Document:

<PAGE>   1
                                                                    Exhibit 10.6

Amendment Three Phase II to Development Agreement                    Page 1 of 5

* CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                            AMENDMENT THREE PHASE II
                                       TO
                              DEVELOPMENT AGREEMENT

    This Amendment Three made as of May 12, 2001 ("Effective Date") between SRI
International, a California, non-profit and public benefit corporation, having a
place of business located at 333 Ravenswood Avenue, Menlo Park, CA 94025
(hereinafter "SRI") and Lipid Sciences Incorporated, a Delaware corporation,
having a place of business located at 7068 Koll Center Parkway, Suite 401,
Pleasanton, CA 94566 (hereinafter "LSI").

      WHEREAS, SRI and LSI have entered into a development agreement having an
effective date of October 6, 2000 and an Amendment One thereto dated March 8,
2001 and Amendment Two dated March 28, 2001 (hereinafter individually and
collectively "Development Agreement") and which the parties hereby amend; and

      WHEREAS, the parties intend that this Amendment Three provides for the
details of Phase II Development Plan of the Development Agreement.

      NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, SRI and LSI agree as follows:

1.    For consistency and unless otherwise defined herein all initially
      capitalized terms shall have the meaning set forth in the Development
      Agreement.

2.    Attached hereto as Exhibit A is the Phase II Development Plan, which
      consists of a list of definition of terms used throughout the Development
      Plan, Project Cost and Design/Cost Assumptions, LSI furnished resources,
      Statement of Work, Milestones for Single and Multi-Solvent Systems,
      Acceptance Criteria for each System, the System Specification number REV
      -1 dated June 15, 2001 and the Microsoft Project Plan dated June 1, 2001.

3.    The Effective Date of this Amendment is May 12, 2001, the execution date
      of this Amendment is the date last subscribed below.

4.    Paragraph 1.2 shall be amended to include the following: "Phase II
      Development Period shall extend until thirty days following the completion
      of all milestones for the second system, unless terminated earlier as
      provided in the Agreement or extended by mutual written agreement of the
      parties."
<PAGE>   2
Amendment Three Phase II to Development Agreement                    Page 2 of 5

5.    Paragraph 2.2.1 shall be amended to include the following: "In
      consideration for the services to be performed by SRI in Phase II of the
      Development Program, as described in the Phase II Development Plan, LSI
      shall pay SRI fees not-to-exceed [ * ], inclusive of the advanced deposit
      payment under Section 2.2.4 as amended below."

6.    Paragraph 2.2.2 shall be amended to include the following: "During the
      remainder of Phase II SRI shall not expend more than six hundred thousand
      dollars ($600,000) in any one month pursuant to the Phase II Development
      Plan attached hereto, without the prior written consent of LSI."

7.    Paragraph 2.2.4 of the Development Agreement, second sentence beginning on
      line 4 through the end of the paragraph shall be deleted in its entirety
      and replaced with the following sentence:

            "In lieu of LSI providing an advance payment, the parties agree that
            SRI will invoice LSI weekly, for work conducted from Sunday through
            Saturday of each week. SRI will provide such invoice in writing to
            LSI by the close of business on any Wednesday thereafter and SRI
            will receive payment from LSI by the Friday immediately following
            receipt of the SRI invoice. Each such invoice shall identify the
            total cost of labor and the number of employees used by SRI for the
            period of time being invoiced. In the event any such Friday is a
            Federal holiday or the Friday following Thanksgiving Day, then the
            payment shall be due on the next following business day. Should LSI
            dispute any portion of the SRI invoice, which it believes in good
            faith to be erroneous, then LSI shall provide an explanation of the
            disputed portion to SRI by the payment date along with payment for
            the undisputed portion of the invoice and the parties shall promptly
            negotiate in good faith to resolve the dispute. In the event that
            any LSI payment is not timely paid, then SRI may at its option,
            cease all work under the Phase II Development Plan until such time
            as the LSI payment, which is due is paid in full. If SRI stops work
            for nonpayment or late payment reasons, then the Parties agree to
            negotiate in good faith an adjustment to the deliverable dates,
            and/or costs caused as a direct result of having to stop work for
            nonpayment. Any revised cost shall exclude idle time caused by
            having to stop work.

8.    The parties agree that Paragraphs 2.2.5 through 2.2.8 of the Development
      Agreement shall not apply to Phase II.

9.    Exhibit C of the Development Agreement, under the subtitle Exercise
      Section (a) subsection (ii) should be deleted in its entirety and replaced
      with the following:

            "Upon meeting the Phase II Milestone Design History File Transfer &
            Final Prototype Delivery for the first system, the Warrant will
            become exercisable with respect to one hundred and seventy-five
            thousand (175,000) shares of LSI Common Stock. Upon meeting the
            Phase II Milestone Design History File Transfer & Final Prototype
            Delivery for the second system, the Warrant will
<PAGE>   3
Amendment Three Phase II to Development Agreement                    Page 3 of 5

            become exercisable with respect to one hundred and seventy-five
            thousand (175,000) shares of LSI Common Stock. In the event that LSI
            discontinues development and design of one of the systems under
            Phase II, then all three hundred and fifty thousand (350,000) shares
            of LSI common stock shall be exercisable upon SRI meeting Design
            History File Transfer & Final Prototype Delivery Milestone for the
            other system."

10.   LSI is currently involved in entering into a merger with a third party. In
      the event that such a merger does not take place, then the parties
      understand that it is probable that LSI will request SRI to decrease its
      monthly spend rate amount. SRI will comply with such a request. Both
      parties agree to meet and negotiate in good faith revisions to the Phase
      II Development Plan Schedule, Statement of Work (Tasks) and an equitable
      adjustment to the total cost of Phase II, recognizing that changes to the
      proposed spend rate may result in higher program costs.

11.   The parties agree that due to unforeseen delays the end date Milestones,
      previously agreed to by the parties, the Production Prototype based on
      System Specification & Product Specs Assembled for the Single Solvent
      System of February 4, 2002 and the Production Prototype based on System
      Specification & Product Specs Assembled the Multi-Solvent System of July
      25, 2002; shall be extended by not more than sixty (60) days and all other
      Milestones will be adjusted appropriately as described below. The parties
      further agree that the project management plan is being changed from a
      task based project management to critical chain project management.
      Critical chain project management involves the optimization of technical
      abilities of the SRI team to achieve short-term goals on which the entire
      team is focused. As a result of such change the Milestones as identified
      herein will be reordered and reorganized by the project leader from SRI,
      Tom Low, and the V.P. of Product Development of LSI, Marc Bellotti as
      necessary throughout the Phase II Development Period.

12.   The parties each recognize that there are technical risks associated with
      the Phase II Development Plan, (e.g. TBD's in the attached Systems
      Specification, Rev 1, June 15, 2001) and that there may be technical
      issues, which arise that are outside of the current scope of work. In the
      event that such technical issues arise, SRI shall promptly identify such
      technical issue in writing to LSI. Such writing shall detail SRI's
      proposal for resolving the technical issue, including the time-line
      changes and effect on overall project cost, as well as an approximate time
      within which LSI needs to respond to SRI to resolve the issue. LSI shall
      then timely provide a written response to SRI with its instruction on how
      to proceed with respect to the technical issue being addressed.

13.   In the event that the Agreement is terminated by LSI pursuant to Paragraph
      6 of the Development Agreement then LSI agrees that it shall pay for all
      cost incurred as of the notice date of termination and that the parties
      shall negotiate in good faith to agree on reasonable costs to be covered
      by LSI and deliverables from SRI in order for to close down the Phase II
      Development Plan.
<PAGE>   4
Amendment Three Phase II to Development Agreement                    Page 4 of 5

14.   Unless expressly amended by this Amendment Three, all other terms and
      conditions of the Development Agreement shall remain in full force and
      effect.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date last subscribed below.

SRI:                                      LSI:
SRI International                         Lipid Sciences, Incorporated

By: /s/ V. Rene Harmount                    By: /s/ Phil Radlick
    ----------------------------                ----------------------------
    V. Rene Harmount                            Phil Radlick, Ph.D.
Group Manager, Contract Administration      President & Chief Executive Officer

Date: July 25, 2001                         Date: July 25, 2001
    ----------------------------                ----------------------------
<PAGE>   5
Amendment Three Phase II to Development Agreement                    Page 5 of 5

                                Exhibit A
                        Development Plan Phase II

                                  [ * ]<PAGE>   1
                                                                    Exhibit 10.8

                    WARRANT AND SHAREHOLDERS RIGHTS AGREEMENT

This security has been acquired for investment and has not been registered under
the Securities Act of 1933, as amended, or applicable state securities laws.
This security may not be sold, pledged or otherwise transferred in the absence
of this registration or pursuant to an exemption therefrom under the Act and
laws, supported by an opinion of counsel, reasonably satisfactory to the Company
and its counsel, that registration is not required.

                                                             For the Purchase of
                                                                  500,000 shares

                          COMMON STOCK PURCHASE WARRANT
                               FOR THE PURCHASE OF
                            SHARES OF COMMON STOCK OF
                              LIPID SCIENCES, INC.

Lipid Sciences, Inc., a Delaware corporation ("Company"), hereby certifies that
for value received, SRI International, or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
any time or from time to time during the period commencing on October 6, 2000
("Grant Date") and ending on October 6, 2007, five hundred thousand (500,000)
shares of common stock, $.01 par value, of the Company "Common Stock"), at an
initial exercise price equal to $5.00 per share. The number of shares of Common
Stock purchasable upon exercise of this Warrant, and the exercise price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Exercise
Price," respectively.

Exercise.

         (a)      The Warrant will be exercisable as follows:

                  (i) Upon completion of Phase I of the Development Program, as
defined in that certain Development Agreement between the Company and SRI, the
Warrant will become exercisable with respect to one hundred thousand fifty
(150,000) shares of LSI common stock.

                  (ii) Upon demonstration of the medical device at the end of
Phase II of the Development Program, the Warrant will become exercisable with
respect to three hundred fifty thousand (350,000) shares of LSI common stock.

         (b) This Warrant may be exercised by the Holder, in whole or in part,
by the surrender of this Warrant (with the Notice of Exercise Form attached
hereto as Attachment 1 duly executed by the Holder who is registered on the
Company books as the Holder (the "Registered Holder")) at the principal office
of the Company, or at any other office or agency the Company designates,
accompanied by payment in full, in lawful money of the United States, of an
amount equal to the
<PAGE>   2
then applicable Exercise Price multiplied by the number of Warrant Shares then
being purchased upon exercise.

         (c) Each exercise of this Warrant will be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant is
surrendered to the Company as provided in subsection 1(b) above. At that time,
the person or persons in whose name or names any certificates for Warrant Shares
will be issuable upon exercise as provided in subsection 1(d) below will be
deemed to have become the holder or holders of record of the Warrant Shares
represented by these certificates.

         (d) Within three (3) business days after the exercise of the purchase
right represented by this Warrant, the Company at its expense will use its best
efforts to cause to be issued in the name of, and delivered to, the Holder, or,
subject to the terms and conditions hereof, to any other individual or entity as
Holder (upon payment by Holder of any applicable transfer taxes) may direct:

                  (i) a certificate or certificates for the number of full
shares of Warrant Shares to which Holder is entitled upon exercise plus, in lieu
of any fractional share to which Holder would otherwise be entitled, cash in an
amount determined pursuant to Section 3 hereof, and

                  (ii) in case the exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, stating on the face or faces
thereof the number of shares currently stated on the face of this Warrant minus
the number of shares purchased by the Registered Holder upon exercise as
provided in subsection 1(b) above.

         (e) Conversion Right. In lieu of the payment of the Exercise Price in
the manner required by Section 1(b), the Holder will have the right (but not the
obligation ) to convert any exercisable but unexercised portion of this Warrant
into Common Stock ("Conversion Right") as follows: upon exercise of the
Conversion Right, the Company will deliver to the Holder (without payment by the
Holder of any of the Exercise Price in cash) that number of shares of Common
Stock equal to the quotient obtained by dividing (x) the "Value" (as defined
below) of the portion of the Warrant being converted by (y) the Market Price (as
defined below). The "Value" of the portion of the Warrant being converted equals
the remainder derived from subtracting (a) the Exercise Price multiplied by the
number of shares of Common Stock underlying the portion of the Warrant being
converted from (b) the Market Price of the Common Stock multiplied by the number
of shares of Common Stock underlying the portion of the Warrant being converted.
As used herein, the term "Market Price" means the last reported sale price of
the Common Stock on the date prior to the date the Conversion Right is
exercised. If no reported sale takes place on that day, the term "Market Price"
means the average of the last reported sale prices for the immediately preceding
three trading days. In either case, the reported sale price is the one
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any exchange on
which the Common Stock is listed is not its principal trading market, the last
reported sale price as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the Nasdaq Stock Market, or, if applicable, the
OTC Bulletin Board. If the Common Stock is not listed or admitted to trading on
any of the foregoing markets, or similar organization, the term "Market Price"
means the price determined in good faith by

Warrant and Shareholders Rights Agreement                           Page 2 of 11
<PAGE>   3
resolution of the Board of Directors of the Company, based on the best
information available to it. The Conversion Right may be exercised by the Holder
on any business day on or after the Grant Date and not later than the Expiration
Date by delivering this Warrant to the Company with a duly executed exercise
form attached hereto with the conversion section completed.

Adjustments.

         (a) Split, Subdivision or Combination of Shares. While this Warrant
remains outstanding and unexpired, if the outstanding shares of the Company's
Common Stock at any time is subdivided or split into a greater number of shares
or a dividend in Common Stock will be paid in respect of Common Stock, or if the
outstanding shares of Common Stock are combined or reverse-split into a smaller
number of shares the Exercise Price and the number and kind of Warrant Shares
issuable upon exercise of this Warrant as in effect immediately prior to such
action shall be proportionately adjusted so that the Holder may receive the
aggregate number and kind of shares of capital stock of the Company which such
Holder would have owned immediately following such action if this Warrant had
been exercised immediately prior to such action.

         (b) Reclassification Reorganization, Consolidation or Merger. In the
case of any reclassification of the Common Stock (other than a change in par
value or a subdivision or combination as provided for in subsection 2(a) above),
or any reorganization, consolidation or merger of the Company with or into
another corporation, or a transfer of all or substantially all of the assets of
the Company, or the payment of a liquidating distribution then, as part of any
such reorganization, reclassification, consolidation, merger, sale or
liquidating distribution, lawful provision will be made so that the Holder of
this Warrant will have the right thereafter to receive upon the exercise hereof
(to the extent, if any, still exercisable) the kind and amount of shares of
stock or other securities or property that Holder would have been entitled to
receive if, immediately prior to any reorganization, reclassification,
consolidation, merger, sale or liquidating distribution, as the case may be,
Holder had held the number of shares of Common Stock that were then purchasable
upon the exercise of this Warrant. In any case, appropriate adjustment (as
reasonably determined by the Board of Directors of the Company) will be made in
the application of the provisions set forth herein with respect to the rights
and interests thereafter of the Holder of this Warrant so that the provisions
set forth in this Section 2 (including provisions with respect to the Exercise
Price) will thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.

         (c) Price Adjustment. No adjustment in the Exercise Price will be
required unless the adjustment requires an increase or decrease in the Exercise
Price of at least $0.01. But, any adjustments that by reason of this subsection
are not required to be made will be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 2 will be made to
the nearest cent or to the nearest 1/100th of a share.

         (d) Price Reduction. Notwithstanding any other provision set forth in
this Warrant, while this Warrant is exercisable, the Company in its sole
discretion may reduce the Exercise Price or extend the period that this Warrant
is exercisable.

Warrant and Shareholders Rights Agreement                           Page 3 of 11
<PAGE>   4
         (e) No Impairment. The Company may not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company. The Company will at all times in
good faith assist in the carrying out of all the provisions of this Section 2
and will take all actions as may be necessary or appropriate in order to protect
against impairment of the rights of the Holder of this Warrant to adjustments in
the Exercise Price.

         (f) Notice of Adjustment. If any event requires an adjustment of the
Exercise Price hereunder, the Company will promptly give written notice thereof
to the Holder of this Warrant stating the adjusted Exercise Price and the
adjusted number of Warrant Shares resulting from the event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

Fractional Shares. The Company is not required upon this Warrant's exercise to
issue any fractional shares, but will make an adjustment in cash on the basis of
the Market Price of the Company' s Common Stock.

Limitation on Sales. Each holder of this Warrant acknowledges that this Warrant
and the Warrant Shares have not been registered under the Securities Act of
1933, as amended ("Act"), as of the date of issuance hereof and agrees not to
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant, or any Warrant Shares issued upon its exercise except under
circumstances which will not result in a violation of applicable federal and
state securities laws and the terms and conditions of this Warrant.

         Without limiting the generality of the foregoing, unless the offer and
sale of the Warrant Shares to be issued on the particular exercise of the
Warrant have been effectively registered under the Act, the Company is under no
obligation to issue the shares covered by the exercise unless the Holder has
executed an investment letter, the form attached hereto as Attachment 2; it
being understood that the box referenced in item (f) of such investment letter
need be checked. Any stock certificate representing Warrant Shares will be
imprinted with a legend in substantially the following form:

     This security has been acquired for investment and has not been registered
     under the Securities Act of 1933, as amended, or applicable state
     securities laws. This security may not be sold, pledged or otherwise
     transferred in the absence of such registration or pursuant to an exemption
     therefrom under said Act and such laws.

Market Stand-off.

Holder may not, without the prior written consent of the Company's Board of
Directors, during the period commencing on the effective date of the first
public offering of the Common Stock of the Company to the general public which
is effected pursuant to a registration statement filed with the Securities and
Exchange Commission under the Act ("IPO") and ending on the second anniversary
of this date (i) lend, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or

Warrant and Shareholders Rights Agreement                           Page 4 of 11
<PAGE>   5
indirectly, any shares of the Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are then owned by Holder or are thereafter acquired), or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. In
order to enforce the covenant in this Section, the Company may impose
stop-transfer instructions with respect to the shares of Holder until the end of
the relevant period. The agreed upon "lock-up" has been established with the
understanding that LSI employees are presently restricted from selling the stock
they receive from LSI until two (2) years following LSI's IPO. Should the
"lock-up" period for LSI's employees be reduced such that they can sell their
stock prior to two (2) years following LSI's IPO, then the "lock-up" period
applicable to SRI's shares shall be reduced to the same extent. SRI may transfer
all or a portion of the Warrant under the terms of its Intellectual Property and
Equity Sharing Policy. All persons who receive any portion of the Warrant will
be subject to the market stand-off described in this section.

Registration Rights.

         (a) Grant of Right. The Holders will have the right until October 6,
2007, to include the Warrant Shares as part of any registration of securities
filed by the Company (other than in connection with a transaction contemplated
by Rule 145(a) promulgated under the Securities Act or under Form S-8 or any
equivalent form). The Company is not required to include Warrant Shares in a
registration statement relating to an offering of securities if the managing
underwriter has advised the Company that marketing factors require a limitation
of the number of shares to be included (in which case the amount of securities
to be offered for the accounts of Holders will be reduced pro rata (according to
the shares proposed for registration) to the extent necessary to reduce the
total amount of securities to be included in the offering to the amount
recommended by the managing underwriter. Any such limitation may reduce the
number of Warrant Shares registered for the Holder to not less than thirty
percent (30%) of the total number of Warrant Shares requested to be included).

         (b) Terms. The Company will bear all fees and expenses attendant to
registering the Warrant Shares, but Holders will pay any and all underwriting
commissions and the expenses of any legal counsel selected by Holders to
represent them in connection with the sale of the Warrant Shares. In the event
of a proposed registration, the Company will furnish the then Holders with not
less than 30 days' written notice prior to the proposed date of filing of such
registration statement. This notice will continue to be given for each
registration statement filed by the Company until the earlier of (i) such time
as all of the Warrant Shares have been sold by the Holders thereof or (ii) the
expiration of the "piggy-back" rights provided for herein. The Holders will
exercise the "piggy-back" rights provided for herein by giving written notice
within 20 days of the receipt of the Company' s notice of its intention to file
a registration statement. The Company will cause any registration statement
filed pursuant to the above "piggy-back" rights to remain effective for a period
of at least nine consecutive months from the date that the Holders of the
Warrant Shares covered by the registration statement are first given the
opportunity to sell all of the securities. Notwithstanding the provisions of
this Section, the Company will have the right at any time after it will have
given written

Warrant and Shareholders Rights Agreement                           Page 5 of 11
<PAGE>   6
notice of its intention to file a registration statement (irrespective of
whether a written request for inclusion of any Warrant Shares will have been
made) to elect not to file any proposed registration statement, or to withdraw
the same after the filing but prior to the effective date thereof.

         (c) Indemnification. The Company will indemnify the Holder(s) of the
Warrant Shares to be sold pursuant to any registration statement hereunder and
each person, if any, who controls such Holders within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Securities Act,
the Exchange Act or otherwise, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in (i) such
registration statement; or (ii) any application or other document or written
communication (in this paragraph (c) collectively called "application") executed
by the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Warrant Shares under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to the Holder(s) by or on behalf of the Holder(s) expressly
for use in such registration statement or in any application, as the case may
be. The Company agrees promptly to notify the Holder(s) of the commencement of
any litigation or proceedings against the Company or any of its officers,
directors or controlling persons in connection with the issue and sale of the
Warrant Shares or in connection with the registration statement or any
application. The Holder(s) and their successors and assigns will severally, and
not jointly, indemnify the Company, against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Securities Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holders, with respect to such Holders, in writing, for specific inclusion
in such registration statement or any application.

         (d) Elimination of Registration Rights. Notwithstanding anything to the
contrary in paragraphs (a) and (b) of this Section 6, no Holders are entitled to
have their Warrant Shares registered under the Securities Act if, in the opinion
of counsel to the Company, they may be sold without restriction under Rule
144(k) promulgated under the Securities Act and any restrictive legends under
the Securities Act are removed from the certificates representing such
securities and any stop transfer order for the certificates is removed.

         (e) Successors and Assigns. The registration rights granted to the
Holders inure to the benefit of all the Holders' successors, heirs, pledgees,
assignees, transferees and Holders of the Warrant Shares.

         (f) Exercise of Warrants. Nothing contained in this Agreement will be
construed as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the effectiveness
thereof.

Warrant and Shareholders Rights Agreement                           Page 6 of 11
<PAGE>   7
         (g) Documents Delivered to Holders. The Company will furnish to each
Holder participating in any of the foregoing offerings and to each underwriter
of any such offering, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of the registration statement (and, if the registration includes an
underwritten public offering, an opinion dated the date of the closing under any
underwriting agreement related thereto), and (ii) a "cold comfort" letter dated
the effective date of the registration statement (and, if the registration
includes an underwritten public offering, a letter dated the date of the closing
under the underwriting agreement) signed by the independent public accountants
who have issued a report on the Company's financial statements included in the
registration statement, in each case covering substantially the same matters
with respect to the registration statement (and the prospectus included therein)
and, in the case of the accountants' letter, with respect to events subsequent
to the date of the financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities. The Company will also deliver
promptly to each Holder participating in the offering requesting the
correspondence and memoranda described below and to the managing underwriter
copies of all correspondence between the Commission and the Company, its counsel
or auditors and all memoranda relating to discussions with the Commission or its
staff with respect to the registration statement and permit each Holder and
underwriter to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the registration statement
as it deems reasonably necessary to comply with applicable securities laws or
rules of the National Association of Securities Dealers, Inc.

Notices of Record Date. If:

         (a) the Company takes a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of any class or any other securities, or to receive any other right, or

         (b) the Company enters into any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company, or

         (c) the Company is the subject of the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, then, and in each case,
the Company will mail or cause to be mailed to the Registered Holder of this
Warrant a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Warrant) will be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up. Such
notice

Warrant and Shareholders Rights Agreement                           Page 7 of 11
<PAGE>   8
will be mailed at least fifteen (15) days prior to the record date or effective
date for the event specified in such notice, provided that the failure to mail
such notice will not affect the legality or validity of any such action.

Reservation of Stock. The Company will at all times reserve and keep available,
solely for issuance and delivery upon the exercise of this Warrant, Warrant
Shares and other stock, securities and property, as from time to time will be
issuable upon the exercise of this Warrant.

Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and (in
the case of loss, theft or destruction) upon delivery of an indemnity agreement
(with surety if reasonably required) in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation of this
Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

Transfers, etc.

         (a) The Company will maintain a register containing the names and
addresses of the Holders of this Warrant. Any Holder may change its, his or her
address as shown on the warrant register by written notice to the Company
requesting such change.

         (b) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the registered Holder of this Warrant as the absolute
owner hereof for all purposes; provided, however, that if and when this Warrant
is properly assigned in blank, the Company may (but will not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.

No Rights as Stockholder. Until the exercise of this Warrant, the Holder of this
Warrant does not have or exercise any rights by virtue hereof as a stockholder
of the Company.

Successors. The rights and obligations of the parties to this Warrant inure to
the benefit of and are binding on the parties and their respective heirs,
successors, assigns, pledgees, transferees and Holders. Without limiting the
foregoing, the registration rights set forth in this Warrant inure to the
benefit of the Registered Holder and all the Registered Holder's successors,
heirs, pledgees, assignees, transferees and Holders of this Warrant and the
Warrant Shares.

Change or Waiver. Any term of this Warrant may be changed or waived only by an
instrument in writing signed by the party against whom enforcement of the change
or waiver is sought.

Headings. The headings in this Warrant are for purposes of reference only and
will not limit or otherwise affect the meaning of any provision of this Warrant.

Governing Law. This Warrant is governed by and construed in accordance with the
laws of the State of California as these laws are applied to contracts made and
to be fully performed entirely within that state between residents of that
state.

Jurisdiction and Venue. The Company (i) agrees that any legal suit, action or
proceeding arising out of or relating to this Warrant will be instituted
exclusively in

Warrant and Shareholders Rights Agreement                           Page 8 of 11
<PAGE>   9
California, (ii) waives any objection to the venue of any such suit, action or
proceeding and the right to assert that such forum is not a convenient forum.

Mailing of Notices, etc. All notices and other communications under this Warrant
(except payment) will be in writing and will be sufficiently given if delivered
to the addressees in person, by Federal Express or similar receipt delivery, or
if mailed, postage prepaid, by certified mail, return receipt requested, as
follows:

Holder:                             To his, her or its address on page 1
                                     of this Warrant.

The Company:                        Lipid Sciences, Inc.
                                    7068 Koll Center Parkway, Suite 401
                                    Pleasanton, CA 94566

In either case, with a copy to:     Joseph Lesko
                                    Foley & Lardner
                                    402 W. Broadway 23rd Floor
                                    San Diego, CA
                                    (619)234-3510 FAX

or to any other address as any of them, by notice to the others may designate
from time to time. Time will be counted to, or from, as the case may be, the
delivery in person or by mailing.

LIPID SCIENCES, INC.

By: /s/  Phil Radlick
    ------------------------------------
     Phillip C. Radlick, Ph.D
     President & CEO

Warrant and Shareholders Rights Agreement                           Page 9 of 11
<PAGE>   10
                                  ATTACHMENT 1

                               NOTICE OF EXERCISE

TO:       Lipid Sciences, Inc.

The undersigned hereby elects irrevocably to purchase _____ shares of Common
Stock of Lipid Sciences, Inc., pursuant to terms of the attached Warrant, and
tenders herewith payment of the exercise price of such shares in full, together
with all applicable transfer taxes, if any. Please issue a certificate or
certificates representing said shares of the Common Stock in the name of the
undersigned or in such other name as is specified below.

                                       or

The undersigned hereby elects irrevocably to exercise the within Warrant and to
purchase ____________ shares of Common Stock of Lipid Sciences, Inc. by
surrender of the unexercised portion of the within (with a "Value" of $________
based on a "Market Price" of $__________). Please issue a certificate or
certificates representing said shares of Common Stock in the name of the
undersigned or in such other name as is specified below.

                                            ____________________________________
                                            (Name)

                                            ____________________________________
                                            (Address)

                                            ____________________________________

                                            ____________________________________
                                            (Taxpayer Identification Number)

________________________________________
[print name of Holder]
By: ____________________________________

Title:__________________________________

Date:___________________________________

         NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.

Warrant and Shareholders Rights Agreement                          Page 10 of 11
<PAGE>   11
                                  ATTACHMENT 2

                     INVESTMENT REPRESENTATION CERTIFICATE

Purchaser:

Company:  [COMPANY]

Security: Common Stock

Amount:

Date:

(a)  In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:

(b)  The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. The Purchaser
is purchasing the Securities for its own account for investment purposes only
and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act");

(c)  The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefor, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein;

(d)  The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased; and

(e)  The Purchaser is aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among
other things: (i) the availability of certain public information about the
Company; (ii) the resale occurring not less than one (1) year after the party
has purchased and paid for the securities to be sold; (iii) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein.

(f)  Please check the box if you are an accredited Investor as that term is
defined under Regulation D promulgated under the Securities Act. [ ]

PURCHASER: _____________________________________      Date: ____________
<PAGE>   12

                      INVESTMENT REPRESENTATION CERTIFICATE

Holder:           SRI International

Company:          Lipid Sciences, Inc.

Security:         Common Stock Purchase Warrant

Amount:           500,000 shares

Date:             October 6, 2000

(a) In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Holder") represents to the Company as
follows:

(b) The Holder is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Holder is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act");

(c) The Holder understands that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefor, which
exemption depends upon, among other things, the bona fide nature of the Holder's
investment intent as expressed herein;

(d) The Holder further understands that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. In addition, the Holder understands
that the certificate evidencing the Securities will be imprinted with the legend
referred to in the Warrant under which the Securities are being purchased; and

(e) The Holder is aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; (iii) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein.

(f) Holder is an accredited investor as that term is defined under Regulation D
promulgated under the Securities Act.

HOLDER

By:    /s/  Curtis R. Carlson
      ---------------------------

Its:   CEO
      ---------------------------

Date:  October 6, 2000
      ---------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00029-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00029-of-00352.parquet"}]]