**Exhibit 10.29**

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THISSECURITY IS EXERCISABLE 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 “SECURITIESACT”), 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 REGISTRATIONREQUIREMENTS 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. THISSECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES 

 

**STOCK PURCHASE WARRANT**

 

To Purchase              Shares of CommonStock of 

 

**Hollis-Eden Pharmaceuticals, Inc.**

 

THIS STOCK PURCHASE WARRANT CERTIFIES that,for value received,              (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at anytime on or after February 25, 2003 (the “Initial Exercise Date”) and on or prior to the close of business on the fourth anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, tosubscribe for and purchase from Hollis-Eden Pharmaceuticals, Inc., a corporation incorporated in the State of Delaware (the “Company”), up to              shares(the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrantshall be **$            [$6.17/$6.71]**, subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subjectto adjustment as provided herein. **Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement****”), dated February 25, 2003,between the Company and the purchasers signatory thereto.**

 

This Warrant is issued to Holder pursuant to and in full satisfaction of the conditions and of the Company’s obligations to Holder pursuant to Sections 2.1 and 2.2(b)(ii) of the Purchase Agreement. 

 

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1.    Title to Warrant.    Prior to the Termination Date and subject to compliance with applicable laws and to the conditions set forth in Section 7(d) hereof and to the provisions ofSection 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warranttogether with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company. 

 

2.    Authorization of Shares.    The Company covenants thatall Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable andfree from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 

 

3.    Exercise of Warrant. 

 

(a) Except as provided elsewhere herein,exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed heretoduly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of theExercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or by means of a cashless exercise pursuant to Section 3(d), the Holder shall be entitled to receive a certificate for the numberof Warrant Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed tohave been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as ofthe date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If the Company fails todeliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 3(a) by the third Trading Day after the date of exercise, then the Holder will have the right to rescind such exercise. In addition to anyother rights available to the Holder, if the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise by the third Trading Day after the date of exercise, and if after such thirdTrading Day the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving uponsuch exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) 

 

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for theshares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sellorder giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder thenumber of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover aBuy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay theHolder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing hereinshall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure totimely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. 

 

(b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate orcertificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with thisWarrant. 

 

(c) (i)Notwithstanding anything herein to the contrary, in no event shall the Holder be permitted to exercise this Warrant for Warrant Shares to the extent that (A) the number of shares of Common Stock beneficially owned by such Holder, together with anyaffiliate thereof (other than Warrant Shares issuable upon exercise of this Warrant) plus (B) the number of Warrant Shares issuable upon exercise of this Warrant, would be equal to or exceed 4.9999% of the number of shares of Common Stock thenissued and outstanding**,** including shares issuable upon exercise of this Warrant held by such Holder after application of this Section 3(c). As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of theExchange Act and the rules promulgated thereunder. To the extent that the limitation contained in this Section 3(c) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder) and of whichportion of this Warrant is exercisable shall be in the sole discretion of such Holder, and the submission of a Notice of Exercise shall be deemed to be such Holder’s determination of whether this Warrant is exercisable (in relation to othersecurities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.Nothing contained herein shall be deemed to restrict the right of a Holder to exercise this Warrant into Warrant Shares at such time as such exercise will not violate the provisions of this Section 3(c). The provisions of this Section 3(c) may bewaived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the 

 

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Company, and the provisions of this Section 3(c) shall continue to apply until such61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). Noexercise of this Warrant in violation of this Section 3(c) but otherwise in accordance with this Warrant shall affect the status of the Warrant Shares as validly issued, fully-paid and nonassessable. 

 

(ii) If the Company has not obtainedShareholder Approval (as defined below) if required, then the Company may not issue upon exercise of this Warrant in the aggregate, in excess of 19.999% of the number of shares of Common Stock outstanding on the Trading Day immediately preceding theClosing Date, less any shares of Common Stock issued upon conversion of the Debentures, upon prior exercise of this or any other Warrant issued pursuant to the Purchase Agreement, or as payment of interest on the Debentures (such number of shares,the “Issuable Maximum”). If on any attempted exercise of this Warrant, the issuance of Warrant Shares would exceed the Issuable Maximum, and the Company shall not have previously obtained the vote of shareholders (the“Shareholder Approval”), if any, as may be required by the applicable rules and regulations of the Principal Market (or any successor entity) applicable to approve the issuance of shares of Common Stock in excess of the IssuableMaximum pursuant to the terms hereof, then the Company shall issue to the Holder requesting a Warrant exercise such number of Warrant Shares as may be issued below the Issuable Maximum and, with respect to the remainder of the aggregate number ofWarrant Shares, this Warrant shall not be exercisable until and unless Shareholder Approval has been obtained or is otherwise no longer required. 

 

(d) If at any time after one year from the date of issuance of this Warrant there is no effective Registration Statementregistering the resale of the Warrant Shares by the Holder, or if Shareholder Approval shall be required but has not been obtained, this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shallbe entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where: 

 

(A) = the VWAP on the Trading Day preceding the date of such election; 

 

(B) = the Exercise Price of the Warrants, asadjusted; and 

 

(X) = the numberof Warrant Shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant.****

 

4.    No Fractional Shares or Scrip.    No fractional shares or scrip representingfractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction inan amount equal to such fraction multiplied by the Exercise Price. 

 

5.    Charges, Taxes and Expenses.    Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidentalexpense in respect of the issuance of such certificate, all of which taxes and expenses shall be 

 

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paid by the Company, and suchcertificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name ofthe Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it forany transfer tax incidental thereto. 

 

6.    Closing of Books.    The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

7.    Transfer, Divisionand Combination. 

 

(a)Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole orin part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient topay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination ordenominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may beexercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. ****

 

(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of theCompany, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involvedin such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 

 

(c) The Company shall prepare, issue anddeliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7. 

 

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transferof the Warrants. 

 

(e) If, at thetime of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable statesecurities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be inform, substance and 

 

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scope customary for opinions of counsel in comparable transactions) to the effect thatsuch transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substanceacceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act. 

 

8.    No Rights as Shareholder until Exercise.    This Warrant does not entitle the Holderto any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares sopurchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 

 

9.    Loss, Theft, Destruction or Mutilation ofWarrant.    The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the WarrantShares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stockcertificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 

 

10.    Saturdays, Sundays, Holidays,etc.    If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may beexercised on the next succeeding day not a Saturday, Sunday or legal holiday. 

 

11.    Adjustments of Exercise Price and Number of Warrant Shares. 

 

(a) Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and theExercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of itsoutstanding Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to the terms of this Debenture, including as interest thereon), (ii) subdivide its outstanding shares of CommonStock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number ofWarrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have ownedor have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafterbe entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise 

 

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Price perWarrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number ofWarrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, forsuch event. 

 

(b)Anti-Dilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares issuable hereunder and for which this Warrant is then exercisable pursuant to Section 1 hereof shall be subject to adjustment from timeto time as provided in this Section 11(b). In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. 

 

(i) Adjustment of Exercise Price.Except as set forth in Section 11(b)(ii)(E), if and whenever the Company issues or sells, or in accordance with Section 11(b) hereof is deemed to have issued or sold, any shares of Common Stock for an effective consideration per share of less thanthe then Exercise Price or for no consideration (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”), then, the Exercise Price shall be reduced to a price determined bydividing (i) an amount equal to the sum of (a) the total number of shares of Common Stock outstanding immediately prior to such issuance or sale (excluding treasury shares, if any) multiplied by the Exercise Price then in effect, plus (b) theconsideration, if any, received by the Company upon such issuance or sale, by (ii) the total number of shares of Common Stock outstanding immediately after such issuance or sale, provided, that for purposes hereof, all shares of Common Stockthat are issuable upon conversion, exercise or exchange of Capital Shares Equivalents (including, without limitation, the Debentures) shall be deemed outstanding immediately after the issuance of such Capital Shares Equivalents. Such adjustmentshall be made whenever such shares of Common Stock or Capital Share Equivalents are issued. For purposes of this Section 11(b), the number of shares of Common Stock outstanding as of a given date shall be the number of shares of Common Stock(excluding treasury shares, if any) outstanding plus all Underlying Shares issuable on conversion of the Debentures. 

 

(ii) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price underSection 11(b) hereof, the following will be applicable: 

 

(A) Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or othersecurities exercisable, convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as“Options”) and the effective price per share for which Common 

 

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Stock isissuable upon the exercise of such Options is less than the Exercise Price (“Below Base Price Options”), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Base Price Options(assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will, as of the date of the issuance or grant of such Below Base Price Options, be deemed to be outstanding and to have been issued and sold by the Company forsuch price per share and the maximum consideration payable to the Company upon such exercise (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will be deemed to have been received by the Company. For purposesof the preceding sentence, the “effective price per share for which Common Stock is issuable upon the exercise of such Below Base Price Options” is determined by dividing (i) the total amount, if any, received or receivable by the Companyas consideration for the issuance or granting of all such Below Base Price Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Base Price Options, plus, in thecase of Convertible Securities issuable upon the exercise of such Below Base Price Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securitiesfirst become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Base Price Options (assuming full conversion of Convertible Securities, if applicable). Nofurther adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such Below Base Price Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise ofsuch Below Base Price Options. 

 

(B) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) andthe effective price per share for which Common Stock is issuable upon such exercise, conversion or exchange is less than the Exercise Price, then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchangeof all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share and the maximum consideration payable to theCompany upon such exercise (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will be deemed to have been received by the Company. For the purposes of the preceding sentence, the “effective price per sharefor which Common Stock is issuable upon such exercise, conversion or exchange” is determined by dividing (i) the total amount, if any, received 

 

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orreceivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange thereofat the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities. Nofurther adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon exercise, conversion or exchange of such Convertible Securities. 

 

(C) Change in Option Price or Conversion Rate. If there is a change at any time in(i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange of any Convertible Securities;or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (in each such case, other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at thetime of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, asthe case may be, at the time initially granted, issued or sold. 

 

(D) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of thisWarrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant orsale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair marketvalue of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the fair market value (closing bid price, if traded on any market) thereof as of the dateof receipt. In case any Common Stock, Options or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fairmarket value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cashor securities will be determined in good faith 

 

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by aninvestment banker or other appropriate expert of national reputation selected by the Company and reasonably acceptable to the holder hereof, with the costs of such appraisal to be borne by the Company. 

 

(E) Exceptions to Adjustment of ExercisePrice. Notwithstanding the foregoing, no adjustment to the Exercise Price will be made under this subsection 11(b) in respect of (A) the granting or extension of existing options to employees, officers and directors of the Company pursuant toany stock option plan duly adopted by the Company or to the issuance of Common Stock upon exercise of such options or (B) the issuance of up to 150,000 shares of Common Stock or Capital Shares Equivalents, in the aggregate, to consultants oradvisors to the Company for services to be rendered to the Company by such consultants or advisors, or (C) upon the exercise of, or payment of interest on, any Debenture or security issued by the Company in connection with the offer and sale of thisCompany’s securities pursuant to the Purchase Agreement, or (D) upon the exercise of or conversion of any Capital Share Equivalents, options or warrants issued and outstanding on the Closing Date (including the Warrants issued to the Holdersand the Cowen Warrants), (E) the issuance of any Capital Shares or Capital Shares Equivalents in connection with an investment in the Company by, or a joint venture, merger, consolidation, acquisition, licensing arrangement or business partnershipwith (I) another Person or Persons, which such other Person(s) is commonly recognized to be a non-financial participant in the pharmaceutical industry or any sub-aspect thereof, including, without limitation, the conduct of clinical trials, or (II)to another Person, in any event where from the legal documentation thereof or other publicly available information, it is manifest that the primary purpose of such transaction from the perspective of such other Person is other than to take an equityposition in the Company, or (F) in connection with a leasing arrangement from a bank or similar financial institution approved by the Company’s Board of Directors. 

 

(iii) Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shallbe made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the nextsubsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. 

 

12.    Reorganization, Reclassification, Merger, Consolidation or Disposition ofAssets.    In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a changein or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization,reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever 

 

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(including warrants or othersubscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then theHolder shall have the right thereafter to receive upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable uponor as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any suchreorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenantand condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board ofDirectors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subjectto redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of aspecified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or dispositionof assets. 

 

13.    Voluntary Adjustment by the Company.    The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of timedeemed appropriate by the Board of Directors of the Company. 

 

14.    Notice of Adjustment.    Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the ExercisePrice is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Priceof such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. 

 

15.    Notice of CorporateAction.    If at any time: 

 

(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of itsindebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or 

 

(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capitalstock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of 

 

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all orsubstantially all the property, assets or business of the Company to, another corporation or, 

 

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

 

then, in any one or more of such cases, the Company shall give to Holder (i)at least 20 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger,consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution orright, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation,sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or otherproperty deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered inaccordance with Section 17(d). 

 

16.    Authorized Shares.    The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number ofshares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are chargedwith the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary toassure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. 

 

Except and to the extent as waived or consented to by theHolder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any othervoluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary orappropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable thereforupon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise ofthis Warrant, and (c) use commercially reasonable efforts to 

 

12 

 

obtain all suchauthorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which thisWarrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 

 

17.    Miscellaneous. 

 

(a) Jurisdiction. This Warrant shallconstitute a contract under the laws of New York, without regard to its conflict of law, principles or rules. 

 

(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, ifnot registered, will have restrictions upon resale imposed by state and federal securities laws. 

 

(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on thepart of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to complywith any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 

 

(d) Notices. Any notice, request or other document required or permitted to be givenor delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement. 

 

(e) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercisethis Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether suchliability is asserted by the Company or by creditors of the Company. 

 

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

 

13 

 

(g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successorsand permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. 

 

(h) Amendment. This Warrant may bemodified or amended or the provisions hereof waived with the written consent of the Company and the Holder. 

 

(i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to beeffective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating theremainder of such provisions or the remaining provisions of this Warrant. 

 

(j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 

 

(k) Acceptance. Receipt of thisWarrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein. 

 

******************** 

 

14 

 

IN WITNESSWHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. 

 

Dated: February 25, 2003 

 

**HOLLIS-EDEN PHARMACEUTICALS, INC.**

By:
 
/s/    Eric J.Loumeau            
  
Name: Eric J. Loumeau
  
Title: Vice President, General Counsel

 

 

 

 

15 

 

**NOTICE OFEXERCISE**

 

To: Hollis-Eden Pharmaceuticals, Inc. 

 

(1) The undersigned hereby elects to purchase             Warrant Shares of Hollis-Eden Pharmaceuticals, Inc. pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of theexercise price in full, together with all applicable transfer taxes, if any. 

 

(2) Payment shall take the form of (check applicable box): 

 

[    ] in lawful money of the United States; or 

 

[    ] the cancellation of such number of Warrant Shares as is necessary, in accordancewith the formula set forth in subsection 3(d), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3(d). 

 

(3) Please issue a certificate or certificates representingsaid Warrant Shares in the name of the undersigned or in such other name as is specified below: 

 

                                                                                                                  

 

The Warrant Shares shall be delivered to the following:

                                                                                                                  

 

                                                                                                                  

 

                                                                                                                  

 

 

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended. 

 

[PURCHASER]

By:
 
                                                                                               
  
Name:
  
Title:

Dated:                                                                                          

 

 

 

 

 

**ASSIGNMENTFORM**

 

(To assign the foregoing warrant,execute 

this form and supply required information. 

Do not use this form to exercise the warrant.) 

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to 

 

                                                                                                                                           whose address is 

 

                                                                                                                                                                          . 

 

                                                                                                                                                                           

 

Dated:                                    ,                          

 

Holder’s Signature:                                                                 

 

Holder’s Address:                                                                     

 

                                                                                                   

 

Signature Guaranteed:                                                                                                                               

 

NOTE: Thesignature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations andthose acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. 

 

 

**Schedule I**

 

**Holders of Warrants, Exercise Prices andShares Underlying Warrants**

 

**Holder**
  
**Exercise**

**Price**
  
**Shares**

Midsummer Investment, Ltd.
  
$

6.17
  
42,105
   
 

6.71
  
42,105

Islandia, L.P.
  
 

6.17
  
28,071
   
 

6.71
  
28,071

Omicron Master Trust
  
 

6.17
  
70,176
   
 

6.71
  
70,176

Series J of SBL Fund
  
 

6.17
  
70,176
   
 

6.71
  
70,176

Series V of SBL Fund
  
 

6.17
  
35,088
   
 

6.71
  
35,088

Mid Cap Value Series of Security Equity Fund
  
 

6.17
  
35,088
   
 

6.71
  
35,088

Security Mid Cap Growth Fund
  
 

6.17
  
35,088
   
 

6.71
  
35,088

Capital Ventures International
  
 

6.17
  
17,544
   
 

6.71
  
17,544

Portside Growth and Opportunity Fund
  
 

6.17
  
17,544
   
 

6.71
  
17,544