Exhibit
4.1


Exhibit A
to

Securities Purchase Agreement


THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT
THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER,
SALE OR TRANSFER. SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED OR HYPOTHECATED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS
WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT.


WARRANT TO PURCHASE
COMMON STOCK


OF


LIPID
SCIENCES, INC.


Issue
Date:  August 8, 2006                                                                                                                    Warrant
No. 2006-       


THIS CERTIFIES that                       
(the “Holder”) of this
Warrant (this “Warrant”),
has the right to purchase from LIPID SCIENCES, INC., a Delaware corporation
(the “Company”), up to             
fully paid and nonassessable shares of the Company’s common stock, par value
$0.001 per share (the “Common
Stock”), subject to adjustment as provided herein, at a price
per share equal to the Exercise Price (as defined below), at any time during
the period commencing on the first Business Day following the six month
anniversary of the date on which this Warrant is issued (the “Issue Date”) and ending at
5:00 p.m., New York City time, on the date that is the fifth (5th) anniversary
of such commencement date (the “Expiration
Date”).  This Warrant is
issued pursuant to a Securities Purchase Agreement, dated as of August 8,
2006 (the “Securities Purchase
Agreement”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Securities Purchase Agreement.


1.             Exercise.


(a)           Right
to Exercise; Exercise Price.  Subject
to the terms and conditions set forth herein, the Holder shall have the right
to exercise this Warrant at any time and from time to time during the period
commencing on the six month anniversary of the Issue Date and ending on the
Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the “Warrant
Shares”).  The “Exercise Price”
for each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be equal to $1.51 (subject to adjustment for the events specified in Section 4
of this Warrant).


(b)           Exercise
Notice.  In order to exercise this
Warrant, the Holder shall deliver, at any time prior to 5:00 p.m. New York City
time on the Business Day on which the Holder wishes to effect such









 



exercise (the “Exercise Date”), to the Company an executed
copy of the notice of exercise in the form attached hereto as Exhibit A
(the “Exercise Notice”)
and the Exercise Price (by delivery of immediately available funds).  The Exercise Notice shall also state the name
or names (with address) in which the shares of Common Stock that are issuable
on such exercise shall be issued.  After
delivery of the Exercise Notice, the Holder shall promptly deliver the original
warrant to the Company for cancellation. 
In the case of a dispute as to the calculation of the Exercise Price or
the number of Warrant Shares issuable hereunder (including, without limitation,
the calculation of any adjustment pursuant to Section 4 of this
Warrant), the Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and shall submit the disputed calculations to a
certified public accounting firm of national recognition (other than the
Company’s independent accountants) promptly following the date on which the
Exercise Notice is delivered to the Company. The Company shall cause such
accountant to calculate the Exercise Price and/or the number of Warrant Shares
issuable hereunder and to notify the Company and the Holder of the results in
writing no later than ten (10) Business Days following the day on which such
accountant received the disputed calculations (the “Dispute Procedure”). Such accountant’s
calculation shall be deemed conclusive absent manifest error.  The fees of any such accountant shall be
borne by the party whose calculations were most at variance with those of such
accountant.


(c)           Holder
of Record.  The Holder shall, for all
purposes, be deemed to have become the holder of record of the Warrant Shares
specified in an Exercise Notice as of 5:00 p.m. New York City time on the
Exercise Date, irrespective of the date of delivery of such Warrant
Shares.  Except as specifically provided
herein, nothing in this Warrant shall be construed as conferring upon the
Holder hereof any rights as a stockholder of the Company prior to the Exercise
Date.


(d)           Cancellation
of Warrant.  This Warrant shall be
canceled upon its exercise and, if this Warrant is exercised in part, the
Company shall, at the time that it delivers Warrant Shares to the Holder
pursuant to such exercise as provided herein, issue a new warrant, and deliver
to the Holder a certificate representing such new warrant, with terms identical
in all respects to this Warrant (except that such new warrant shall be
exercisable into the number of shares of Common Stock with respect to which
this Warrant shall remain unexercised); provided, however, that
the Holder shall be entitled to exercise all or any portion of such new warrant
at any time following the time at which this Warrant is exercised, regardless
of whether the Company has actually issued such new warrant or delivered to the
Holder a certificate therefor.


(e)           Redemption
Right.  Should the Company’s Common
Stock trade at $2.52 or greater per share (as appropriately adjusted for stock
splits, stock dividends, combinations, recapitalizations and the like) for
thirty (30) consecutive Trading Days, on the basis of closing prices of the
Common Stock quoted on the Principal Market as reported by the Wall Street Journal (or, if the Wall Street
Journal is not then representing such prices, by a comparable
reporting service of national reputation selected by the Company), the Company
may, at its sole option, redeem the Warrant by repurchasing it from the Holder
for a purchase price of $0.01 per Share (as appropriately adjusted for stock
splits, stock dividends, combinations, recapitalizations and the like);
provided that the Company shall give the Holder thirty (30) days’ prior written
notice, and the Holder shall have the right to exercise the Warrant during such
notice period.


2.             Delivery of Warrant Shares Upon
Exercise.  Upon exercise pursuant to Section 1
of this Warrant, the Company shall issue and deliver or caused to be delivered
to the Holder the number of Warrant Shares as shall be determined as provided
herein within a reasonable time, not exceeding (A) the close of business
on the third (3rd) Business Day following the Exercise Date and (B) with
respect to Warrant Shares that are the subject of a Dispute Procedure, the
close of business on the third (3rd) Business Day following the determination
made pursuant to Section 1(b) of this Warrant (each of the dates
specified in (A) and (B) being referred to as a “Delivery Date”).  The Company shall effect delivery 



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of Warrant Shares to the
Holder by, as long as the Transfer Agent participates in the Depository Trust
Company (“DTC”)
Fast Automated Securities Transfer program (“FAST”), crediting the account of the
Holder or its nominee at DTC (as specified in the applicable Exercise Notice)
with the number of Warrant Shares required to be delivered, no later than the
close of business on such Delivery Date. 
In the event that the Transfer Agent is not a participant in FAST, or if
the Warrant Shares are not otherwise eligible for delivery through FAST, or if
the Holder so specifies in an Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares
by delivering to the Holder or its nominee physical certificates representing
such Warrant Shares, no later than the close of business on such Delivery
Date.  The certificates representing the
Warrant Shares may bear legends in accordance with the Securities Purchase
Agreement or applicable law.


3.             Failure to Deliver Warrant
Shares.


(a)           In
the event that the Company fails for any reason to deliver to the Holder the
number of Warrant Shares specified in the applicable Exercise Notice on or
before the Delivery Date therefor (an “Exercise Default”),
the Company shall pay to the Holder payments (“Exercise Default Payments”) in the amount of
(i) (N/365) multiplied by (ii) the aggregate Exercise Price of the
Warrant Shares which are the subject of such Exercise Default multiplied by
(iii) the lower of twelve percent (12%) per annum and the maximum rate
permitted by applicable law (the “Default
Interest Rate”), where “N” equals the number of days elapsed
between the original Delivery Date of such Warrant Shares and the date on which
all of such Warrant Shares are issued and delivered to the Holder.  Cash amounts payable hereunder shall be paid
on or before the fifth (5th) Business Day of each calendar month following the
calendar month in which such amount has accrued.


(b)           In
the event that the Holder has not received certificates representing the
Warrant Shares on or before the Delivery Date, the Holder may, upon written
notice to the Company (an “Exercise Default Notice”), regain on the date
of such notice the rights of the Holder under the exercised portion of this
Warrant that is the subject of such Exercise Default.  In such event, the Holder shall retain all of
the Holder’s rights and remedies with respect to the Company’s failure to
deliver such Warrant Shares (including without limitation the right to receive
the cash payments specified in Section 3(a) of this Warrant).


(c)           The
Holder’s rights and remedies hereunder are cumulative, and no right or remedy
is exclusive of any other.  In addition
to the amounts specified herein, the Holder shall have the right to pursue all
other remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).  Nothing herein shall limit the Holder’s right
to pursue actual damages for the Company’s failure to issue and deliver Warrant
Shares on the applicable Delivery Date.


4.             Anti-Dilution Adjustments;
Distributions; Other Events.  The
Exercise Price and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section 4.


(a)           Subdivision
or Combination of Common Stock.  If
the Company, at any time after the Issue Date, subdivides (by any stock split,
stock dividend, recapitalization, reorganization, reclassification or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, then after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced.  If the Company,
at any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record
for effecting such combination, the Exercise Price in effect immediately prior
to such combination will be proportionally increased.



 3
 






 



(b)           Distributions.  If the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend or otherwise (including any
dividend or distribution to the Company’s stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary) (a “Distribution”),
the Company shall deliver written notice of such Distribution (a “Distribution Notice”)
to the Holder at least twenty (20) Business Days prior to the earlier to occur
of (i) the record date for determining stockholders entitled to such
Distribution (the “Record
Date”) and (ii) the date on which such Distribution is made
(the “Distribution Date”).  The Holder shall be entitled to a reduction
in the Exercise Price as of the Record Date therefor, such reduction to be
effected by reducing the Exercise Price in effect on the Business Day
immediately preceding the Record Date by an amount equal to the fair market
value of the assets to be distributed divided by the number of shares of
Common Stock as to which such Distribution is to be made, such fair market
value to be reasonably determined in good faith by the independent members of
the Company’s Board of Directors.


(c)           Dilutive
Issuances.


(i)            Adjustment
Upon Dilutive Issuance.  If, at any
time after the Issue Date, the Company issues or sells, or in accordance with Section 4(c)(ii)
of this Warrant, is deemed to have issued or sold, any shares of Common Stock
for no consideration or for a consideration per share less than the Exercise
Price on the date of such issuance or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then the
Exercise Price shall be adjusted as follows:


(A)          If such Dilutive Issuance occurs prior
to the Effective Date (as defined in the Registration Rights Agreement), then
effective immediately upon the Dilutive Issuance, the Exercise Price shall be
adjusted so as to equal the consideration received or receivable by the Company
(on a per share basis) for the additional shares of Common Stock so issued,
sold or deemed issued or sold in such Dilutive Issuance (which, in the case of
a deemed issuance or sale, shall be calculated in accordance with Section 4(c)(ii)
of this Warrant).  Notwithstanding the
foregoing, prior to the Effective Date, the Company shall not engage in any
transaction that would result in the issuance or deemed issuance of shares of
Common Stock (other than Excluded Securities (as defined below) for no
consideration.


(B)           If such Dilutive Issuance occurs on
or after the Effective Date, then effective immediately upon the Dilutive
Issuance, the Exercise Price shall be adjusted so as to equal an amount
determined by multiplying such Exercise Price by the following fraction:


N0 + N1


N0 + N2


where:


N0 =                        the number
of shares of Common Stock outstanding immediately prior to the issuance, sale
or deemed issuance or sale of such additional shares of Common Stock in such
Dilutive Issuance (without taking into account any shares of Common Stock
issuable upon conversion, exchange or exercise of any securities or other
instruments which are convertible into or exercisable or exchangeable for
Common Stock (“Convertible Securities”)
or options, warrants or other rights to purchase or subscribe for Common Stock
or Convertible Securities (“Purchase
Rights”), including, without limitation, the Warrants);



 4
 






 



N1 =                        the number
of shares of Common Stock which the aggregate consideration, if any, received
or receivable by the Company for the total number of such additional shares of
Common Stock so issued, sold or deemed issued or sold in such Dilutive Issuance
(which, in the case of a deemed issuance or sale, shall be calculated in
accordance with Section 4(c)(ii) of this Warrant) would purchase at
the Exercise Price in effect immediately prior to such Dilutive Issuance; and


N2 =   the number of such additional shares of
Common Stock so issued, sold or deemed issued or sold in such Dilutive
Issuance.


Notwithstanding the foregoing, no adjustment shall be made pursuant
hereto if such adjustment would result in an increase in the Exercise Price.


(ii)           Effect
On Exercise Price of Certain Events. 
For purposes of determining the adjusted Exercise Price under Section 4(c)(i)
of this Warrant, the following will be applicable:


(A)          Issuance of Purchase Rights.  If the Company issues or sells any Purchase
Rights, whether or not immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Purchase Rights (and
the price of any conversion of Convertible Securities, if applicable) is less
than the Exercise Price in effect on the date of issuance or sale of such
Purchase Rights, then the maximum total number of shares of Common Stock issuable
upon the exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable) shall, as of the
date of the issuance or sale of such Purchase Rights, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share.  For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Purchase Rights” shall be determined by dividing (x) the
total amount, if any, received or receivable by the Company as consideration
for the issuance or sale of all such Purchase Rights, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Purchase Rights, plus, in the case of Convertible
Securities issuable upon the exercise of such Purchase Rights, the minimum
aggregate amount of additional consideration payable upon the conversion,
exercise or exchange of all such Convertible Securities (determined in accordance
with the calculation method set forth in Section 4(c)(ii)(B) of
this Warrant), by (y) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Purchase Rights (assuming full
conversion, exercise or exchange of Convertible Securities, if
applicable).  Except as provided in Section 4(c)(ii)(C)
of this Warrant, no further adjustment to the Exercise Price shall be made upon
the actual issuance of such Common Stock upon the exercise of such Purchase
Rights or upon the conversion, exercise or exchange of Convertible Securities
issuable upon exercise of such Purchase Rights.


(B)           Issuance of Convertible Securities.  If the Company issues or sells any
Convertible Securities, whether or not immediately convertible, exercisable or exchangeable,
and the price per share for which Common Stock is issuable upon such
conversion, exercise or exchange is less than the Exercise Price in effect on
the date of issuance or sale of such Convertible Securities, then the maximum
total number of shares of Common Stock issuable upon the conversion, exercise
or exchange of all such Convertible Securities shall, as of the date of the
issuance or sale of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share.  If the Convertible Securities so issued or
sold do not have a fluctuating conversion or exercise price or exchange ratio,
then for the purposes of the immediately preceding sentence, the “price per
share for which Common 



 5
 






 



Stock is
issuable upon such conversion, exercise or exchange” shall be determined by
dividing (A) the total amount, if any, received or receivable 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 conversion, exercise or exchange of all
such Convertible Securities (determined in accordance with the calculation
method set forth in this Section 4(c)(ii)(B)), by (B) the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities.  If the Convertible Securities so issued or
sold have a fluctuating conversion or exercise price or exchange ratio (a “Variable Rate Convertible Security”),
then for purposes of the first sentence of this Section 4(c)(ii)(B),
the “price per share for which Common Stock is issuable upon such conversion,
exercise or exchange” shall be deemed to be the lowest price per share which
would be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have been
satisfied) if the conversion price of such Variable Rate Convertible Security
on the date of issuance or sale thereof were seventy-five percent (75%) of the
actual conversion price on such date (the “Assumed Variable Market
Price”), and, further, if the conversion price of such Variable
Rate Convertible Security at any time or times thereafter is less than or equal
to the Assumed Variable Market Price last used for making any adjustment under
this Section 4(c) with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to
equal the Exercise Price which would have resulted if the Assumed Variable
Market Price at the time of issuance of the Variable Rate Convertible Security
had been seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the adjustment
required by this sentence.  No further
adjustment to the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion, exercise or exchange of such Convertible Securities.


(C)           Change In Option Price or Conversion
Rate; Expiration of Cancellation.  If
there is a change at any time in (x) the amount of additional
consideration payable to the Company upon the exercise of any Purchase Rights;
(y) the amount of additional consideration, if any, payable to the Company
upon the conversion, exercise or exchange of any Convertible Securities the
adjustment for which is not otherwise covered under Section 4(c)(ii)(B)
of this Warrant; or (z) the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Stock, then in any
such case, the Exercise Price in effect at the time of such change shall be
readjusted to the Exercise Price which would have been in effect at such time
had such Purchase Rights or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion, exercise or
exchange rate, as the case may be, at the time initially issued or sold.  In addition, if the Purchase Rights or Convertible
Securities shall expire or be cancelled, the Exercise Price in effect at the
time of such expiration or cancellation shall be readjusted to the Exercise
Price which would have been in effect had an adjustment been made upon the
issuance of such Purchase Rights or Convertible Securities on the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise or conversion of such Purchase Rights or Convertible Securities prior
to such expiration or cancellation.


(D)          Calculation of Consideration Received.  If any Common Stock, Purchase Rights or
Convertible Securities are issued or sold for cash, the consideration received
therefor will be the amount received by the Company therefor, after deduction
of all underwriting discounts or allowances in connection with such issuance,
grant or sale.  In case any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, including in the
case of a strategic or similar arrangement in which the other entity will
provide services to the Company, purchase services from the 



 6
 






 



Company or
otherwise provide intangible consideration to the Company, the amount of the
consideration other than cash received by the Company (including the net present
value of the consideration expected by the Company for the provided or
purchased services) shall be the fair market value of such consideration,
except where such consideration consists of marketable securities, in which
case the amount of consideration received by the Company will be the average of
the last sale prices thereof on the principal market for such securities during
the period of ten Trading Days immediately preceding the date of receipt.  In case any Common Stock, Purchase Rights 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 fair market value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Purchase Rights or Convertible Securities,
as the case may be.  The independent
members of the Company’s Board of Directors shall calculate reasonably and in
good faith, using standard commercial valuation methods appropriate for valuing
such assets, the fair market value of any consideration other than cash or
securities; provided, however, that if the Holder does not agree to such fair
market value calculation within three Business Days after receipt thereof from
the Company, then such fair market value shall be determined in good faith by
an investment banker or other appropriate expert of national reputation
selected by the Holder and reasonably acceptable to the Company, with the costs
of such appraisal to be borne equally by the Company and the Holder.


(iii)          Exceptions
To Adjustment of Exercise Price. 
Notwithstanding the foregoing, no adjustment to the Exercise Price shall
be made pursuant to this Section 4(c) upon the issuance of any
Excluded Securities and in no event shall the Exercise Price be adjusted
pursuant to Section 4(c) to a price less than $1.20 per Warrant
Share.  For purposes hereof, “Excluded Securities” means
(I) securities purchased under the Securities Purchase Agreement;
(II) securities issued upon exercise of the Warrants; (III) shares of
Common Stock issuable or issued to employees, consultants or directors from
time to time upon the exercise of options, in such case granted or to be
granted in the discretion of the Board of Directors pursuant to one or more
stock option plans or restricted stock plans in effect as of the Issue Date;
(IV) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization of the Company; (V) securities issued
in connection with bona fide licensing or other strategic transactions not for
the primary purpose of raising equity capital approved by the Board of
Directors; and (VI) shares of Common Stock issued in connection with the
acquisition by the Company of any corporation or other entity occurring after
the Effective Date and as long as a fairness opinion with respect to such
acquisition is rendered by an investment bank of national recognition.


(iv)          Notice
Of Adjustments.  Upon the occurrence
of each adjustment or readjustment of the Exercise Price pursuant to this Section 4(c)
resulting in a change in the Exercise Price by more than one percent (1%), or
any change in the number or type of stock, securities and/or other property
issuable upon exercise of this Warrant, the Company, at its expense, shall
promptly compute such adjustment or readjustment or change and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment or change and showing in detail the facts upon which such
adjustment or readjustment or change is based. 
The Company shall, upon the written request at any time of the Holder,
furnish to the Holder a like certificate setting forth (i) such adjustment
or readjustment or change, (ii) the Exercise Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon exercise
of this Warrant.


(d)           Major
Transactions.  In the event of a
merger, consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a
result of which shares of Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities or other assets of the Company or another entity or the Company
shall sell all or substantially all of its assets (each of the foregoing being
a “Major 



 7
 






 



Transaction”),
the Company will give the Holder at least twenty (20) Trading Days’ written
notice prior to the earlier of (I) the closing or effectiveness of such
Major Transaction and (II) the record date for the receipt of such shares
of stock or securities or other assets, and the Holder shall be permitted to exercise
this Warrant in whole or in part at any time prior to the record date for the
receipt of such consideration and shall be entitled to receive, for each share
of Common Stock issuable to the Holder upon such exercise, the same per share
consideration payable to the other holders of Common Stock in connection with
such Major Transaction.  If and to the
extent that the Holder retains this Warrant or any portion hereof following
such record date, the Company will cause the surviving or, in the event of a sale
of assets, purchasing entity, as a condition precedent to such Major
Transaction, to assume the obligations of the Company with respect to this
Warrant, with such adjustments to the Exercise Price and the securities covered
hereby as may be necessary in order to preserve the economic benefits of this
Warrant to the Holder.  The failure to
give any notice required by this Section 4(d) or any defect therein
shall not affect the legality or validity of any Major Transaction or the vote
upon any such action.


(e)           Adjustments;
Additional Shares, Securities or Assets. 
In the event that at any time, as a result of an adjustment made
pursuant to this Section 4, the Holder of this Warrant shall, upon
exercise of this Warrant, become entitled to receive securities or assets
(other than Common Stock) then, wherever appropriate, all references herein to
shares of Common Stock shall be deemed to refer to and include such shares
and/or other securities or assets; and thereafter the number of such shares
and/or other securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as practicable to the
provisions of this Section 4. 
Any adjustment made herein that results in a decrease in the Exercise
Price shall also effect a proportional increase in the number of shares of
Common Stock into which this Warrant is exercisable.


(f)            Board
Discretion.  Notwithstanding any
provision in this Warrant to the contrary, subject to the prior written consent
of the Holder, the Board of Directors has the right to reduce the Exercise
Price and/or increase the number of Warrant Shares issuable under this Warrant
at any time or from time to time in its sole and absolute discretion.


5.             Fractional Interests.


No fractional shares or scrip representing fractional
shares shall be issuable upon the exercise of this Warrant.  If, on exercise of this Warrant, the Holder
hereof would be entitled to a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, the Company shall, in lieu of
issuing any such fractional share, pay to the Holder an amount in cash equal to
the product resulting from multiplying such fraction by the closing price of
the Company’s Common Stock as of the Exercise Date.


6.             Transfer of this Warrant.


The Holder may sell, transfer, assign, pledge or
otherwise dispose of this Warrant, in whole or in part, as long as such sale or
other disposition is made pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act, and
applicable state securities laws, and is otherwise made in accordance with the
applicable provisions of the Securities Purchase Agreement.  Upon such transfer or other disposition, the
Holder shall deliver this Warrant to the Company together with a written notice
to the Company, substantially in the form of the Transfer Notice attached
hereto as Exhibit B
(the “Transfer Notice”),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred, the number of Warrant Shares
to be covered by the part of this Warrant to be transferred to each such
person.  Within three (3) Business Days
of receiving a Transfer Notice and the original of this Warrant, the Company
shall deliver to the transferee designated by the Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of 



 8
 






 



Warrant Shares and, if
less than all this Warrant is transferred, shall deliver to the Holder a
Warrant for the remaining number of Warrant Shares.


7.             Benefits of this Warrant.


This Warrant shall be for the sole and exclusive
benefit of the Holder of this Warrant and nothing in this Warrant shall be
construed to confer upon any person other than the Holder of this Warrant any legal
or equitable right, remedy or claim hereunder.


8.             Loss, Theft, Destruction or
Mutilation of Warrant.


Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of indemnity reasonably satisfactory to the Company, and
upon surrender of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.


9.             Notice or Demands.


Any notice, demand or request required or permitted to
be given by the Company or the Holder pursuant to the terms of this Warrant
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such delivery is made on a day
that is not a Business Day, in which case such delivery will be deemed to be
made on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to a reputable overnight courier and (iii) on the Business Day
actually received if deposited in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed as follows:


If to
the Company:


Lipid Sciences, Inc.


7068 Koll Center Parkway


Suite 401


Pleasanton, CA 94566


Attn:  Sandra Gardiner


Chief Financial Officer


Tel:  (925)
249-4000


Fax:  (925) 249-4080


with a
copy (which shall not constitute notice) to:


Allen Matkins Leck Gamble Mallory & Natsis


Three Embarcadero Center, 12th Floor


San Francisco, CA 94111-4074


Phone: (415) 837-1515


Fax: (415) 837-1516


Attn:  Roger S. Mertz, Esq.


Tel: (415) 273-7441


Fax: (415) 837-1516



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and if to the Holder, to such address as shall be designated by the
Holder in writing to the Company.


10.           Applicable Law.


This Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of California applicable to contracts made and to be performed entirely within
the State of California.


11.           Amendments.


No amendment, modification or other change to, or
waiver of any provision of, this Warrant may be made unless such amendment,
modification or change is (A) set forth in writing and is signed by the
Company and the Holder and (B) agreed to in writing by the holders of at
least seventy-five percent (75%) of the number of shares into which the
Warrants are exercisable (without regard to any limitation contained herein on
such exercise), it being understood that upon the satisfaction of the
conditions described in (A) and (B) above, each Warrant (including any Warrant
held by the Holder who did not execute the agreement specified in (B) above)
shall be deemed to incorporate any amendment, modification, change or waiver
effected thereby as of the effective date thereof.


12.           Entire Agreement.


This Warrant and the other Transaction Documents
constitute the entire agreement and supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.


13.           Headings.


The headings in this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.


14.           Restrictions.


The Holder acknowledges that the shares acquired upon
exercise of this Warrant, if not registered, will have restrictions upon resale
imposed by state and federal securities laws.


15.           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 successors and
permitted assigns of the Holder.


[Signature Page to Follow]



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IN WITNESS WHEREOF, the Company has duly executed and
delivered this Warrant as of the Issue Date.


	
   

  	
  LIPID SCIENCES, INC.

  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
							



 



 11














 


EXHIBIT A to WARRANT


EXERCISE NOTICE


The undersigned Holder hereby irrevocably exercises
the right to purchase                  of
the shares of Common Stock (“Warrant Shares”) of LIPID SCIENCES, INC.
evidenced by the attached Warrant (the “Warrant”), and tenders herewith
payment of the purchase price in full, together with all applicable transfer
taxes, if any.  Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth
in the Warrant.


	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Name of
  Registered Holder

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
        Name:

  
	
        Title:

  
						



 



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EXHIBIT B to
WARRANT


TRANSFER NOTICE


FOR VALUE RECEIVED, the
undersigned Holder of the attached Warrant hereby sells, assigns and transfers
unto the person or persons named below the right to purchase            
shares of the Common Stock of LIPID SCIENCES, INC. evidenced by the attached
Warrant.  By signing this Transfer
Notice, the transferee agrees to be legally bound by the terms of the attached
Warrant and of the related Securities Purchase Agreement and Registration
Rights Agreement applicable to an Investor.


	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Name of
  Registered Holder

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
        Name:

  
	
        Title:

  
						



Accepted and Agreed:


	
   

  	
   

  
	
  

  	
   

  
	
  Transferee Name

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
        Name:

  
	
        Title:

  
	
   

  
	
  Address:

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				



 



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