 238 N. Church St. George Town, Grand Cayman Cayman Islands Ph: (345) 949-5900 Fax: (345) 945-7046	60,000	4,000	20,000	20,000
Baffles S.A. Whitehall House, 3rd Fl. 238 N. Church St. George Town, Grand Cayman Cayman Islands Ph: (345) 949-5900 Fax: (345) 945-7046	60,000	4,000	20,000	20,000
Hytek International, Ltd. Whitehall House, 3rd Fl. 238 N. Church St. George Town, Grand Cayman Cayman Islands Ph: (345) 949-5900 Fax: (345) 945-7046	42,000	2,800	14,000	14,000
SEGOES Trust Whitehall House, 3rd Fl. 238 N. Church St. George Town, Grand Cayman Cayman Islands Ph: (345) 949-5900 Fax: (345) 945-7046	78,000	5,200	26,000	26,000
SF Capital Partners 3600 South Lake Drive St. Francis, WI 53235 Ph: (414) 294-7016 Fax: (414) 294-4416	439,995	29,333	146,665	146,665
OTAPE Investments, LLC One Manhattanville Rd. Purchase, NY 10577 Ph: (914) 694-5800 Fax: (914) 694-6342	100,005	6,667	33,335	33,335
Easton Hunt Capital Partners SBS Tower, Suite 750 2601 South Bay Shore Drive Miami, FL 31333 Ph: (305) 361-6479 Fax: (305) 284-0277	1,249,995	83,333	416,665	416,665
North Sound Legacy Fund LLC 53 Forest Avenue Old Greenwich, CT 06870 Ph: (203) 967-5880 Fax: (___) ___-____	15,000	1,000	5,000	5,000
North Sound Legacy Institutional Fund LLC 53 Forest Avenue Old Greenwich, CT 06870 Ph: (203) 967-5880 Fax: (___) ___-____	165,000	11,000	55,000	55,000
North Sound Legacy International Ltd. 53 Forest Avenue Old Greenwich, CT 06870 Ph: (203) 967-5880 Fax: (___) ___-____	319,995	21,333	106,665	106,665
SDS Capital Group SPC Ltd. 53 Forest Avenue Old Greenwich, CT 06870 Ph: (203) 967-5880 Fax: (___) ___-____	250,005	16,667	83,335	83,335
Sagamore Hill Hub Fund, Ltd. 10 Glenville Street Greenwich, CT 06831 Ph: (203) 532-7557 Fax: (203) 422-7214	499,995	33,333	166,665	166,665
Alpha Capital AG 160 Central Park West New York, NY 10019 Ph: (212) 586-8224 Fax: (212) 586-8244	199,995	13,333	66,665	66,665
Paul Scharfer 237 Park Avenue, 9th Floor New York, NY 10017 Ph: (212) 692-3684 Fax: (212) 692-3627	250,005	16,667	83,335	83,335
David Musket 125 Cambridgepark Drive Cambridge, MA 02140 Ph: (617) 441-0259 Fax: (617) 441-0855	150,000	10,000	50,000	50,000
John Imhoff* Cottage 441, 55 Rutledge Land Sea Island, GA 31561 Ph: (912) 634-9868 Fax: (912) 267-0545	499,995	33,333	166,665	166,665
Susan Imhoff* Cottage 441, 55 Rutledge Land Sea Island, GA 31561 Ph: (912) 634-9868 Fax: (912) 267-0545	49,995	3,333	16,665	16,665
Dolores Maloof* 2669 Mercedes Drive Atlanta, GA 30345 Ph: (770) 901-5443 Fax: (___) ___-____	250,005	16,667	83,335	83,335
Keith Ignotz* 3151 Willow Green Court Duluth, GA 30096 Ph: (678) 957-1003 Fax: (770) 242-3178	100,005	6,667	33,335	33,335
Mark Samuels* 440 Missendell Lane Norcross, GA 30092 Ph: (770) 242-1924 Fax: (770) 242-3178	100,005	6,667	33,335	33,335
Kensington Partners, L.P. 200 Park Avenue, Suite 3900 New York, NY 10166	142,920	9,528	47,640	47,640
Bald Eagle Fund, Ltd. 200 Park Avenue, Suite 3900 New York, NY 10166	7,080	472	2,360	2,360
Douglas Schmidt 6 West 75th Street, #5a New York, NY 10023	50,010	3,334	16,670	16,670
	$7,330,035	488,669	2,443,345	2,443,345

* To pay Purchase Price by delivery of Bridge Note, per the provisions of Section 1.2.

EX-99.3

EXHIBIT 99.3

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of March 26, 2004, by and among SPECTRX, INC., a Delaware corporation (the "Company"), and those Persons (defined below) set forth on Schedule I hereto (the "Purchasers").

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of March 26, 2004 (the "Securities Purchase Agreement"), by and among the Company and the Purchasers, pursuant to which the Company is issuing to the Purchasers 488,504 shares of the Company's Series A Convertible Preferred Stock, par value $.001 per share (the "Preferred Shares"), and warrants (the "Warrants") to purchase 4,885,040 shares of the Company's common stock, par value $.001 per share (the "Common Stock"). The execution and delivery of this Agreement is a condition to the closing (the "Closing") under the Securities Purchase Agreement.

In consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:  ___________________________________

1. 3Registration Rights.

(a) Filing of "Resale" Registration Statement. Within 30 days following the date of the Closing (the "Filing Deadline"), the Company shall use its best efforts to file with the Securities and Exchange Commission (the "Commission") a "resale" registration statement on such form as the Company determines pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") (together with any exhibits, amendments or supplements thereto, and any documents incorporated by reference therein, the "Registration Statement") with respect to (i) the Common Stock issuable pursuant to the conversion of, or issuable as dividends payable in respect of, the Preferred Shares, (ii) the shares of Common Stock issuable pursuant to the exercise of the Warrants (such shares, together with the shares of Common Stock described in clause (i), the "Common Shares") and (iii) any securities of the Company issued as a dividend or other distribution w ith respect to, or in exchange for or in replacement of, the Common Shares.

The securities described in the preceding sentence are collectively referred to herein as the "Registrable Securities"; provided, that the term "Registrable Securities" shall not include securities sold pursuant to the Registration Statement or Rule 144 or securities transferred to a person other than a Permitted Transferee as defined in Section 8(a) herein.

The Registration Statement may include securities of the Company other than Registrable Securities.

(b) Effectiveness of Registration Statement. The Company shall, subject to Section 6 hereof, use its best efforts to cause the Registration Statement to become effective as soon as practicable after the filing thereof, and shall use its best efforts to keep the Registration Statement continuously effective from the date such Registration Statement becomes effective until the earliest of (i) the date on which all such Securities have been disposed of in accordance with such Registration Statement, (ii) the date on which all Registrable Securities (other than Registrable Securities held by Mark Samuels or Keith Ignotz) are eligible to be sold pursuant to Rule 144(k) and (iii) the seventh (7^th) anniversary of the date of this Agreement (the "Termination Date").

(c) Supplements; Amendments. In the event that any securities are issued in respect of the Common Shares, the Company shall cause such additional securities that become Registrable Securities to be registered under the Securities Act.

(d) Registration Default. Subject to Section 6(a) hereof, if the Registration Statement covering the Registrable Securities required to be filed by the Company pursuant to Section 1(a) is not (i) filed with the Commission by the Filing Deadline (a "Filing Default"), or (ii) declared effective by the Commission within 90 days after the date of the Closing (or, if the Registration Statement is reviewed by the Commission, within 120 days after the date of the Closing) (the "Effectiveness Deadline") (an "Effectiveness Default"; each of a Filing Default and an Effectiveness Default being referred to herein as a "Registration Default"), then, as the exclusive remedy in respect of such Registration Default, the Company shall pay, as liquidated damages and not as a penalty, to the Purchasers (pro rata to each Purchaser, based upon the number of Registrable Securities held by each Purchaser on the date payment is due) an amount equal to the Applicable D efault Percentage (defined below) multiplied by the aggregate Purchase Price (as defined in the Securities Purchase Agreement ) paid for the Preferred Shares for every 30 calendar days following the Filing Deadline or Effectiveness Deadline, as the case may be, that the Registration Statement is not filed or declared effective, as the case may be (the "Payment Amount"). Such amount shall be paid by the Company to the Purchasers within three days after each Computation Date. As used in this Section 1(d), "Computation Date" means the date which is 30 days after the date of the Registration Default and, if the Registration Statement to be filed by the Company pursuant to Section 1(a) has not theretofore been filed with the Commission or declared effective by the Commission, as the case may be, each date which is 30 days after the previous Computation Date, until such Registration Statement is so filed or declared effective, as the case may be. Within three days after the Registration Sta tement is filed with the Commission, in the case of a Filing Default, or within three days after the Registration Statement is declared effective by the Commission, in the case of an Effectiveness Default, the Company shall pay to the Purchasers (pro rata to each Purchaser, based upon the number of Registrable Securities held by each Purchaser at the time payment is due) a pro rata portion of the Payment Amount, based on the number of days between the, as applicable, date of the Registration Default or last Computation Date. For the avoidance of doubt, (x) the Company shall not pay under this Section 1(d) in respect of any 30-day period and in respect of all Registration Defaults more than an amount equal to the Applicable Default Percentage multiplied by the aggregate Purchase Price ; and (y) if a Filing Default occurs and the Registration Statement is subsequently filed with the Commission, then no Payment Amount shall be payable in respect of the period following filing of the Registration Statement with the Commission, unless the Registration Statement is not declared effective by the Commission prior to the Effectiveness Deadline. As used herein, the term "Applicable Default Percentage" means, prior to one hundred and fifty (150) days following the Closing Date, one percent (1%) and, thereafter, two percent (2%).

2. Expenses.

The Company shall bear all expenses, fees and costs incurred in connection with the preparation, filing, distribution and effectiveness of the Registration Statement and any supplements or amendments thereto, whether or not the Registration Statement becomes effective, and whether all, none or some of the Registrable Securities are sold pursuant to the Registration Statement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and state securities, or "blue sky," fees and expenses and the expense of any special audits incident to or required by, or in connection with the filing and effectiveness of the Registration Statement (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company), and the Holder shall pay all selling commissions, brokerage fees and stock transfer taxes applicable to the securities sold by such holder.

3. Registration Procedures.

The Company will promptly advise the Purchasers and their permitted transferees ("the Holders") of the filing and effectiveness of the Registration Statement and, at the Company's expense, will:  ___________________________________

(a) furnish to each Holder copies of the Registration Statement (excluding exhibits thereto) and any prospectus forming a part thereof and any amendments and supplements thereto (excluding all documents incorporated or deemed incorporated by reference therein prior to the effectiveness of the Registration Statement and including each preliminary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, which documents, other than documents incorporated or deemed incorporated by reference, will be subject to the review of the Holders for a period of at least two (2) business days, and the Company shall not file the Registration Statement or such prospectus or any amendment or supplement to the Registration Statement or prospectus if any Holder shall reasonably object within two (2) business days after the receipt thereof; a Holder shall be deemed to have reasonably objected to such filing only if the Registration Statement, amendment, prospectus or supplement, a s applicable, as proposed to be filed, contains a material misstatement or omission with respect to such Holder or its plan of resale;

(b) furnish to each Holder one conformed copy of the Registration Statement and of each amendment and supplement thereto (in each case excluding exhibits) and such number of copies of the prospectus forming a part of the Registration Statement (including each preliminary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, and such other documents, including, without limitation, documents incorporated or deemed to be incorporated by reference prior to the effectiveness of such registration statement, as each of the Holders from time to time may reasonably request;

(c) make available, at reasonable times for inspection by the Holders, and any attorney, accountant, financial adviser or other representative (collectively, "Representatives") retained by the Holders, subject to the recipient's prior agreement to keep such information confidential and not use or disclose it, all financial and other records, pertinent corporate documents and properties of the Company and cause the officers, directors and employees of the Company to supply all information reasonably requested by the Holders or their respective Representatives in connection with the preparation, filing and effectiveness of the Registration Statement;

(d) use its reasonable best efforts (i) to register or qualify all Registrable Securities covered by the Registration Statement under state securities, or "blue sky," laws of such States of the United States of America as the Holders of Registrable Securities covered by the Registration Statement shall reasonably request, (ii) to keep such registration or qualification in effect for so long as the Registration Statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable the Holders to consummate the disposition in such jurisdictions of the securities to be sold by the Holders, consistent with the plan of distribution described in the prospectus included in the Registration Statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where it is not so qualified, or to subject itself to taxation in any such jurisdict ion, or to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder;

(e) subject to Section 6 hereof, promptly notify each Holder of Registrable Securities covered by the Registration Statement (i) upon discovery that, or upon the happening of any event as a result of which, the prospectus forming a part of the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits 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, (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of proceedings for that purpose, (iii) of any request by the Commission for (A) amendments to the Registration Statement or any document incorporated or deemed to be incorporated by reference in the Registration Statement or (B) supplements to the prospectus forming a part of the Registration Statement, or (iv) 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 at the request of any such Holder promptly prepare and file an amendment to the Registration Statement or a supplement to the prospectus as the Company may deem necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and furnish to each Holder a reasonable number of copies of such supplement to, or amendment of, such prospectus and, in the event of a stop order, use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any the Registration Statement, or the liftin g of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction;

(f) if requested by any Holder, promptly incorporate in the Registration Statement by filing a supplement to the prospectus to reflect any change in the information regarding the Holder;

(g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(h) use its best efforts to cause all Registrable Securities to be eligible for trading in any over-the-counter market or trading system in which securities of the same class are then traded;

(i) cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold pursuant to the Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Registrable Securities pursuant to the Registration Statement.

4. Indemnification.

(a) Indemnification by the Company. The Company will indemnify:  ___________________________________

(i) each of the Holders, as applicable,

(ii) any underwriter (as defined in the Securities Act) for a Holder,

(iii) each of the officers, directors, trustees, members and partners of each of the Holders and any underwriter for a Holder, and

(iv) each individual, partnership, joint stock company, corporation, trust, unincorporated organization, government agency or political subdivision (each of the foregoing, a "Person") controlling each of the Holders or any underwriter for a Holder (each of (i) through (iv), an "Indemnified Person"),

with respect to the Registration Statement, against all expenses, claims, losses, damages and liabilities (including in settlement of litigation) (or actions, investigations or proceedings in respect thereof) (collectively, a "Claim") arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement or any prospectus, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation (or alleged violation) by the Company of this Agreement, the Securities Act, the Exchange Act or any other law, including any state securities law, or any rule or regulation thereunder, and will reimburse each Indemnified Person promptly as such expenses are incurred, for any legal and any other expenses reasonably incurred in connection with investigating or d efending any such Claim; provided, however, that the Company will not be liable to any Indemnified Person to the extent that any such Claim arises out of or is based on any untrue statement or omission based upon and in conformity with written information furnished to the Company by such Indemnified Person or their representatives and stated to be specifically for use in the Registration Statement, provided further, the Company will not be liable to any Indemnified Person with respect to any Claim arising with respect to a purchaser of Registrable Securities if a copy of an amended Registration Statement or amended or supplemented prospectus that was delivered to the Holder prior to the pertinent sale or sales was not sent or given by the Holder to such person, at or prior to the written confirmation of sale of such Registrable Securities to such person, and if the amended Registration Statement or amended or supplemented prospectus would have cured the deficit giving rise to such Claim. This indemn ity obligation will remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Persons and will survive any transfer of the Registrable Securities by the Holders.

(b) Indemnification by the Holders. Each of the Holders, severally and not jointly, will, if Registrable Securities held by it are included in the securities as to which such Registration Statement is being effected, indemnify the Company, each of its directors and officers, and each Person who controls the Company, against all Claims arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement or any prospectus, offering circular or other document made by or on behalf of such Holder, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by or on behalf of such Holder therein, in light of the circumstances in which they were made, not misleading, and will reimburse the Company, its directors, officers, partners, members or control Persons for any legal or any other expenses reasonably incurred in connection with investigat ing or defending any such Claim, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in the Registration Statement or any prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use therein; provided, however, that the obligations of each of the Holders hereunder shall be limited to an amount equal to the net proceeds to such Holder of securities sold as contemplated herein.

(c) Procedures. Each party entitled to indemnification under this Agreement (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any Claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such Claim; provided that counsel for the Indemnifying Party, who shall conduct the defense of such Claim, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of one such counsel for all Indemnified Parties shall be at the expense of the Indemnifying Party), a nd provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement except to the extent that the Indemnifying Party is prejudiced thereby. No Indemnifying Party, in the investigation or defense of any such Claim shall, except with the consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement or compromise which does not include an unconditional release of the Indemnified Party from all liability in respect to such Claim. Each Indemnified Party shall furnish such information regarding itself or the Claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the investigation and defense of such Claim.

(d) Contribution. If the indemnification provided for in this Agreement is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any Claim, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Contribution (together with any indemnification or other obligations under this Agreement) by any Holder (including any Indemnified Person associated with such Holder) shall be limited in amount to the net amount of proceeds received by such Holder from the sale of Registrable Securities by it.

5. Provision of Information by the Holders.

Each of the Holders whose Registrable Securities are included in the Registration Statement shall furnish to the Company such information regarding such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement, and shall promptly notify the Company if such information becomes incorrect or misleading, or requires amendment or updating. Each of the Holders agrees that the plan of distribution included in any prospectus relating to the Registrable Securities shall be as set forth in Schedule III hereto and that such Holder will not sell any Securities in any manner other than as provided therein. Each Holder represents and warrants to the Company that the information regarding such Holder set forth on Schedule II is accurate and complete in all material respects.

6. Holdback; Postponement.

(a) Notwithstanding the other provisions of this Agreement, if the Board of Directors of the Company determines in good faith that it is in the best interests of the Company (i) not to disclose the existence of facts surrounding any proposed or pending acquisition, disposition, strategic alliance or financing transaction involving the Company, or (ii) for any other purpose in order to comply with federal securities laws, to suspend the registration rights set forth herein, the Company may, by prompt notice to the Holders, (A) suspend the rights of the Holders to make sales pursuant to the Registration Statement, and/or (B) postpone the preparation, filing and effectiveness of the Registration Statement, in each case for such a period of time as the Board of Directors may reasonably determine; provided that such periods of suspension may not exceed 90 days in the aggregate in any consecutive 12 month period.

(b) In addition, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) hereof, and, if so directed by the Company such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

7. Rule 144 Reporting.

With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, until the Termination Date the Company shall:  ___________________________________

(i) Make and keep adequate current public information available, as those terms are understood and defined in Rule 144 under the Act;

(ii) File with the Commission in a timely manner all reports and other documents required of the Company under the Act and the Securities Exchange Act of 1934, as amended; and

(iii) So long as a Holder owns any Registrable Securities furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Act and the Securities Exchange Act of 1934, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonable obtainable by the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

8. Miscellaneous.

(a) Assignment. The registration rights set forth herein may be assigned, in whole or in part, to any transferee of Registrable Securities permitted in accordance with the Securities Purchase Agreement, which transferee, upon registration on the Company's or its transfer agent's books and records as a holder of record of Registrable Securities, shall be considered thereafter to be a Holder and shall be bound by all obligations and limitations of this Agreement and the Securities Purchase Agreement, provided, however that assignment will only be available if (i) such transfer may otherwise be effected in accordance with applicable securities laws and (ii) (A) such assignee or transferee acquires at least 500,000 shares of Registrable Securities, or (B) if such assignee or transferee is a partner, limited partner, member or other equity holder of a Holder, or (C) if such assignee or transferee acquires Registrable Securities by virtue of an assignment or transfer, or partial a ssignment or transfer, to it of a Warrant, such assignee or transferee acquires at least 50,000 shares of Registrable Securities, or (D) if such assignee transfer is an affiliate of the Holder and the Company's consents in writing to such assignment or transfer (which consent may not be unreasonably withheld or delayed) (any such assignee or transferee in the case of (A), (B), (C) or (D), a "Permitted Transferee"). Promptly after an assignment to a Permitted Transferee, the Company shall file any required prospectus supplement reflecting such transfer and naming the Permitted Transferee as a selling stockholder therein, if applicable, enabling the Permitted Transferee to sell all of the Registrable Securities required by it, provided the Permitted Transferee provides all information reasonably requested by the Company in connection therewith.

(b) Interpretation.

(i) Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

(ii) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.

(iii) Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.

(c) Notices.

(i) All communications under this Agreement shall be in writing and shall be delivered by facsimile or by hand or mailed by overnight courier or by registered or certified mail, postage prepaid:  ___________________________________

(A) if to the Company, to SpectRx, Inc., 6025A Unity Drive, Norcross, Georgia 30071, facsimile (770) 242-8639, Attention:  ___________________________________ Thomas H. Muller, Jr. or at such other address as it may have furnished in writing to the Purchasers;

(B) if to the Purchasers, at the addresses listed on Schedule I hereto, or at such other addresses as may have been furnished the Company in writing.

(ii) Any notice so addressed shall be deemed to be given (A) if delivered by facsimile or by hand, on the date of such delivery, (B) if mailed by overnight mail service, on the first business day following the date of such mailing, or (C) if mailed by registered or certified mail, on the third business day after the date of such mailing.

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

(e) Entire Agreement; Amendment and Waiver. This Agreement, the Preferred Shares, the Warrants and the Securities Purchase Agreement constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. This Agreement may be amended, and the observance of any term of this Agreement may be waived only with the written consent of the Company and the Holders of a majority of the then outstanding Registrable Securities.

(f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

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

(h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of the remaining provisions contained herein shall not be in any way impaired thereby, and shall remain in full force and effect, it being intended and understood that all of the rights and privileges of each of the Holders shall be enforceable to the fullest extent permitted by law.

(i) Termination of Registration Rights. All rights of the Holders under this Agreement shall terminate on the Termination Date.

(j) Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Holders, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a Holder of any breach or default under this Agreement, or any waiver by a Holder of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to a Holder, shall be cumulative and not alternati ve.

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have executed this Agreement as of the date first set forth above.

SPECTRX, INC.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PURCHASERS:  ___________________________________

OTAPE INVESTMENTS, LLC

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

DOLPHIN OFFSHORE PARTNERS, LP

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

Pamela Kaweske

BAFFLES S.A.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

HYTEK INTERNATIONAL, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

SEGOES TRUST

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

SF CAPITAL PARTNERS

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

BRISTOL INVESTMENT FUND, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

EASTON HUNT CAPITAL PARTNERS

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PROMED PARTNERS, LP

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PROMED PARTNERS II, LP

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

PROMED OFFSHORE FUND, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

SAGAMORE HILL HUB FUND, LTD.

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

ALPHA CAPITAL AG

By:  ___________________________________
Name:  ___________________________________
Title:  ___________________________________

___________________________________
Paul Scharfer

___________________________________
David Musket

___________________________________
John Imhoff

___________________________________
Susan Imhoff

___________________________________
Dolores Maloof

___________________________________
Keith Ignotz

___________________________________
Mark Samuels

KENSINGTON PARTNERS, L.P.

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

BALD EAGLE FUND, LTD.

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

___________________________________
Douglas Schmidt

NORTH SOUND LEGACY FUND, LLC

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

NORTH SOUND LEGACY INSTITUTIONAL FUND, LLC

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

NORTH SOUND LEGACY INTERNATIONAL LTD.

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

SDS CAPITAL GROUP SPC, LTD

By:  ___________________________________

Name:  ___________________________________

Title:  ___________________________________

Schedule I

The Purchasers

Name	Address
OTAPE Investments, LLC	One Manhattanville Rd. Purchase, NY 10577
Dolphin Offshore Partners, LP	129 E.17th St, 2nd Floor New York, NY 10003
Pamela Kaweske	Whitehall House, 3rd Floor 238 N. Church Street George Town, Grand Cayman, Cayman Islands
Baffles S.A	Whitehall House, 3rd Floor 238 N. Church Street George Town, Grand Cayman, Cayman Islands
Hytek International, Ltd.	Whitehall House, 3rd Floor 238 N. Church Street George Town, Grand Cayman, Cayman Islands
SEGOES Trust	Whitehall House, 3rd Floor 238 N. Church Street George Town, Grand Cayman, Cayman Islands
SF Capital Partners	3600 South Lake Drive St. Francis, WI 53235
Bristol Investment Fund, Ltd.	6363 Sunset Blvd., 5th Floor Hollywood, CA 90028
Easton Hunt Capital Partners	SBS Tower, Suite 750 2601 South Bay Shore Drive Miami, FL 31333
ProMed Partners, LP	125 Cambridgepark Drive Cambridge, MA 02140
ProMed Partners II, LP	125 Cambridgepark Drive Cambridge, MA 02140
ProMed Offshore Fund, Ltd.	125 Cambridgepark Drive Cambridge, MA 02140
SDS Capital Group SPC, Ltd.	53 Forest Avenue Old Greenwich, CT 06870
North Sound Legacy Fund LLC	53 Forest Avenue Old Greenwich, CT 06870
North Sound Legacy Institutional Fund LLC	53 Forest Avenue Old Greenwich, CT 06870
North Sound Legacy International Ltd.	53 Forest Avenue Old Greenwich, CT 06870
Sagamore Hill Hub Fund, Ltd.	10 Glenville Street Greenwich, CT 06831
Alpha Capital AG	160 Central Park West New York, NY 10019
Paul Sharfer	237 Park Avenue, 9th Floor New York, NY 10017
David Musket	125 Cambridgepark Drive Cambridge, MA 02140
John Imhoff	Cottage 441, 55 Rutledge Land Sea Island, GA 31561
Susan Imhoff	Cottage 441, 55 Rutledge Land Sea Island, GA 31561
Delores Maloof	2669 Mercedes Drive Atlanta, GA 30345
Keith Ignotz	3151 Willow Green Court Duluth, GA 30096
Mark Samuels	440 Missendell Lane Norcross, GA 30092

Schedule II

Holder Information

[Shares to be held in nominee name - to be provided]

Schedule III

Plan of Distribution

Any or all of the shares offered by the selling stockholders may be offered for sale and sold by or on behalf of the selling stockholders from time to time in varying amounts, including in block transactions, on the Nasdaq Stock Market or the over-the-counter market, in privately negotiated transactions, or otherwise (other than underwritten offerings), at prices prevailing in such market or as may be negotiated at the time of the sale. The shares may be sold by the selling stockholders directly to one or more purchasers, through agents designated from time to time or to or through broker-dealers designated from time to time. In the event the shares are publicly offered through broker-dealers or agents, the selling stockholders may enter into agreements with respect thereto. Such broker-dealers or agents may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of the shares. The selling stockholders and an y such broker-dealers or agents that participate in the distribution of the shares may be deemed to be underwriters within the meaning of the Securities Act, and any profit on the sale of the shares by them and any discounts, commissions or concessions received by them may be deemed to be underwriting discounts and commissions under the Securities Act. Any such broker-dealers and agents may engage in transactions with, and perform services for, the Company. At the time a particular offer of shares is made by the selling stockholders, to the extent required, a prospectus supplement will be distributed which will set forth the aggregate number of shares being offered, and the terms of the offering, including the public offering price thereof, the name or names of any broker-dealers or agents, any discounts, commissions and other items constituting compensation from, and the resulting net proceeds to, the selling stockholders.

In order to comply with the securities laws of certain states, sales of shares offered hereby to the public in such states may be made only through broker-dealers who are registered or licensed in such states. Sales of shares offered hereby must also be made by the selling stockholders in compliance with other applicable state securities laws and regulations.

EX-99.4

EXHIBIT 99.4

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK

OF

SPECTRX, INC.

SpectRx, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"),

DOES HEREBY CERTIFY:

That, pursuant to authority conferred upon the Board of Directors by the Restated Certificate of Incorporation of the Corporation, as amended, and pursuant to the provisions of Section 151 of Title 8 of the Delaware General Corporation Law, said Board of Directors by unanimous written consent executed on March 24, 2004 adopted resolutions providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of the Series A Convertible Preferred Stock of the Corporation, which resolutions are set forth below (with the attachment to such resolution being attached hereto as Schedule 1):

WHEREAS, Section 151(g) of the Delaware General Corporation Law and the Restated Certificate of Incorporation, as amended, of SpectRx, Inc., a Delaware corporation (the "Corporation"), authorizes the Board of Directors to divide the shares of the Corporation's preferred stock, $.001 par value, into one or more series and to issue shares of any such series, and to fix and to determine the relative rights and preferences of the shares of such series; and

WHEREAS, the Board of Directors of the Corporation has determined that it is in the best interests of the Corporation to enter into a Securities Purchase Agreement by and among the Corporation and purchasers identified therein (the "Purchase Agreement"), pursuant to which the Corporation will issue and sell up to 510,000 shares of its Series A Convertible Preferred Stock for Fifteen Dollars and No Cents ($15.00) per share;

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation hereby establishes a series of $.001 par value preferred stock of the Corporation to be designated as the "Series A Convertible Preferred Stock";

FURTHER RESOLVED, that the number of shares of Series A Convertible Preferred Stock, the voting rights, dividend rights, liquidation rights and conversion rights of the holders of the shares of the Series A Convertible Preferred Stock, the provisions for redemption of the shares of Series A Convertible Preferred Stock, and all other preferences and relative rights in respect of shares of Series A Convertible Preferred Stock, shall be as set forth on Schedule 1 attached to these resolutions.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Mark Samuels, its Chairman and Chief Executive Officer, and attested by Thos Muller, its Secretary, this ___ day of March, 2004.

SPECTRX, INC.




By:
Mark Samuels, Chairman and Chief

Executive Officer

ATTEST:



By:
Thomas H. Muller, Jr., Secretary


(Corporate Seal)

Schedule 1

DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
SPECTRX, INC.

Pursuant to authority granted in the Restated Certificate of Incorporation, as amended, of SpectRx, Inc., a Delaware corporation (the "Corporation"), the Board of Directors of the Corporation has been authorized to issue in series shares of preferred stock and to designate by resolution the relative preferences and rights of each series established. By resolution of the Corporation's Board of Directors, the Corporation has established and fixed the relative preferences and rights of 510,000 shares of preferred stock designated as the "Series A Convertible Preferred Stock," each of $0.001 par value.

For the purposes of this statement,

"Additional Appraiser" has the meaning set forth in Section (b).

"Automatic Conversion Date" means the date on which the Common Stock is listed on either a national or regional securities exchange within the United States, or is listed on the Nasdaq National Market or Small Cap Market System (or similar system then in use), and achieves a Current Market Price of the greater of (i) Four Dollars and Fifty Cents ($4.50) (such per share price to be proportionately adjusted for any stock split, stock dividend, or the like occurring after the Original Issue Date) or (ii) three (3) times the Conversion Price for a period of twenty (20) consecutive trading days; provided that (i) on such date the shares of Common Stock issuable upon the conversion of the Preferred Stock have been registered for resale under the Securities Act of 1933, as amended, pursuant to a registration statement filed with the SEC (if the Registration Rights Agreement has not at such time expired or been terminated in accordance with its terms), (ii) the Corporation has not in the ninety (90) days preceding such date issued a Redemption Notice (as such term is defined in the Warrants); (iii) such date is not within ninety (90) days succeeding a prior Automatic Conversion Date; and (iv) (A) if any A Warrants are then outstanding, such date is not within the one hundred eighty (180) days preceding the Expiration Date (as such term is defined in the A Warrants), and (B) if any B Warrants are then outstanding, such date is not within the one hundred eighty (180) days preceding the Expiration Date (as such term is defined in the B Warrants).

"Board of Directors" shall mean the board of directors of the Corporation.

"Common Stock" shall mean the common stock, $0.001 par value, of the Corporation.

"Corporation" shall mean SpectRx, Inc., a Delaware corporation.

"Current Market Price" shall mean, per share of Common Stock on any date specified herein, (a) the last sale price on such date of such Common Stock or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, Inc., the last trading price of such Common Stock on such date, or (c) if such Common Stock is not then designated as a national market system security by the National Association of Securities Dealers, Inc. but is trading on either the over-the-counter market on the OTC Bulletin Board or the "Pink Sheets," the last sale price as reported by the National Quotation Bureau, or ( d) if neither (a), (b) nor (c) is applicable, a price per share thereof equal to the fair value thereof determined in good faith by a resolution of the Board of Directors of the Corporation as of a date which is within 15 days of the date as of which the determination is to be made.

"Existing Preferred" shall mean the Redeemable Convertible Preferred Stock of the Corporation.

"Initial Appraiser" has the meaning set forth in Section (b).

"Holder" means a holder of record of shares of Preferred Stock.

"Issue Date" as to any share of Preferred Stock shall mean the date of issuance of such share.

"Invested Amount" per share of Preferred Stock shall mean $15.00 (as adjusted for changes in the Preferred Stock by stock split, stock dividend, or the like occurring after the Original Issue Date).

"Junior Stock" means shares of any class of capital stock of the Corporation ranking subordinate to the Preferred Stock as to both dividends and distribution of assets upon liquidation.

"Liquidation Amount" has the meaning set forth in Section (b).

"Original Issue Date" shall mean the date on which shares of Preferred Stock are first issued.

"Pari Passu Stock" means shares of any class of capital stock of the Corporation ranking equal to the Preferred Stock as to dividends and the distribution of assets upon liquidation.

"Person" shall mean any individual, association, partnership, corporation, limited liability company, limited partnership, limited liability partnership, joint stock company, trust or unincorporated organization.

"Preferred Stock" shall mean the 510,000 shares of Series A Convertible Preferred Stock, $0.001 par value, hereby designated.

"Registration Rights Agreement" means the Registration Rights Agreement entered into by and among the Corporation and the initial Holders of the Preferred Stock on the Original Issue Date.

"Sale or Merger" has the meaning set forth in Section (b).

"SEC" means the United States federal Securities and Exchange Commission.

"Warrants" shall mean the warrants to purchase shares of Common Stock issued by the Corporation on the Original Issue Date to the initial Holders of the Preferred Stock. The "A Warrants" shall mean the Warrants whose Scheduled Expiration Time (as such term is defined therein) is the second (2^nd) anniversary of the Original Issue Date, and the "B Warrants" shall mean the Warrants whose Scheduled Expiration Time (as such term is defined therein) is the fifth (5^th) anniversary of the Original Issue Date.

The rights, preferences, privileges and restrictions granted to and imposed upon the Preferred Stock are as follows:

(a) Dividend Rights. The Holders of the Preferred Stock shall be entitled to receive quarterly at the end of each calendar quarter, commencing on and after the second (2^nd) anniversary of the Original Issue Date, out of funds legally available therefor, dividends per share at the per annum rate of five percent (5%) on the Invested Amount, prior and in preference to any declaration or payment of any dividend on any Junior Stock. Such dividends shall be cumulative, compounded annually, and accrue from the Original Issue Date, whether or not declared by the Board of Directors. At the election of the Corporation, dividends on the Preferred Stock may be paid by the issuance and delivery of whole shares of Common Stock having a then (at the time of such issuance) aggregate Current Market Price equal to the amount of dividends so paid. The shares of the Existing Preferred and shares of Pari Passu Stock shall rank equally with the Preferred Stock as to payment of di vidends. In the event that any dividend becomes due and payable to the Holders of the Preferred Stock and there is also due and payable a dividend to the holders of the Existing Preferred or other Pari Passu Stock, and the Corporation has insufficient funds to make payment in full to all Holders of the Preferred Stock and to the holders of the Existing Preferred or other Pari Passu Stock of such respective dividends, then such funds as are available shall be distributed among the Holders of the Preferred Stock and the holders of the Existing Preferred or other Pari Passu Stock at the time outstanding, ratably in proportion to the full amounts to which they would otherwise respectively be entitled.

(b) Liquidation or Sale or Merger.

In the event of:

(A) any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (a "Liquidation"), or

(B) a "Sale or Merger" (defined below), unless, in the case of a Sale or Merger, the Holders of the Preferred Stock have elected by a vote of at least fifty-one percent (51%) of the total number of shares of such series outstanding, voting separately as a class, to exclude such Sale or Merger from the application of this Section (b) (in which case this Section (b) shall not apply to such transaction),

the Holders of the outstanding shares of the Preferred Stock shall, at their election, be entitled to receive in exchange for and in redemption of each share of their Preferred Stock, prior and in preference to the holders of Junior Stock, (x) in the case of a Liquidation, from any funds legally available for distribution to shareholders, and (y) in the case of a Sale or Merger to which this Section (b) applies, from the net proceeds therefrom (defined for these purposes to mean the proceeds, whether cash, securities, or property, available for distribution to shareholders or payable to the shareholders by reason of the Sale or Merger), an amount (the "Liquidation Amount") equal to the greater of (i) Invested Amount per share, plus the aggregate amount of all declared or accrued, but unpaid, dividends per share, or (ii) the amounts to which such holders would have been entitled if the share were converted to shares of Common Stock immediately before the Liquidation, or Sal e or Merger as the case may be. If upon any Liquidation, the assets of the Corporation shall be insufficient to make payment in full to all Holders of the Preferred Stock of the liquidation preference set forth in this Section (b) and to make payment in full to all holders of the Existing Preferred of the liquidation preference set forth in Section (b) of the Designations, Preferences and Rights of the Existing Preferred, then the assets of the Corporation shall be distributed among the Holders of the Preferred Stock and the holders of the Existing Preferred then outstanding, ratably in proportion to the full amounts to which they would otherwise respectively be entitled.

For purposes of these Designations, a "Sale or Merger" shall mean any of the following:

(x) the merger, reorganization, or consolidation of the Corporation into or with another corporation in which the shareholders of the Corporation immediately preceding such merger, reorganization, or consolidation (solely by virtue of their shares or other securities of the Corporation) shall own less than fifty percent (50%) of the voting securities of the surviving corporation; or

(y) the sale, transfer, or lease (but not including a transfer or lease by pledge or mortgage to a bona fide lender), whether in a single transaction or pursuant to a series of related transactions, of all or substantially all the assets of the Corporation, whether pursuant to a single transaction or a series of related transactions or plan (which assets shall include for these purposes fifty percent (50%) or more of the outstanding voting interests of such of the Corporation's subsidiaries the assets of which constitute all or substantially all the assets of the Corporation and its subsidiaries taken as a whole) to any entity fifty percent (50%) or more of the voting securities of which are not beneficially owned (as determined in accordance with the rules and regulations promulgated under the federal Securities Exchange Act of 1934) by all or substantially all of the individuals and entities that were the beneficial owners of the Corporation's voting securities prior to such tr ansaction or transactions.

Any securities to be delivered to the Holders of the Preferred Stock pursuant to this Section (b) as a consequence of a Sale or Merger shall be valued as follows:

(i) if traded on a securities exchange or through NASDAQ Stock Market, by averaging the closing prices of the securities on such exchange over the thirty (30)-day period ending three (3) days prior to the closing;

(ii) if actively traded over-the-counter, by averaging the closing bid or sale prices (whichever are applicable) over the thirty (30)-day period ending three (3) days prior to the closing; and

(iii) if there is no active public market, at the fair market value thereof, as determined by the Board of Directors in good faith following the Board of Directors' approval of a Sale or Merger, and each Holder shall be notified in writing of such value at least thirty (30) days prior to the scheduled closing of the Sale or Merger. If, however, any Holders shall give the Board of Directors written notice at least twenty (20) days prior to the scheduled closing that he, it, or they disagree with the value placed upon the securities, then the Holders and the Board of Directors shall attempt to agree upon a fair market value. Should the Holders and the Board of Directors be unable to agree during the ten (10)-day period immediately following the giving of the written notice of such disagreement as to the fair market value without the employment of appraisers, then they shall each select an appraiser experienced in the business of evaluating or appraising the market value of stock. The appraisers so selected (the "Initial Appraisers") shall, on or prior to the scheduled closing, appraise such securities to be received as of the date of the closing. If the difference between the resulting appraisals is no greater than ten percent (10%) of the higher appraisal, then the average of the appraisals shall be deemed the fair market value; otherwise, the Initial Appraisers shall select an additional appraiser (the "Additional Appraiser"), who shall be experienced in a manner similar to the Initial Appraisers. If they fail to select such Additional Appraiser as provided above, then either the Holders or the Board of Directors may apply, after immediate written notice to the other, to the Atlanta, Georgia, office of the American Arbitration Association for the appointment of such Additional Appraiser. The Additional Appraiser shall then choose from the values determined by the Initial Appraisers the value that the Additional Appraiser considers closest to the fair market value of the securities, and such value shall be the fair market value. The Additional Appraiser shall forthwith give written notice of his determination to the Board of Directors and the Holders. Each party shall pay the expenses and fees of the appraiser selected by him or it, and, if an Additional Appraiser is employed, the party who selected the Initial Appraiser whose value determination was rejected by the Additional Appraiser shall pay all the expenses and fees of the Additional Appraiser. The fair market value determined pursuant to this provision shall apply to all Holders, including any Holders not providing notice of a challenge pursuant to this provision.

(c) Conversion. The Holders shall have conversion rights in respect of these shares of Preferred Stock as follows (the "Conversion Rights"):

1. Conversion Rate. The shares of Preferred Stock shall be convertible, at the times and under the conditions described in this Section (c) hereafter, at the rate (the "Conversion Rate") of one share of Preferred Stock into the number of shares of Common Stock that equals the quotient obtained by dividing the sum of (i) the Invested Amount plus (ii) all declared or accrued but unpaid dividends on such share of Preferred Stock, by the Conversion Price (defined hereinafter). Such conversion shall be deemed to have been made on the Conversion Effective Date (defined hereinafter), and such conversion shall be effected in accordance with the procedures described in Subsection (c)(5) below. The "Conversion Price" shall initially be equal to One Dollar and Fifty Cents ($1.50). "Conversion Effective Date" shall mean, in the case of conversion pursuant to Subsection (c)(2) below, the date the Corporation receives the Conversion Notice delivered pursuant to Subsection (c)(5) bel ow and, in the case of conversion pursuant to Subsection (c)(3) below, the Automatic Conversion Date.

2. Conversion Right. Each share of Preferred Stock shall be convertible at any time, at the option of the Holder thereof, at the office of the Corporation or any transfer agent for the Preferred Stock, into Common Stock at the then effective Conversion Rate.

3. Automatic Conversion. On any Automatic Conversion Date, each share of Preferred Stock then outstanding (subject to the proviso below) shall automatically be converted into Common Stock at the then effective Conversion Rate; provided, however, the number of shares of Preferred Stock to be converted on any Automatic Conversion Date shall not exceed, as measured by the aggregate number of shares of Common Stock issued or to be issued upon conversion thereof, the cumulative trading volume for the ninety (90) preceding consecutive trading days for the Common Stock on its principal trading market in the United States. Such conversion shall be automatic, without need for any further action by the Holders and regardless of whether the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such convers ion or to pay the dividends payable upon such conversion unless certificates evidencing such shares of the Preferred Stock are surrendered to the Corporation in accordance with the procedures described in Subsection (c)(5) below. Upon the conversion of the Preferred Stock pursuant to this Subsection (c)(3), the Corporation shall promptly send notice thereof to each Holder, which notice shall state that certificates evidencing shares of Preferred Stock must be surrendered at the office of the Corporation (or of its transfer agent for the Common Stock, if applicable) in the manner described in Subsection (c)(5) below.

4. Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock, and any shares of Preferred Stock surrendered for conversion that would otherwise result in a fractional share of Common Stock shall be redeemed at the then effective Conversion Price per share, payable as promptly as possible when funds are legally available therefor.

5. Mechanics of Conversion. Before any Holder shall be entitled to receive certificates representing the shares of Common Stock into which shares of Preferred Stock are converted in accordance with Subsections (c)(2) or (c)(3) above, such Holder shall surrender the certificate or certificates for such shares of Preferred Stock, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock (or if such certificate or certificates have been lost or destroyed, provide an affidavit in conformance with the provisions of Section (g)), and shall give written notice to the Corporation at such office of the name or names in which such Holder wishes the certificate or certificates for shares of Common Stock to be issued, if different from the name shown on the books and records of the Corporation. Said conversion notice ("Conversion Notice") shall also contain such representations of the Holder and, if applicable, another Person in whose name the certificate or certificates for the shares of Common Stock are to be issued accompanied by an opinion of counsel, as may reasonably be required by the Corporation to the effect that the shares to be received upon conversion are not being acquired and will not be transferred in any way that might violate the then applicable securities laws. The Corporation shall, as soon as practicable thereafter and in no event later than thirty (30) days after the delivery of said certificates, issue and deliver at such office to such Holder of Preferred Stock, or to the nominee or nominees of such Holder as provided in such notice, a certificate or certificates for the number of shares of Common Stock to which such Holder shall be entitled as aforesaid and, if the Conversion Notice does not cover all of the outstanding shares of Preferred Stock owned by such Holder, a new certificate representing the remainder of the shares of Preferred Stock of such Holder not yet converted. The person or persons entitled to receive th e shares of Common Stock issuable upon a conversion pursuant to Subsections (c)(2) or (c)(3) shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of the Conversion Effective Date. All certificates issued upon the exercise or occurrence of the conversion shall contain a legend governing restrictions upon such shares imposed by law or agreement of the Holder or such Holder's predecessors or successors.

6. Anti-Dilution Provisions. The Conversion Price shall be subject to adjustment in accordance with this Subsection (c)(6).

(A) Except as provided in Subparagraph (D) below, if the Corporation shall issue or sell, or shall in accordance with subparagraphs (i) to (viii), inclusive, of this Subparagraph (A) be deemed to have issued or sold any shares of Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale, then forthwith upon such issue or sale, the Conversion Price shall, subject to subparagraphs (i) to (viii), inclusive, of this Subparagraph (A), be adjusted so as to equal such per share consideration.

For purposes of determining the adjusted Conversion Price under this Subparagraph (A), the following subsections (i) to (viii), inclusive, shall be applicable:

(i) In case the Corporation at any time shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable and the price per share for which the Common Stock is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such Option, then the total maximum amount of Common Stock issuable upon the exercise of such Options or in the case of Options for Convertible Securities, upon the conversion or exchange of such Convertible Securities shall (as of the date of granting of such options) be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. No adjustment of the Conversion Price shall be made upon the actual issue of such shares of Common Stock or such Convertible Securities upon the exercise of such O ptions, except as otherwise provided in subparagraph (iii) below.

(ii) In case the Corporation at any time shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Co nvertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. No adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon exercise of the rights to exchange or convert under such Convertible Securities, except as otherwise provided in subparagraph (iii) immediately below.

(iii) If the purchase price provided for in any Options referred to in subparagraph (i), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (i) or (ii), or the rate at which any Convertible Securities referred to in subparagraphs (i) or (ii) are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution of the type set forth in this Subparagraph (A) or Subparagraph (B) below), the Conversion Price in effect at the time of such change shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. If the purchase price provided for in any Option referred to in subparagraph (i) or the rate at which any Convertible Securities referred to in subparagraphs (i) or (ii) are convertible into or exchangeable for Common Stock, shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Security, the Conversion Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Security never been issued as to such Common Stock and had adjustments been made upon the issuance of the shares of Common Stock delivered as aforesaid, but only if as a result of such adjustment the Conversion Price then in effect hereunder is hereby reduced.

(iv) On the expiration of any Option or the termination of any right to convert or exchange any Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.

(v) In case any Options shall be issued in connection with the issue or sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration.

(vi) In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration as determined in good faith by the Board of Directors of the Corporation. In case any shares of Common Stock, Options or Convertible Securities shall be issued in connection with any merger in which the Corporation is the surviving Corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving Corporation as shall be attributable to such Common Stock, Options or Convertible Securities, as the case may be.

(vii) In case the Corporation shall declare a dividend or make any other distribution upon the stock of the Corporation payable in Options or Convertible Securities, then in such case any Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.

(viii) For purposes of this Subparagraph (A), in case the Corporation shall set a record date for the holders of its Common Stock for the purpose of entitling them (x) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities, or (y) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right or subscription or purchase, as the case may be.

(B) In the event the Corporation shall at any time (i) subdivide the outstanding Common Stock or (ii) issue a stock dividend on the Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock shall be proportionately increased by the same ratio as the subdivision or dividend (with appropriate adjustments to the Conversion Price in effect immediately prior to such subdivision or dividend). In the event the Corporation shall at any time combine its outstanding Common Stock, the number of shares issuable upon conversion of the Preferred Stock immediately prior to such combination shall be proportionately decreased by the same ratio as the combination (with appropriate adjustments to the Conversion Price in effect immediately prior to such combination).

(C) If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with or into another Person (other than a consolidation or merger that is a Sale or Merger to which Section (b) applies) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then the consideration payable to the Holders of the Preferred Stock in such reorganization, reclassification, consolidation or merger shall be the amount of such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation or merger) with respect to or in exchange for such number of outstanding shares of Common Stock as would be received upon conversion of the Preferred Stock (and payment of any declared or accrued but unpaid dividends then due in Common Stock in accordance wit h the proviso in the penultimate sentence of Subsection (c)(1)) at the Conversion Price in effect on the effective date of such reorganization, reclassification, consolidation, merger or sale.

(D) The provisions of this Subsection (c)(6) shall not apply to shares of Common Stock issued, or deemed to be outstanding under Subparagraph (A), subparagraphs (i) to (viii), inclusive, as a result of any of the following: (i) issuance of Common Stock, Options or Convertible Securities pursuant to any stock option, stock purchase or similar plan, arrangement or contract for the benefit of members of the Board of Directors, members of the board of directors of any of the Corporation's subsidiaries, or employees of, or consultants or advisors to, the Corporation or any of its subsidiaries, in any such case, in effect on the Original Issue Date or thereafter adopted, approved or ratified by the Board of Directors, (ii) issuance of Common Stock, Options or Convertible Securities issued pursuant to other options, warrants and conversion rights in existence on the Original Issue Date, (iii) issuance of Common Stock pursuant to the conversion of the Preferred Stock or the Existing Preferred, or issued as dividends in respect of the Preferred Stock; (iv) issuance of Common Stock, Options or Convertible Securities pursuant to any strategic alliance or joint venture, or in connection with the acquisition by the Corporation of any product, technology or know-how, or license therefor or other right in respect thereof, or the acquisition of another Person by merger, consolidation, stock purchase, purchase of assets of such other Person, or other form of acquisition; (v) issuance of Common Stock upon exercise of the Warrants; or (vi) any issuance of Common Stock, Options or Convertible Securities as to which the Holders of a majority of the shares of Preferred Stock have determined that the provisions of this Subsection (c)(6) shall not apply.

(E) In the event that:

(1) the Corporation shall declare any cash dividend upon the Common Stock, or

(2) the Corporation shall declare any dividend upon the Common Stock payable in stock or make any special dividend or other distribution to the holders of the Common Stock, or

(3) the Corporation shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights, or

(4) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Corporation with or into, or sale of all or substantially all of its assets to, another Person, or

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

then, in connection with such event, the Corporation shall give to each Holder:

(a) at least twenty (20) days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and

(b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place.

Such notice in accordance with the foregoing paragraph (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing paragraph (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be.

7. No Impairment. The Corporation shall not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but shall at all times in good faith assist in the carrying out of all the provisions of this Section (c) and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holders against impairment.

8. Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall be insufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(d) Voting Rights. Each Holder of a share of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Preferred Stock would be convertible under the circumstances described in Section (c) hereof on the record date for the vote or consent of stockholders, and shall otherwise have voting rights and powers equal to the voting rights and powers of the Common Stock; provided, however, that, so long as at least one hundred thousand (100,000) shares of Preferred Stock (such number subject to adjustment for any stock split, stock dividend or the like occurring after the Original Issue Date in respect of the Preferred Stock) are outstanding, with respect to the election of directors, in addition to and not in limitation of the foregoing, if requested of the Company in a writing delivered to the Company at its principal executive offices and signed by the Holders of a majority of the issued and outstanding s hares of the Preferred Stock (or their duly designated proxies), the Holders of the Preferred Stock shall vote together as a single class to elect two (2) members of the Board of Directors. Each Holder of Preferred Stock shall be entitled to receive the same prior notice of any stockholders' meeting as provided to the holders of the Common Stock in accordance with the Bylaws of the Corporation, as well as prior notice of all stockholder actions to be taken by legally available means in lieu of a meeting, and shall vote with holders of the Common Stock upon any matter submitted to a vote of stockholders, except those matters required by law or by the terms hereof to be submitted to a class vote of the Holders of the Preferred Stock. In addition, Holders shall have the right to vote on those matters which, under the Delaware General Corporation Law, voting by classes of stock is required and, so long as at least one hundred thousand (100,000) shares of Preferred Stock (such number subject to adjustment for a ny stock split, stock dividend or the like occurring after the Original Issue Date in respect of the Preferred Stock) are outstanding, the Corporation shall not, without the consent (given by vote in person or by proxy at a meeting called for the purpose, or by written consent) of the Holders of a majority of the shares of Preferred Stock then outstanding:

(i) create or authorize any shares of any class or series of capital stock of the Corporation having a preference or priority as to either dividends or distribution of assets upon liquidation equal or superior to any such preference or priority of the shares of Preferred Stock, reclassify any existing securities into shares of such equal or superior stock or amend the terms of any existing securities in a manner inconsistent with the foregoing restriction;

(ii) amend or repeal any provision of, or add any provision to, the Corporation's Certificate of Incorporation or Bylaws, if such action would adversely alter or change the preferences, rights, privileges, or powers of, or restrictions provided for the benefit of, the Preferred Stock;

(iii) declare, pay or set aside any dividends on any Junior Stock, or redeem or repurchase any Junior Stock;

(iv) increase or decrease (other than in connection with a redemption or conversion) the authorized number of shares of Preferred Stock; or

(v) alter or change the rights, preferences or privileges of the Preferred Stock in a manner different from each other class of Pari Passu Stock.

(e) Preemptive Rights. Upon the terms and conditions set forth in this Section (e), the Holders of the Preferred Stock shall have the right of first refusal to purchase their pro rata share of any New Securities that the Company may, from time to time, propose to sell and issue.

(i) For purposes hereof, "New Securities" shall mean shares of Common Stock or any class or series of preferred stock of the Company, whether or not now authorized, and rights, options or warrants to purchase shares of Common Stock or preferred stock, and securities of any type whatsoever that are, or may become, convertible into shares of Common Stock or preferred stock; provided that "New Securities" does not include (A) any shares of Common Stock issuable upon the conversion of the Preferred Stock, or payable as dividends in respect of shares of the Preferred Stock, or issuable upon exercise of the Warrants; (B) securities offered to the public pursuant to a registration statement under the Securities Act; (C) securities offered pursuant to any stock option, stock purchase or similar plan, arrangement or contract for the benefit of members of the board of directors of the Company, members of the board of directors of any of the Company's subsidiaries, or employees of, or consu ltants or advisors to, the Company or any of its subsidiaries, in any such case, in effect on the date of the Closing or thereafter adopted, approved or ratified by the board of directors of the Company; (D) issuance of securities pursuant to options, warrants and conversion rights in existence on the Closing Date, including without limitation conversion of the Existing Preferred; (E) issuance of securities pursuant to any strategic alliance or joint venture, or in connection with the acquisition by the Company of any product, technology or know-how, or license therefor or other right in respect thereof, or the acquisition by the Company of another Person by merger, consolidation, stock purchase, purchase of assets of such other Person, or other form of acquisition; (F) shares of Common Stock or preferred stock issued in connection with any stock split, stock dividend or recapitalization by the Company; or (G) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to clauses (A) through (F).

(ii) In the event, and each time, that the Company proposes to undertake an issuance of New Securities, it shall give each Holder of the Preferred Stock written notice of its intention, describing the type of New Securities, the price, the closing date of the offering thereof, and the general terms upon which the Company proposes to issue same (the "Offer Notice"). Each Holder of the Preferred Stock shall be entitled to purchase some or all of such Holder's pro rata portion of such New Securities for the price and upon the general terms specified in the Office Notice, by giving, within twenty (20) days after receiving such notice from the Company, written notice to the Company of such election stating therein the quantity of New Securities such Holder desires to purchase. For purposes of this Section (e), each Holder's pro rata portion of New Securities shall be equal to a fraction, the numerator of which is the sum of:

(A) the number of shares of Common Stock into which shares of the Preferred Stock held by such Holder immediately prior to such issuance have been converted since the date of the Closing, and

(B) the number of shares of Common Stock into which such Holder's shares of the Preferred Stock could be converted if fully converted immediately prior to such issuance (such sum hereinafter referred to, with respect to any Holder, as "Holder Shares"),

and the denominator of which is the sum of

(y) the number of shares of Common Stock actually outstanding immediately prior to such issuance, and

(z) the number of shares of Common Stock into which the then-outstanding shares of the Preferred Stock could be converted if fully converted immediately prior to such issuance.

(iii) The Company shall promptly, in writing, inform each Holder of the Preferred Stock who elected to purchase such Holder's pro rata portion of such New Securities in full (a "Fully Exercising Holder") of any other Preferred Stock Holder's failure to do likewise. During the seven (7)-day period after receipt of such information, each Fully Exercising Holder shall have the right to participate in the purchase of such remaining, unpurchased portion by giving written notice to the Company, with each such Holder having the right to purchase in the proportion that the number of its Holder Shares (prior to receipt of the Offer Notice) bears to the number of Holder Shares owned by all Fully Exercising Holders. After expiration of such seven (7)-day period, the Company shall promptly, in writing, inform each Fully Exercising Holder that purchased the full amount of the remaining, unpurchased portion of New Securities that it is entitled to purchase in accordance with the immediately preceding sentence of any other Fully Exercising Holder's failure to do likewise and, during the three (3)-day period after receipt of such information, each such Fully Exercising Holder shall have the right to participate in the purchase of such remaining, unpurchased portion by giving written notice to the Company, with each such Fully Exercising Holder having the right to purchase in the proportion that the number of its Holder Shares (prior to receipt of the Offer Notice) bears to the number of Holder Shares owned by all such Fully Exercising Holders that purchased the full amount of the remaining, unpurchased portion of New Securities that they were entitled to purchase in accordance with the immediately preceding sentence. All such purchases shall be made within the same period specified for closing above.

(iv) If all New Securities proposed to be issued by the Company that Holders of the Preferred Stock are entitled to purchase in accordance with Sections (e)(ii) and (iii) hereof are not elected to be obtained as provided in Sections (e)(ii) and (iii) hereof, the Company may, during the sixty (60)-day period following the expiration of the ten (10)-day period provided in the immediately preceding paragraph, offer the remaining unsubscribed portion of New Securities to any person or persons at a price not less than, and upon material terms on the whole no more favorable to, the offeree(s) than those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within ninety (90) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first re-offered to the Holders of Preferred Stock in accord ance with this Section (e).

(v) The rights granted in this Section (e) shall terminate as to any Holder of Preferred Stock upon the conversion of all of the shares of Preferred Stock held by such Holder into shares of Common Stock.

(f) Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place, the Corporation shall, at the request of the record Holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and shall represent such number of shares as is requested by the Holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Preferred Stock represented by such new certificate from the date to which dividends hav e been fully paid on such Preferred Stock represented by the surrendered certificate. The issuance of new certificates shall be made without charge to the Holders of the surrendered certificates.

(g) Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the Holder is a financial institution, other institutional investor or executive officer of the Corporation, such Holder's own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Preferred Stoc k represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.

(h) Notices. Any notice required by the provisions hereof to be given to the Corporation or Holders shall be deemed given if deposited in the United States Postal Service, postage prepaid, and addressed to the Corporation at its then principal executive office, or to each Holder at the address of such Holder appearing on the books of the Corporation.

* * * * * *

EX-99.5

EXHIBIT 99.5

[FORM OF WARRANT - Exhibit B-1]

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE WARRANT AND THE SHARES OF COMMON STOCK UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM.

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS CONTAINED IN THIS WARRANT.

SPECTRX, INC.

COMMON STOCK WARRANT

_________ shares of Common Stock

March 26, 2004

No.

SPECTRX, INC., a Delaware corporation (the "Company"), for value received, hereby certifies that __________________ or its registered assigns, (the "Holder") is entitled, subject to the provisions hereof, to purchase from the Company, at any time or from time to time prior to the Expiration Date (as defined below), _______ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (defined below) of the Company at a purchase price of One Dollar and Sixty-Five Cents ($1.65) per share (the "Warrant Price"), all subject to the terms, conditions and adjustments set forth below in this warrant (this warrant, and any new warrant issued pursuant to the terms hereof, being referred to herein as "Warrants").

1. Exercise of Warrant.

1.1 Manner of Exercise. This Warrant may be exercised by the Holder, in whole or in part, during normal business hours on any Business Day by its surrender to the Company at the principal executive office of the Company, accompanied by (i) a subscription in the form of Schedule 1 hereto duly executed by such Holder and (ii) by payment in cash or by certified or official bank check payable to the order of the Company or by wire transfer in the amount obtained by multiplying (a) the number of shares of Common Stock issuable upon exercise of this Warrant and designated in such subscription by (b) the Warrant Price.

1.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 1.1. At such time, the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise as provided in Section 1.3 shall be deemed to have become the stockholder(s) of record thereof.

1.3 Delivery of Stock Certificates, etc. As soon as practicable after the exercise of this Warrant, in whole or in part, and in any event within five (5) Business Days thereafter, the Company at its expense will cause to be issued to and delivered or registered in the name of the Holder hereof or, subject to Section 3, as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which such Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price per share on the Business Day next preceding the date of such exercise. If the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as certificates issued pu rsuant the exercise hereof do not bear a legend and the Holder is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Warrant Shares so purchased to the Holder by crediting the account of the Holder with DTC through its Deposit Withdrawal Agent Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver to the Holder physical certificates representing the Warrant Shares so purchased. Further, the Holder may instruct the Company to deliver to the Holder physical certificates representing the Warrant Shares so purchased in lieu of delivering such shares by way of DTC Transfer. Any certificates so delivered shall be in such denominations as may be reasonably requested by the Holder hereof, shall be registered in the name of such Holder and shall bear a restrictive legend. If this Warrant shall have been exercised only in part, then the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for issuance of the number of shares of Common Stock equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares so designated by such Holder upon such exercise as provided in Section 1.1.

1.4 Representations of the Company.

The Company represents, warrants and acknowledges to the Holder that:

1.4.1. it is a corporation duly formed and validly existing in the State of Delaware;

1.4.2. it will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, the number of shares of Common Stock (or Other Securities) from time to time issuable upon the exercise of the Warrant at the time outstanding. All such securities shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof.

1.4.3. this Warrant has been duly authorized and approved by all requisite action of the Company, and constitutes a valid and binding agreement of the Company; and

1.4.4. when issued in accordance with the terms of this Warrant, the shares of Common Stock covered by this Warrant will be duly authorized and validly issued, fully paid and nonassessable.

2. Anti-Dilution Provisions.

2.1 Adjustment to Warrant Price. Upon the adjustment to the Conversion Price (as that term is defined in the Company's Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (as same may be amended from time to time, the "Designations")) pursuant to Subsection (c)(6)(A) thereof, and subject to the provisions of subparagraphs (i) to (viii) of such Subsection (c)(6)(A) of the Designations, and all of the terms and conditions of the Designations, including without limitation, the provisions of Subsection (c)(6)(D) of the Designations (and whether or not any shares of such Series A Convertible Preferred Stock then remain outstanding), then the Warrant Price shall simultaneously with said adjustment to the Conversion Price be adjusted to equal the Conversion Price as so adjusted.

2.2 Stock Dividends, Subdivisions and Combination.

2.2.1. Triggering Events. If at any time the Company shall: (i) declare a dividend or otherwise make a distribution to the holders of its Common Stock in the form of additional shares of Common Stock into a larger number of shares of Common Stock, or (ii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the adjustments set forth in Sections 2.2.2 and 2.2.3 of this Section 2.2 shall be made to the number of shares of Common Stock for which this Warrant is exercisable and to the Warrant Price, respectively.

2.2.2. Adjustment to Number of Shares of Common Stock for Which Warrant is Exercisable. The number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal: (i) the number of shares of Common Stock for which this Warrant is exercisable immediately before the occurrence of any such event, (ii) multiplied by a fraction, (A) the numerator of which is the total number of shares of Common Stock outstanding immediately after the occurrence of such event, and (B) the denominator of which is the total number of shares of Common Stock outstanding immediately before the occurrence of such event.

2.2.3. Adjustment to Warrant Price. The Warrant Price shall be adjusted to equal: (i) the Warrant Price immediately prior to the occurrence of any such event, (ii) multiplied by a fraction, the numerator of which is the number of shares of Common Stock for which this Warrant is exercisable immediately before such event, and the denominator of which is the number of shares of Common Stock for which this Warrant is exercisable immediately after the adjustment.

2.2.4. Effective Date. Any adjustment under this Section 2.2 shall become effective at the close of business on the date the subdivision or combination becomes effective; provided, however, if the subdivision is effected through a stock dividend, then any adjustment shall become effective at the close of business on the record date for such stock dividend. Such adjustment shall be made successively whenever such an event occurs.

2.3 Reclassification, Exchange, and Substitution. If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock or other securities of the Company, including any such reclassification in connection with a consolidation or merger in which the Company is the surviving entity, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above), the Holder shall, on its exercise, be entitled to receive the kind and number of shares of Common Stock or Other Securities which the Holder would have owned or been entitled to receive had such Warrant been exercised in full immediately prior to the happening of such reclassification, exchange or substitution for the same aggregate consideration. If the Company shall at any time change its Common Stock or Other Securities, as the case may be, int o the same or a different number of shares of any other class or classes of stock or Other Securities, as the case may be, the Warrant Price then in effect immediately before that reclassification, exchange or substitution shall be adjusted by multiplying the Warrant Price by a fraction, the numerator of which shall be the number of shares of Common Stock or Other Securities, as the case may be, purchasable upon the exercise of this Warrant immediately prior to such adjustment and the denominator of which shall be the number of shares of Common Stock or Other Securities, as the case may be, purchasable immediately thereafter. An adjustment made pursuant to this Section 2.3 shall become effective immediately after the effective date of such event. Such adjustment shall be made successively whenever such an event occurs.

2.4 Reorganization, Mergers or Consolidations. In the event of a reorganization, merger or consolidation of the Company with or into another entity, then, as part of such reorganization, merger or consolidation, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, at any time prior to the Expiration Date and upon payment of the Warrant Price then in effect, the number of shares of Common Stock or Other Securities or property of the Company, or of the successor corporation resulting from such merger or consolidation, to which the Holder would have been entitled in such reorganization, merger, or consolidation if this Warrant had been exercised immediately before that reorganization, merger or consolidation. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the reorganization, merger or consolidation to the end that the provisions of this Warrant (including adjustment of the Warrant Price then in effect and number of shares of Common Stock purchasable upon exercise of this Warrant) shall be applicable after that event, as near as reasonably may be, in relation to any Common Stock or Warrants or other property deliverable after than event upon exercise of this Warrant. The Company shall, within thirty (30) days after making such adjustment, give written notice (by first class mail, postage prepaid) to the Holder at the address of the Holder shown on the Company's books. That notice shall set forth, in reasonable detail, the event requiring the adjustment and the method by which the adjustment was calculated and specify the Warrant Price then in effect after the adjustment and the increased or decreased number of shares of Common Stock purchasable upon exercise of this Warrant. When appropriate, that noti ce may be given in advance and include as part of the notice required under other provisions of this Warrant. Notwithstanding the foregoing, in the event of any transaction described in this Section 2.4 in which the consideration to be received by holders of Common Stock is payable only in cash, the Holder shall be entitled only to cash in the amount, if any, that such cash payment per share exceeds the Warrant Price.

2.5 Deferral of Adjustments. Notwithstanding any adjustments to the Warrant Price required under this Section 2, no adjustment in the number of shares of Common Stock purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Warrant Price in effect at the time such adjustment is otherwise so required to be made; provided, however, that any adjustments which by reason of this Section 2.5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest .001 of a cent.

2.6 Form of Warrant after Adjustments. The form of this Warrant need not be changed because of any adjustments in the Warrant Price or number or kind of the shares of Common Stock purchasable pursuant to this Warrant, and Warrants theretofore or hereunder issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued; provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed.

3. Restrictions on Transfer.

3.1 Restrictive Legends. Except as otherwise permitted by this Section 3, each Warrant originally issued, each Warrant issued upon direct or indirect transfer, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the direct or indirect transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form, if applicable:

"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM."

3.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to any transfer of any Restricted Securities which are not registered under an effective registration statement under the Securities Act (other than a transfer pursuant to Rule 144, Rule 144A or any comparable rule under such Act), the Holder thereof will give written notice to the Company of such Holder's intention to effect such transfer and to comply in all other respects with this Section 3.2. Each such notice shall (a) describe the manner and circumstances of the proposed transfer in sufficient detail to enable counsel to render the opinion referred to below, and (b) designate counsel for the Holder giving such notice, which counsel shall be reasonably satisfactory to the Company. The Holder giving such notice will submit a copy thereof to the counsel designated in such notice. The following provisions shall then apply:

3.2.1. if in the written opinion of such counsel for the Holder, obtained at the Holder's sole cost and expense and a copy of which shall be delivered to the Company and shall be reasonably satisfactory in form, scope and substance to the Company, the proposed transfer may be effected without registration of such Restricted Securities under the Securities Act or applicable state securities laws, such Holder shall thereupon be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by such Holder to the Company. Each Restricted Security or certificate, if any, issued upon or in connection with such transfer shall bear the appropriate restrictive legend set forth in Section 3.1 unless, in the opinion of such counsel, such legend is no longer required to insure compliance with the Securities Act and applicable state securities laws; and

3.2.2. if the opinion of such counsel rendered pursuant to the foregoing subdivision 3.2.1 is not to the effect that the proposed transfer may legally be effected without registration of such Restricted Securities under the Securities Act or applicable state securities laws (such opinion to state the basis of the legal conclusions reached therein), such Holder shall not be entitled to transfer such Restricted Securities (other than a transfer pursuant to Rule 144, Rule 144A or any comparable rule under the Securities Act) until receipt by the Company of a further notice and a further opinion of counsel for such Holder to the effect stated in subdivision 3.2.1 above or until registration of such Restricted Securities under the Securities Act and applicable state securities laws has become effective.

3.3 Termination of Restrictions. The restrictions imposed by this Section 3 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities upon sale of the Restricted Securities in an offering registered under the Securities Act or when, in the opinion of counsel for the Company, such restrictions are no longer required in order to ensure compliance with the Securities Act. Whenever such restrictions shall terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than transfer taxes, if any), new securities of like tenor not bearing the applicable legend set forth in Section 3.1.

4. Ownership, Transfer and Substitution of Warrants. The Company, may treat the Person in whose name this Warrant is registered on the register kept at the principal executive office of the Company as the owner and Holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 3, a Warrant, if properly assigned, may be exercised by a new Holder without first having a new Warrant issued.

5. Redemption. The Company may redeem all or a portion of this Warrant in accordance with the terms and conditions of this Section 5 by the issuance to the Holder of a notice of redemption ("Redemption Notice") indicating the redemption of the Warrant, or the portion thereof to be redeemed, and by paying on or prior to the effective date of such redemption in cash a redemption price of One Hundredth of One Cent ($0.0001) for each share of Common Stock issuable upon the exercise of this Warrant, or portion thereof, being redeemed that have not been exercised by the Holder prior to the effective date of such redemption. No Redemption Notice may be issued as to this Warrant, or any portion of this Warrant, as to which a subscription form providing for the exercise thereof has been previously received by the Company, nor shall the redemption right provided for herein have any application to shares of Common Stock previously issued upon exercise of this Warrant. The Redemption Notice shall be issued thirty (30) days prior to the effective date of the redemption. The Company may redeem this Warrant, or a portion thereof (as determined hereinbelow), should the Common Stock achieve, immediately prior to the issuance of the Redemption Notice, a Target Price of Four Dollars and Ninety-Five Cents ($4.95) per share (such per share price to be proportionately adjusted for any stock split, stock dividend, or the like, occurring after the date of this Warrant), and provided that the following further conditions are met: (i) the shares of Common Stock issuable upon exercise of the Warrant or portion thereof being redeemed have been registered for resale under the Securities Act pursuant to a registration statement with the Securities and Exchange Commission in effect on the effective date of the redemption (if at such time the Registration Rights Agreement has not expired or been terminated in accordance with its terms), and the Company reasonably believes that such registration statement will not b e declared ineffective or temporarily suspended during the sixty (60) day period following the effective date of redemption; (ii) the Company has not in the sixty (60) days prior to the effective date of the redemption issued a prior Redemption Notice, nor during the ninety (90) day period immediately prior to the effective date of redemption has an automatic conversion of the shares of the Company's Series A Convertible Preferred Stock into shares of Common Stock occurred pursuant to the terms of the Designations; and (iii) the effective date of such redemption is not within ninety (90) days prior to the Scheduled Expiration Time. In addition, the portion of this Warrant (as measured by the number of shares of Common Stock such portion is then exercisable for ("Warrant Shares")) that may be redeemed at any time shall not exceed, the cumulative trading volume for the thirty (30) consecutive trading days for Common Stock on its principal trading market in the United States prior to the issuanc e of the Redemption Notice.

6. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:

"Business Day" shall mean any day other than a Saturday, Sunday or any other day on which U.S. Federal Reserve member banks are not open for business in Atlanta, Georgia.

"Commission" shall mean the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.

"Common Stock" shall mean, the common stock, par value $.001 per share (or other common equity interest, however denominated) of the Company and any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock.

"Company" shall have the meaning specified in the opening paragraph of this Warrant, including any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 2.3.

"Expiration Date" shall mean the sooner to occur of (i) the Scheduled Expiration Time or (ii) any of the following (provided written notice of same is given to the Holder at least fifteen (15) days prior to the occurrence thereof):

(x) the merger, reorganization or consolidation of the Company into or with another corporation in which the shareholders of the Company immediately preceding such merger, reorganization or consolidation (solely by virtue of their shares or other securities of the Company) shall own less than fifty percent (50%) of the voting securities of the surviving corporation;

(y) the sale, transfer or lease (but not including a transfer or lease by pledge or mortgage to a bona fide lender), of all or substantially all the assets of the Company, whether pursuant to a single transaction or a series of related transactions or plan, to any entity fifty percent (50%) or more of the voting securities of which are not beneficially owned (as determined in accordance with the rules and regulations promulgated under the federal Securities Exchange Act of 1934) by all or substantially all of the individuals and entities that were the beneficial owners of the Company's voting securities prior to such transaction or transactions; or

(z) the sale or transfer, whether in a single transaction or pursuant to a series of related transactions, of securities of the Company such that all holders of voting securities of the Company immediately prior to such transaction or series of related transactions do not hold after such transaction a majority of the Company's voting securities.

"Holder" shall have the meaning specified in the opening paragraph of this Warrant.

"Market Price" shall mean, per share of Common Stock on any date specified herein, (a) the last sale price on such date of such Common Stock or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, Inc., the last trading price of such Common Stock on such date, or (c) if such Common Stock is not then designated, as a national market system security by the average National Association of Securities Dealers, Inc., but is trading on either the over-the-counter market on the OTC Bulletin Board or the "Pink Sheets", the last sale price as reported by the National Quotation Bureau, or (d) if n either (a), (b) nor (c) is applicable, a price per share thereof equal to the fair value thereof determined in good faith by a resolution of the Board of Directors of the Company as of a date which is within 15 days of the date as of which the determination is to be made.

"Original Issue Date" shall have the date this Warrant was first issued.

"Other Securities" shall mean any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the Holder of the Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 2 or otherwise.

"Person" shall mean a corporation, an association, a partnership, an organization or business, an individual, a government or political subdivision thereof or a governmental agency.

"Registration Statement" shall mean the resale registration statement to be filed with the Commission by the Company pursuant to that certain Registration Rights Agreement, dated of even date herewith, by and among the Company, the initial Holder of this Warrant and the other parties thereto (the "Registration Rights Agreement").

"Restricted Securities" shall mean (a) any Warrants bearing the applicable legend set forth in Section 3.1, (b) any shares of Common Stock (or Other Securities) issued upon the exercise of Warrants which are evidenced by a certificate or certificates bearing the applicable legend set forth in such Section and (c) any shares of Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding shares of Common Stock (or Other Securities) into a greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section.

"Scheduled Expiration Time" shall mean 5:00 p.m., Eastern Standard time on March 26, 2006.

"Securities Act" shall mean the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

"Target Price" shall mean: (i) if the principal trading market for the Common Stock is a United States national or regional securities exchange, the average closing price on such exchange for the twenty (20) consecutive trading days prior to the day in question of; or (ii) if sales prices for shares of the Common Stock are reported by the Nasdaq National Market System or Small Cap Market System (or a similar system then in use), the average last reported sales price so reported for the twenty (20) consecutive trading days prior to the day in question; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of the Common Stock are reported in the over-the-counter market by Nasdaq (or, if not so reported, by the National Quotation Bureau), the average last reported sales price so reported for the twenty (20) consecutive trading days prior to the day in question.

"Warrants" shall have the meaning specified in the opening paragraphs of this Warrant.

"Warrant Price" shall have the meaning specified in the opening paragraph of this Warrant.

7. No Rights or Liabilities as Stockholder. Nothing contained in this Warrant shall be construed as conferring upon Holder hereof any rights as a stockholder of the Company or as imposing any obligation on such Holder to purchase any securities or as imposing any liabilities on the Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company.

8. Notices. All notices and other communications provided for herein shall be delivered or mailed by first class mail, postage prepaid, addressed to:

if to the Holder:

if to the Company:

Thomas H. Muller, Jr.

SpectRx, Inc.

6025A Unity Drive

Norcross, Georgia 30071

The address provided in this Section 7 may be modified by the Company by providing the Holder notice in writing; provided, however, that the exercise of any Warrant shall be effective in the manner provided in Section 1.

9. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Any provision of this Warrant which shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the Company waives any provision of law which shall render any provision hereof prohibited or unenforceable in any respect. This Warrant shall be governed by the substantive laws of the State of Georgia without reference to the choice of law rules thereof. The headings of this Warrant are inserted for convenience only and sh all not be deemed to constitute a part hereof.

10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein is not a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

12. Expiration. The right to exercise this Warrant shall expire on the Expiration Date.

SPECTRX, INC.


By:

Name: Thomas H. Muller, Jr.
Title: Executive Vice President, Chief
Financial Officer and Secretary

Schedule 1

SUBSCRIPTION FORM

To: SPECTRX, INC.

The undersigned irrevocably elects to purchase _________ shares of Common Stock of the Company by exercising the Warrant to which this form is attached and tenders payment of the full Warrant Price with respect to such shares of Common Stock. The undersigned requests that the certificates representing the shares of Common Stock of the Company as to which the Warrant is being exercised be registered as follows:

Name:

Social Security or Employer Identification Number: ___________________________________

Address:

Deliver to:

Address:

¨ The undersigned requests that the Company cause its transfer agent to electronically transmit the Common Stock issuable pursuant to this Subscription Form to the account of the undersigned or its nominee (which is _________________) with DTC through its Deposit Withdrawal Agent Commission System ("DTC Transfer"), provided that such transfer agent participates in the DTC Fast Automated Securities Transfer program and the Common Stock issuable pursuant to this Subscription Form may be issued without a restrictive legend if permitted under the applicable securities laws.

¨ In lieu of receiving the shares of Common Stock issuable pursuant to this Subscription Form by way of DTC Transfer, the undersigned hereby requests that the Company cause its transfer agent to issue and deliver to the undersigned physical certificates representing such shares of Common Stock.

The undersigned represents and warrants that it is an accredited investor within the meaning of Regulation D promulgated under the Securities Act and is purchasing the Warrant Shares for his own account for investment, and not with a view to, or for resale in connection with the distribution thereof, and has no present intention of distributing or reselling any Warrant Shares, and in making the foregoing representations, the undersigned is aware that he must bear, and is able to bear, the economic risk of such investment for an indefinite period of time. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of this Warrant except under circumstances that will not result in a violation of the Securities Act of 1933, as amended.

If the number of shares of Common Stock of the Company as to which the Warrant is being exercised are fewer than all the shares of Common Stock of the Company to which the Warrant relates, please issue a new Warrant for the balance of such shares of Common Stock registered in the name of the undersigned and deliver it to the undersigned at the following address:

Address:

Date: ____________________	Signature _________________
	(Signature must conform with the name of the Holder as specified on the face of the Warrant)

EX-99.6

EXHIBIT 99.6

[FORM OF WARRANT - Exhibit B-2]

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE WARRANT AND THE SHARES OF COMMON STOCK UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM.

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS CONTAINED IN THIS WARRANT.

SPECTRX, INC.

COMMON STOCK WARRANT

________ shares of Common Stock

March 26, 2004

No.

SPECTRX, INC., a Delaware corporation (the "Company"), for value received, hereby certifies that __________________ or its registered assigns, (the "Holder") is entitled, subject to the provisions hereof, to purchase from the Company, at any time or from time to time prior to the Expiration Date (as defined below), _______ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (defined below) of the Company at a purchase price of Two Dollars and Twenty-Five Cents ($2.25) per share (the "Warrant Price"), all subject to the terms, conditions and adjustments set forth below in this warrant (this warrant, and any new warrant issued pursuant to the terms hereof, being referred to herein as "Warrants").

1. Exercise of Warrant.

1.1 Manner of Exercise. This Warrant may be exercised by the Holder, in whole or in part, during normal business hours on any Business Day by its surrender to the Company at the principal executive office of the Company, accompanied by (i) a subscription in the form of Schedule 1 hereto duly executed by such Holder and (ii) by payment in cash or by certified or official bank check payable to the order of the Company or by wire transfer in the amount obtained by multiplying (a) the number of shares of Common Stock issuable upon exercise of the warrant and designated in such subscription by (b) the Warrant Price.

1.2 Notwithstanding the foregoing, if the Market Price is greater than the Warrant Price (at the date of calculation as set forth below), in lieu of exercising the Warrant for cash, the Holder may elect to receive shares of Common Stock equal to the value (as determined below) of the Warrant (or portion thereof being exercised) by surrender of the Warrant at the principal executive office of the Company together with the duly executed subscription, in which event the Company shall issue to the Holder a number of shares of the Common Stock computed using the following formula:

X= Y(A-B)
    A

Where X equals the number of shares of Common Stock to be issued to the Holder;

Y equals the number of shares of the Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation);

A equals the Market Price (at the date of such calculation); and

B equals Warrant Price (at the date of such calculation).

For purposes of the above calculation, Market Price shall be the Market Price on the day immediately prior to the date the subscription is received by the Company.

1.3 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 1.1. At such time, the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise as provided in Section 1.4 shall be deemed to have become the stockholder(s) of record thereof.

1.4 Delivery of Stock Certificates, etc. As soon as practicable after the exercise of this Warrant, in whole or in part, and in any event within five (5) Business Days thereafter, the Company at its expense will cause to be issued to and delivered or registered in the name of the Holder hereof or, subject to Section 3, as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which such Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price per share on the Business Day next preceding the date of such exercise. If the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as certificates issued pursuant the exerci se hereof do not bear a legend and the Holder is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Warrant Shares so purchased to the Holder by crediting the account of the Holder with DTC through its Deposit Withdrawal Agent Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver to the Holder physical certificates representing the Warrant Shares so purchased. Further, the Holder may instruct the Company to deliver to the Holder physical certificates representing the Warrant Shares so purchased in lieu of delivering such shares by way of DTC Transfer. Any certificates so delivered shall be in such denominations as may be reasonably requested by the Holder hereof, shall be registered in the name of such Holder and shall bear a restrictive legend. If this Warrant shall have been exercised only in part, then the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for issuance of the number of shares of Common Stock equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares so designated by such Holder upon such exercise as provided in Section 1.1.

1.5 Representations of the Company.

The Company represents, warrants and acknowledges to the Holder that:

1.5.1. it is a corporation duly formed and validly existing in the State of Delaware;

1.5.2. it will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, the number of shares of Common Stock (or Other Securities) from time to time issuable upon the exercise of the Warrant at the time outstanding. All such securities shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof.

1.5.3. this Warrant has been duly authorized and approved by all requisite action of the Company, and constitutes a valid and binding agreement of the Company; and

1.5.4. when issued in accordance with the terms of this Warrant, the shares of Common Stock covered by this Warrant will be duly authorized and validly issued, fully paid and nonassessable.

2. Anti-Dilution Provisions.

2.1 Adjustment to Warrant Price. Upon the adjustment to the Conversion Price (as that term is defined in the Company's Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (as same may be amended from time to time, the "Designations")) pursuant to Subsection (c)(6)(A) thereof, and subject to the provisions of subparagraphs (i) to (viii) of such Subsection (c)(6)(A) of the Designations, and all of the terms and conditions of the Designations, including without limitation the provisions of Subsection (c)(6)(D) of the Designations (and whether or not any shares of such Series A Convertible Preferred Stock then remain outstanding), then the Warrant Price shall simultaneously with said adjustment to the Conversion Price be adjusted to equal 125% of the Conversion Price as so adjusted.

2.2 Stock Dividends, Subdivisions and Combination.

2.2.1. Triggering Events. If at any time the Company shall: (i) declare a dividend or otherwise make a distribution to the holders of its Common Stock in the form of additional shares of Common Stock into a larger number of shares of Common Stock, or (ii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the adjustments set forth in Sections 2.2.2 and 2.2.3 of this Section 2.2 shall be made to the number of shares of Common Stock for which this Warrant is exercisable and to the Warrant Price, respectively.

2.2.2. Adjustment to Number of Shares of Common Stock for Which Warrant is Exercisable. The number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal: (i) the number of shares of Common Stock for which this Warrant is exercisable immediately before the occurrence of any such event, (ii) multiplied by a fraction, (A) the numerator of which is the total number of shares of Common Stock outstanding immediately after the occurrence of such event, and (B) the denominator of which is the total number of shares of Common Stock outstanding immediately before the occurrence of such event.

2.2.3. Adjustment to Warrant Price. The Warrant Price shall be adjusted to equal: (i) the Warrant Price immediately prior to the occurrence of any such event, (ii) multiplied by a fraction, the numerator of which is the number of shares of Common Stock for which this Warrant is exercisable immediately before such event, and the denominator of which is the number of shares of Common Stock for which this Warrant is exercisable immediately after the adjustment.

2.2.4. Effective Date. Any adjustment under this Section 2.2 shall become effective at the close of business on the date the subdivision or combination becomes effective; provided, however, if the subdivision is effected through a stock dividend, then any such adjustment shall become effective at the close of business on the record date for such stock dividend. Such adjustment shall be made successively whenever such an event occurs.

2.3 Reclassification, Exchange, and Substitution. If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock or other securities of the Company, including any such reclassification in connection with a consolidation or merger in which the Company is the surviving entity, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above), the Holder shall, on its exercise, be entitled to receive the kind and number of shares of Common Stock or Other Securities which the Holder would have owned or been entitled to receive had such Warrant been exercised in full immediately prior to the happening of such reclassification, exchange or substitution for the same aggregate consideration. If the Company shall at any time change its Common Stock or Other Securities, as the case may be, into the same or a d ifferent number of shares of any other class or classes of stock or Other Securities, as the case may be, the Warrant Price then in effect immediately before that reclassification, exchange or substitution shall be adjusted by multiplying the Warrant Price by a fraction, the numerator of which shall be the number of shares of Common Stock or Other Securities, as the case may be, purchasable upon the exercise of this Warrant immediately prior to such adjustment and the denominator of which shall be the number of shares of Common Stock or Other Securities, as the case may be, purchasable immediately thereafter. An adjustment made pursuant to this Section 2.3 shall become effective immediately after the effective date of such event. Such adjustment shall be made successively whenever such an event occurs.

2.4 Reorganization, Mergers or Consolidations. In the event of a reorganization, merger or consolidation of the Company with or into another entity, then, as part of such reorganization, merger or consolidation, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, at any time prior to the Expiration Date and upon payment of the Warrant Price then in effect, the number of shares of Common Stock or Other Securities or property of the Company, or of the successor corporation resulting from such merger or consolidation, to which the Holder would have been entitled in such reorganization, merger or consolidation if this Warrant had been exercised immediately before that reorganization, merger or consolidation. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rig hts and interests of the Holder after the reorganization, merger or consolidation to the end that the provisions of this Warrant (including adjustment of the Warrant Price then in effect and number of shares of Common Stock purchasable upon exercise of this Warrant) shall be applicable after that event, as near as reasonably may be, in relation to any Common Stock or Warrants or other property deliverable after than event upon exercise of this Warrant. The Company shall, within thirty (30) days after making such adjustment, give written notice (by first class mail, postage prepaid) to the Holder at the address of the Holder shown on the Company's books. That notice shall set forth, in reasonable detail, the event requiring the adjustment and the method by which the adjustment was calculated and specify the Warrant Price then in effect after the adjustment and the increased or decreased number of shares of Common Stock purchasable upon exercise of this Warrant. When appropriate, that notice may be given in advance and include as part of the notice required under other provisions of this Warrant. Notwithstanding the foregoing, in the event of any transaction described in this Section 2.4 in which the consideration to be received by holders of Common Stock is payable only in cash, the Holder shall be entitled only to cash in the amount, if any, that such cash payment per share exceeds the Warrant Price.

2.5 Deferral of Adjustments. Notwithstanding any adjustments to the Warrant Price required under this Section 2, no adjustment in the number of shares of Common Stock purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Warrant Price in effect at the time such adjustment is otherwise so required to be made; provided, however, that any adjustments which by reason of this Section 2.5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest .001 of a cent.

2.6 Form of Warrant after Adjustments. The form of this Warrant need not be changed because of any adjustments in the Warrant Price or number or kind of the shares of Common Stock purchasable pursuant to this Warrant, and Warrants theretofore or hereunder issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued; provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed.

3. Restrictions on Transfer.

3.1 Restrictive Legends. Except as otherwise permitted by this Section 3, each Warrant originally issued, each Warrant issued upon direct or indirect transfer, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the direct or indirect transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form, if applicable:

"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM."

3.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to any transfer of any Restricted Securities which are not registered under an effective registration statement under the Securities Act (other than a transfer pursuant to Rule 144, Rule 144A or any comparable rule under such Act), the Holder thereof will give written notice to the Company of such Holder's intention to effect such transfer and to comply in all other respects with this Section 3.2. Each such notice shall (a) describe the manner and circumstances of the proposed transfer in sufficient detail to enable counsel to render the opinion referred to below, and (b) designate counsel for the Holder giving such notice, which counsel shall be reasonably satisfactory to the Company. The Holder giving such notice will submit a copy thereof to the counsel designated in such notice. The following provisions shall then apply:

3.2.1. if in the written opinion of such counsel for the Holder, obtained at the Holder's sole cost and expense and a copy of which shall be delivered to the Company and shall be reasonably satisfactory in form, scope and substance to the Company, the proposed transfer may be effected without registration of such Restricted Securities under the Securities Act or applicable state securities laws, such Holder shall thereupon be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by such Holder to the Company. Each Restricted Security or certificate, if any, issued upon or in connection with such transfer shall bear the appropriate restrictive legend set forth in Section 3.1 unless, in the opinion of such counsel, such legend is no longer required to insure compliance with the Securities Act and applicable state securities laws; and

3.2.2. if the opinion of such counsel rendered pursuant to the foregoing subdivision 3.2.1 is not to the effect that the proposed transfer may legally be effected without registration of such Restricted Securities under the Securities Act or applicable state securities laws (such opinion to state the basis of the legal conclusions reached therein), such Holder shall not be entitled to transfer such Restricted Securities (other than a transfer pursuant to Rule 144, Rule 144A or any comparable rule under the Securities Act) until receipt by the Company of a further notice and a further opinion of counsel for such Holder to the effect stated in subdivision 3.2.1 above or until registration of such Restricted Securities under the Securities Act and applicable state securities laws has become effective.

3.3 Termination of Restrictions. The restrictions imposed by this Section 3 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities upon sale of the Restricted Securities in an offering registered under the Securities Act or when, in the opinion of counsel for the Company, such restrictions are no longer required in order to ensure compliance with the Securities Act. Whenever such restrictions shall terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than transfer taxes, if any), new securities of like tenor not bearing the applicable legend set forth in Section 3.1.

4. Ownership, Transfer and Substitution of Warrants. The Company, may treat the Person in whose name this Warrant is registered on the register kept at the principal executive office of the Company as the owner and Holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 3, a Warrant, if properly assigned, may be exercised by a new Holder without first having a new Warrant issued.

5. Redemption. The Company may redeem all or a portion of this Warrant in accordance with the terms and conditions of this Section 5 by the issuance to the Holder of a notice of redemption ("Redemption Notice") indicating the redemption of the Warrant, or the portion thereof to be redeemed, and by paying on or prior to the effective date of such redemption in cash a redemption price of One Hundredth of One Cent ($0.0001) for each share of Common Stock issuable upon the exercise of this Warrant, or portion thereof, being redeemed that have not been exercised by the Holder prior to the effective date of such redemption. No Redemption Notice may be issued as to this Warrant, or any portion of this Warrant, as to which a subscription form providing for the exercise thereof has been previously received by the Company, nor shall the redemption right provided for herein have any application to shares of Common Stock previously issued upon exercise of this Warrant. The Redemption Notice shal l be issued thirty (30) days prior to the effective date of the redemption. The Company may redeem this Warrant, or a portion thereof (as determined hereinbelow), should the Common Stock achieve, immediately prior to the issuance of the Redemption Notice, a Target Price of Six Dollars and Seventy-Five Cents ($6.75) per share (such per share price to be proportionately adjusted for any stock split, stock dividend, or the like, occurring after the date of this Warrant), and provided that the following further conditions are met: (i) the shares of Common Stock issuable upon exercise of the Warrant or portion thereof being redeemed have been registered for resale under the Securities Act pursuant to a registration statement with the Securities and Exchange Commission in effect on the effective date of the redemption (if at such time the Registration Rights Agreement has not expired or been terminated in accordance with its terms), and the Company reasonably believes that such registration statement will n ot be declared ineffective or temporarily suspended during the sixty (60) day period following the effective date of redemption; (ii) the Company has not in the sixty (60) days prior to the effective date of the redemption issued a prior Redemption Notice, nor during the ninety (90) day period immediately prior to the effective date of redemption has an automatic conversion of the shares of the Company's Series A Convertible Preferred Stock into shares of Common Stock occurred pursuant to the terms of the Designations; and (iii) the effective date of such redemption is not within ninety (90) days prior to the Scheduled Expiration Time. In addition, the portion of this Warrant (as measured by the number of shares of Common Stock such portion is then exercisable for ("Warrant Shares")) that may be redeemed at any time shall not exceed the cumulative trading volume for the thirty (30) consecutive trading days for Common Stock on its principal trading market in the United States prior to the issu ance of the Redemption Notice.

6. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:

"Business Day" shall mean any day other than a Saturday, Sunday or any other day on which U.S. Federal Reserve member banks are not open for business in Atlanta, Georgia.

"Commission" shall mean the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.

"Common Stock" shall mean, the common stock, par value $.001 per share (or other common equity interest, however denominated) of the Company and any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock.

"Company" shall have the meaning specified in the opening paragraph of this Warrant, including any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 2.3.

"Expiration Date" shall mean the sooner to occur of (i) the Scheduled Expiration Time or (ii) any of the following (provided written notice of same is given to the Holder at least fifteen (15) days prior to the occurrence thereof):

(x) the merger, reorganization or consolidation of the Company into or with another corporation in which the shareholders of the Company immediately preceding such merger, reorganization or consolidation (solely by virtue of their shares or other securities of the Company) shall own less than fifty percent (50%) of the voting securities of the surviving corporation.

(y) the sale, transfer or lease (but not including a transfer or lease by pledge or mortgage to a bona fide lender), of all or substantially all the assets of the Company, whether pursuant to a single transaction or a series of related transactions or plan to any entity fifty percent (50%) or more of the voting securities of which are not beneficially owned (as determined in accordance with the rules and regulations promulgated under the federal Securities Exchange Act of 1934) by all or substantially all of the individuals and entities that were the beneficial owners of the Company's voting securities prior to such transaction or transactions; or

(z) the sale or transfer, whether in a single transaction or pursuant to a series of related transactions, of securities of the Company such that all holders of voting securities of the Company immediately prior to such transaction or series of related transactions do not hold after such transaction a majority of the Company's voting securities.

"Holder" shall have the meaning specified in the opening paragraph of this Warrant.

"Market Price" shall mean, per share of Common Stock on any date specified herein, (a) the last sale price on such date of such Common Stock or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, Inc., the last trading price of such Common Stock on such date, or (c) if such Common Stock is not then designated as a national market system security by the National Association of Securities Dealers, Inc. but is trading on either the over-the-counter market on the OTC Bulletin Board or the "Pink Sheets", the last sale price as reported by the National Quotation Bureau, or (d ) if neither (a), (b) nor (c) is applicable, a price per share thereof equal to the fair value thereof determined in good faith by a resolution of the Board of Directors of the Company as of a date which is within 15 days of the date as of which the determination is to be made.

"Original Issue Date" shall have the date this Warrant was first issued.

"Other Securities" shall mean any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the Holder of the Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 2 or otherwise.

"Person" shall mean a corporation, an association, a partnership, an organization or business, an individual, a government or political subdivision thereof or a governmental agency.

"Registration Statement" shall mean the resale registration statement to be filed with the Commission by the Company pursuant to that certain Registration Rights Agreement, dated of even date herewith, by and among the Company, the initial Holder of this Warrant and the other parties thereto (the "Registration Rights Agreement").

"Restricted Securities" shall mean (a) any Warrants bearing the applicable legend set forth in Section 3.1, (b) any shares of Common Stock (or Other Securities) issued upon the exercise of Warrants which are evidenced by a certificate or certificates bearing the applicable legend set forth in such Section and (c) any shares of Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding shares of Common Stock (or Other Securities) into a greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section.

"Scheduled Expiration Time" shall mean 5:00 p.m., Eastern Standard time on March 26, 2009.

"Securities Act" shall mean the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

"Target Price" shall mean: (i) if the principal trading market for the Common Stock is a United States national or regional securities exchange, the average closing price on such exchange for the twenty (20) consecutive trading days prior to the day in question of; or (ii) if sales prices for shares of the Common Stock are reported by the Nasdaq National Market System or Small Cap Market System (or a similar system then in use), the average last reported sales price so reported for the twenty (20) consecutive trading days prior to the day in question; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of the Common Stock are reported in the over-the-counter market by Nasdaq (or, if not so reported, by the National Quotation Bureau), the average last reported sales price so reported for the twenty (20) consecutive trading days prior to the day in question.

"Warrants" shall have the meaning specified in the opening paragraphs of this Warrant.

"Warrant Price" shall have the meaning specified in the opening paragraph of this Warrant.

7. No Rights or Liabilities as Stockholder. Nothing contained in this Warrant shall be construed as conferring upon Holder hereof any rights as a stockholder of the Company or as imposing any obligation on such Holder to purchase any securities or as imposing any liabilities on the Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company.

8. Notices. All notices and other communications provided for herein shall be delivered or mailed by first class mail, postage prepaid, addressed to:

if to the Holder:

if to the Company:

Thomas H. Muller, Jr.
SpectRx, Inc.
6025A Unity Drive
Norcross, Georgia 30071

The address provided in this Section 7 may be modified by the Company by providing the Holder notice in writing; provided, however, that the exercise of any Warrant shall be effective in the manner provided in Section 1.

9. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Any provision of this Warrant which shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the Company waives any provision of law which shall render any provision hereof prohibited or unenforceable in any respect. This Warrant shall be governed by the substantive laws of the State of Georgia without reference to the choice of law rules thereof. The headings of this Warrant are inserted for convenience only and shall not be deemed to constitute a part hereof.

10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein is not a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

12. Expiration. The right to exercise this Warrant shall expire on the Expiration Date.

SPECTRX, INC.

By:

Name: Thomas H. Muller, Jr.
Title: Executive Vice President, Chief
Financial Officer and Secretary

Schedule 1

SUBSCRIPTION FORM

To: SPECTRX, INC.

The undersigned irrevocably elects to purchase _________ shares of Common Stock of the Company by exercising the Warrant to which this form is attached and tenders payment of the full Warrant Price with respect to such shares of Common Stock. The undersigned requests that the certificates representing the shares of Common Stock of the Company as to which the Warrant is being exercised be registered as follows:

Name:

Social Security or Employer Identification Number: ___________________________________

Address:

Deliver to:

Address:

¨ The undersigned requests that the Company cause its transfer agent to electronically transmit the Common Stock issuable pursuant to this Subscription Form to the account of the undersigned or its nominee (which is _________________) with DTC through its Deposit Withdrawal Agent Commission System ("DTC Transfer"), provided that such transfer agent participates in the DTC Fast Automated Securities Transfer program and the Common Stock issuable pursuant to this Subscription Form may be issued without a restrictive legend if permitted under the applicable securities laws.

¨ In lieu of receiving the shares of Common Stock issuable pursuant to this Subscription Form by way of DTC Transfer, the undersigned hereby requests that the Company cause its transfer agent to issue and deliver to the undersigned physical certificates representing such shares of Common Stock.

The undersigned represents and warrants that it is an accredited investor within the meaning of Regulation D promulgated under the Securities Act and is purchasing the Warrant Shares for his own account for investment, and not with a view to, or for resale in connection with the distribution thereof, and has no present intention of distributing or reselling any Warrant Shares, and in making the foregoing representations, the undersigned is aware that he must bear, and is able to bear, the economic risk of such investment for an indefinite period of time. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of this Warrant except under circumstances that will not result in a violation of the Securities Act of 1933, as amended.

If the number of shares of Common Stock of the Company as to which the Warrant is being exercised are fewer than all the shares of Common Stock of the Company to which the Warrant relates, please issue a new Warrant for the balance of such shares of Common Stock registered in the name of the undersigned and deliver it to the undersigned at the following address:

Address:

Date: ____________________	Signature ________________
	(Signature must conform with the name of the Holder as specified on the face of the Warrant)