Exhibit 10.4
EXHIBIT A

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

Original Issue Date: March 15, 2005

$200,000.00

8% SENIOR SECURED NOTE DUE JUNE 15, 2005

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

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

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

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

“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking
institutions in the State of New York are authorized or required by law or other
government action to close.

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“Change of Control Transaction” means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, or (ii) a replacement at one time or within a
three year period of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), or (iii) the
execution by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in (i) or
(ii).

“Common Stock” means the common stock, $.001 par value, of the Company and stock
of any other class into which such shares may hereafter have been reclassified
or changed.  
 
“Event of Default” shall have the meaning set forth in Section 8.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fundamental Transaction” shall have the meaning set forth in Section 4(c)
hereof.
 
“Late Fee” shall have the meaning set forth in Section 2(c) hereof.

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

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

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

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

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
  
 “Trading Day” means a day on which (i) the New York Stock Exchange is open for
business, if the Common Stock is not publicly traded or (ii) if the Company’s
Common Stock is publicly traded, the Common Stock is traded on a Trading Market.
 
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq
SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.
 
“Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.

Section 2. Interest and Prepayments.
 

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

b)  Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall
entail a late fee at the rate of 20% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (“Late Fee”) which will
accrue daily, from the date such interest is due hereunder through and including
the date of payment.
 
c)  Optional Prepayment. The Company shall have the right to prepay, in cash,
all or a portion of the Notes at any time at (i) 100% of the principal amount
thereof plus accrued interest to the date of repayment if in the first 60 days
and (ii) 106% of the principal amount thereof plus accrued interest to the date
of repayment if after 60 days.
 
d) Mandatory Prepayment. In the event that the Company receives proceeds of at
least $2,000,000 from the sale of Common Stock, preferred stock, or debt
securities of the Company, the Company shall be required to redeem the Notes at
(i) 100% of the principal amount thereof plus accrued interest to the date of
repayment if in the first 60 days and (ii) 106% of the principal amount thereof
plus accrued interest to the date of repayment if after 60 days. 

Section 3.  Registration of Transfers and Exchanges.
 
a)  Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
 

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

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

Section 4. Intentionally Omitted.
 
Section 5. Intentionally Omitted.

Section 6. Penalty Warrant Issuance. In addition to all of the remedies
available to the Holder pursuant to Section 8, in the event that the principal
amount of the Note, together with all accrued, but unpaid, interest is not paid
within two (2) Trading Days of the Maturity Date, the Company shall issue the
Penalty Warrants to the Holder.
 
Section 7. Negative Covenants. So long as any portion of this Note is
outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:

a)  enter into, create, incur, assume or suffer to exist any indebtedness or
liens of any kind, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits therefrom
that is senior to, or pari passu with, in any respect, the Company’s obligations
under the Notes;
 
b)  amend its certificate of incorporation, bylaws or other charter documents so
as to adversely affect any rights of the Holder;

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

d)  enter into any agreement with respect to any of the foregoing.
 
Section 8. Events of Default.

a)  “Event of Default”, wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

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i.  any default in the payment of (A) the principal of amount of any Note, or
(B) interest (including Late Fees) on, or damages in respect of, any Note, in
each case free of any claim of subordination, as and when the same shall become
due and payable (whether on the Maturity Date or by acceleration or otherwise)
which default, solely in the case of an interest payment or other default under
clause (B) above, is not cured, within 2 Trading Days;
 
ii.  the Company shall fail to observe or perform any other covenant or
agreement contained in this Note or any of the other Transaction Documents which
failure is not cured, if possible to cure, within the earlier to occur of (A) 5
Trading Days after notice of such default sent by the Holder or by any other
Holder and (B) 10 Trading Days after the Company shall become or should have
become aware of such failure;

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

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

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

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vi.  the Company or any Subsidiary shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the Company in an amount
exceeding $150,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

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

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

b)  Remedies Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Note, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become, at the Holder’s
election, immediately due and payable in cash. The aggregate amount payable upon
an Event of Default shall be equal to the Mandatory Prepayment Amount.
Commencing 5 days after the occurrence of any Event of Default that results in
the eventual acceleration of this Note, the interest rate on this Note shall
accrue at the rate of 20% per annum, or such lower maximum amount of interest
permitted to be charged under applicable law. All Notes for which the full
Mandatory Prepayment Amount hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a Note holder until such time,
if any, as the full payment under this Section shall have been received by it.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.

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Section 9. Miscellaneous.

a)  Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above, facsimile number
212-922-2081, Attn: General Counsel, or such other address or facsimile number
as the Company may specify for such purposes by notice to the Holders delivered
in accordance with this Section. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:30 p.m. (New
York City time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 5:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
 
b)  Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Note at the time, place, and rate, and in the coin or currency,
herein prescribed. This Note is a direct debt obligation of the Company. This
Note ranks pari passu with all other Notes now or hereafter issued under the
terms set forth herein. 
 
c)  Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

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

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e)  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Note or
the transactions contemplated hereby. If either party shall commence an action
or proceeding to enforce any provisions of this Note, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
 
f)  Waiver. Any waiver by the Company or the Holder of a breach of any provision
of this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note.
The failure of the Company or the Holder to insist upon strict adherence to any
term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note. Any waiver must be in writing.
 
g)  Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Note as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted.
 

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h)  Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

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

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

 

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

 

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