**Exhibit 4.14**

 

**SECURITIESPURCHASE AGREEMENT**

 

**THIS SECURITIES PURCHASE AGREEMENT**(the or this “**Agreement**”) dated asof April 19, 2004 is entered into by and among IMCOR Pharmaceutical Co., aNevada corporation (the “**Company**”), and the purchasers identified onthe signature pages hereto (each a “**Purchaser**”and collectively, the “**Purchasers**”**).**

 

**WHEREAS,** theCompany and the Purchasers are executing and delivering this Agreement inreliance upon the exemption from securities registration afforded by theprovisions of Regulation D (“**Regulation D**”), as promulgated by the U.S.Securities and Exchange Commission (the “**SEC**”) under the Securities Act of 1933, asamended (the “**1933 Act**”);

 

**WHEREAS,** theCompany issued to the Purchasers certain Revolving Convertible Senior SecuredPromissory Notes in an aggregate principal amount of $4,160,000 (the “**Convertible Notes**”) and Secured PromissoryNotes in an aggregate principal amount of $8,564,500 (the “**Demand Notes**” and collectively with theConvertible Notes, the “**Notes**”);

 

**WHEREAS**,the financing transaction pursuant to that certain Securities PurchaseAgreement dated as of April 19, 2004 by and among the Company and certainpurchasers signatory thereto for the purchase of Company Common Stock (definedbelow) and warrants to acquire Common Stock (the “**Financing Securities Purchase Agreement**”) triggers theconversion of the Convertible Notes by their terms the Company has requestedthat the Purchasers convert their Demand Notes (including any accrued butunpaid interest thereon) into shares of common stock of the Company, $0.001 parvalue per share (the “**Common Stock**”),all upon the terms and conditions set forth in this Agreement (the “**Debt Conversion**”); and

 

**WHEREAS**,the Notes are secured by liens, pledges, security interests and otherencumbrances, including security agreements, patent and trademark securityagreements and UCC-1 financing statements (collectively, the “**Security Documents**”).

 

**NOW, THEREFORE,** inconsideration of the mutual promises and covenants contained in this Agreement,and for other good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged, intending to be legally bound by the terms andconditions of this Agreement, the parties hereto hereby agree as follows.

 

# **1.**                                      Purchase and Sale of Conversion Shares.

 

**1.1.         Offering. **Subject to the terms and conditions of thisAgreement, each Purchaser hereby severally agrees to: (a) convert all principaland accrued but unpaid interest due on the Convertible Notes as of theconversion date into Common Stock at $0.75 per share on or effective as of thedate of the Initial Closing (defined below); and (b) agrees to convert allprincipal and accrued but unpaid interest due on the Demand Notes as of theconversion date into Common Stock at $0.75 per share on or effective as of thedate of the Second Closing (defined below). The shares of Common Stock issuable upon conversion of the Notes arecollectively referred to as the “**ConversionShares**.”

 

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# **2.             Delivery of the Conversion Shares at the Closings.**

 

## **2.1.        **Initial Closing. The initial closing (the “Initial Closing”) shall take place at the offices of Grippo & Elden LLC, 227 W.Monroe Street, Chicago, Illinois  60606on the second business day following the date on which the applicableconditions set forth in Section 5.2 (excluding Section 5.2.7) and Section 6shall have been satisfied or waived by the appropriate parties, or at suchother time, date and place as are mutually agreeable to the Company and thePurchasers subscribing for a majority of the Conversion Shares.  At the Initial Closing:

 

(a)           EachPurchaser shall deliver its Convertible Notes for cancellation and the Companyshall deliver to each Purchaser certificates representing the Conversion Sharesto which such Purchaser is entitled as a result of the conversion of theConvertible Notes.

 

(b)           Fromand after the Initial Closing, the Convertible Notes shall represent solely theright to receive the Conversion Shares in accordance with this Agreement, andno further obligations shall accrue or exist under the Convertible Notes.

 

(c)           Ifa Purchaser has lost its Convertible Note(s) and is unable to deliver itsConvertible Note at the Initial Closing, it shall submit an affidavit of lossand indemnity agreement so that the Convertible Note may be replaced and deemedcancelled in accordance with the terms hereof. In the event that as a result of the Debt Conversion, fractions ofshares would be required to be issued, such fractional shares shall be roundedup to the nearest whole share.

 

## **2.2.        **Second Closing. The second closing (the “Second Closing”) shalltake place at the offices of Grippo & Elden LLC, 227 W. Monroe Street,Chicago, Illinois  60606 on the secondbusiness day following the date on which the applicable conditions set forth inSection 5.2, including 5.2.7, and Section 6 shall have been satisfied or waivedby the appropriate parties.  At theSecond Closing:

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(a)           EachPurchaser shall deliver its Demand Notes for cancellation and the Company shalldeliver to each Purchaser certificates representing the Conversion Shares towhich such Purchaser is entitled as a result of the conversion of the DemandNotes.

 

(b)           Fromand after the Second Closing, the Demand Notes shall represent solely the rightto receive the Conversion Shares in accordance with this Agreement, and nofurther obligations shall accrue or exist under the Demand Notes.  Upon delivery of the Conversion Shares tothe Purchasers, all liens, pledges, security interests and other encumbrancesunder the Security Documents shall be terminated and released, and eachPurchaser shall execute and deliver to the Company termination statements,releases of liens and similar interests and in all other reasonable respectsshall cooperate with the Company to effect such termination and release.

 

(c)           Ifa Purchaser has lost its Demand Note(s) and is unable to deliver its DemandNotes at the Initial Closing, it shall submit an affidavit of loss andindemnity agreement so that the Demand Notes may be replaced and deemedcancelled in accordance with the terms hereof. In the event that as a result of the Debt Conversion, fractions ofshares would be required to be issued, such fractional shares shall be roundedup to the nearest whole share.

 

The Initial Closing and the Second Closing are collectively referred toherein as the **“Closings”** and individually as a **“Closing.”**  The date on which the Closings occur arereferred to herein as a **“Closing Date.”**

 

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## **2.3.         Termination. **If by the applicable dates set forth in Section 5.2.10 theconditions set forth in Section 5.2 that apply to the applicable Closing shallnot have been fulfilled by the Company, then each Purchaser to receiveConversion Shares at such Closing shall, at its election, be relieved of all ofits obligations under this Agreement as to such Closing without thereby waivingany other right it may have by reason of such failure or suchnon-fulfillment.  If by the applicabledate set forth in Section 6.5, any of the conditions set forth in Section 6 ofthis Agreement that apply to the applicable Closing shall not have beenfulfilled by any Purchaser, the Company shall, at its election, be relieved ofall of its obligations to such Purchaser under this Agreement as to suchClosing without thereby waiving any other right it may have by reason of suchfailure or such non-fulfillment.

 

**3.             Representationsand Warranties of the Company. **Exceptas disclosed in the SEC Filings (as defined below) and the Disclosure Scheduleattached hereto (which Disclosure Schedule makes explicit reference to, andshall only modify, the particular Section containing the representation orwarranty as to which exception is taken), the Company hereby represents and warrantsto the Purchasers as follows:

 

**3.1.         Organization; Amended Articles.**  The Company is a corporation duly organized,validly existing and in corporate good standing under the laws of the State ofNevada and is qualified to do business as a foreign corporation in eachjurisdiction in which such qualification is required, except where the failureto be so qualified would not have, either individually or in the aggregate, amaterial adverse effect on the business, operations, financial condition,assets, prospects, liabilities or contractual rights of the Company, whetherindividually or taken as a whole (a “**Material Adverse Effect**”).  The Company has, or prior to each Closingwill have, duly authorized the sale and issuance, pursuant to the terms of thisAgreement an adequate number shares of its Common Stock authorized andavailable for purchase hereunder, having the rights, restrictions, privilegesand preferences set forth in the Amended and Restated Certificate ofIncorporation (the “**Amended Articles**”).

 

**3.2.         Corporate Power.**  The Company has all required corporate powerand authority to own its property, to carry on its business as presentlyconducted or contemplated, to enter into and perform this Agreement, theRegistration Rights Agreement by and among the Company and the Purchasers inthe form attached as Exhibit A (the “**RegistrationRights Agreement**”), the Voting Agreement (as defined in Section5.1.5), and the other agreements, documents and instruments contemplated hereby(collectively with this Agreement, the “**Conversion****Documents**”),and to carry out the transactions contemplated hereby.  The copies of the Amended Articles andBylaws of the Company, as amended to date, which have been furnished by theCompany to counsel for the Purchasers, are correct and complete at the datehereof.  The Company is not in violationof any term of its Amended Articles or Bylaws, each as amended, or in violationof any term of any agreement, instrument, judgment, decree, order, statute,rule or government regulation applicable to the Company or to which the Companyis a party, where any violation, noncompliance or default would result in aMaterial Adverse Effect.

 

**3.3.         Authorization.**  The Conversion Documents are valid andbinding obligations of the Company, enforceable in accordance with theirterms.  The execution, delivery andperformance of the Conversion Documents have been duly authorized by allnecessary corporate or other action of the Company.  Subject to obtaining stockholder approval for the issuance of morethan 20% of the Company’s Common Stock pursuant to Nasdaq Marketplace Rule 4350with respect to Conversion Shares to be issued at the Second Closing, theissuance, sale and delivery of the Conversion Shares in accordance with thisAgreement have been, or will be prior to each Closing, duly authorized by allnecessary corporate action on the part of the Company.  The Conversion Shares when so issued, soldand delivered against payment therefor in accordance with the provisions ofthis Agreement will be duly and

 

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validly issued, fullypaid and non-assessable.  No consent,approval or authorization of, or designation, declaration or filing with, anygovernmental authority or any other person or entity is required of the Companyin connection with the execution and delivery of the Conversion Documents, orthe issuance, sale and delivery of the Conversion Shares in accordance with theterms of this Agreement, or the consummation of any other transaction contemplatedhereby or by the other Conversion Documents, except (i) the filing with the SECof one or more Registration Statements in accordance with the requirementsRegistration Rights Agreement and the filing of a Form D with the SEC, (ii) anyfilings required by state securities laws, (iii) the filings required inaccordance with Section 8.12, (iv) the filing of the Proxy Statement inaccordance with Section 5.1.4, and (v) those that have been made or obtainedprior to or as of the date of this Agreement.

 

**3.4.         Capitalization.** The authorized capital stock of the Companyconsists of Series A Preferred Stock, $0.001 par value per share, of which12,856 shares are authorized, issued and outstanding as of December 31, 2003,and 150,000,000 shares of Common Stock, $0.001 par value per share, of which21,541,476 shares are issued and outstanding as of March 31, 2004.  All of the issued and outstanding shares ofthe Company’s capital stock have been duly authorized and validly issued andare fully paid and non-assessable.  TheCompany will have reserved, immediately prior to the First Closing, a total of6,068,740 shares of its Common Stock for issuance pursuant to the Option Plans(defined below).  Except as contemplatedby this Agreement, the other Conversion Documents, the Amended Articles,(i) no subscription, warrant, option, convertible security or other right(contingent or otherwise) to purchase or acquire any shares of capital stock ofthe Company is authorized or outstanding, (ii) there is not any commitmentor offer of the Company to issue any subscription, warrant, option, convertiblesecurity or other such right or to issue or distribute to holders of any sharesof its capital stock any evidences of indebtedness or assets of the Company,(iii) the Company has no obligation (contingent or otherwise) to purchase,redeem or otherwise acquire any shares of its capital stock or any interesttherein or to pay any dividend or make any other distribution in respectthereof, and (iv) there are no restrictions on the transfer of the Company’scapital stock other than those arising from securities laws or contemplated bythis Agreement and the other Conversion Documents.  Except as contemplated by this Agreement and the other ConversionDocuments, there are no voting trusts or agreements, stockholders’ agreements,pledge agreements, buy-sell agreements, rights of first refusal, preemptiverights or proxies relating to any securities of the Company to which theCompany is a party.  All of theoutstanding securities of the Company were issued in compliance with allapplicable federal and state securities laws. Set forth in the Disclosure Schedule is a capitalization table for theCompany showing (i) the capitalization of the Company on a fully dilutedbasis immediately prior to the issuance of the Conversion Shares; and(ii) the capitalization of the Company on a fully diluted basis givingeffect to the issuance of the Conversion Shares and the shares to be issuedpursuant to the Financing Securities Purchase Agreement.  For the purposes of this Agreement, the term“on a fully diluted basis” means that for purposes of calculating thepercentage interest of the Company’s capital stock represented by a specifiednumber of shares, there shall be deemed outstanding (i) all shares of CommonStock, $0.001 per value per share, of the Company currently outstanding; (ii)all shares of Common Stock issuable pursuant to the exercise of options grantedand capable of being granted under the Company’s 1998 Long Term IncentiveCompensation Plan, 2000 Long Term Incentive Compensation Plan, and SeniorExecutive Long Term Incentive Compensation Plan (the “**Option Plans**”); and (iii) allshares of Common Stock issuable pursuant to other existing options, warrants,convertible debt securities and other instruments and agreementswhatsoever.  The issue and sale of theConversion Shares will not, immediately or with the passage of time, obligatethe Company to issue shares of Common Stock or other securities to any Personand will not result in a right of any holder of Company securities to adjustthe exercise, conversion, exchange or reset price under such securities.

 

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**3.5.         Subsidiaries. **Except for Sentigen Ltd., the Company does notcontrol, directly or indirectly, any other entity (a “**Subsidiary**”) and does not ownof record or beneficially, directly or indirectly, any shares of capital stockor securities convertible into capital stock of any other corporation, or anyparticipating interest in any partnership, joint venture or other non-corporatebusiness enterprise.

 

**3.6.         SEC Filings; Business.**  The Company has filed all reports requiredto be filed by it under the 1933 Act and the Securities Exchange Act of 1934,as amended (the “**1934 Act**”), including pursuant to Section 13(a) or 15(d)thereof, for the twelve months preceding the date hereof (or such shorterperiod as the Company was required by law to file such reports) (collectively,the “**SECFilings**”) on a timely basis or has timely filed a valid extension ofsuch time of filing and any such SEC Filings have been accepted by the SECprior to the expiration of any such extension. The SEC Filings are the only filings required of the Company pursuant tothe 1934 Act for such period.  At thetime of filing thereof, the SEC Filings complied as to form in all materialrespects with the requirements of the 1934 Act and did not contain any untruestatement of a material fact or omit to state any material fact necessary inorder to make the statements made therein, in the light of the circumstancesunder which they were made, not misleading. During the preceding two years, each registration statement and anyamendment thereto filed by the Company pursuant to the 1933 Act and the rulesand regulations thereunder, as of the date such statement or amendment becameeffective, complied as to form in all material respects with the 1933 Act anddid not contain any untrue statement of a material fact or omit to state anymaterial fact required to be stated therein or necessary in order to make thestatements made therein, in light of the circumstances under which they weremade, not misleading; and each prospectus filed pursuant to Rule 424(b) underthe 1933 Act, as of its issue date and as of the closing of any sale ofsecurities pursuant thereto did not contain any untrue statement of a materialfact or omit to state any material fact required to be stated therein ornecessary in order to make the statements made therein, in the light of thecircumstances under which they were made, not misleading.  The Company and its Subsidiaries are engagedonly in the business described in the SEC Filings and the SEC Filings contain acomplete and accurate description in all material respects of the business ofthe Company and its Subsidiaries, taken as a whole, as required to bedisclosed.

 

**3.7.         No Material Adverse Change.**  Since December 31, 2002, except asidentified and described in the SEC Filings, there has not been:

 

(a)           any change in the consolidatedassets, liabilities, financial condition or operating results of the Companyfrom that reflected in the financial statements included in the 2002 10-K,except for changes in the ordinary course of business which have not and couldnot reasonably be expected to have a Material Adverse Effect, individually orin the aggregate;

 

(b)           any declaration or payment of anydividend, or any authorization or payment of any distribution, on any of thecapital stock of the Company, or any redemption or repurchase of any securitiesof the Company;

 

(c)           any material damage, destruction orloss, whether or not covered by insurance to any assets or properties of theCompany;

 

(d)           any waiver, not in the ordinarycourse of business, by the Company or any Subsidiary of a material right or ofa material debt owed to it;

 

(e)           any satisfaction or discharge of anylien, claim or encumbrance or payment of any obligation by the Company or aSubsidiary, except in the ordinary course of business and which is

 

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not material to theassets, properties, financial condition, operating results or business of theCompany and its Subsidiaries taken as a whole (as such business is presentlyconducted and as it is proposed to be conducted);

 

(f)            any change or amendment to theCompany’s Amended Articles or Bylaws, or material change to any materialcontract or arrangement by which the Company or any Subsidiary is bound or towhich any of their respective assets or properties is subject;

 

(g)           any material labor difficulties orlabor union organizing activities with respect to employees of the Company orany Subsidiary;

 

(h)           any transaction entered into by theCompany or a Subsidiary other than in the ordinary course of business;

 

(i)            any loss of the services of any keyemployee, or material change in the composition or duties of the seniormanagement of the Company or any Subsidiary;

 

(j)            any loss or threatened loss of anycustomer which has had or could reasonably be expected to have a MaterialAdverse Effect; or

 

(k)           any other event or condition of anycharacter that has had or could reasonably be expected to have a MaterialAdverse Effect.

 

**3.8.         Financial Statements.**  The financial statements included in eachSEC Filing present fairly, in all material respects, the consolidated financialposition of the Company as of the dates shown and its consolidated results ofoperations and cash flows for the periods shown, and such financial statementshave been prepared in conformity with United States generally accepted accountingprinciples applied on a consistent basis (except as may be disclosed therein orin the notes thereto, and, in the case of quarterly financial statements, aspermitted by Form 10-Q or Form 10-QSB, as applicable, under the 1934 Act).  Except as set forth in the financialstatements of the Company included in the SEC Filings filed prior to the datehereof, neither the Company nor any of its Subsidiaries has incurred anyliabilities, contingent or otherwise, except those incurred in the ordinarycourse of business, consistent (as to amount and nature) with past practicessince the date of such financial statements, none of which, individually or inthe aggregate, have had or could reasonably be expected to have a MaterialAdverse Effect.

 

**3.9.         Contracts and Commitments.** Except as identified and described in the SECFilings, the Company (i) is not a party to any oral or written contract,obligation, instrument, corporate restriction or commitment which involves apotential obligation or liability in excess of $25,000 and which is otherwisematerial and not entered into in the ordinary course of business, (ii) does nothave any oral or written employment contracts, financing agreements, licenses,distributor or sales representative agreements, agreements with officers,directors, employees or shareholders of the Company or persons or organizationsrelated to or affiliated with any such persons, leases, agreements relating toproduct development; and (iii) does not have any pension, profit sharing,retirement or stock option plans other than the Option Plans and the Company’s401(k) Plan.

 

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## **3.10.       Proprietary Rights, EmployeeRestrictions.**

 

(a)           The Company owns or has the right touse all copyrights, copyright registrations and copyright applications,trademark registrations and applications for registration, patents and patentapplications, trademarks, service marks, trade names, or other proprietaryrights (collectively, “**Intellectual Property Rights**”) as describedin the SEC Filings used or useful in the Company’s business as presentlyconducted or currently contemplated to be conducted and all licenses,assignments and releases of Intellectual Property Rights of others in materialworks embodied in the Company’s products. All Intellectual Property Rights held by any employee, officer orconsultant have been assigned to the Company. The Company has exclusive ownership of, or exclusive license to use, allIntellectual Property Rights.  TheCompany has obtained any licenses, releases or assignments necessary to use allthird parties’ Intellectual Property Rights in works embodied in itsproducts.  All such licenses, releasesand assignments are specifically identified in the Disclosure Schedule.  To the Company’s knowledge, neither thepresent nor currently contemplated business activities or products of theCompany infringe any Intellectual Property Rights of others.  The Company has not received any notice orother written claim from any person asserting that any of the Company’s presentor currently contemplated activities infringe or may infringe any IntellectualProperty Rights of such person.  TheCompany has the right to use, free and clear of known or asserted claims or rightsof others, all trade secrets, customer lists, hardware designs, programmingprocesses, software and other information required for or incident to itsproducts or its business as presently conducted or contemplated to beconducted, except for claims which would not have a Material Adverse Effect.  The Company has taken all reasonablemeasures to protect and preserve the security, confidentiality and value of itsIntellectual Property Rights, including its trade secrets and otherconfidential information.  The Companyis not aware of any infringement by others of its copyrights or otherIntellectual Proprietary Rights in any of its products, technology or services,or any violation of the confidentiality of any of its proprietaryinformation.  The activities of theCompany’s employees on behalf of the Company do not violate any agreements orarrangements known to the Company which any such employees have with formeremployers or any other entity to whom such employees may have renderedconsulting services.  For the purposesof this Section 3.10, Intellectual Property Rights also includes any andall material licenses, databases, computer programs and other computer softwareuser interfaces (other than those generally available to the public), know-how,trade secrets, customer lists, proprietary technology, processes and formulae,source code, object code, algorithms, architecture, structure, display screens,layouts, development tools, instructions, templates, marketing materials,inventions, trade dress, logos and designs and all documentation and mediaconstituting, describing or relating to the foregoing.

 

(b)           All key employees, including allconsultants (contract or otherwise), of or to the Company have executed anddelivered to and in favor of the Company an agreement regarding the protection ofconfidential and proprietary information and the assignment to the Company ofall Intellectual Property Rights arising from the services performed for theCompany by such Persons.

 

**3.11.       Litigation; Compliance with Law. **There is no(i) action, suit, claim, proceeding or investigation pending or, to thebest of the Company’s knowledge, threatened against or affecting the Company,at law or in equity, or before or by any federal, state, municipal or othergovernmental department, commission, board, bureau, agency or instrumentality,domestic or foreign, (ii) arbitration or mediation proceeding relating to theCompany, pending or, to the best of the Company’s knowledge, threatened, or(iii) governmental inquiry pending or, to the best of the Company’s knowledge,threatened against or affecting the Company (including without limitation anyinquiry as to the qualification of the Company to hold or receive any licenseor permit).  The Company has notreceived any opinion or memorandum or legal advice from legal counsel to theeffect that it is exposed, from a legal standpoint,

 

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to any liability whichmay have a Material Adverse Effect.  TheCompany is not in default with respect to any order, writ, injunction or decreeknown to or served upon the Company of any court or of any federal, state,municipal or other governmental department, commission, board, bureau, agencyor instrumentality, domestic or foreign. There is no action or suit by the Company, and to the best of theCompany’s knowledge, pending, threatened or contemplated against others.  To the best of the Company’s knowledge, theCompany has complied and will continue to comply, in all material respects,with all laws, rules, regulations and orders applicable to its present andcontemplated business, operations, properties, assets, products andservices.  The Company has all necessarypermits, licenses and other authorizations required to conduct its business as conductedand as proposed to be conducted, except where the failure to obtain suchpermits, licenses or authorization would not have a Material Adverse Effect,and the Company has been and will continue to be operating its businesspursuant to and in compliance with the terms of all such permits, licenses andother authorizations, except where the failure to so operate the business wouldnot have a Material Adverse Effect.  TheCompany has all franchises, permits, licenses and other rights and privilegesnecessary to permit it to own its property and to conduct its business as it ispresently conducted or proposed to be conducted.  The Company is not subject to any pending or threatenedinvestigation, inquiry or proceeding by the SEC, any state securities commissionor any other federal, state, municipal or other governmental department,commission, board, bureau, agency or instrumentality, domestic or foreign, orany securities exchange or securities market, with respect to any matter.  The Company is in compliance with alleffective requirements of the Sarbanes-Oxley Act of 2002, as amended, and therules and regulations thereunder, that are applicable to it, except where suchnoncompliance could not have or reasonably be expected to result in a MaterialAdverse Effect.

 

**3.12.       Leasehold Interests.**  Each lease or agreement to which the Companyis a party under which it is a lessee of any property, real or personal,is a valid and subsisting agreement, duly authorized and entered into, withoutany default of the Company thereunder and, to the best of the Company’sknowledge, without any default thereunder of any other party thereto.  No event has occurred and is continuingwhich, with due notice or lapse of time or both, would constitute a default orevent of default by the Company under any such lease or agreement or, to thebest of the Company’s knowledge, by any other party thereto.  The Company’s possession of such propertyhas not been disturbed and, to the best of the Company’s knowledge, no claimhas been asserted against the Company adverse to its rights in such leaseholdinterests.

 

**3.13.       Insurance.**  The Company and each Subsidiary maintain infull force and effect insurance coverage that is customary for comparablysituated companies for the business being conducted and properties owned orleased by the Company and each Subsidiary, and the Company reasonably believessuch insurance coverage to be adequate against all liabilities, claims andrisks against which it is customary for comparably situated companies toinsure.

 

**3.14.       Loans and Advances.**  The Company does not have any outstandingloans or advances to any person and is not obligated to make any such loans oradvances.

 

**3.15.       Assumptions, Guaranties, Etc. ofIndebtedness of Other Persons.**  The Company has not assumed, guaranteed, endorsed or otherwisebecome directly or contingently liable on any indebtedness of any other person(including, without limitation, liability by way of agreement, contingent orotherwise, to purchase, to provide funds for payment, to supply funds to orotherwise invest in the debtor, or otherwise to assure the creditor againstloss), except for guaranties by endorsement of negotiable instruments fordeposit or collection in the ordinary course of business.

 

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**3.16.       Governmental Approvals.**  Subject to the accuracy of therepresentations and warranties of the Purchasers set forth in Section 4, noregistration or filing with, or consent or approval of or other action by, anyfederal, state or other governmental agency or instrumentality is or will benecessary for the valid execution, delivery and performance by the Company ofany of the Conversion Documents, the issuance, sale and delivery of theConversion Shares other than filings pursuant to federal and state securitieslaws (all of which filings have been made by the Company, other than thosewhich are required to be made after the Closing and which will be duly made ona timely basis) in connection with the sale of the Conversion Shares.

 

**3.17.       Tax Matters.**  Each of the Company and each Subsidiary hastimely prepared and filed all tax returns required to have been filed by theCompany or such Subsidiary with all appropriate governmental agencies andtimely paid all taxes shown thereon or otherwise owed by it.  The charges, accruals and reserves on thebooks of the Company in respect of taxes for all fiscal periods are adequate inall material respects, and there are no material unpaid assessments against theCompany or any Subsidiary nor any basis for the assessment of any additionaltaxes, penalties or interest for any fiscal period or audits by any federal,state or local taxing authority except for any assessment which is not materialto the Company and its Subsidiaries, taken as a whole.  All taxes and other assessments and leviesthat the Company or any Subsidiary is required to withhold or to collect forpayment have been duly withheld and collected and paid to the propergovernmental entity or third party when due. There are no tax liens or claims pending or threatened against theCompany or any Subsidiary or any of their respective assets or property.  There are no outstanding tax sharingagreements or other such arrangements between the Company and any Subsidiary orother corporation or entity.

 

**3.18.       Title to Properties.**  The Company and each Subsidiary has good andmarketable title to all real properties and all other properties and assetsowned by it, in each case free and clear from any and all liens, securityinterests, encumbrances and defects, and the Company and each Subsidiary holdsany leased real or personal property under valid and enforceable leases with noexceptions that would materially interfere with the use made or currentlyplanned to be made thereof by them.

 

**3.19.       No Labor Disputes**.  No material labor dispute with the employeesof the Company or any Subsidiary exists or is imminent.

 

**3.20.       Environmental Matters.**  Neither the Company nor any Subsidiary is inviolation of any statute, rule, regulation, decision or order of anygovernmental agency or body or any court, domestic or foreign, relating to theuse, disposal or release of hazardous or toxic substances or relating to theprotection or restoration of the environment or human exposure to hazardous ortoxic substances (collectively, “**Environmental Laws**”), owns or operates anyreal property contaminated with any substance that is subject to anyEnvironmental Laws, is liable for any off-site disposal or contaminationpursuant to any Environmental Laws, and is subject to any claim relating to anyEnvironmental Laws, which violation, contamination, liability or claim has hador could reasonably be expected to have a Material Adverse Effect, individuallyor in the aggregate; and there is no pending or threatened investigation thatmight lead to such a claim.

 

**3.21.       Compliance with Nasdaq Continued ListingRequirements. **TheCompany is in compliance with applicable Nasdaq SmallCap Market continuedlisting requirements.  There are noproceedings pending or threatened against the Company relating to the continuedlisting of the Company’s Common Stock on the Nasdaq SmallCap Market and theCompany has not received any notice of, nor is there any basis for, thedelisting of the Common Stock from the Nasdaq SmallCap Market.

 

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**3.22.       Brokers. **The Company has no contract, arrangement orunderstanding with any broker, finder or similar agent with respect to thetransactions contemplated by this Agreement.  No person or entity will have, as a result of the transactionscontemplated by this Agreement, any right, interest or claim against or uponthe Company, any Subsidiary or a Purchaser for any commission, fee or othercompensation pursuant to any agreement, arrangement or understanding enteredinto by or on behalf of the Company.

 

**3.23.       Certain Registration Matters. **Assuming the accuracy ofthe Purchasers’ representations and warranties set forth in Section 4.1-4.5, noregistration under the Securities Act is required for the offer and sale of theConversion Shares by the Company to the Purchaser under the ConversionDocuments.  The Company has not grantedor agreed to grant to any Person any rights (including “piggy-back”registration rights) to have any securities of the Company registered with theSEC or any other governmental authority that have not been satisfied ordeferred during the period between the date hereof and the date the Company’sregistration statement pursuant to the Registration Rights Agreement isdeclared effective.  Other than theRegistration Statement (as defined in the Registration Rights Agreement), theregistration statement being filed pursuant to the terms of the FinancingSecurities Purchase Agreement and that certain registration statement which maybe filed on behalf of Xmark Funds, Ltd. and Xmark Funds, L.P., prior to thedate that a Registration Statement is first declared effective by the SEC, theCompany may not file any registration statement (other than on Form S-8) withthe SEC with respect to any securities of the Company.

 

**3.24.       Transactions With Affiliates.**  Except as identified and described in theSEC Filings, no director, officer, employee or stockholder of the Company, ormember of the family of any such person, or any corporation, partnership, trustor other entity in which any such person, or any member of the family of anysuch person, has a substantial interest or is an officer, director, trustee,partner or holder of more than 5% of the outstanding capital stock thereof, isa party to any transaction with the Company, including any contract, agreementor other arrangement providing for the employment of, furnishing of servicesby, rental of real or personal property from or otherwise requiring payments toany such person or firm, other than employment-at-will arrangements in theordinary course of business.

 

**3.25.       Questionable Payments.**  Neither the Company nor any of itsSubsidiaries nor any of their respective current or former shareholders,directors, officers, employees, agents or other persons or entities acting onbehalf of the Company or any Subsidiary, has on behalf of the Company or anySubsidiary or in connection with their respective businesses: (a) used anycorporate funds for unlawful contributions, gifts, entertainment or otherunlawful expenses relating to political activity; (b) made any direct orindirect unlawful payments to any governmental officials or employees fromcorporate funds; (c) established or maintained any unlawful or unrecorded fundof corporate monies or other assets; (d) made any false or fictitious entrieson the books and records of the Company or any Subsidiary; or (e) made anyunlawful bribe, rebate, payoff, influence payment, kickback or other unlawfulpayment of any nature.

 

**3.26.       Information Supplied to Purchasers.**  Neither this Agreement, the DisclosureSchedule and Exhibits attached hereto, nor any other Conversion Documentsfurnished to the Purchasers by or on behalf of the Company contains any untruestatement of a material fact, and none of this Agreement, the Disclosure Scheduleand Exhibits attached hereto, or such other Conversion Documents omits to statea material fact necessary in order to make the statements contained herein ortherein not misleading.  None of thematters described on the Disclosure Schedules have had, or could reasonably beexpected to have, a Material Adverse Effect, individually or in the aggregate.

 

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## **3.27.       Internal Accounting Controls. **The Company and the Subsidiariesmaintain a system of internal accounting controls sufficient to providereasonable assurance that (i) transactions are executed in accordance withmanagement’s general or specific authorizations, (ii) transactions are recordedas necessary to permit preparation of financial statements in conformity withgenerally accepted accounting principles and to maintain asset accountability,(iii) access to assets is permitted only in accordance with management’sgeneral or specific authorization, and (iv) the recorded accountability forassets is compared with the existing assets at reasonable intervals andappropriate action is taken with respect to any differences.  The Company has established disclosurecontrols and procedures (as defined in 1934 Act Rules 13a-14 and 15d-14) forthe Company and designed such disclosure controls and procedures to ensure thatmaterial information relating to the Company, including its Subsidiaries, ismade known to the certifying officers by others within those entities,particularly during the period in which the Company’s Form 10-KSB or 10-QSB, asthe case may be, is being prepared.

 

## **3.28.         No Additional Agreements. **The Company does not have anyagreement or understanding with any Purchaser with respect to the transactionscontemplated by the Conversion Documents other than as specified in theConversion Documents.

 

## **3.29.         Disclosure. **The Company confirms that neither it nor any person actingon its behalf has provided any Purchaser or its respective agents or counselwith any information that the Company believes constitutes material, non-publicinformation except insofar as the existence and terms of the proposedtransactions hereunder may constitute such information. The Company understandsand confirms that the Purchasers will rely on the foregoing representations andcovenants in effecting transactions in securities of the Company.

 

**4.             Representationsof the Purchasers.** Each of the Purchasers represents and warrants to the Company as toitself and no other Purchaser as follows:

 

**4.1.         Validity.**  Assuming the due execution and delivery bythe Company of this Agreement and the Conversion Documents, this Agreement andthe Conversion Documents to which such Purchaser is a party constitute legal,valid and binding obligations of the Purchaser, enforceable against suchPurchaser in accordance with their respective terms.

 

**4.2.         Investor Status.**  Such Purchaser is an “accredited investor”as such term is defined in Regulation D under the 1933 Act.  Such Investor is not a registeredbroker-dealer under Section 15 of the 1934 Act.

 

**4.3.         Investment.**  The Conversion Shares to be received by suchPurchaser hereunder will be acquired for the Purchaser’s own account, not asnominee or agent, and not with a view to the resale or distribution of any partthereof in violation of the 1933 Act, and the Purchaser has no intention ofselling, granting any participation in, or otherwise distributing the same inviolation of the 1933 Act.  SuchPurchaser is acquiring the Conversion Shares hereunder in the ordinary courseof its business. Such Purchaser does not have any agreement or understanding,directly or indirectly, with any Person to distribute any of the ConversionShares.

 

**4.4.         Investment Experience.**  Such Purchaser acknowledges that it can bearthe economic risk and complete loss of its investment in the Conversion Sharesand has such knowledge and experience in financial or business matters that itis capable of evaluating the merits and risks of the investment contemplatedhereby.

 

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**4.5.         Restricted Securities.**  Such Purchaser understands that theConversion Shares are characterized as “restricted securities” under the U.S.federal securities laws inasmuch as they are being acquired from the Company ina transaction not involving a public offering and that under such laws andapplicable regulations such securities may be resold without registration underthe 1933 Act only in certain limited circumstances.

 

**4.6.         Access to Management.**  Such Purchaser has had an opportunity toreceive additional information related to the Company requested by it and toask questions of and receive answers from the Company regarding the Company,its business and the terms and conditions of the offering of the ConversionShares.  Neither such inquiries nor anyother investigation conducted by or on behalf of such Purchaser or itsrepresentatives or counsel shall modify, amend or affect such Purchaser’s rightto rely on the truth, accuracy and completeness of the Company’srepresentations and warranties contained in the Conversion Documents.

 

**4.7.         No General Solicitation**.  Such Purchaser did not learn of theinvestment in the Conversion Shares as a result of any public advertising orgeneral solicitation.

 

## **4.8.         Independent Investment Decision. **Such Purchaser has independentlyevaluated the merits of its decision to purchase Conversion Shares pursuant tothis Agreement, such decision has been independently made by such Purchaser andsuch Purchaser confirms that it has only relied on the advice of its own businessand/or legal counsel (which such Purchaser acknowledges is not Bryan Cave LLP)and not on the advice of any other Purchaser’s business or legal counsel norupon any investment banker, placement agent, or their respective counsel inmaking such decision.

 

**5.             Pre-ClosingCovenants; Conditions to the Obligations of the Purchasers.**

 

**5.1.         Pre-Closing Covenants.**  The parties covenant and agree that theywill perform and observe the following covenants and provisions until theSecond Closing Date, as applicable.

 

**5.1.1.****                  Dealings withAffiliates.**  Except as contemplatedherein, the Company will not enter into any transaction, including, withoutlimitation, any loans, leases, extension of credit or royalty agreements withany employee, officer or director of the Company****or holder of ten percent (10%) or more of any class ofcapital stock of the Company, or any member of their respective immediatefamilies or any corporation or other entity directly or indirectly controlledby one or more of such employees, officers, directors or stockholders ormembers of their immediate families.

 

**5.1.2.****                  Distributions.** Except as contemplated herein, the Companywill not declare or pay any dividends, purchase, redeem, retire, or otherwiseacquire for value any of its capital stock (or rights, options or warrants topurchase such shares) now or hereafter outstanding, return any capital to itsstockholders as such, or make any distribution of assets to its stockholders assuch, or pay into or set aside a sinking fund for such purpose (suchtransactions being hereinafter referred to as “**Distributions**”); provided,however, that nothing herein contained shall prevent the Company from:

 

(i)            complying with any specificprovision of the terms of this Agreement;

 

(ii)           redeeming any stock of a deceasedstockholder out of insurance held by the Company on that stockholder’s life; or

 

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(iii)          repurchasing any stock of an officer,employee or consultant subject to a stock repurchase agreement under which theCompany has the right or obligation to repurchase such shares in the event oftermination of employment or of a consulting arrangement.

 

**5.1.3.****                  ExtraordinaryCorporate Transactions.** Except ascontemplated herein, the Company will not take any corporate action, enter intoany agreement to take such action, or obligate itself to take any such action,if such action would:

 

(i)            cause the Company to create,authorize or issue any class or series of capital stock with equity features orconvertible into equity ranking senior to the Common Stock with respect toliquidation preferences, dilution protection, redemption rights, or payment ofdividends, or otherwise having terms and conditions superior to the terms ofthe Common Stock, or that would impair or limit the Company’s obligations underthis Agreement;

 

(ii)           enter into any transaction thatexpressly prohibits or limits the Company’s right to perform its obligationsunder this Agreement;

 

(iii)          cause or authorize any transaction,whether by consolidation or merger of the Company, which results in the holdersof the Company’s capital stock holding less than 50% of the voting securitiesof the resulting or surviving entity, or a sale of all or substantially all ofthe capital stock or assets of the Company, or any other form of businesscombination or acquisition in which the Company is the object of theacquisition and in which control of the voting securities or assets of theCorporation are transferred in any way;

 

(iv)          create or incur any additionalindebtedness (other than replacement of existing indebtedness for borrowedmoney) for money borrowed which is secured by assets of the Company or anysubsidiary or otherwise mortgage or pledge, or create a security interest inall or substantially all of the property of the Company;

 

(v)           change the principal business of theCompany, enter new lines of business, or exit its current and proposed line ofbusiness;

 

(vi)          make investments in, or loans to, anythird parties other than for employee travel or relocation; or

 

(vii)         make any single capital expenditure inexcess of $50,000.

 

**5.1.4.      Proxy Statement**.  The Company shall (a) prepare and file withthe SEC, promptly after the date hereof and in any event by the 10thbusiness day following the Initial Closing, preliminary proxy materials withrespect to a meeting of the Company’s stockholders for the purpose of approvingthe issuance of the Conversion Shares to be issued at the Second Closing, ascontemplated by this Agreement. Promptly after comments are received from the SEC with respect to thepreliminary proxy materials and after the furnishing by the Company of allinformation required to be contained therein, the Company shall file with theSEC the definitive proxy statement and (b) acting through the Company’s Boardof Directors, (i)  call a meeting of theholders of the Common Stock for the purpose of approving the issuance of theConversion Shares to be issued at the Second Closing as contemplated by this Agreementand (ii) include in the proxy statement the recommendation of its Board ofDirectors that holders of the Common Stock approve such issuance ascontemplated by this Agreement.

 

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## **5.1.5.      StockholdersAgreement.**  The Company shallobtain on or before the date of the Initial Closing, a duly executed anddelivered Voting Agreement (the “Voting Agreement”) among the holders of at least 50%of the Common Stock to approve the issuance of the Conversion Shares at theSecond Closing as contemplated by this Agreement.

 

**5.2.         Conditions to the Obligations of thePurchasers. **Theobligations of the Purchasers under this Agreement are subject to thefulfillment, or the waiver by the Purchasers, of the conditions set forth inthis Section 5.2 on or before each Closing Date. All such documents and actionsshall be satisfactory in form and substance to such Purchaser and its counsel.

 

**5.2.1.      Accuracy of Representations andWarranties; Performance.** Each representation and warranty of the Company contained in thisAgreement shall be true and correct in all material respects on and as of eachClosing Date, with the same effect as though such representation and warrantyhad been made on and as of that date. The Company shall have performed in all material respects all agreementsand covenants required to be performed by it under the Conversion Documentsprior to such Closing Date.

 

**5.2.2.      Consents.**  The Company shall have obtained any and allconsents, permits, approvals, registrations and waivers necessary or appropriatefor consummation of the purchase and sale of the Conversion Shares to beoffered and sold at such Closing.  Nojudgment, writ, order, injunction, award or decree of or by any court, orjudge, justice or magistrate, including any bankruptcy court or judge, or anyorder of or by any governmental authority, shall have been issued, and noaction or proceeding shall have been instituted by any governmental authority,enjoining or preventing the consummation of the transactions contemplatedhereby or in the other Conversion Documents.

 

**5.2.3.      Certificates and Documents.**  The Company shall have delivered to counselto the Purchasers:

 

(a)           the Amended Articles, certified bythe Secretary of State of the State of Nevada;

 

(b)           a certificate, as of the most recentpracticable date, of the Secretary of State of the State of Nevada as to theCompany’s legal existence and corporate good standing;

 

(c)           the Bylaws of the Company in effecton and as of the First Closing Date; and

 

**5.2.4.      Opinion.**  The Company shall have delivered to counselto the Purchasers an original opinion from Grippo & Elden LLC, counsel tothe Company, dated as of the Closing Date, addressed to the Purchasers, and inthe form attached hereto as Exhibit B.

 

**5.2.5.      SEC Approvals; Effective Registration;Blue Sky.**  Any SECapproval required to consummate the transactions contemplated by the ConversionDocuments (other than the effectiveness of registration statements) shall havebeen obtained.

 

**5.2.6.      Registration Rights Agreement.**  The Company shall have executed anddelivered to the Purchasers the Registration Rights Agreement.

 

## **5.2.7.     **Stockholder Approval.  With respect to the Second Closing, on orbefore July 19, 2004 the Company’s stockholders shall have approved theissuance of the Conversion Shares at the Second Closing, as contemplated bythis Agreement, the conversion of the Demand Notes issued to

 

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## **threeCompany stockholders (Oxford Bioscience Partners IV L.P., Mi3 L.P. and MRNAFund II L.P.) into Common Stock at $0.75 per share and the issuance of sharesof the Company’s Common Stock and warrants to purchase shares of the Company’sCommon Stock in accordance with the Financing Securities Purchase Agreement.**

 

## **5.2.8.      Nasdaq Listing. **The Nasdaq Stock Market shall have waived application ofthe 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) orsuch timeframe shall have expired without objection.  Trading in the Common Stock shall not have been suspended by theSEC or the Nasdaq Stock Market (except for any suspensions of trading of notmore than one trading day solely to permit dissemination of materialinformation regarding the Company) at any time since the date of execution ofthis Agreement, and the Common Stock shall have been at all times since suchdate listed for trading on the Nasdaq Small Cap Market or Nasdaq NationalMarket.

 

## **5.2.9.      No Adverse Changes. **Between the execution of thisAgreement and such Closing, no event or series of events (other than stock pricefluctuations) shall have occurred which reasonably would be expected to have orresult in a material adverse effect on the results of operations, assets,prospects, business or condition (financial or otherwise) of the Company andthe Subsidiaries, taken as a whole.

## ** **

## **5.2.10.    Timing. **The Initial Closing shall occur effective as of the date of the initialclosing under the terms of the Financing Securities Purchase Agreement.  The Second Closing shall occur effective asof the date of the second closing under the terms of the Financing SecuritiesPurchase Agreement.

 

**6.             Conditionsto the Obligations of the Company.**  The obligations of the Company under this Agreement are subjectto the fulfillment, or the waiver in writing by the Company, of the conditionsset forth in this Section 6 on or before each Closing Date.

 

**6.1.         Accuracy of Representations andWarranties.**  Therepresentations and warranties of the Purchasers contained in Section 4 shallbe true and correct in all material respects on and as of each Closing Date,with the same effect as though such representations and warranties had beenmade on and as of that date.

 

**6.2.         Performance.**  The Purchasers shall have performed andcomplied with all agreements contained in this Agreement required to be performedand complied with by it prior to or at the Closing.

 

## **6.3.         Stockholder Approval.**  With respect to the Second Closing, the Company’s stockholders shall have approvedthe issuance of the Conversion Shares at the Second Closing, as contemplated bythis Agreement.

 

## **6.4.         NasdaqListing. **The Nasdaq StockMarket shall have waived application of the 15 day prior notice contained inNASD Marketplace Rule 4310(c)(17)(D) or such timeframe shall have expiredwithout objection.

 

## **6.5.         Timing. **The Initial Closing shall have occurred no later than April19, 2004.  The Second Closing shall haveoccurred no later than July 19, 2004.

 

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# **7.             Post Closing Covenants.**

 

**7.1.         No Integration.** Neither the Company nor any of itsaffiliates, nor any person or entity acting on its or their behalf will makeany offers or sales of any Company security or solicit any offers to buy anysecurity, under circumstances that would adversely affect reliance by theCompany on Section 4(2) of the 1933 Act for the exemption from registration forthe transactions contemplated hereby or would require registration of theConversion Shares under the 1933 Act.

 

**7.2.         Non-Contravention.**  The Company will not take any action, enterinto any agreement or make any commitment that would conflict or interfere withthe obligations to the Purchasers under the Conversion Documents.

 

**7.3.         Listing of Conversion Shares.** The Company shall take such action as may berequired to cause the Conversion Shares to be listed on the Nasdaq SmallCapMarket no later than the date required under the rules and regulationsthereof.  Further, if the Companyapplies to have its Common Stock or other securities traded on any otherprincipal stock exchange or market, it shall include the Conversion Shares insuch application and will take such other action as is necessary to cause suchCommon Stock to be so listed.  TheCompany will use reasonable best efforts to continue the listing and trading ofits Common Stock on The Nasdaq SmallCap Market or on the Nasdaq National Marketand, in accordance, therewith, will use its best efforts to comply in allrespects with the Company’s reporting, filing and other obligations under thebylaws or rules of such exchange, as applicable.

 

## **7.4.         Non-Public Information. **The Company covenants and agreesthat neither it nor any other Person acting on its behalf will provide anyPurchaser or its agents or counsel with any information that the Companybelieves constitutes material non-public information, unless prior thereto suchPurchaser shall have executed a written agreement regarding the confidentialityand use of such information.  TheCompany understands and confirms that each Purchaser shall be relying on theforegoing representations in effecting transactions in securities of theCompany.

 

# **8.             General.**

 

**8.1.         Successors and Assigns.**  The provisions of this Agreement shall bindand inure to the benefit of the respective successors, assigns, heirs,executors, and administrators of the parties hereto, including but not limitedto assigns of the Purchasers pursuant to Section 1.1 of this Agreement.

 

**8.2.         Survival of Representations andWarranties.**  Allrepresentations and warranties shall survive and remain in full force andeffect after the Closing with respect to the Company.

 

**8.3.         Indemnification.**  The Company agrees to indemnify and holdharmless each Purchaser and its affiliates and their respective directors,officers, employees and agents from and against any and all losses, claims,damages, liabilities and expenses (including without limitation reasonableattorney fees and disbursements and other expenses incurred in connection withinvestigating, preparing or defending any action, claim or proceeding, pendingor threatened and the costs of enforcement hereof) to which such person orentity may become subject as a result of and will reimburse any such person orentity for all such amounts as they are incurred by such person or entity as aresult of any breach of representation, warranty, covenant or agreement made byor to be performed on the part of the Company under the Conversion Documents.

 

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**8.4.         Conduct of Indemnification Proceedings.**  Promptly after receipt by any person orentity (the “**Indemnified Person**”) of notice of any demand, claim orcircumstances which would or might give rise to a claim or the commencement ofany action, proceeding or investigation by a third party in respect of whichindemnity may be sought pursuant to Section 8.3 hereof, such Indemnified Personshall promptly notify the Company in writing and the Company shall assume thedefense thereof, including the employment of counsel reasonably satisfactory tosuch Indemnified Person, and shall assume the payment of all fees and expenses;provided, however, that the failure of any Indemnified Person so to notify theCompany shall not relieve the Company of its obligations hereunder except tothe extent that the Company is materially prejudiced by such failure to notify.  In any such proceeding, any IndemnifiedPerson shall have the right to retain its own counsel, but the fees andexpenses of such counsel shall be at the expense of such Indemnified Personunless: (i) the Company and the Indemnified Person shall have mutually agreedto the retention of such counsel; or (ii) in the reasonable judgment of counselto such Indemnified Person representation of both parties by the same counselwould be inappropriate due to actual or potential differing interests betweenthem.  The Company shall not be liablefor any settlement of any proceeding effected without its written consent,which consent shall not be unreasonably withheld, but if settled with suchconsent, or if there be a final judgment for the plaintiff, the Company shallindemnify and hold harmless such Indemnified Person from and against any lossor liability (to the extent stated above) by reason of such settlement orjudgment.  Without the prior writtenconsent of the Indemnified Person, which consent shall not be unreasonably withheld,the Company shall not effect any settlement of any pending or threatenedproceeding in respect of which any Indemnified Person is or could have been aparty and indemnity could have been sought hereunder by such Indemnified Party,unless such settlement includes an unconditional release of such IndemnifiedPerson from all liability arising out of such proceeding.

 

**8.5.         Notices.**All notices,requests, consents and other communications under this Agreement shall be inwriting and shall be delivered by hand, by telecopier, by express overnightcourier service or mailed by first class mail, postage prepaid, to therespective addresses set forth on the signature pages of this Agreement, assuch addresses may be modified by notice given pursuant to this Section 8.5,with copies provided simultaneously to counsel as set forth on the signaturepages of this Agreement.  Noticesprovided in accordance with this Section 8.5 shall be deemed delivered uponpersonal delivery, receipt by telecopy or overnight mail, or 48 hours afterdeposit in the mail in accordance with the above.

 

**8.6.         Entire Agreement.**  This Agreement, together with theinstruments and other documents hereby contemplated to be executed anddelivered in connection herewith, contains the entire agreement andunderstanding of the parties hereto, and supersedes any prior agreements orunderstandings between or among them, with respect to the subject matterhereof.  Except as expressly set forthin this Agreement, the Disclosure Schedule, the Exhibits attached hereto andthe Conversion Documents, the Company makes no representation or warranty,express or implied, with respect to the transactions contemplated by thisAgreement or the other Conversion Documents, the business of the Company, theCompany, the Company’s assets or its future prospects.  No party is relying on any understandings,agreements or representations other than those expressly contained thisAgreement, the Disclosure Schedule, the Exhibits attached hereto, the SECFilings and the Conversion Documents.

 

**8.7.         Amendmentsand Waivers.** No provision of this Agreement may bewaived or amended except in a written instrument signed by the Company and thePurchasers holding a majority of the Conversion Shares.  No waiver of any default with respect to anyprovision, condition or requirement of this Agreement shall be deemed to be acontinuing waiver in the future or a waiver of any subsequent default or awaiver of any other provision, condition or requirement hereof, nor shall anydelay or omission of either party to exercise any right hereunder in any mannerimpair the exercise of any such

 

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right.  No consideration shallbe offered or paid to any Investor to amend or consent to a waiver or modificationof any provision of any Conversion Document unless the same consideration isalso offered to all Investors who then hold Shares.

 

**8.8.         Counterparts.**  This Agreement may be executed in severalcounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

**8.9.         Captions.**  The captions of the sections, subsectionsand paragraphs of this Agreement have been added for convenience only and shallnot be deemed to be a part of this Agreement.

 

**8.10.       Severability.**  Each provision of this Agreement shall beinterpreted in such manner as to validate and give effect thereto to thefullest lawful extent, but if any provision of this Agreement is determined bya court of competent jurisdiction to be invalid or unenforceable underapplicable law, such provision shall be ineffective only to the extent sodetermined and such invalidity or unenforceability shall not affect theremainder of such provision or the remaining provisions of this Agreement.

 

**8.11.       Governing Law.**  This Agreement shall be governed by andinterpreted and construed in accordance with the laws of the State of New York;provided, however, that matters relating to the authorization, issuanceand enforceability of the terms of the Conversion Shares shall be governed andinterpreted and construed in accordance with the Nevada General CorporationLaw.  The Company irrevocably submits tothe exclusive jurisdiction of the state and federal courts located in the Stateof New York  for the purpose of anysuit, action, proceeding or judgment relating to or arising out of thisAgreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action orproceeding may be served on each party hereto anywhere in the world by the samemethods as are specified for the giving of notices under this Agreement.  The Company irrevocably consents to thejurisdiction of any such court in any such suit, action or proceeding and tothe laying of venue in such court. The Company irrevocably waives any objectionto the laying of venue of any such suit, action or proceeding brought in suchcourts and irrevocably waives any claim that any such suit, action orproceeding brought in any such court has been brought in an inconvenientforum.  If either party shall commencean action to enforce any provisions of a Conversion Document, then theprevailing party in such action shall be reimbursed by the other party for itsreasonable attorneys’ fees and other costs and expenses incurred with theinvestigation, preparation and prosecution of such action.

 

**8.12.       Independent Nature of Purchasers. **The obligations of eachPurchaser under any Conversion Document are several and not joint with theobligations of any other Purchaser, and no Purchaser shall be responsible inany way for the performance of the obligations of any other Purchaser under anyConversion Document.  The decision ofeach Purchaser to purchase Conversion Shares pursuant to the ConversionDocuments has been made by such Purchaser independently of any otherPurchaser.  Nothing contained herein orin any Financing Document, and no action taken by any Purchaser pursuantthereto, shall be deemed to constitute the Purchasers as a partnership, anassociation, a joint venture or any other kind of entity, or create apresumption that the Purchasers are in any way acting in concert or as a groupwith respect to such obligations or the transactions contemplated by theConversion Documents.  Each Purchaseracknowledges that no other Purchaser has acted as agent for such Purchaser inconnection with making its investment hereunder and that no Purchaser will beacting as agent of such Purchaser in connection with monitoring its investmentin the Conversion Shares or enforcing its rights under the ConversionDocuments.  Each Purchaser shall beentitled to independently protect and enforce its rights, including withoutlimitation the rights arising out of this Agreement or out of the other ConversionDocuments, and it shall not be necessary for any other Purchaser to be joinedas an additional party in any proceeding for such purpose.  The Company acknowledges that each of the

 

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Purchasers has beenprovided with the same Conversion Documents for the purpose of closing atransaction with multiple Purchasers and not because it was required orrequested to do so by any Purchaser.

 

## **8.13.       Securities Laws Disclosure;Publicity. **By 9:00 a.m. (New Yorktime) on the business day following the execution of this Agreement, and by9:00 a.m. (New York time) on each Closing Date, the Company shall issue pressreleases disclosing the transactions contemplated hereby and each Closing.  On the business day following the executionof this Agreement the Company will file a Current Report on Form 8-K disclosingthe material terms of the Conversion Documents (and attach as exhibits theretothe Conversion Documents), and on each Closing Date the Company will file anadditional Current Report on Form 8-K to disclose such Closing.  In addition, the Company will make suchother filings and notices in the manner and time required by the SEC and theNasdaq Stock Market.  Notwithstanding theforegoing, the Company shall not publicly disclose the name of any Purchaser,or include the name of any Purchaser in any filing with the SEC (other than theRegistration Statements and any exhibits to filings made in respect of thistransaction in accordance with periodic filing requirements under the 1934 Act)or any regulatory agency or the Nasdaq Stock Market, without the prior writtenconsent of such Purchaser, except to the extent such disclosure is required bylaw or Nasdaq Stock Market regulations.

 

## **8.14.       Remedies. **In addition to being entitled toexercise all rights provided herein or granted by law, including recovery ofdamages, each of the Investors and the Company will be entitled to specificperformance under the Conversion Documents. The parties agree that monetary damages may not be adequate compensationfor any loss incurred by reason of any breach of obligations described in theforegoing sentence and hereby agrees to waive in any action for specificperformance of any such obligation the defense that a remedy at law would beadequate.

 

## **8.15.       Payment Set Aside. **To the extent that the Companymakes a payment or payments to any Purchaser pursuant to any ConversionDocument or a Purchaser enforces or exercises its rights thereunder, and suchpayment or payments or the proceeds of such enforcement or exercise or any partthereof are subsequently invalidated, declared to be fraudulent orpreferential, set aside, recovered from, disgorged by or are required to berefunded, repaid or otherwise restored to the Company, a trustee, receiver orany other person under any law (including, without limitation, any bankruptcylaw, state or federal law, common law or equitable cause of action), then tothe extent of any such restoration the obligation or part thereof originallyintended to be satisfied shall be revived and continued in full force andeffect as if such payment had not been made or such enforcement or setoff hadnot occurred.

 

## **8.16.       Limitation of Liability**.  Notwithstanding anything herein to thecontrary, the Company acknowledges and agrees that the liability of a Purchaserarising directly or indirectly, under any Conversion Document of any and everynature whatsoever shall be satisfied solely out of the assets of suchPurchaser, and that no trustee, officer, other investment vehicle or any otherAffiliate of such Purchaser or any investor, shareholder or holder of shares ofbeneficial interest of such a Purchaser shall be personally liable for anyliabilities of such Purchaser.

 

**[Signature Pages Follow]**

 

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**IN WITNESS WHEREOF**,the parties have executed this Securities Purchase Agreement as of the day andyear first above written.

 
|   | **IMCOR Pharmaceutical Co.**                       |
|--------|----------------------------------------------------|
|   |                                               |
|   | By:                                                |   |   |
|   |                                               | Taffy J. Williams,  Ph.D., President |   |
|   |                                               |
|   | Notice Address:                                    | 6175 Lusk Boulevard |   |
|   |                                               | San Diego, CA  92121 |   |
|   |                                               |
|   |                                               |
|   | **Purchasers:**                                    |
|   |                                               |
|   | **Mi3  L.P.**                                      |
|   |                                               |
|   | By:  MI3 Services L.L.C., its General Partner |
|   |                                               |
|   |                                               |
|   | By:                                                |   |   |
|   |                                               | William D. McPhee,  President |   |
|   |                                               |
|   | **Oxford  Bioscience Partners IV L.P.**            |
|   |                                               |
|   | By:  OBP Management IV L.P.                   |
|   |                                               |
|   | By:                                                |   |   |
|   |                                               | Jonathan J. Fleming,  General Partner |   |
|   |                                               |
|   |                                               |
|   | **MRNA  Fund II L.P.**                             |
|   |                                               |
|   | By:  OBP Management IV L.P.                   |
|   |                                               |
|   | By:                                                |   |   |
|   |                                               | Jonathan J. Fleming,  General Partner |   |
|        |                                                    |  |  |  |  |  |  |

 

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