EXHIBIT 10.4

THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THIS NOTE MAY NOT BE TRANSFERRED
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (B) PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

INNCARDIO, INC.

 
Senior Secured Grid Note
 

Up to $12,000,000                                               March 9th, 2005

FOR VALUE RECEIVED, Inncardio, Inc., a Utah corporation (the “Company”), with
its principal executive office 712 Fifth Avenue, New York, NY, 10019, promises
to pay to the order of Bioaccelerate, Inc, a Delaware Corporation with offices
at 712 Fifth Avenue, New York, NY, 10019 (together with any permitted registered
assigns, the “Payee”) the principal sum of $12,000,000 or, if less, the
aggregate unpaid principal amount of all Tranches made to the Company by Payee
(the “Principal Amount”) pursuant to the letter agreement, dated as of even date
herewith, between the Company and the Payee (the “Letter Agreement”), on the
Maturity Date. Capitalized terms used, and not defined, herein shall have the
meanings ascribed thereto in the Letter Agreement.
 
The Initial Tranche of will be immediately available to the Company, subject to
the satisfaction of all required conditions under the Letter Agreement.
Additional Tranches will be made available to the Company as per the agreed
budget thereafter from drawdown of initial tranche(each a “Funding Date”). Each
Additional Tranche will be funded within two (2) business days following receipt
by the Payee on a Funding Date of a Request Letter and a certification (in form
and substance satisfactory to Bioaccelerate) signed by an authorized officer of
the Company that all conditions to funding set forth herein have been satisfied
and that the Company is not in breach of any representation, warranty or
covenant provided in this Note, the Letter Agreement, the Security Documents,
the Security Agreement, any Warrant issued by the Company to the Payee, the
Engagement Letter or any agreement between the Company and either the Payee or
Bioaccelerate Limited related to the subject matter contained in such agreements
or documents.
 
The Company hereby authorizes the Payee to endorse on the Schedule of Tranches
annexed to this Note all Tranches made to the Company and all payments of
principal amounts in respect of such Traches, which endorsements shall, in the
absence of manifest error, be conclusive as to the outstanding principal amount
of all Tranches; provided, however, that the failure to make such notation with
respect to any Tranche or payment shall not limit or otherwise affect the
obligations of the Company under the Letter Agreement or this Note.
 
The Maturity Date shall mean the earliest of (i) the date on which any Placement
occurs, (ii) the date on which an Event of Default (as defined herein) occurs,
(iii)  the date on which a Change in Control occurs. “Change in Control” shall
mean (a) a merger , consolidation or any other combination of the Company (other
than a merger, consolidation or combination of a wholly-owned subsidiary of the
Company or any other person or entity with respect to which the Payee has given
its approval in writing) with any entity or person, (b) the sale of all or
substantially all of the assets of the Company, or (c) the purchase by a single
entity or group, as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended, of more than 25% of the voting stock of the Company in a
single transaction or a series of related transactions. A “Placement” shall mean
the closing of either debt or equity financing in which the Company receives at
least Twenty Million Dollars ($20,000,000) in gross proceeds in any transaction
or series of related transactions after the date hereof. The Principal Amount,
accrued interest and any other amounts due under this senior secured grid note
(this “Note”) are payable in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. Interest on this Note shall accrue on the Principal
Amount outstanding from time to time at a rate per annum computed in accordance
with Section 4 hereof. This Note is made with full recourse to the Company and
upon all the warranties, representations, covenants and agreements contained
herein.
 

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The Company (i) waives presentment, demand, protest or notice of any kind in
connection with this Note and (ii) agrees, in the event of an Event of Default
(as defined below), to pay to the holder of this Note, on demand, all reasonable
out-of-pocket costs and expenses (including legal fees) incurred in connection
with the enforcement and collection of this Note.
 
1.  Prepayments; Mandatory Prepayments. The Company may prepay at any time all
or any portion of the principal sum hereunder without penalty or premium;
provided, however, that (i) any prepayment (whether voluntary or involuntary)
shall be applied first to any accrued and unpaid interest hereunder up to the
date of such prepayment, then to any other sums which may be payable to Payee
hereunder, and then to the principal balance outstanding hereunder, and (ii) the
acceptance of any such prepayment following the occurrence and during the
continuance of any Event of Default hereunder shall not constitute a waiver,
release or accord and satisfaction thereof or of any rights with respect thereto
by Payee. Notwithstanding anything to the contrary provided herein or elsewhere,
in the event that prior to the Maturity Date, a Placement has occurred, then the
Company, upon the closing of such transaction or transactions, as the case may
be, will immediately repay in full the Principal Amount and all accrued and
unpaid interest thereon. The Company shall provide in any applicable financing
document that the Company uses in connection with any Placement that the
required amount of funds raised will be used to repay the Principal Amount and
all accrued and unpaid interest thereon and the Company shall provide to the
Payee no later than five (5) Business Days prior to the date of funding of any
such financing the date such financing is expected to close, the amount of
financing to be received and the place and time of such closing. The Company
shall provide to the Payee all other such applicable information the Payee shall
subsequently reasonably request. The Company shall provide to the Payee at the
closing of such financing in immediately available funds such funds as is
necessary to repay the entire Principal Amount and all accrued and unpaid
interest thereon.
 
2.  Day of Payment. Whenever any payment to be made hereunder shall become due
and payable on a day which is not a Business Day (as defined below), such
payment may be made on the next succeeding Business Day without being deemed
past due and, in the case of any payment of principal, such extension of time
shall in such case be included in computing interest on such payment. As used
herein, “Business Day” shall mean any day which is not a Saturday or Sunday and
on which banks in the State of New York are not authorized or required to close.
Interest on past due principal and accrued interest thereon shall be calculated
as follows: the amount of principal and interest past due multiplied by the
Penalty Interest Rate (as defined herein) and multiplied by a fraction, the
numerator of which is the number of days such principal and interest is past due
and the denominator of which is 360.
 
3.  Use of Proceeds. The Company shall use the proceeds of each Tranche solely
for the purposes as agreed with Bioaccelerate, Inc.
 
4.  Computation of Interest.
 
A.  Base Interest Rate. Subject to subsections 4B and 4C below, the outstanding
Principal Amount shall bear interest per annum at the Applicable Federal Rate
(the “Base Interest Rate”), as defined in Section 1274(d) of the Internal
Revenue Code of 1986, as amended (the “Code”), payable on the Maturity Date.
 
B.  Penalty Interest. In the event the Note is not repaid on the Maturity Date,
the rate of interest applicable to the unpaid Principal Amount and accrued
interest thereon shall be adjusted to ten percent (10%) per annum (the “Penalty
Interest Rate”) from the date of default until repayment; provided, that in no
event shall the interest rate exceed the Maximum Rate provided in Section 4C
below.
 
C.  Maximum Rate. In the event that it is determined that New York law is not
applicable to the indebtedness evidenced by this Note or that under New York law
(“Applicable Usury Laws”) the interest, charges and fees payable by the Company
in connection herewith or in connection with any other document or instrument
executed and delivered in connection herewith cause the effective interest rate
applicable to the indebtedness evidenced by this Note to exceed the maximum rate
allowed by law (the “Maximum Rate”), then such interest shall be recalculated
for the period in question and any excess over the Maximum Rate paid with
respect to such period shall be credited, without further agreement or notice,
to the Principal Amount outstanding hereunder to reduce said balance by such
amount with the same force and effect as though the Company had specifically
designated such extra sums to be so applied to principal and the Payee had
agreed to accept such extra payment(s) as a premium-free prepayment. All such
deemed prepayments shall be applied to the principal balance payable at
maturity.
 

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5.  Collateral. This Note is secured by a Security Agreement dated the date
hereof (as amended, modified or supplemented from time to time, the “Security
Agreement”) of the Company in favor of the Payee covering all assets and future
assets of the Company therein described (collectively, the “Collateral”), and is
entitled to the benefits thereof. The Security Agreement, the Uniform Commercial
Code financing statements in connection with the Security Agreement, and any and
all other documents executed and delivered by the Company to the Payee under
which the Payee is granted liens on assets of the Company are collectively
referred to as the “Security Documents.”
 
6.  Covenants of Company.
 
A.  Affirmative Covenants. The Company covenants and agrees with respect to the
Company and each of its Subsidiaries (which, for purposes of this Note means any
entity (i) in which the Company, directly or indirectly, owns 51% of the capital
stock or holds an equity or similar interest and (ii) which conducts substantive
business activities or holds material assets) that on and after the date hereof,
so long as this Note shall remain in effect, or the Principal Amount of, or
interest thereon, or any fee, expense or amount payable hereunder or with
respect to this Note shall be unpaid, it will perform the obligations set forth
in this Section 6A:
 
(i)  Conduct of Business. The Company will, and cause each of its Subsidiaries
to, use its best efforts to conduct its business in a manner consistent with
past practices, do or to be done all things necessary to preserve relationship
with its material vendors, customers, distributors, sales representatives and
others having material business relationships with the Company or any of its
Subsidiaries, and inform and consult with the Payee on any key decisions
involving any capital expenditure in excess of $25,000;
 
(ii)  Taxes and Levies. The Company will, and cause each of its Subsidiaries to,
promptly pay and discharge all taxes, assessments, and governmental charges or
levies imposed upon the Company or any of its Subsidiaries, or upon any of their
income and profits, or upon any of their property, before the same shall become
delinquent, as well as all claims for labor, materials and supplies which, if
unpaid, might become a lien or charge upon such properties or any part thereof;
provided, however, that neither the Company nor any of its Subsidiaries shall be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate
proceedings and the Company and each of its Subsidiaries shall set aside on its
books adequate reserves in accordance with generally accepted accounting
principles (“GAAP”) with respect to any such tax, assessment, charge, levy or
claim so contested; provided, further, that this Section 6A(ii) shall not apply
to those claims for labor, materials and supplies which the Payee consents in
writing shall be excluded herewith, notwithstanding that such claims, if unpaid,
might become a lien or charge upon such properties or any part thereof.
 
(iii)  Maintenance of Existence. The Company will, and cause each of its
Subsidiaries to, do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, rights
(character and statutory) and franchises, except where the failure to comply
would not have a Material Adverse Effect (as defined herein) on the Company or
any of its Subsidiaries;
 
(iv)  Maintenance of Property. The Company will, and cause each of its
Subsidiaries to, at all times maintain, preserve, protect and keep its property
used or useful in the conduct of its business in good repair, working order and
condition, and from time to time make all needful and proper repairs, renewals,
replacements and improvements thereto as shall be reasonably required in the
conduct of its business and protect and maintain its licenses and its patents,
copyrights, trademarks and trade secrets and all registrations and application
for registration thereof except where the failure to take such action would not
reasonably be expected to have a Material Adverse Effect;
 

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(v)  Compliance with Laws. The Company will, and cause each of its Subsidiaries
to, use its best efforts to comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, any governmental agency,
in respect of the conduct of its business and the ownership of its properties
(including without limitation applicable statutes, regulations and orders
relating to equal employment opportunities or environmental standards or
controls), except such as are being contested in good faith by appropriate
proceedings, except where failure to comply would not have a Material Adverse
Effect;
 
(vi)  Insurance. The Company will, and cause each of its Subsidiaries to, keep
adequately insured all property of a character usually insured by similar
corporations and carry such other insurance as is usually carried by similar
corporations;
 
(vii)  Books and Records. The Company will, and cause each of its Subsidiaries
to, at all times keep true and correct books, records and accounts reflecting
all of its business affairs and transactions in accordance with GAAP. Such books
and records shall be open at reasonable times and upon reasonable notice to the
inspection of the Payee or its agents, subject to customary confidentiality
restrictions but in no event more than once in each month absent a good-faith
showing of need for such restrictions;
 
(viii)  Notice of Certain Events. The Company will, and cause each of its
Subsidiaries to, give prompt written notice (with a description in reasonable
detail) to the Payee of:
 
(a)  the occurrence of any Event of Default or any event which, with the giving
of notice or the lapse of time, would constitute an Event of Default; and
 
(b)  the delivery of any notice effecting the acceleration of any indebtedness
which singly or together with any other accelerated indebtedness exceeds
$25,000;
 
(c)  the issuance by any court or governmental agency or authority of any
injunction, order, decision or other restraint prohibiting, or having the effect
of prohibiting, the making of or invalidating, or having the effect of
invalidating, any material provision of this Agreement, of the initiation of any
litigation or similar proceedings seeking any such injunction, order, decision,
or other restraint;
 
(d)  the filing or commencement of any action, suit or proceeding against the
Company or any of its Subsidiaries, whether at law or in equity or by or before
any court of any Federal, state, municipal or other governmental agency or
authority, which is brought by or on behalf of any governmental agency or
authority, or in which injunctive or other equitable relief is sought and such
relief, if obtained, would materially impair the right or ability of the Company
to perform it obligations under this Note;
 
(e)  the commencement of any claim, litigation, proceeding or tax audit not
covered by insurance when the amount claimed is in any individual claim,
litigation, proceeding or tax audit in excess of $25,000 or, in the aggregate,
$50,000; and
 
(f)  of any material development materially and adversely affecting the
business, properties, liabilities, obligations, financial condition, prospects,
operations or results of operations of the Company and its Subsidiaries, taken
as a whole;
 
(ix)  Financial Statements and Information. The Company shall furnish or cause
to be furnished to the Payee:
 
(a)  within 90 days after the end of each fiscal year (or such time as permitted
under Rule 12b-25 of the Securities Exchange Act of 1934, as amended; provided
however, that in no event shall the Company be permitted more than one extension
pursuant to either Section 6A(ix)(a) or (b)), a copy of the audited consolidated
balance sheet of the Company and its Subsidiaries, together with the related
statements of income, changes in stockholder’s equity, changes in cash flows as
of the end of and for such fiscal year, all reported on by the accountants to
the effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Company and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
 

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(b)  within 45 days after the end of each of the first three fiscal quarters of
each fiscal year (or such time as permitted under Rule 12b-25 of the Securities
Exchange Act of 1934, as amended; provided, however, that in no event shall the
Company be permitted more than one extension pursuant to either Section
6A(ix)(a) or (b); provided, further, however, that the extension with respect to
the restatement of the quarterly report for the period ending September 30, 2001
shall not be deemed to count as an extension pursuant to (i) above), a copy of
the consolidated balance sheet of the Company and each of its Subsidiaries
together with the related statements of income and cash flows as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its financial officers as presenting fairly in all material
respects the financial conditions and results of operations of the Company and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
 
(c)  promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by the Company or
any of its Subsidiary with the SEC or with any national securities exchange, or
distributed by the Company or any of its Subsidiaries to its shareholders, as
the case may be; and
 
(d)  promptly following any request therefor, such other information regarding
the business, financial condition or operations of the Company or compliance
with the terms of this Note, as the Payee may reasonably request, subject to
customary confidentiality agreements and without causing undue expense to the
Company or undue distraction of its employees or management.
 
B.  Negative Covenants. The Company covenants and agrees with respect to the
Company and each of its Subsidiaries that, so long as this Note shall remain in
effect, or the Principal Amount of, or interest thereon, or any fee, expense or
amount payable hereunder or with respect to this Note shall be unpaid, it will
perform the obligations set forth in this Section 6B:
 
(i)  Business in the Ordinary Course. The Company will, and will cause each of
its Subsidiaries to, (i) refrain from engaging in transactions other than in the
ordinary course of business consistent with past practice; (ii) operate its
respective businesses in accordance and in compliance with all applicable laws,
ordinances, rules or regulations or orders, including, without limitation
environmental laws, and all permits, authorizations, consents and approvals;
(iii) maintain all permits and licenses in effect and, if necessary, make all
appropriate filings for the renewal of any permits or licenses; (iv) refrain
from entering into any transaction involving capital expenditures or commitments
therefor (including any borrowings in connection with such transaction) of more
than $25,000, individually, or $50,000 in the aggregate, or the disposal of any
properties or assets (other than inventory in the ordinary course) with a value
of more than $25,000, individually, or $50,000, in the aggregate, except in the
case of foregoing clauses (ii) and (iii) where the failure to take such action
would not reasonably be expected to have a Material Adverse Effect, and except,
in the case of all of the foregoing clauses, with respect to any financing
transaction, or as otherwise contemplated by the agreements entered into in
connection with this Note;
 
(ii)  Merger, Liquidation, Dissolution. The Company will not, and will not
permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or
merge into or with, any other corporation or other entity (other than a merger
or consolidation of a wholly-owned subsidiary of the Company.), except that any
wholly-owned subsidiary may merge with another wholly-owned subsidiary or with
the Company (so long as the Company is the surviving corporation and no Event of
Default shall occur as a result thereof); provided, however, that the Company
may permit its Subsidiaries to liquidate or dissolve only on the condition that
all of the assets of such Subsidiaries are immediately transferred to the
Company and only if such liquidation or dissolution, as the case may be, would
not result in a Material Adverse Effect;
 
(iii)  Sales of Assets. The Company will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease or otherwise dispose of, or grant
options, warrants or other rights with respect to, all or a substantial part of
its properties or assets to any person or entity, provided that this clause
(iii) shall not restrict any disposition made in the ordinary course of business
and consisting of capital goods which are obsolete or have no remaining useful
life;
 

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(iv)  Redemptions. The Company will not redeem or repurchase any outstanding
equity and/or debt securities of the Company or its Subsidiaries (or securities
convertible into or exchangeable for equity securities of such entity);
 
(v)  Indebtedness. Other than indebtedness for borrowed money of the Company or
any of its Subsidiaries existing on the date of this Note and identified on the
schedule delivered to the Payee on the date hereof, neither the Company nor any
of its Subsidiaries will hereafter create, incur, assume or suffer to exist,
contingently or otherwise, any indebtedness for borrowed money, except in the
ordinary course of business (consistent with past practice) but not to exceed
$50,000 at any time outstanding;
 
(vi)  Negative Pledge. Other than Liens existing on the date of this Note and
expressly identified in the schedule delivered to the Payee on the date hereof,
the Company will not, and will not permit any of its Subsidiaries to, hereafter
create, incur, assume or suffer to exist any mortgage, pledge, hypothecation,
assignment, security interest, encumbrance, lien (statutory or other),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any financing lease) (each, a “Lien”) upon any of its
property, revenues or assets, whether now owned or hereafter acquired, except:
 
(a)  Liens for taxes, assessments or other governmental charges or levies not at
the time delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
 
(b)  Liens of carriers, warehousemen, mechanics, materialman and landlords
incurred in the ordinary course of business for sums not overdue or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;
 
(c)  Liens (other than Liens arising under the Employee Retirement Income
Security Act of 1974, as amended, or Section 412(n) of the Internal Revenue Code
of 1986, as amended) incurred in the ordinary course of business in connection
with workers’ compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; and
 
(d)  Judgment Liens in existence less than 30 days after the entry thereof or
with respect to which execution has been stayed in an amount not to exceed
$25,000 singly or in the aggregate (the liens described in (a)-(d) being
referred to herein as “Permitted Liens”);
 
(vii)  Investments. The Company will not, and will not permit any of its
Subsidiaries to, purchase, own, invest in or otherwise acquire, directly or
indirectly, any stock or other securities or make or permit to exist any
investment or capital contribution or acquire any interest whatsoever in any
other person or entity or permit to exist any loans or advances for such
purposes except for (i) investments in direct obligations of the United States
of America or any agency thereof, (ii) obligations guaranteed by the United
States of America, (iii) certificates of deposit or other obligations of any
bank or trust company organized under the laws of the United States or any state
thereof and having capital and surplus of at least $500,000, (iv) existing
investments in Subsidiaries, or (v) an investment in any subsidiary created for
the purpose of making that investment;
 
(viii)  Transactions with Affiliates. The Company will not, and will not permit
any of its Subsidiaries to, enter into any transaction, including, without
limitation, the purchase, sale, lease or exchange of property, real or personal,
the purchase or sale of any security, the borrowing or lending of any money, or
the rendering of any service, with any person or entity affiliated with the
Company or any of its Subsidiaries (including officers, directors and
shareholders owning five (5%) percent or more of the Company’s outstanding
capital stock), except (i) in the ordinary course of and pursuant to the
reasonable requirements of its business and upon fair and reasonable terms not
less favorable than would be obtained in a comparable arms-length transaction
with any other person or entity not affiliated with the Company and, where the
transaction is valued at in excess of $5,000 with the prior written consent of
the Payee, which shall not be unreasonably withheld, (ii) transactions pursuant
to existing agreements as set forth on the schedule delivered to the Payee on
the date hereof and (iii) transactions contemplated by the agreements entered
into in connection with this Note;
 

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(ix)  Fundamental Changes. The Company will not, and will not permit any of its
Subsidiaries to, consolidate or merge with any other person or entity, or to
permit any other person or entity to merge into or consolidate with it or any of
its Subsidiaries (other than a merger, consolidation or any other combination of
a wholly-owned subsidiary of the Company);
 
(x)  Acquisitions. The Company will not, and will not permit any of it
Subsidiaries to, at any time, acquire all or substantially all of the assets or
any of the capital stock of any person or entity;
 
(xi)  Restricted Payments. The Company will not, and will not permit any of its
Subsidiaries to, declare, play or make any dividend or other distribution,
direct or indirect, on account of any shares of capital stock in such person or
entity now or hereafter outstanding (other than a dividend payable solely in
shares of such capital stock to the holders of such shares) or any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition,
direct or indirect, of any shares of any class of its capital stock now or
hereafter outstanding (collectively, “Restricted Payments”), except:
 
(a)  any wholly-owned subsidiary of the Company may make Restricted Payments to
the Company; and
 
(b)  Restricted Payments made by any Subsidiary of the Company to the Company in
amounts sufficient to enable the Company, as the consolidated taxpayer for
itself and its Subsidiaries, if applicable, to pay taxes when due;
 
(xii)  Lines of Business. Except as contemplated by the agreements entered into
in connection with this Note, the Company will not, and will not permit any of
its Subsidiaries to, materially change the nature of the business of the Company
and its Subsidiaries as conducted on the date hereof or enter into any new
business which materially increase the risk profile of the Company and its
Subsidiaries, taken as a whole; and
 
(xiii)  Amendment of Documents. The Company will not, and will not permit any of
its Subsidiaries to, modify, amend, supplement or terminate, or agree to modify,
amend, supplement or terminate, their organizational documents in any way that
could result in a Material Adverse Effect without the written consent of the
Payee; provided, however, that with respect to the following (to the extent
deemed to result in a Material Adverse Effect), such consent shall not be
unreasonably withheld: (i) amendment to the by-laws of the Company or any
Subsidiary to preclude actions by written consent or nominations of directors
other than through a prescribed nominations process, and (ii) amendment to the
Company’s or any Subsidiaries’ certificate of incorporation to increase its
authorized common stock.
 
(xiv)  Stock Option Plan; Board of Directors. Notwithstanding anything to the
contrary set forth in this Note, the Company will not, and not permit any of its
Subsidiaries to, without the written consent of the Lender (a) adopt a stock
option plan, or to increase the number of shares of common stock issuable
pursuant to an existing stock option plan or (b) amend its by-laws to increase
the number of directors serving on its board of directors.
 
7.  Events of Default.
 
A.  The term “Event of Default” shall mean any of the events set forth in this
Section 7A:
 
(i)  Non-Payment of Obligations. The Company shall default in the payment of the
principal or accrued interest of this Note as and when the same shall become due
and payable, whether by acceleration or otherwise.
 

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(ii)  Non-Performance of Affirmative Covenants. The Company shall default in the
due observance or performance of any covenant set forth in (a) clauses (i),
(iii), (vi), (viii) and (ix) of Section 6A or (b) clauses (ii), (iv), (v) and
(vii) of Section 6A and such default of clauses (ii), (iv), (v) and (vii) of
Section 6A shall continue remedial for ten (10) Business Days.
 
(iii)  Non-Performance of Negative Covenants. The Company shall default in the
due observance or performance of any covenant set forth in Section 6B.
 
(iv)  Bankruptcy. The Company (or any of its Subsidiaries) shall:
 
(a)  apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any of its
Subsidiaries, or any of their property, or make a general assignment for the
benefit of creditors; or
 
(b)  in the absence of such application, consent or acquiesce in the appointment
of a trustee, receiver, sequestrator or other custodian for the Company or any
of its Subsidiaries, or for any part of their property; or
 
(c)  permit or suffer to exist (i) the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, (ii) any dissolution, winding up or liquidation
proceeding, in respect of the Company or any of its Subsidiaries, or (iii) the
appointment of a trustee, receiver, sequestrator or other custodian, without
causing the same to be dismissed within forty-five (45) days; and, if such case
or proceeding is not commenced by the Company or converted to a voluntary case,
such case or proceeding shall be consented to or acquiesced in by the Company or
any of its Subsidiaries, or shall result in the entry of an order for relief; or
 
(d)  take any corporate or other action authorizing, or in furtherance of, any
of the foregoing; or
 
(v)  Cross-Default. The Company (or any of its Subsidiary) shall default in the
payment when due of any amount payable under any other obligation for money
borrowed in an amount exceeding Fifty Thousand Dollars ($50,000); or
 
(vi)  Cross-Acceleration. Any indebtedness for borrowed money of the Company (or
any of its Subsidiaries) identified on the schedule delivered to the Payee on
the date hereof in an aggregate principal amount exceeding Twenty Five Thousand
Dollars ($25,000) shall be duly declared to be or shall become due and payable
prior to the stated maturity thereof; or
 
(vii)  Orders, Judgments or Decrees. If any order, judgment, or decree shall be
entered in any proceeding against the Company (or any Subsidiary) requiring such
party to divest itself of a substantial part of its or his assets, or awarding a
money judgment or judgments against any such entity aggregating more than
$25,000, and if, within thirty (30) days after entry thereof, such order,
judgment or decree shall not have been discharged or execution thereof stayed
pending appeal; or if, within thirty (30) days after the expiration of any such
stay, such judgment, order or decree shall not have been discharged; or
 
(viii)  Invalidity of Note or Security Documents. This Note or any other
Security Document shall for any reason cease to be, or shall be asserted by the
Company not to be, a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, or the security interest or Lien
purported to be created by any of the Security Documents shall for any reason
cease to be, or be asserted by the Company not to be, a valid, first priority
perfected security interest in any Collateral (except to the extent otherwise
permitted under any of the Security Documents); or
 
(ix)  Other Breaches, Defaults. The Company shall default and/or be in breach of
any representation, warranty or covenant made by the Company to the Payee
provided under this Note, any Security Document, the Warrant, the Letter
Agreement, the Engagement Letter or any other agreement between the Company and
either the Payee or Bioaccelerate Limited related to the subject matter
contained in such agreements or documents.
 

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B.  Rights and Remedies Cumulative. No right or remedy herein conferred upon the
Payee is intended to be exclusive of any other right or remedy contained herein
or in any instrument or document delivered in connection with or pursuant to
this Note or the Security Documents, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
 
C.  Rights and Remedies Not Waived. No course of dealing between the Company and
the Payee or any failure or delay on the part of the Payee in exercising any
rights or remedies of the Payee and no single or partial exercise of any rights
or remedies hereunder or under the Security Documents shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder.
 
8.  Representations of the Company. The Company represents and warrants to the
Payee that:
 
A.  Corporate Organization; Etc. The Company and its Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction in which they are incorporated, and have the full
corporate power and authority to carry on their business as they are now being
conducted and to own the properties and assets they now own; are duly qualified
or licensed to do business as a foreign corporation in good standing in the
jurisdictions in which such qualification is required, except where the failure
to so qualify or to be so licensed would not have a Material Adverse Effect on
its business, financial condition, results of operations or on its ability to
continue to conduct its business as currently conducted. The copies of the
articles of incorporation and by-laws (or other relevant organization documents)
and any amendments thereto of the Company and each of its Subsidiaries
heretofore delivered to the Payee are complete and correct copies of such
instruments as currently in effect. As used in this Note, “Material Adverse
Effect” means any material adverse effect on the business, properties, assets,
operations, results of operations, prospects or financial condition of the
Company and its Subsidiaries, taken as a whole. The term “Material Adverse
Effect” does not include any material developments adversely affecting (i) the
industry in which the Company is engaged generally or (ii) the national economy,
security, stability or peace of the United States or any country, taken as a
whole.
 
B.  Capitalization. The authorized, issued and outstanding capital stock of the
Company prior to the consummation of the transactions contemplated hereby is set
forth in Schedule 8B. All of such outstanding shares have been and are, or upon
issuance will be, validly issued, fully paid and non-assessable. Except as
disclosed in the schedule delivered to the Payee on the date hereof, (i) no
shares of the Company’s capital stock are subject to preemptive rights under
Delaware law or any other similar rights or any liens or encumbrances suffered
or permitted by the Company; (ii) there are no outstanding debt securities
issued by the Company (other than as may be issued pursuant to the Letter
Agreement); (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act; (v) there are no outstanding securities of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of this Note; and (vii) the Company does
not have any stock appreciation rights or “phantom stock” plans or agreements or
any similar plan or agreement. All prior sales of securities of the Company or
any of its Subsidiaries were either registered under the 1933 Act and applicable
state securities laws or exempt from such registration, and no security holder
has any rescission rights with respect thereto except to the extent any such
rights would not reasonably be expected to have a Material Adverse Effect.
 

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C.  Title. Except as set forth in or contemplated by the schedule to be
delivered to the Payee on the date hereof, the Company has good and marketable
title to all material properties and assets owned by it, free and clear of all
liens, charges, encumbrances or restrictions, except as not prohibited by
Section 6(B)(vi) hereof or such as are not significant or important in relation
to the Company’s business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee are in full force
and effect, and the Company is not in default in any material respect with
respect to any of the terms or provisions of any of such leases or subleases,
and no material claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease. .
 
D.  Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth on the schedule delivered to the Payee on the
date hereof, none of the Company’s trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights has expired or terminated, or is expected to
expire or terminate within two years from the date of this Note, except where
such expiration or termination would not have either individually or in the
aggregate a Material Adverse Effect. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademarks, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade
secrets or other similar rights of others, or of any such development of similar
or identical trade secrets or technical information by others and, except as set
forth on such schedule, no claim, action or proceeding has been made or brought
against, or to the Company’s knowledge, has been threatened against, the Company
or its Subsidiaries regarding trademarks, trade name rights, patents, patent
rights, inventions, copyrights, licenses, service names, service marks, service
mark registrations, trade secrets or other infringement, except where such
infringement, claim, action or proceeding would not reasonably be expected to
have either individually or in the aggregate a Material Adverse Effect. Except
as set forth on such schedule, the Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties
except where the failure to do so would not reasonably be expected to have
either individually or in the aggregate a Material Adverse Effect.
 
E.  Litigation. Except as set forth in or contemplated by the schedule delivered
to the Payee on the date hereof, there is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by or
before any court, arbitrator, governmental instrumentality or authority or other
agency now pending or, to the knowledge of the Company, threatened against the
Company, the adverse outcome of which would be reasonably likely to have a
Material Adverse Effect. The Company is not subject to any judgment, order,
writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which have a Material Adverse Effect.
 
F.  Taxes. Except as set forth in or contemplated by the schedule delivered to
the Payee on the date hereof, the Company has filed all Federal, state, local
and foreign tax returns which are required to be filed by it or otherwise met
its disclosure obligations to the relevant agencies and all such returns are
true and correct in all material respects. The Company has paid or adequately
provided for all tax liabilities of the Company as reflected on such returns or
determined to be due on such returns or pursuant to any assessments received by
it or which it is obligated to withhold from amounts owing to any employee,
creditor or third party. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim. The Company has properly
accrued all taxes required to be accrued by GAAP consistently applied. The tax
returns of the Company have never been audited by any state or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.
 

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G.  Compliance With Laws; Licenses; Etc. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental entity except for such violations the sanctions
for which either individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect, and the Company has not received
notice of any violation of or noncompliance with any Federal, state, local or
foreign, laws, ordinances, regulations and orders applicable to its business
which has not been cured, the violation of, or noncompliance with which, would
be reasonably likely to have a Material Adverse Effect. The Company has all
material licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, “Licenses”) required by
every Federal, state and local government or regulatory body for the operation
of its business as currently conducted and the use of its properties, except
where the failure to be licensed or possess a permit would not reasonably be
expected to have a Material Adverse Effect. The Licenses are in full force and
effect and to the Company’s knowledge no violations currently exist in respect
of any License and no proceeding is pending or threatened to revoke or limit any
thereof.
 
H.  Existing Indebtedness. The schedule delivered to the Payee on the date
hereof is a complete and correct list of all indebtedness for borrowed money of
the Company and its Subsidiaries in an unpaid principal amount exceeding
$10,000, showing as to each item of such indebtedness the obligor, the aggregate
principal amount outstanding and a brief description of any security therefor
(after giving effect to the application of the proceeds of the sale of this
Note). The Company is not in default in any material respect in the performance
or observance of any of the terms, covenants or conditions contained in any
instrument evidencing any such indebtedness and no event has occurred and is
continuing which, with notice or the lapse of time or both, would become such a
default.
 
I.  Security Interest. Assuming that the Security Documents are in proper form
and are perfected in accordance with applicable laws and regulations on the date
thereof, the Security Documents create and grant to the Payee a legal, valid and
perfected first priority security interest in the Collateral. The Collateral is
not subject to any other Lien or security interest whatsoever except Permitted
Liens.
 
J.  Subsidiaries. As of the date hereof, (i) the Company has only the
Subsidiaries set forth on, and the authorized, issued and outstanding capital
stock of each Subsidiary is as set forth on, the schedule delivered to the Payee
on the date hereof and (ii) the ownership interests in each Subsidiary of the
Company are duly authorized, validly issued, fully paid and nonassessable and
are owned beneficially and of record by the persons set forth on such schedule,
free and clear of all Liens. As of the date hereof, the Subsidiaries of the
Company have not issued any securities convertible into, or options or warrants
for, any common or preferred equity securities thereof, except as set forth on
such schedule. Except as set forth on such schedule, there are no agreements,
voting trusts or understandings binding on the Company or any of its
Subsidiaries restricting the transfer of the voting securities of any of the
Company’s Subsidiaries or affecting in any manner the sale, pledge, assignment
or other dispositions thereof, including any right of first refusal, option,
redemption, call or other right with respect thereto, whether similar or
dissimilar to any of the foregoing.
 
K.  Investment Companies and Other Regulated Entities. Neither the Company nor
any of its Subsidiaries is (i) an “investment company” or a company “controlled”
by an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended, or (ii) a “holding company” as
defined in, or subject to regulation under, the Public Utility Holding Company
Act of 1935 or the Federal Power Act, as amended.
 
L.  Absence of Certain Restrictions. No indenture, certificate of designation
for preferred stock, agreement or instrument to which the Company or any of its
Subsidiary is a party (other than this Note or any Note issued pursuant to the
Letter Agreement), prohibits or limits in any way, directly or indirectly the
ability of any such Subsidiary to make Restricted Payments or repay any
indebtedness to the Company or to another Subsidiary of the Company.
 
M.  ERISA. Each Pension Plan is in compliance with the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the rules and
regulations issued thereunder, as from time to time in effect (“ERISA”) and the
Code, where applicable, in all material respects and no ERISA Event has occurred
or is reasonably expected to occur that, when taken together with all other
ERISA Events for which liability is reasonably expected to occur, is reasonably
expected to result in a Material Adverse Effect. As used in this Note, “Pension
Plan” means, at any date of determination, any employee pension benefit plan,
the funding of which (under Section 302 of ERISA or Section 412 of the Code)
are, or at any time within the six years immediately preceding such date, were
in whole or in part, the responsibility of the Company or any of its
Subsidiaries, or any person or entity which is a member of any group of
organizations within the meaning of Section 414(b) or (c) of the Code (or,
solely for the purposes of potential liability under Section 302(c)(11) of
ERISA, and Section 412(n) of the Code, Sections 414(m) or (o) of the Code) which
the Company or any of its Subsidiaries is a member (each, an “ERISA Affiliate”).
As used in this Note, “ERISA Event” means (i) a “reportable event”, as defined
in Section 4043 of ERISA with respect to a Pension Plan (other than an event for
which the 30-day notice period is waived), (ii) the existence with respect to
any Pension Plan of an “accumulated funding deficiency” (as defined in Section
412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Pension Plan; (iv) the incurrence by the Company or its Subsidiaries or any
ERISA Affiliate of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan; (v) the receipt by the Company or any of its
Subsidiaries or any ERISA Affiliate from the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA (or any
governmental authority succeeding to the functions thereof) or a plan
administrator of any notice relating to an intention to terminate any Pension
Plan or Pension Plans or to appoint a trustee to administer any Pension Plan;
(vi) the incurrence by the Company or any of its Subsidiaries or any ERISA
Affiliate of any liability with respect to the withdrawal or partial withdrawal
from any Pension Plan or Multiemployer Plan (as defined in Section 4003(a)(3) of
ERISA); or (vii) the receipt by the Company or any of its Subsidiaries or ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability (as
defined in Part I of Subtitle E of Title IV of ERISA) or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
 

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N.  Authorization; No Violation.
 
(a)  The Company has full corporate power and authority necessary to enter into
this Note and the Security Documents to carry out the transactions contemplated
by the Documents. The Board of Directors of the Company has taken such necessary
action to authorize the execution and delivery of this Note and the Security
Documents and the consummation of the transactions contemplated thereby. This
Note and the Security Documents have been duly executed and delivered by the
Company and are legal, valid and binding obligations of the Company enforceable
against it in accordance with its terms except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors’ rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought.
 
(b)  Neither the execution and delivery of any of the Security Documents nor the
consummation of the transactions contemplated thereby will violate any provision
of the articles or certificate of incorporation or by-laws or other
organizational documents of the Company, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any debt
or obligation pursuant to, or result in the creation or imposition of any
security interest, lien or other encumbrance upon any property or assets of the
Company, any agreement or commitment to which the Company is a party or by which
the Company is bound or to which the property of the Company is subject, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority applicable to the Company.
 
9.  Miscellaneous.
 
A.  Parties in Interest. All covenants, agreements and undertakings in this Note
binding upon the Company or the Payee shall bind and inure to the benefit of the
successors and permitted assigns of the Company and the Payee, respectively. The
Payee shall not be entitled to assign this Note without the written consent of
the Company, which consent shall not be unreasonably withheld.
 
B.  Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflicts of laws
or principles thereof. The parties hereto hereby agree that any suit or
proceeding arising directly and/or indirectly pursuant to or under this
instrument or the consummation of the transactions contemplated hereby, shall be
brought solely in a federal or state court located in the City, County and State
of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction of the federal and state
courts located in the City, County and State of New York and agree that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon them
in New York City. The parties hereto waive any claim that any such jurisdiction
is not a convenient forum for any such suit or proceeding and any defense or
lack of in personam jurisdiction with respect thereto. In the event of any such
action or proceeding, the party prevailing therein shall be entitled to payment
from the other party hereto of its reasonable counsel fees and disbursements in
an amount judicially determined.
 

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C.  Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE’S PURCHASING THIS NOTE.
 
D.  Expenses and Fees. All fees, costs and expenses of every kind and nature,
including but not limited to the reasonable attorneys’ fees and legal expenses,
incurred by Payee in connection with the collection, administration, or
enforcement of its rights under this Note or in defending or prosecuting any
actions or proceedings arising out of or related to any amounts due to Payee
under this Note shall be borne and paid by the Company upon written demand by
the Payee and until paid, shall be added to the amounts due hereunder and bear
interest at a rate per annum equal to 12%.
 
E.  Repricing of Options. No representation or covenant shall be deemed to be
breached in the event that the Company effectuates a repricing of any options
previously issued pursuant to a stock option plan in accordance with the terms
therewith as a result of the receipt by Holder of any Warrant; provided,
however, that under no circumstances shall such repricing result in an exercise
price less than the Warrant Share Price.
 
F.  Entire Agreement. This Note (including any schedule referenced herein), the
Security Documents and the Letter Agreement set forth the entire agreement of
the parties with respect to the subject matter hereof and thereof, superseding
and replacing any agreement or understanding that may have existed between the
parties prior to the date hereof in respect to such subject matter.

 

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IN WITNESS WHEREOF, this Note has been executed and delivered on the date first
specified above by the duly authorized representative of the Company.

INNCARDIO, INC.

By:   /s/ Bernard Ross    
Name: Bernard Ross
Title: Chief Executive Officer

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