Document:

Exhibit
4.11

 

SECURITIES
PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT
(the or this “Agreement”) dated as
of April 14 2004 is entered into by and among IMCOR Pharmaceutical Co., a
Nevada corporation (the “Company”), and the purchasers identified on
the signature pages hereto (each a “Purchaser”
and collectively, the “Purchasers”).

 

WHEREAS, the
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as
amended (the “1933 Act”); and

 

WHEREAS, the
Purchasers wish to purchase from the Company, and the Company wishes to sell
and issue to the Purchasers, shares of Common Stock of the Company, $0.001 par
value per share (the “Common Stock”), together with Warrants (the
“Warrants”) to purchase Common
Stock, upon the terms and conditions set forth in this Agreement;

 

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

 

1.             Purchase
and Sale of Securities.

 

1.1.         Offering.  Subject to the terms and conditions of
this Agreement, the Company shall sell and issue to each of the Purchasers, and
each of the Purchasers shall severally, and not jointly, purchase from the
Company, the aggregate number of shares of Common Stock (the “Shares”)
equal to the investment amount set forth opposite the Purchaser’s name on Schedule
I divided by $0.75 per share (the “Per
Share Purchase Price”) plus the Warrants set forth opposite such
Purchaser’s name (50% Warrant coverage). 
The Shares, the Warrants and the Common Stock issuable upon exercise of
the Warrants are collectively referred to as the “Securities.” 
Additional investors may be added by the Company to Schedule I at
the discretion of the Company following the First Closing and prior to the
filing of a Registration Statement (as defined in the Registration Rights
Agreement, defined below), and upon execution by such additional investors of a
counterpart signature page to this Agreement, such additional investors shall
be deemed a Purchaser hereunder and shall be subject to and may rely upon the
representations, warranties, terms and conditions contained herein; provided,
that such investors may only acquire Securities at the Second Closing.

 

1.2.         Proceeds.  Net proceeds from the sale of the
Securities will be used for the following purposes and appropriately related
administrative costs, subject to changes authorized by a majority of the
Company’s Board of Directors (the “Board”):

 

•      manufacturing,
marketing and continued development of Imagent;

 

•      research
and development of PH-50;

 

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•      research
and development of N1177;

 

•      payment
of commissions and other fees associated with the transactions in this
Agreement;

 

•      payment
of obligations to vendors of goods or services and other creditors (except as
described in the last sentence of this Section 1.2) not to exceed the amounts
set forth in the Disclosure Schedule; and

 

•      working
capital and general corporate purposes.

 

Pending use of the
proceeds in accordance with the preceding sentence, the proceeds will be
invested in securities issued or guaranteed by the United States, national bank
repurchase agreements secured by such securities or such other types of
investments as may be approved by a majority of the Company’s Board of
Directors, but in no event in such a manner that would cause the Company to be
deemed an Investment Company as defined in the Investment Company Act of 1940,
as amended.  The Company shall not use
any portion of the net proceeds to redeem any capital stock of the Company or
to repay indebtedness described in Section 5.3.14 below.

 

2.             Delivery of the Shares
at the Closings.

 

2.1.         Initial Closing. 
The initial closing (the “Initial Closing”) shall take place at the offices of Grippo & Elden, LLC, 227 W.
Monroe Street, Chicago, Illinois  60606
on the second business day following the date on which the applicable
conditions set forth in Section 5.3 (excluding Section 5.3.9) and Section 6
shall have been satisfied or waived by the appropriate parties, or at such
other time, date and place as are mutually agreeable to the Company and the
Purchasers subscribing for a majority of the Shares.  At the Initial Closing:

 

(a)           in
accordance with the terms of the Escrow Agreement (as defined in
Section 3.2), the Escrow Agent 
shall disburse to the Company by wire transfer of immediately available
funds payment of the purchase price of the Securities delivered to the
Purchasers at the Initial Closing (which shall not exceed 19.9% of the
Company’s outstanding Common Stock), as set forth on Schedule I hereto;
and

 

(b)           the
Company shall deliver to the Purchasers certificates for the number of
Securities to be delivered at the Initial Closing, as set forth opposite their
respective names on Schedule I hereto, registered in the name of such
Purchasers.

 

2.2.         Second Closing. 
The second closing (the “Second Closing”) shall
take place at the offices of Grippo & Elden LLC, 227 W. Monroe Street,
Chicago, Illinois  60606 on the second
business day following the date on which the applicable conditions set forth in
Section 5.3 (including Section 5.3.9) and Section 6.  At the Second Closing:

 

(a)           in
accordance with the terms of the Escrow Agreement, the Escrow Agent, shall
disburse to the Company the purchase price of the Securities, together with any
interest accrued thereon, to be delivered to the Purchasers at the Second
Closing, as set forth on Schedule I hereto; and

 

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(b)           the
Company shall deliver to the Purchasers certificates for the number of
Securities to be delivered at the Second Closing, as set forth opposite their
respective names on Schedule I hereto, registered in the name of such
Purchasers.

 

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

 

2.3.         Termination.  If by the applicable
dates set forth in Section 5.3.13 the conditions set forth in Section 5.3 that
apply to the applicable Closing shall not have been fulfilled by the Company,
then each Purchaser to receive Securities at such Closing shall, at its
election, be relieved of all of its obligations under this Agreement as to such
Closing without thereby waiving any other right it may have by reason of such
failure or such non-fulfillment.  In
connection therewith, such Purchaser shall have the right to require the Escrow
Agent to disburse to such Purchasers the funds delivered by such Purchaser to
the Escrow Account in respect of the applicable Closing (plus any interest
thereon).  If by the applicable date set
forth in Section 6.5, any of the conditions set forth in Section 6 of this
Agreement that apply to the applicable Closing shall not have been fulfilled by
any Purchaser, the Company shall, at its election, be relieved of all of its
obligations to such Purchaser under this Agreement as to such Closing without
thereby waiving any other right it may have by reason of such failure or such
non-fulfillment.

 

3.             Representations and
Warranties of the Company.  Except
as disclosed in the Disclosure Schedule attached hereto (which Disclosure
Schedule makes explicit reference to, and shall only modify, the particular
Section containing the representation or warranty as to which exception is
taken), the Company hereby represents and warrants to the Purchasers as follows:

 

3.1.         Organization; Amended
Articles.  The Company is a
corporation duly organized, validly existing and in corporate good standing
under the laws of the State of Nevada and is qualified to do business as a
foreign corporation in each jurisdiction in which such qualification is
required, except where the failure to be so qualified would not have, either
individually or in the aggregate, a material adverse effect on the business,
operations, financial condition, assets, prospects, liabilities or contractual
rights of the Company, whether individually or taken as a whole (a “Material
Adverse Effect”).  The
Company has, or prior to each Closing will have, duly authorized the sale and
issuance, pursuant to the terms of this Agreement an adequate number shares of
its Common Stock authorized and available for purchase hereunder and upon
exercise of the Warrants issuable at such Closing, having the rights,
restrictions, privileges and preferences set forth in the Amended and Restated
Certificate of Incorporation (the “Amended Articles”).

 

3.2.         Corporate Power.  The Company has all required corporate power
and authority to own its property, to carry on its business as presently
conducted or contemplated, to enter into and perform this Agreement, the Escrow
Agreement, in the form attached as Exhibit A  (the “Escrow Agreement”), the
Warrant Agreements by and between the Company and each of the Purchasers, each
in the form attached as Exhibit B (the “Warrant Agreement”), the Registration Rights Agreement by and
among the Company and the Purchasers in the form attached as Exhibit C
(the “Registration Rights Agreement”),
the Voting Agreement (as defined in Section 5.15), and the other agreements,
documents and instruments contemplated hereby (collectively with this Agreement,
the “Financing
Documents”), and to carry out the transactions contemplated
hereby.  The copies of the Amended
Articles and Bylaws of the Company, as amended to date, which have been
furnished by the Company to counsel for the Purchasers, are correct and
complete at the date hereof.  The
Company is not in violation of any term of its Amended Articles or Bylaws, each
as amended, or in violation of any term of any agreement, instrument, judgment,
decree,

 

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order, statute, rule or
government regulation applicable to the Company or to which the Company is a
party, where any violation, noncompliance or default would result in a Material
Adverse Effect.

 

3.3.         Authorization.  The Financing Documents are valid and
binding obligations of the Company, enforceable in accordance with their
terms.  The execution, delivery and
performance of the Financing Documents have been duly authorized by all
necessary corporate or other action of the Company.  Subject to obtaining stockholder approval for the issuance of
more than 20% of the Company’s Common Stock pursuant to Nasdaq Marketplace Rule
4350 with respect to Securities to be issued at the Second Closing, the
issuance, sale and delivery of the Securities in accordance with this Agreement
or the Warrant Agreement have been, or will be prior to each Closing, duly
authorized by all necessary corporate action on the part of the Company.  The Securities when so issued, sold and
delivered against payment therefor in accordance with the provisions of this
Agreement or the Warrant Agreement will be duly and validly issued, fully paid
and non-assessable.  No consent,
approval or authorization of, or designation, declaration or filing with, any
governmental authority or any other person or entity is required of the Company
in connection with the execution and delivery of the Financing Documents, or
the issuance, sale and delivery of the Securities in accordance with the terms
of this Agreement or the Warrants, or the consummation of any other transaction
contemplated hereby or by the other Financing Documents, except (i) the filing
with the SEC of one or more Registration Statements in accordance with the
requirements Registration Rights Agreement and the filing of a Form D with the
SEC, (ii) any filings required by state securities laws, (iii) the filings
required in accordance with Section 8.12, (iv) the filing of the Proxy
Statement in accordance with Section 5.1.4, and (v) those that have been made
or obtained prior to or as of the date of this Agreement.

 

3.4.         Capitalization.  The authorized capital stock of the Company
consists of Series A Preferred Stock, $0.001 par value per share, of which
12,856 shares are authorized, issued and outstanding as of December 31, 2003,
and 150,000,000 shares of Common Stock, $0.001 par value per share, of which
21,541,476 shares are issued and outstanding as of March 31, 2004.  All of the issued and outstanding shares of
the Company’s capital stock have been duly authorized and validly issued and are
fully paid and non-assessable.  The
Company will have reserved, immediately prior to the First Closing, a total of
6,068,740 shares of its Common Stock for issuance pursuant to the Option Plans
(defined below).  Except as contemplated
by this Agreement, the other Financing Documents, the Amended Articles,
(i) no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
the Company is authorized or outstanding, (ii) there is not any commitment
or offer of the Company to issue any subscription, warrant, option, convertible
security or other such right or to issue or distribute to holders of any shares
of its capital stock any evidences of indebtedness or assets of the Company,
(iii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof, and (iv) there are no restrictions on the transfer of the Company’s
capital stock other than those arising from securities laws or contemplated by
this Agreement and the other Financing Documents.  There are no voting trusts or agreements, stockholders’
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company to which
the Company is a party.  All of the
outstanding securities of the Company were issued in compliance with all
applicable federal and state securities laws. 
Set forth in the Disclosure Schedule is a capitalization table for the
Company showing (i) the capitalization of the Company on a fully diluted
basis immediately prior to the issuance of the Shares; and (ii) the capitalization
of the Company on a fully diluted basis giving effect to the issuance of the
Shares.  For the purposes of this
Agreement, the term “on a fully diluted basis” means that for purposes of
calculating the percentage interest of the Company’s capital stock represented
by a specified number of shares, there shall be deemed outstanding (i) all
shares of Common Stock, $0.001 per value

 

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per share, of the Company
currently outstanding; (ii) all shares of Common Stock issuable pursuant to the
exercise of options granted and capable of being granted under the Company’s
1998 Long Term Incentive Compensation Plan, 2000 Long Term Incentive
Compensation Plan, and Senior Executive Long Term Incentive Compensation Plan
(the “Option
Plans”); and (iii) all shares of Common Stock issuable pursuant to
other existing options, warrants, convertible debt securities and other
instruments and agreements whatsoever. 
The issue and sale of the Securities will not, immediately or with the
passage of time, obligate the Company to issue shares of Common Stock or other
securities to any Person and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities.

 

3.5.         Subsidiaries.  Except for Sentigen Ltd., the Company
does not control, directly or indirectly, any other entity (a “Subsidiary”)
and does not own of record or beneficially, directly or indirectly, any shares
of capital stock or securities convertible into capital stock of any other
corporation, or any participating interest in any partnership, joint venture or
other non-corporate business enterprise.

 

3.6.         SEC Filings; Business.  The Company has filed all reports required
to be filed by it under the 1933 Act and the Securities Exchange Act of 1934,
as amended (the “1934 Act”), including pursuant to Section 13(a) or 15(d)
thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (collectively,
the “SEC
Filings”) on a timely basis or has timely filed a valid extension of
such time of filing and has filed any such SEC Filings prior to the expiration
of any such extension..  The SEC Filings
are the only filings required of the Company pursuant to the 1934 Act for such
period.  At the time of filing thereof,
the SEC Filings complied as to form in all material respects with the
requirements of the 1934 Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.  During the
preceding two years, each registration statement and any amendment thereto
filed by the Company pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933
Act, as of its issue date and as of the closing of any sale of securities
pursuant thereto did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. 
The Company and its Subsidiaries are engaged only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole, as required to be disclosed.

 

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

 

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

 

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(b)           any declaration or
payment of any dividend, or any authorization or payment of any distribution,
on any of the capital stock of the Company, or any redemption or repurchase of
any securities of the Company;

 

(c)           any material damage,
destruction or loss, whether or not covered by insurance to any assets or
properties of the Company;

 

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

 

(e)           any satisfaction or
discharge of any lien, claim or encumbrance or payment of any obligation by the
Company or a Subsidiary, except in the ordinary course of business and which is
not material to the assets, properties, financial condition, operating results
or business of the Company and its Subsidiaries taken as a whole (as such
business is presently conducted and as it is proposed to be conducted);

 

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

 

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

 

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

 

(i)            any loss of the
services of any key employee, or material change in the composition or duties
of the senior management of the Company or any Subsidiary;

 

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

 

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

 

3.8.         Financial Statements.  The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein or in the notes thereto, and, in the case of quarterly financial
statements, as permitted by Form 10-Q or Form 10-QSB, as applicable, under the
1934 Act).  Except as set forth in the
financial statements of the Company included in the SEC Filings filed prior to
the date hereof, neither the Company nor any of its Subsidiaries has incurred
any liabilities, contingent or otherwise, except those incurred in the ordinary
course of business, consistent (as to amount and nature) with past practices
since the date of such financial statements, none of which, individually or in
the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect.

 

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

 

3.10.       Proprietary Rights,
Employee Restrictions.  

(a)           The Company owns or has
the right to use all copyrights, copyright registrations and copyright
applications, trademark registrations and applications for registration,
patents and patent applications, trademarks, service marks, trade names, or
other proprietary rights (collectively, “Intellectual Property Rights”) as described
in the SEC Filings used or useful in the Company’s business as presently
conducted or currently contemplated to be conducted and all licenses,
assignments and releases of Intellectual Property Rights of others in material
works embodied in the Company’s products. 
All Intellectual Property Rights held by any employee, officer or
consultant have been assigned to the Company. 
The Company has exclusive ownership of, or exclusive license to use, all
Intellectual Property Rights.  The
Company has obtained any licenses, releases or assignments necessary to use all
third parties’ Intellectual Property Rights in works embodied in its products.  All such licenses, releases and assignments
are specifically identified in the Disclosure Schedule.  To the Company’s knowledge, neither the
present nor currently contemplated business activities or products of the
Company infringe any Intellectual Property Rights of others.  The Company has not received any notice or
other written claim from any person asserting that any of the Company’s present
or currently contemplated activities infringe or may infringe any Intellectual
Property Rights of such person.  The Company
has the right to use, free and clear of known or asserted claims or rights of
others, all trade secrets, customer lists, hardware designs, programming
processes, software and other information required for or incident to its
products or its business as presently conducted or contemplated to be
conducted, except for claims which would not have a Material Adverse
Effect.  The Company has taken all
reasonable measures to protect and preserve the security, confidentiality and
value of its Intellectual Property Rights, including its trade secrets and
other confidential information.  The
Company is not aware of any infringement by others of its copyrights or other
Intellectual Proprietary Rights in any of its products, technology or services,
or any violation of the confidentiality of any of its proprietary
information.  The activities of the
Company’s employees on behalf of the Company do not violate any agreements or
arrangements known to the Company which any such employees have with former
employers or any other entity to whom such employees may have rendered
consulting services.  For the purposes
of this Section 3.10, Intellectual Property Rights also includes any and
all material licenses, databases, computer programs and other computer software
user interfaces (other than those generally available to the public), know-how,
trade secrets, customer lists, proprietary technology, processes and formulae,
source code, object code, algorithms, architecture, structure, display screens,
layouts, development tools, instructions, templates, marketing materials,
inventions, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing.

 

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

 

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3.11.       Litigation; Compliance with
Law.  There is no (i) action,
suit, claim, proceeding or investigation pending or, to the best of the
Company’s knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration or mediation proceeding relating to the Company,
pending or, to the best of the Company’s knowledge, threatened, or
(iii) governmental inquiry pending or, to the best of the Company’s
knowledge, threatened against or affecting the Company (including without
limitation any inquiry as to the qualification of the Company to hold or
receive any license or permit).  The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability which may have a Material Adverse Effect.  The Company is not in default with respect to any order, writ,
injunction or decree known to or served upon the Company of any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.  There is no action or suit by the Company,
and to the best of the Company’s knowledge, pending, threatened or contemplated
against others.  To the best of the
Company’s knowledge, the Company has complied and will continue to comply, in
all material respects, with all laws, rules, regulations and orders applicable
to its present and contemplated business, operations, properties, assets,
products and services.  The Company has
all necessary permits, licenses and other authorizations required to conduct
its business as conducted and as proposed to be conducted, except where the
failure to obtain such permits, licenses or authorization would not have a
Material Adverse Effect, and the Company has been and will continue to be
operating its business pursuant to and in compliance with the terms of all such
permits, licenses and other authorizations, except where the failure to so
operate the business would not have a Material Adverse Effect.  The Company has all franchises, permits,
licenses and other rights and privileges necessary to permit it to own its
property and to conduct its business as it is presently conducted or proposed
to be conducted.  The Company is not
subject to any pending or threatened investigation, inquiry or proceeding by
the SEC, any state securities commission or any other federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any securities exchange or securities
market, with respect to any matter.  The
Company is in compliance with all effective requirements of the Sarbanes-Oxley
Act of 2002, as amended, and the rules and regulations thereunder, that are
applicable to it, except where such noncompliance could not have or reasonably
be expected to result in a Material Adverse Effect.

 

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

 

3.13.       Insurance.  The Company and each Subsidiary maintain in
full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted and properties owned or
leased by the Company and each Subsidiary, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to
insure.

 

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

 

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

 

3.16.       Governmental Approvals.  Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Section 4, no
registration or filing with, or consent or approval of or other action by, any
federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
any of the Financing Documents, the issuance, sale and delivery of the Shares
other than filings pursuant to federal and state securities laws (all of which
filings have been made by the Company, other than those which are required to
be made after the Closing and which will be duly made on a timely basis) in
connection with the sale of the Shares.

 

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

 

3.18.       Title to Properties.  The Company and each Subsidiary has good and
marketable title to all real properties and all other properties and assets
owned by it, in each case free and clear from any and all liens, security
interests, encumbrances and defects, and the Company and each Subsidiary holds
any leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or currently
planned to be made thereof by them.

 

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

 

3.20.       Environmental Matters.  Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is subject to any claim relating to any
Environmental Laws,

 

9

 

which violation,
contamination, liability or claim has had or could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate; and there is
no pending or threatened investigation that might lead to such a claim.

 

3.21.       Compliance with Nasdaq
Continued Listing Requirements.  The
Company is in compliance with applicable Nasdaq SmallCap Market continued
listing requirements.  There are no
proceedings pending or threatened against the Company relating to the continued
listing of the Company’s Common Stock on the Nasdaq SmallCap Market and the
Company has not received any notice of, nor is there any basis for, the
delisting of the Common Stock from the Nasdaq SmallCap Market.

 

3.22.       Brokers.  The Company has no contract, arrangement
or understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.  
No person or entity will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon
the Company, any Subsidiary or a Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company.

 

3.23.       Certain Registration
Matters.  Assuming the accuracy of
the Purchaser’ representations and warranties set forth in Section 4.1-4.5, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchaser under the Financing Documents.  The Company has not granted or agreed to
grant to any Person any rights (including “piggy-back” registration rights) to
have any securities of the Company registered with the SEC or any other
governmental authority that have not been satisfied or deferred during the
period between the date hereof and the date the Company’s registration
statement pursuant to the Registration Rights Agreement is declared
effective.  Other than the Registration
Statement (as defined in the Registration Rights Agreement), prior to the date
that a Registration Statement is first declared effective by the SEC, the
Company may not file any registration statement (other than on Form S-8) with
the SEC with respect to any securities of the Company.

 

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

 

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

 

10

 

3.26.       Information Supplied to
Purchasers.  Neither this Agreement,
the Disclosure Schedule and Exhibits attached hereto, the Private Placement
Memorandum of the Company, dated as of April 1, 2004 (the “Private
Placement Memorandum”), nor any other Financing Documents furnished
to the Purchasers by or on behalf of the Company contains any untrue statement
of a material fact, and none of this Agreement, the Disclosure Schedule and
Exhibits attached hereto, or such other Financing Documents omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.  None of the
matters described on the Disclosure Schedules have had, or could reasonably be
expected to have, a Material Adverse Effect, individually or in the aggregate.

 

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

 

3.28.       No Additional Agreements.  The Company does not have any agreement or understanding
with any Purchaser with respect to the transactions contemplated by the
Financing Documents other than as specified in the Financing Documents.

 

3.29.       Disclosure.  The Company confirms that neither it nor any
person acting on its behalf has provided any Purchaser or its respective agents
or counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the
proposed transactions hereunder may constitute such information. The Company
understands and confirms that the Purchasers will rely on the foregoing
representations and covenants in effecting transactions in securities of the Company.

 

4.             Representations of
the Purchasers.  Each of the
Purchasers represents and warrants to the Company as to itself and no other
Purchaser as follows:

 

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

 

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

 

4.3.         Investment.  The Securities to be received by such Purchaser
hereunder will be acquired for the Purchaser’s own account, not as nominee or
agent, and not with a view to the resale or distribution of any part thereof in
violation of the 1933 Act, and the Purchaser has no intention of selling,

 

11

 

granting any
participation in, or otherwise distributing the same in violation of the 1933
Act.  Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser
does not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.

 

4.4.         Investment Experience.  Such Purchaser acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.

 

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

 

4.6.         Access to Management.  Such Purchaser has had an opportunity to
receive additional information related to the Company requested by it and to
ask questions of and receive answers from the Company regarding the Company,
its business and the terms and conditions of the offering of the
Securities.  Neither such inquiries nor
any other investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser’s right
to rely on the truth, accuracy and completeness of the Company’s
representations and warranties contained in the Financing Documents and upon
the Private Placement Memorandum.  Such
Purchaser has reviewed the SEC Filings and acknowledges that, as of the date of
execution of this Agreement, the Company has not filed its Annual Report on
Form 10-KSB for the fiscal-year ended December 31, 2003.

 

4.7.         No General Solicitation.  Such Purchaser did not learn of the investment
in the Securities as a result of any public advertising or general
solicitation.

 

4.8.         Limited Ownership.  The purchase by such Purchaser of the
Securities issuable to it at each Closing will not immediately upon such
Closing result in such Purchaser (individually or together with other Persons
with whom such Purchaser has identified, or will have identified, itself as
part of a “group” in a public filing made with the Commission involving the
Company’s securities), acquiring, or obtaining the right to acquire, in excess
of 19.999% of the Common Stock or the voting power of the Company on a post
transaction basis that assumes that such Closing shall have occurred.  Such Purchaser does not currently intend to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of a Closing (when
added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of 19.999% of the Common Stock or the voting
power of the Company on a post transaction basis that assumes that such Closing
shall have occurred.

 

4.9.         Independent Investment
Decision.  Such Purchaser has
independently evaluated the merits of its decision to purchase Securities
pursuant to this Agreement, such decision has been independently made by such
Purchaser and such Purchaser confirms that it has only relied on the advice of
its own business and/or legal counsel (which such Purchaser acknowledges is not
Bryan Cave LLP) and not on the advice of any other Purchaser’s business or
legal counsel nor upon any investment banker, placement agent, or their
respective counsel in making such decision.

 

12

 

5.             Pre-Closing
Covenants; Conditions to the Obligations of the Purchasers.

 

5.1.         Pre-Closing Covenants.  The parties covenant and agree that they
will perform and observe the following covenants and provisions until the Second
Closing Date, as applicable.

 

5.1.1.      Dealings with Affiliates.  Except as contemplated herein, the Company
will not enter into any transaction, including, without limitation, any loans,
leases, extension of credit or royalty agreements with any employee, officer or
director of the Company  or holder
of ten percent (10%) or more of any class of capital stock of the Company, or
any member of their respective immediate families or any corporation or other
entity directly or indirectly controlled by one or more of such employees,
officers, directors or stockholders or members of their immediate families.

 

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

 

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

 

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

 

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

 

5.1.3.      Extraordinary Corporate
Transactions.  Except as
contemplated herein, the Company will not take any corporate action, enter into
any agreement to take such action, or obligate itself to take any such action,
if such action would:

 

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

 

(ii)           enter into any
transaction that expressly prohibits or limits the Company’s right to perform
its obligations under this Agreement;

 

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

 

13

 

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

 

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

 

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

 

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

 

5.1.4.      Proxy Statement.  The Company shall (a) prepare and file with
the SEC, promptly after the date hereof and in any event by the 10th
business day following the Initial Closing, preliminary proxy materials with
respect to a meeting of the Company’s stockholders for the purpose of approving
the issuance of the Securities to be issued at the Second Closing, as
contemplated by this Agreement.  Promptly
after comments are received from the SEC with respect to the preliminary proxy
materials and after the furnishing by the Company of all information required
to be contained therein, the Company shall file with the SEC the definitive
proxy statement and (b) acting through the Company’s Board of Directors,
(i)  call a meeting of the holders of
the Common Stock for the purpose of approving the issuance of the Securities to
be issued at the Second Closing as contemplated by this Agreement and (ii)
include in the proxy statement the recommendation of its Board of Directors
that holders of the Common Stock approve such issuance as contemplated by this
Agreement.

 

5.1.5.      Stockholders Agreement.  The Company shall obtain on or before the
date of the Initial Closing, a duly executed and delivered Voting Agreement
(the “Voting
Agreement”) among the holders of at least 50% of the Common Stock to approve the
issuance of the Securities at the Second Closing as contemplated by this
Agreement.  The parties agree and understand
that Purchasers may not vote their respective Shares or the shares of Common
Stock issuable upon exercise of their respective Warrants in any such vote.

 

5.2.         Funding of Escrow Account for Second Closing.  Concurrently with their respective execution
and delivery of this Agreement, each Purchaser will deliver to the Escrow Agent
for deposit into the escrow account (the “Escrow Account”) established pursuant to the terms
and conditions of the Escrow Agreement, the full amount of such Purchaser’s
investment amount as listed on Schedule I hereto for each of the Initial
Closing and the Second Closing, by wire transfer of immediately available
funds.

 

5.3.         Conditions to the
Obligations of the Purchasers.  The
obligations of the Purchasers under this Agreement are subject to the
fulfillment, or the waiver by the Purchasers, of the conditions set forth in
this Section 5.3 on or before each Closing Date. All such documents and actions
shall be satisfactory in form and substance to such Purchaser and its counsel.

 

5.3.1.      Accuracy of Representations
and Warranties; Performance.  Each
representation and warranty of the Company contained in this Agreement shall be
true and correct in all material respects on and as of each Closing Date, with
the same effect as though such representation and warranty had been made on and
as of that date.  The Company shall have
performed in all material respects all agreements and covenants required to be
performed by it under the Financing Documents prior to such Closing Date.

 

14

 

5.3.2.      Consents.  The Company shall have obtained any and all
consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Securities to be
offered and sold at such Closing.  No
judgment, writ, order, injunction, award or decree of or by any court, or
judge, justice or magistrate, including any bankruptcy court or judge, or any
order of or by any governmental authority, shall have been issued, and no
action or proceeding shall have been instituted by any governmental authority,
enjoining or preventing the consummation of the transactions contemplated
hereby or in the other Financing Documents.

 

5.3.3.      Certificates and Documents.  The Company shall have delivered to counsel
to the Purchasers:

 

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

 

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

 

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

 

5.3.4.      Opinion.  The Company shall have delivered to counsel
to the Purchasers an original opinion from Grippo & Elden LLC, counsel to
the Company, dated as of the Closing Date, addressed to the Purchasers, and in
the form attached hereto as Exhibit D.

 

5.3.5.      SEC Approvals; Effective
Registration; Blue Sky.  Any SEC
approval required to consummate the transactions contemplated by the Financing
Documents (other than the effectiveness of registration statements) shall have
been obtained.

 

5.3.6.      Registration Rights
Agreement.  The Company shall have
executed and delivered to the Purchasers the Registration Rights Agreement.

 

5.3.7.      Warrant Agreements.  The Company shall have executed
and delivered to the Purchasers the Warrant Agreements.

 

5.3.8.      Voting Agreement.  The Company shall have delivered to the
Purchasers a copy of the duly executed and delivered Voting Agreement.

 

5.3.9.      Stockholder Approval.  With respect to the Second Closing, on or
before July 19, 2004 the Company’s stockholders shall have approved the
issuance of the Securities at the Second Closing, as contemplated by this
Agreement and the conversion of the demand notes issued to three Company
stockholders (Oxford Bioscience Partners IV L.P., Mi3 L.P. and MRNA Fund II
L.P.) (the “Demand Notes”) into Common Stock at $0.75 per share.

 

5.3.10.    Nasdaq Listing. 
The Nasdaq Stock Market shall have waived application of the 15 day
prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or such
timeframe shall have expired without objection.  Trading in the Common Stock shall not have been suspended by the
SEC or the Nasdaq Stock Market (except for any suspensions of trading of not
more than one trading day solely to permit dissemination of material
information regarding the Company) at any time since the date of execution of
this Agreement, and the Common Stock shall have been at all times since such
date listed for trading on the Nasdaq Small Cap Market or Nasdaq National
Market.

 

15

 

5.3.11.    No Adverse Changes. 
Between the execution of this Agreement and such Closing, no event or
series of events (other than stock price fluctuations) shall have occurred
which reasonably would be expected to have or result in a material adverse
effect on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.

 

5.3.12.    Minimum Subscriptions.  The aggregate of all Purchaser investment amounts delivered
to the Escrow Account in accordance with Section 5.2 shall not be less than
$10,000,000 (provided, that such Purchaser shall have complied with
Section 5.2).

 

5.3.13.    Timing.  The Initial Closing
shall have occurred no later than April 19th, 2004.  The Second Closing shall have occurred no later than July 19,
2004.

 

5.3.14.    Conversion of Outstanding Notes.  Between the date of execution of
this Agreement and the Initial Closing Date, the holders of the Company’s
Revolving Convertible Senior Secured Promissory Note in the aggregate principal
amount of $4,160,000 have converted all principal and interest due thereunder
into Common Stock at $0.75 per share and shall have agreed in writing to
convert all Demand Notes into Common Stock at $0.75 per share at or before the
Second Closing and in any event, the Demand Notes shall automatically convert
upon approval of the stockholders to issue 20% or more of the Company’s stock.

 

6.             Conditions to the
Obligations of the Company.  The
obligations of the Company under this Agreement are subject to the fulfillment,
or the waiver in writing by the Company, of the conditions set forth in this
Section 6 on or before each Closing Date.

 

6.1.         Accuracy of
Representations and Warranties.  The
representations and warranties of the Purchasers contained in Section 4 shall
be true and correct in all material respects on and as of each Closing Date,
with the same effect as though such representations and warranties had been
made on and as of that date.

 

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

 

6.3.         Stockholder Approval.  With respect to the Second Closing, the Company’s stockholders shall have approved
the issuance of the Securities at the Second Closing, as contemplated by this
Agreement.

 

6.4.         Nasdaq
Listing.  The Nasdaq Stock Market shall have
waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(c)(17)(D) or such timeframe shall have expired without objection.

 

6.5.         Timing.  The Initial Closing
shall have occurred no later than April 19th, 2004.  The Second Closing shall have occurred no later than July 19,
2004.

 

6.6.         Minimum Subscriptions.  The aggregate of all Purchaser investment amounts delivered
to the Escrow Account in accordance with Section 5.2 shall not be less than
$10,000,000.

 

16

 

7.             Post Closing Covenants.

 

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

 

7.2.         Non-Contravention.  The Company will not take any action, enter
into any agreement or make any commitment that would conflict or interfere with
the obligations to the Purchasers under the Financing Documents.

 

7.3.         Listing of Shares.
The Company shall take such action as may be required to cause the Shares to be
listed on the Nasdaq SmallCap Market no later than the date required under the
rules and regulations thereof.  Further,
if the Company applies to have its Common Stock or other securities traded on
any other principal stock exchange or market, it shall include the Shares in
such application and will take such other action as is necessary to cause such
Common Stock to be so listed.  The
Company will use reasonable best efforts to continue the listing and trading of
its Common Stock on The Nasdaq SmallCap Market or on the Nasdaq National Market
and, in accordance, therewith, will use its best efforts to comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of such exchange, as applicable.

 

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

 

8.             General.

 

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

 

8.2.         Survival of
Representations and Warranties.  All
representations and warranties shall survive and remain in full force and
effect after the Closing with respect to the Company.

 

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

 

17

 

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

 

8.5.         Notices.  All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be delivered
by hand, by telecopier, by express overnight courier service or mailed by first
class mail, postage prepaid, to the respective addresses set forth on the
signature pages of this Agreement, as such addresses may be modified by notice
given pursuant to this Section 8.5, with copies provided simultaneously to
counsel as set forth on the signature pages of this Agreement.  Notices provided in accordance with this
Section 8.5 shall be deemed delivered upon personal delivery, receipt by
telecopy or overnight mail, or 48 hours after deposit in the mail in accordance
with the above.

 

8.6.         Entire Agreement.  This Agreement, together with the
instruments and other documents hereby contemplated to be executed and
delivered in connection herewith, contains the entire agreement and
understanding of the parties hereto, and supersedes any prior agreements or
understandings between or among them, with respect to the subject matter hereof.  Except as expressly set forth in this
Agreement, the Disclosure Schedule and the Exhibits attached hereto, the
Private Placement Memorandum and the Financing Documents, the Company makes no
representation or warranty, express or implied, with respect to the
transactions contemplated by this Agreement or the other Financing Documents,
the business of the Company, the Company, the Company’s assets or its future
prospects.  No party is relying on any
understandings, agreements or representations other than those expressly
contained this Agreement, the Disclosure Schedule and the Exhibits attached
hereto, the Private Placement Memorandum, the SEC Filings and the Financing
Documents.

 

8.7.         Amendments and
Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Purchasers holding a majority of the Shares.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of

 

18

 

either party to exercise
any right hereunder in any manner impair the exercise of any such right.  No consideration shall be offered or paid to
any Investor to amend or consent to a waiver or modification of any provision
of any Financing Document unless the same consideration is also offered to all
Investors who then hold Shares.

 

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

 

8.9.         Captions.  The captions of the sections, subsections
and paragraphs of this Agreement have been added for convenience only and shall
not be deemed to be a part of this Agreement.

 

8.10.       Severability.  Each provision of this Agreement shall be
interpreted in such manner as to validate and give effect thereto to the
fullest lawful extent, but if any provision of this Agreement is determined by
a court of competent jurisdiction to be invalid or unenforceable under
applicable law, such provision shall be ineffective only to the extent so
determined and such invalidity or unenforceability shall not affect the
remainder of such provision or the remaining provisions of this Agreement.

 

8.11.       Governing Law.  This Agreement shall be governed by and
interpreted and construed in accordance with the laws of the State of New York;
provided, however, that matters relating to the authorization, issuance
and enforceability of the terms of the Securities shall be governed and
interpreted and construed in accordance with the Nevada General Corporation
Law.  The Company irrevocably submits to
the exclusive jurisdiction of the state and federal courts located in the State
of New York  for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.  The Company irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to
the laying of venue in such court. The Company irrevocably waives any objection
to the laying of venue of any such suit, action or proceeding brought in such
courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.  If either party shall commence
an action to enforce any provisions of a Financing Document, then the
prevailing party in such action shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action.

 

8.12.       Independent Nature of
Purchasers.  The obligations of each
Purchaser under any Financing Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Financing Document.  The decision of
each Purchaser to purchase Securities pursuant to the Financing Documents has
been made by such Purchaser independently of any other Purchaser.  Nothing contained herein or in any Financing
Document, and no action taken by any Purchaser pursuant thereto, shall be
deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Financing Documents.  Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with making its
investment hereunder and that no Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment in the Securities or
enforcing its rights under the Financing Documents.  Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Financing Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for

 

19

 

such purpose.  The Company acknowledges that each of the
Purchasers has been provided with the same Financing Documents for the purpose
of closing a transaction with multiple Purchasers and not because it was required
or requested to do so by any Purchaser.

 

8.13.       Securities Laws Disclosure; Publicity.  By 9:00 a.m. (New York time) on the
business day following the execution of this Agreement, and by 9:00 a.m. (New
York time) on each Closing Date, the Company shall issue press releases
disclosing the transactions contemplated hereby and each Closing.  On the business day following the execution
of this Agreement the Company will file a Current Report on Form 8-K disclosing
the material terms of the Financing Documents (and attach as exhibits thereto
the Financing Documents), and on each Closing Date the Company will file an
additional Current Report on Form 8-K to disclose such Closing.  In addition, the Company will make such
other filings and notices in the manner and time required by the SEC and the Nasdaq
Stock Market.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the SEC (other than the
Registration Statements and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the 1934 Act)
or any regulatory agency or the Nasdaq Stock Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Nasdaq Stock Market regulations.

 

8.14.       Remedies. 
In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Investors and the
Company will be entitled to specific performance under the Financing
Documents.  The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.

 

8.15.       Payment Set Aside.  To the extent that the
Company makes a payment or payments to any Purchaser pursuant to any Financing
Document or a Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to
the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.

 

8.16.       Limitation of Liability. 
Notwithstanding anything herein to the contrary, the Company
acknowledges and agrees that the liability of a Purchaser arising directly or
indirectly, under any Financing Document of any and every nature whatsoever
shall be satisfied solely out of the assets of such Purchaser, and that no
trustee, officer, other investment vehicle or any other Affiliate of such
Purchaser or any investor, shareholder or holder of shares of beneficial
interest of such a Purchaser shall be personally liable for any liabilities of
such Purchaser.

 

[Signature Pages Follow]

 

20

 

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

 

	
   

  	
  IMCOR Pharmaceutical Co.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Taffy J. Williams,
  Ph.D., President

  	
   

  
	
   

  	
   

  
	
   

  	
  Notice Address:

  	
  6175 Lusk Boulevard

  
	
   

  	
   

  	
  San Diego, CA  92121

  
					

 

21

 

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

 

	
   

  	
  Purchaser:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
								

 

22

 

Schedule I

 

	
  Purchaser Name

  	
   

  	
  Investment
  Amount

  	
   

  	
  Shares to
  be Issued

  at Initial Closing

  	
   

  	
  Warrants
  to be

  Issued at Initial

  Closing

  	
   

  	
  Shares to
  be Issued

  at Second Closing

  	
   

  	
  Warrants
  to be

  Issued at Second

  Closing

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

1Exhibit 4.12

 

WARRANT AGREEMENT

 

WARRANT
AGREEMENT dated as of April 14, 2004 (this “Warrant Agreement”), between IMCOR
Pharmaceutical Co. , a Nevada corporation (the “Company”), and [Purchaser] (together with its successors
and assigns, the “Holder”).

 

WHEREAS,
the Company and the Holder have entered into that certain Securities Purchase
Agreement dated as of April 14, 2004 (the “Purchase Agreement”) pursuant to
which the Company agreed to sell and the Holder agreed to purchase warrants, as
hereinafter described (the “Warrants”), to purchase shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”);

 

WHEREAS,
the Common Stock issuable upon the exercise of the Warrants is hereinafter
referred to as the “Warrant Shares”; and

 

WHEREAS,
each Warrant entitles the Holder to purchase one Warrant Share at the exercise
price set forth herein.

 

NOW,
THEREFORE, in consideration of the premises and the mutual agreements herein
set forth and as set forth in the Purchase Agreement, the parties hereto agree
as follows:

 

SECTION
1.           Warrant Certificate.  The
certificate evidencing the Warrants (the “Warrant Certificate”) to be delivered
pursuant to this Agreement shall be in registered form only and shall be
substantially in the form set forth in Annex A attached hereto.

 

SECTION
2.           Execution of Warrant Certificates. 
Warrant Certificates shall be signed on behalf of the Company by its
Chairman of the Board or its President or a Vice President and by its Secretary
or an Assistant Secretary.  Each such
signature upon the Warrant Certificates may be in the form of a facsimile
signature of the present or any future Chairman of the Board, President, Vice
President, Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been
Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary, notwithstanding the fact that at the time the Warrant Certificates
shall be countersigned and delivered or disposed of he shall have ceased to
hold such office.

 

Any
Warrant Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Warrant Certificate, shall be a
proper officer of the Company to sign such Warrant Certificate, although at the
date of the execution of this Warrant Agreement any such person was not such
officer.

 

SECTION
3.           Registration.  The
Company shall number and register the Warrant Certificates in the name of the
record holder in a register to be maintained by the Company as they are issued
by the Company.  The Company may deem
and treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, absent actual notice to the
contrary.

 

1

 

SECTION
4.           Registration of Transfers and Exchanges.  The
Company shall register the transfer of any outstanding Warrant Certificates
upon the records to be maintained by it for that purpose, upon surrender
thereof accompanied (if so required by it) by a written instrument or
instruments of transfer duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney.  Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the transferee(s)
and the surrendered Warrant Certificate shall be canceled by the Company.  Canceled Warrant Certificates shall
thereafter be disposed of in a manner satisfactory to the Company.  The acceptance of the new Warrant
Certificate by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a Warrant
Certificate.

 

The
Holder agrees that each certificate representing Warrant Shares will bear the
following legend until the Warrant Shares are registered or freely tradeable
under the Securities Act of 1933, as amended and the regulations promulgated
thereunder:

 

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

 

Warrant
Certificates may be exchanged at the option of the holder(s) thereof, when
surrendered to the Company at its office for another Warrant Certificate or
other Warrant Certificates of like tenor and representing in the aggregate a
like number of Warrants.  Warrant
Certificates surrendered for exchange shall be canceled by the Company.

 

SECTION
5.           Terms of Warrants, Exercise of Warrants. 
Subject to the terms of this Agreement and the Warrant Certificate set
forth as Annex A,  the Warrant holder
shall have the right, commencing on the date hereof and until 5:00 p.m.,
Pacific time on April 19, 2009 (the “Exercise Period”), to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
Holder may at the time be entitled to receive on exercise of such Warrants and
payment of the Exercise Price (defined herein) then in effect for such Warrant
Shares in cash or by certified or official bank check payable to the order of
the Company, or through exercise of the cashless exercise provisions hereof if
available with respect to such exercise. 
Each Warrant not exercised prior to 5:00 p.m., Pacific time, on April
19, 2009 (the “Expiration Date”) shall become void and all rights thereunder
and all rights in respect thereof under this agreement shall cease as of such
time.

 

A
Warrant may be exercised upon surrender to the Company at its principal office
of the certificate or certificates evidencing the Warrants to be exercised with
the form of election to purchase duly filled in and signed, and upon payment to
the Company of the exercise price (the “Exercise Price”)

 

2

 

which is set forth in the form of Warrant
Certificate attached hereto as Annex A as adjusted as herein provided, for the
number of Warrant Shares in respect of which such Warrants are then
exercised.  For purposes of this
Agreement, an “Exercise Date” means the business day on which a Holder tenders
by facsimile to the Company an Exercise Notice, together with the payment of the
Exercise Price in respect of such exercise (whether or not actual Warrant
Certificates have yet been received by the Company.

 

The
Holder may pay the Exercise Price in one of the following manners:

 

(1)           Cash Exercise.  The
Holder may deliver immediately available funds; or

 

(2)           Cashless Exercise.  If
an Exercise Notice is delivered after the first to occur of (1) the date that a
registration statement covering the resale of the Warrant Shares is required to
be declared effective in accordance with terms of the Registration Rights
Agreement (as defined in the Purchase Agreement) or (2) the date that such
registration statement is required to have been declared effective in
accordance with the Registration Rights Agreement, and a registration statement
permitting the Holder to resell the Warrant Shares subject to such exercise is
not then effective or the prospectus forming a part thereof is not then
available to the Holder for the resale of such Warrant Shares, then the Holder
may notify the Company in a form of election to purchase of its election to
utilize cashless exercise, in which event the Company shall issue to the Holder
the number of Warrant Shares determined as follows:

 

X
= Y [(A-B)/A]

 

where:

 

X
= the number of Warrant Shares to be issued to the Holder.

 

Y
= the number of Warrant Shares with respect to which this Warrant is being
exercised.

 

A
= the average of the closing prices for the five trading days immediately prior
to (but not including) the Exercise Date.

 

B
= the Exercise Price.

 

For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

 

Upon
such surrender of Warrants and payment of the Exercise Price the Company shall
promptly issue and cause to be delivered with all reasonable dispatch to or upon
the written order of the Holder in the name of the Holder, a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise
of such Warrants together with cash as provided in SECTION 14; provided,
however, that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in subsection (m) of
SECTION 13 hereof, or a tender offer or an exchange offer for shares of Common
Stock of the Company shall be made, upon such surrender of Warrants and payment
of the Exercise Price as aforesaid, the Company shall, as soon as possible, but
in any event not later than two business days thereafter, issue and cause to be
delivered the full number of Warrant Shares issuable upon the exercise of such
Warrants in the manner described in this sentence together with cash as
provided in SECTION 14. Such certificate or certificates shall be deemed to
have been issued to the holder of record of such Warrant Shares as of the
applicable Exercise Date.

 

3

 

If
by the third business day after an Exercise Date the Company fails to deliver
the required number of Warrant Shares in the manner set forth above, then the
Holder will have the right to rescind such exercise.

 

If
by the third business day after an Exercise Date the Company fails to deliver
the required number of Warrant Shares in the manner required above, and if
after such third business day and prior to the receipt of such Warrant Shares,
the Holder purchases (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 upon such 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) for the shares 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 by (B) the closing bid price of the
Common Stock at the time of the obligation giving rise to such purchase
obligation 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 the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder.  The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In.

 

The
Company’s obligations to issue and deliver Warrant Shares in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing herein shall 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 to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant  as required pursuant to the terms hereof.

 

The
Warrants shall be exercisable, at the election of the Holders, either in full
or from time to time in part and, in the event that a certificate evidencing
Warrants is exercised in respect of fewer than all of the Warrant Shares issuable
on such exercise at any time prior to the date of expiration of the Warrants, a
new certificate evidencing the remaining Warrant or Warrants will be issued
pursuant to the provisions of this Section. 
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Company.  Such canceled
Warrant Certificates shall then be disposed of by the Company.

 

SECTION
6.           Mandatory Exercise. 
Subject to the provisions of this Section 6, if at any time following
the issuance of the Warrant Certificates: (i) the VWAP (as defined below) of
the Common Stock for each of 20 consecutive trading days is greater than $3.50
(subject to adjustments due to stock splits, recapitalizations or similar
events), (ii) the Warrant Shares are either registered for resale pursuant to
an effective registration statement naming the Holders as selling stockholders
thereunder (and the prospectus thereunder is available for use by the Holders
as to all Warrant Shares) or freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act, as determined by
counsel to the Company pursuant to a written opinion letter addressed and in
form and substance reasonably acceptable to the Holders and the transfer agent
for the Common Stock, during the entire 20 trading day period referenced in (i)
above through the expiration of the Call Date as set forth in the Company’s
notice pursuant to this Section (the “Call Condition Period”), and (iii)
the Company shall

 

4

 

have complied in all material respects with its
obligations under this Warrant Agreement and the Financing  Documents and the Common Stock shall at all
times be listed or quoted on a the Nasdaq National Market or Nasdaq SmallCap Market,
then, subject to the conditions set forth in this Section, the Company may, in
its sole discretion, elect to require the exercise of all (but not less than
all) of the then unexercised portion of the Warrants, on the date that is the
10th day after written notice thereof (a “Call Notice”) is received by
the Holders (the “Call Date”) at the address last shown on the records
of the Company for the Holders or given by Holders to the Company for the
purpose of notice; provided, that the conditions to giving such notice
must be in effect at all times during the Call Condition Period or any such
Call Notice shall be null and void. The Company agrees that, if and to the
extent Section 15 hereof would restrict the ability of a Holder to exercise its
Warrants in the event of a delivery of a Call Notice, then notwithstanding
anything to the contrary set forth in the Call Notice, the Call Notice shall be
deemed automatically amended as to such Holder to apply only to such portion of
its Warrants as may be exercised by such Holder by the Call Date in accordance
with such Section.  A Holder will
promptly (and, in any event, prior to the Call Date) notify the Company in
writing following receipt of a Call Notice if Section 15 would restrict its
exercise of Warrants, specifying therein the number of Warrant Shares so
restricted.  The Company covenants and
agrees that it will honor all Exercise Notices tendered through 5:00 p.m.
(Pacific time) on the Call Date.  “VWAP”
means on any particular trading day or for any particular period, the volume
weighted average trading price per share of Common Stock on such date or for
such period as reported by the Bloomberg L.P., by any successor performing
similar functions.

 

Upon
such surrender of Warrants and payment of the Exercise Price the Company shall
promptly issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the Holder in the name of the Holder, a certificate
or certificates for the number of full Warrant Shares issuable upon the exercise
of such Warrants together with cash as provided in SECTION 14.

 

SECTION
7.           Registration Rights.  The
Company shall register the Warrant Shares for resale under the Securities Act
of 1933, as amended, pursuant to the terms and conditions of that certain
Registration Rights Agreement dated even date herewith by and among the
Company, the Holder and the other “Purchasers” named therein.

 

SECTION
8.           Payment of Taxes. 
Issuance and delivery of certificates for shares of Common Stock upon
exercise of a Warrant Certificate shall be made without charge to the Holder
for any issue or transfer tax, withholding tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such certificates, all
of which such taxes and expenses shall be paid by the Company; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that
of the registered holder of a Warrant Certificate surrendered upon the exercise
of a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.

 

SECTION
9.           Mutilated or Missing Warrant Certificates.  In
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company may, in its discretion, issue in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory
to the Company of such loss, theft or destruction of such Warrant Certificate
and indemnity, if requested, also satisfactory to them.  Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.

 

5

 

SECTION
10.         Reservation of Warrant Shares.  The
Company covenants that it will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury,
for the purpose of enabling it to satisfy any obligation to issue Warrant
Shares upon exercise of Warrants, the maximum number of shares of Common Stock
which may then be deliverable upon the exercise of all outstanding Warrants.  The Company covenants that all Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.

 

The
Company or, if appointed, the transfer agent for the Common Stock (the
“Transfer Agent”) and every subsequent transfer agent for any shares of the
Company’s capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.

 

Before
taking any action which would cause an adjustment pursuant to SECTION 12 hereof
to reduce the Exercise Price below the then par value (if any) of the Warrant
Shares, the Company will take any corporate action which may, in the opinion of
its counsel (which may be counsel employed by the Company), be necessary in
order that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares at the Exercise Price as so adjusted.

 

SECTION
11.         Obtaining Stock Exchange Listings.  The
Company will from time to time take all action which may be necessary so that
the Warrant Shares, immediately upon their issuance upon the exercise of
Warrants, will be listed on the principal securities exchanges and markets
within the United States of America, if any, on which other shares of Common
Stock are then listed.

 

SECTION
12.         Adjustment of Exercise Price and Number of
Warrant Shares Issuable.  The Exercise Price and the number of Warrant
Shares issuable upon the exercise of each Warrant are subject to adjustment
from time to time upon the occurrence of the events enumerated in this SECTION
12 but subject in all events to the Company receiving approval from its
stockholders in accordance with Nasdaq rules to issue more than 20% of the its
stock in connection with the transactions in the Purchase Agreement (including
this Warrant Agreement).  For purposes
of this SECTION 12, “Common Stock” means shares now or hereafter authorized of
any class of common stock of the Company and any other stock of the Company,
however designated, that has the right (subject to any prior rights of any
class or series of preferred stock) to participate in any distribution of the
assets or earnings of the Company without limit as to per share amount.

 

(a)           Adjustment for Change in Capital Stock.

 

If
the Company:

 

(1)           pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock;

 

(2)           subdivides its outstanding shares of Common
Stock into a greater number of shares;

 

(3)           combines its outstanding shares of Common
Stock into a smaller number of shares;

 

(4)           makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or

 

6

 

(5)           issues by reclassification of its Common
Stock any shares of its capital stock;

 

then
the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.

 

The
adjustment shall become effective immediately after the record date in the case
of a dividend or distribution and immediately after the effective date in the
case of a subdivision, combination or reclassification.

 

If
after an adjustment a Holder upon exercise may receive shares of two or more
classes of capital stock of the Company, the Company shall determine the
allocation of the adjusted Exercise Price between the classes of capital
stock.  After such allocation, the
exercise privilege and the Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section.

 

Such
adjustment shall be made successively whenever any event listed above shall
occur.

 

(b)           Adjustment for Rights Issue.

 

If
the Company distributes any rights, options or warrants to all holders of its
Common Stock entitling them to purchase shares of Common Stock at a price per
share less than the current market price per share on that record date, the
Exercise Price shall be adjusted in accordance with the formula:

 

O  +  N
x P

E’  =   E  x        M    

O
+ N

 

where:

 

E’  =        the
adjusted Exercise Price.

 

E  =         the
current Exercise Price.

 

O  =         the
number of shares of Common Stock outstanding on the record date.

 

N  =         the
number of additional shares of Common Stock offered.

 

P  =         the
offering price per share of the additional shares.

 

M  =        the
current market price per share of Common Stock on the record date.

 

The
adjustment shall be made successively whenever any such rights, options or
warrants are issued and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
options or warrants.  If, at the end of
the period during which such rights, options or warrants are exercisable, not
all rights, options or warrants shall have been exercised, the Exercise Price
shall be immediately readjusted to what it would have been if “N” in the above
formula had been the number of shares actually issued.

 

7

 

This
subsection (b) does not apply to any of the transactions described in
subsection (a) of this Section.

 

(c)           Adjustment for Other Distributions.

 

If
the Company distributes to all holders of its Common Stock any of its assets or
debt securities or any rights or warrants to purchase debt securities, assets
or other securities of the Company, the Exercise Price shall be adjusted in
accordance with the formula:

 

E’  = 
E  x    M  –  F

M

 

where:

 

E’  =        the
adjusted Exercise Price.

 

E  =         the
current Exercise Price.

 

M  =        the
current market price per share of Common Stock on the record date mentioned
below.

 

F  =         the
fair market value on the record date of the assets, securities, rights or warrants
applicable to one share of Common Stock. 
The Board of Directors shall determine the fair market value.

 

The
adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.

 

This
subsection (c) does not apply to cash dividends or cash distributions paid out
of consolidated current or retained earnings as shown on the books of the
Company prepared in accordance with generally accepted accounting
principles.  Also, this subsection does
not apply to any transaction in subsection (a) or rights, options or warrants
referred to in subsection (b) of this SECTION 12.

 

(d)           Adjustment for Common Stock Issue.

 

If
the Company issues shares of Common Stock for a consideration per share less
than the Exercise Price per share on the date the Company fixes the offering
price of such additional shares, the Exercise Price shall be adjusted in
accordance with the formula:

 

P

E’  = 
E  x    O  +  M

A

 

where:

 

E’  =        the
adjusted Exercise Price.

 

E  =         the
then current Exercise Price.

 

O  =         the
number of shares outstanding immediately prior to the issuance of such
additional shares.

 

8

 

P  =         the
aggregate consideration received for the issuance of such additional shares.

 

M  =        the
current market price per share on the date of issuance of such additional
shares.

 

A  =        the
number of shares outstanding immediately after the issuance of such additional
shares.

 

The
adjustment shall be made successively whenever any such issuance is made, and
shall become effective immediately after such issuance.

 

This
subsection (d) does not apply to:

 

(1)             any of the transactions described in
subsections (a), (b) or (c) of this SECTION 12,

 

(2)             the exercise of Warrants, or the conversion
or exchange of other securities convertible or exchangeable for Common Stock,

 

(3)             Common Stock issued to the Company’s
employees under bona fide employee benefit plans adopted by the Board of
Directors and approved by the holders of Common Stock when required by law, if
such Common Stock would otherwise be covered by this subsection (d) (but only
to the extent that the aggregate number of shares excluded hereby are issued pursuant
to new plans (or amendments to existing plans) authorized after the date of
this Warrant Agreement),

 

(4)             Common Stock upon the exercise of rights or
warrants issued to the holders of Common Stock,

 

(5)             Common Stock issued to shareholders of any person
which merges into the Company in proportion to their stock holdings of such
person immediately prior to such merger, upon such merger,

 

(6)             Common Stock issued in a bona fide public
offering pursuant to a firm commitment underwriting or

 

(7)             Common Stock issued in a bona fide private
placement (except to the extent that any discount from the current market price
attributable to restrictions on transferability of the Common Stock, as
determined in good faith by the Board of Directors and described in a Board
resolution which shall be filed with the Trustee, shall exceed 25%).

 

(e)           Adjustment for Convertible Securities Issue.

 

If
the Company issues any securities convertible into or exchangeable for Common
Stock (other than securities issued in transactions described in subsections
(b) and (c) of this SECTION 12) for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such securities less than
the current market price per share on the date of issuance of such securities,
the Exercise Price shall be adjusted in accordance with this formula:

 

P

E’  = 
E  x     O  +  M

O  +  D

 

9

 

where:

 

E’  =        the
adjusted Exercise Price.

 

E  =         the
then current Exercise Price.

 

O  =         the
number of shares outstanding immediately prior to the issuance of such
securities.

 

P  =         the
aggregate consideration received for the issuance of such securities.

 

M  =        the
current market price per share on the date of issuance of such securities.

 

D  =         the
maximum number of shares deliverable upon conversion or in exchange for such
securities at the initial conversion or exchange rate.

 

The
adjustment shall be made successively whenever any such issuance is made, and
shall become effective immediately after such issuance.

 

If
all of the Common Stock deliverable upon conversion or exchange of such
securities have not been issued when such securities are no longer outstanding,
then the Exercise Price shall promptly be readjusted to the Exercise Price
which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion or exchange of such securities.

 

This
subsection (e) does not apply to:

 

(1)             any of the transaction referred to in
subsection (a), (b), (c) or (d) of this SECTION 12.

 

(2)             convertible securities issued to shareholders
of any person which merges into the Company, or with a subsidiary of the
Company, in proportion to their stock holdings of such person immediately prior
to such merger, upon such merger,

 

(3)             convertible securities issued in a bona fide
public offering pursuant to a firm commitment underwriting or

 

(4)             convertible securities issued in a bona fide
private placement (except to the extent that any discount from the current
market price attributable to restrictions on transferability of Common Stock
issuable upon conversion, as determined in good faith by the Board of Directors
and described in a Board resolution, shall exceed 25% of the then current
market price).

 

(f)            Current Market Price.

 

In
subsections (b), (c), (d) and (e) of this SECTION 12 the current market price
per share of Common Stock on any date shall be the fair market value per
Warrant Share which shall mean (i) if the Common Stock is in the
over-the-counter market and not in The Nasdaq National Market nor on any
national securities exchange, the average of the per share closing price on the
10 consecutive trading days immediately preceding the date in question, as
reported by The Nasdaq Small Cap Market (or an equivalent generally accepted
reporting service if quotations are not reported on The Nasdaq Small Cap
Market), or (ii) if the Common Stock is traded in The Nasdaq National Market or
on a national securities exchange, the average for the 10 consecutive trading
days immediately preceding the date in question of

 

10

 

the daily per share closing prices in The
Nasdaq National Market or on the principal stock exchange on which it is
listed, as the case may be.  For
purposes of clause (i) above, if trading in the Common Stock is not reported by
The Nasdaq Small Cap Market, the applicable closing  price referred to in said clause shall be the last sale price as
reported on the OTC Electronic Bulletin Board of the National Association of
Securities Dealers, Inc. or, if not reported thereon, as reported in the “pink
sheets” published by National Quotation Bureau, Incorporated, and, if such
securities are not so reported, shall be the price of a share of Common Stock
determined by the Company’s Board of Directors in good faith. The closing price
referred to in clauses (i) and (ii) above shall be the last reported sale price
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, in any case in The Nasdaq Small Cap
Market (or the equivalent generally accepted reporting service if quotations
are not reported on The Nasdaq Small Cap Market), The Nasdaq National Market or
on the national securities exchange on which the Common Stock is then listed in
accordance with SECTION 11 of this Agreement.

 

(g)           Consideration Received.

 

For
purposes of any computation respecting consideration received pursuant to
subsections (d) and (e) of this SECTION 10, the following shall apply:

 

(1)             in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith;

 

(2)             in the case of the issuance of shares of
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors (irrespective of
the accounting treatment thereof), whose determination shall be conclusive, and
described in a Board resolution, a copy of which shall be mailed to each
holder; and

 

(3)             in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or
exchange thereof (the consideration in each case to be determined in the same
manner as provided in clauses (1) and (2) of this subsection).

 

(h)           When De Minimis Adjustment May Be Deferred.

 

No
adjustment in the Exercise Price need be made unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Price. Any
adjustments that are not made shall be carried forward and taken into account
in any subsequent adjustment.

 

(i)            All calculations under this Section shall be
made to the nearest cent or to the nearest 1/100th of a share, as the case may
be.

 

(j)            When No Adjustment Required.

 

No
adjustment need be made for a transaction referred to in subsections (b) or (c)
of this SECTION 12 if Warrant holders are to participate in the transaction on
a basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.

 

11

 

No
adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest.

 

No
adjustment need be made for a change in the par value or no par value of the
Common Stock.

 

To
the extent the Warrants become convertible into cash, no adjustment need be
made thereafter as to the cash. 
Interest will not accrue on the cash.

 

(k)           Notice of Adjustment.

 

Whenever
the Exercise Price is adjusted, the Company shall provide the notices required
by SECTION 14 hereof.

 

(l)            Voluntary Reduction.

 

The
Company from time to time may reduce the Exercise Price by any amount for any
period of time if the period is at least 20 days and if the reduction is
irrevocable during the period; provided, however, that in no
event may the Exercise Price be less than the par value of a share of Common
Stock and in no event may any such reduction apply to less than all of the
Warrants then outstanding.

 

Whenever
the Exercise Price is reduced, the Company shall mail to Holders a notice of
the reduction.  The Company shall mail
the notice at least 15 days before the date the reduced Exercise Price takes
effect.  The notice shall state the
reduced Exercise Price and the period it will be in effect.

 

A
reduction of the Exercise Price does not change or adjust the Exercise Price
otherwise in effect for purposes of this Section 12.

 

(m)          Notice of Certain Transactions.

 

If
the Company:

 

(1)             takes any action that would require an
adjustment in the Exercise Price pursuant to this SECTION 12 and if the Company
does not arrange for Warrant holders to participate pursuant to subsection (i)
of this SECTION 12;

 

(2)             takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (m) of this SECTION 12;
or

 

(3)             liquidates or dissolves,

 

then
the Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution.  The
Company shall mail the notice at least 20 days before such date.  Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.

 

(n)           Reorganization of Company.

 

12

 

If
the Company consolidates or merges with or into, or transfers or leases all or
substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind
and amount of securities, cash or other assets which the holder of a Warrant
would have owned immediately after such transaction if the holder had exercised
the Warrant immediately before the effective date of such transaction.  Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or merger
if other than the Company, or the person to which such sale or conveyance shall
have been made, shall enter into a supplemental Warrant Agreement so providing
and further providing for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Section.  The successor Company shall mail to Warrant
holders a notice describing the supplemental Warrant Agreement.  In the event the surviving company to any
such transaction does not have a class of securities registered for and trading
on the New York Stock Exchange, American Stock Exchange, Nasdaq Stock Market or
OTC Bulletin Board, then, at the option of each Holder, such Holder may require
that the Company, as a condition precedent to consummating any such
transaction, redeem the remaining portion of such Holder’s Warrant for an
amount in cash equal to the Black Scholes value of such Warrant.

 

If
the issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant Agreement is an Affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.

 

If
this subsection (l) applies, subsections (a), (b), (c), (d) and (e) of this
SECTION 12 do not apply.

 

(o)           When Issuance or Payment May Be Deferred.

 

In
any case in which this  SECTION 12 shall
require that an adjustment in the Exercise Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event (i) issuing to the holder of any Warrant exercised after
such record date the Warrant Shares and other capital stock of the Company, if
any, issuable upon such exercise over and above the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise on the basis
of the Exercise Price and (ii) paying to such holder any amount in cash in lieu
of a fractional share pursuant to SECTION 13; provided, however,
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.

 

(p)           Adjustment in Number of Shares.

 

Upon
each adjustment of the Exercise Price pursuant to this SECTION 12, each Warrant
outstanding prior to the making of the adjustment in the Exercise Price shall
thereafter evidence the right to receive upon payment of the adjusted Exercise
Price that number of shares of Common Stock (calculated to the nearest
hundredth) obtained from the following formula:

 

N’  = 
N   x  E 

E’

 

where:

 

N’  =       the
adjusted number of Warrant Shares issuable upon exercise of a Warrant by
payment of the adjusted Exercise Price.

 

13

 

N  =         the
number or Warrant Shares previously issuable upon exercise of a Warrant by
payment of the Exercise Price prior to adjustment.

 

E’  =        the
adjusted Exercise Price.

 

E  =         the
Exercise Price prior to adjustment.

 

(q)           Form of Warrants.

 

Irrespective
of any adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.

 

(r)            Any determination that the Company or its
Board of Directors must make pursuant to this SECTION 12 is conclusive (absent
manifest error) if made reasonably and in good faith.

 

SECTION
13.         Fractional Interests.  The
Company shall not be required to issue fractional Warrant Shares on the
exercise of Warrants.  If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented.  If any fraction of a Warrant Share would,
except for the provisions of this SECTION 13, be issuable on the exercise of
any Warrants (or specified portion thereof), the Company shall pay an amount in
cash equal to the Exercise Price on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.

 

SECTION
14.         Notices to Warrant Holders. 
Upon any adjustment of the Exercise Price pursuant to SECTION 12, the
Company shall promptly thereafter (i) cause to be given to each of the
registered holders of the Warrant Certificates at his address appearing on the
Warrant register a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company (who may
be the regular auditors of the Company) setting forth the Exercise Price after
such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Warrant Shares (or portion thereof) issuable after such
adjustment in the Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, by first-class mail, postage
prepaid.  Where appropriate, such notice
may be given in advance and included as a part of the notice required to be
mailed under the other provisions of this SECTION 14.

 

In
case:

 

(a)           the Company shall authorize the issuance to
all holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other subscription
rights or warrants; or

 

(b)           the Company shall authorize the distribution
to all holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares of
Common Stock or distributions referred to in subsection (a) of SECTION 12
hereof); or

 

(c)           of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the

 

14

 

properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or

 

(d)           of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or

 

(e)           the Company proposes to take any action
(other than actions of the character described in Section 10(a)) which would
require an adjustment of the Exercise Price pursuant to SECTION 12; then the
Company shall cause to be given to each of the registered holders of the
Warrant Certificates at his address appearing on the Warrant register, at least
20 days (or 10 days in any case specified in clauses (a) or (b) above) prior to
the applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, by first-class mail, postage prepaid,
a written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock, or (iii) the date on which any such consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up is expected to become
effective or consummated, and the date as of which it is expected that holders
of record of shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up.  The failure to give the
notice required by this SECTION 14 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up, or the vote upon any action.

 

Nothing
contained in this Agreement or in any of the Warrant Certificates shall be
construed as conferring upon the holders thereof the right to vote or to
consent or to receive notice as shareholders in respect of the meetings of
shareholders or the election of Directors of the Company or any other matter,
or any rights whatsoever as shareholders of the Company.

 

SECTION
15.         Limitations on Exercise. 
Notwithstanding anything to the contrary contained herein, the number of
shares of Common Stock that may be acquired by the Holder upon any exercise of
a Warrant Certificate (or otherwise in respect hereof) shall be limited to the
extent necessary to insure that, following such exercise (or other issuance),
the total number of shares of Common Stock then beneficially owned by such
Holder and its Affiliates and any other Persons whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section
13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares
of Common Stock issuable upon such exercise). 
For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  This provision
shall not restrict the number of shares of Common Stock which a Holder may
receive or beneficially own in order to determine the amount of securities or
other consideration that such Holder may receive in the event of a merger or
other business combination or reclassification involving the Company as
contemplated in Section 12 of this Warrant. 
This restriction may not be waived, but will expire automatically on the
65th day prior to the Expiration Date.

 

SECTION
16.         Notices to Company.  Any
notice or demand authorized by this Agreement to be given or made by the
Company or by a Holder to or on the Company shall be sufficiently given or made
when and if deposited in the mail, first class or registered, postage prepaid,
addressed (until another address is filed in writing by the Company), or by
facsimile, as follows:

 

15

 

IMCOR
Pharmaceutical Co.

6175 Lusk Boulevard

San Diego, CA  92121

858-410-5602

Attention:  Taffy J.
Williams, Ph.D., President

 

With
copy to (other than for Exercise Notices)

 

Theodore
W. Grippo, Esq.

Grippo & Elden, LLC

227 West Monroe Street, Suite 3600

Chicago, IL 60606

312-558-1195

 

In
case the Company shall fail to maintain such office or agency or shall fail to
give such notice of the location or of any change in the location thereof,
presentations may be made and notices and demands may be served at the
principal office of the Transfer Agent.

 

SECTION
17.         Supplements and Amendments.  The
Company and the Warrant holders may from time to time supplement or amend this
Agreement with the approval of not less than the Holders of at least a majority
of all then remaining Warrants.

 

SECTION
18.         Successors.  All the covenants and
provisions of this Agreement by or for the benefit of the Company or the Holder
shall bind and inure to the benefit of their respective successors and assigns
hereunder.

 

SECTION
19.         Termination.  This Agreement shall
terminate at 5:00 p.m., Pacific time on the Expiration Date, or such earlier
date on which all Warrants have been exercised and the Company shall have
complied with its obligations as to such exercises.

 

SECTION
20.         Governing Law; Jurisdiction and Venue. 
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for
all purposes shall be construed in accordance with the internal laws of said
State, provided, however, that
if, as a result of the Company’s incorporation in the State of Nevada the
corporate laws of that State should govern a particular issue, the internal
laws of the State of Nevada shall govern that issue.

 

SECTION
21.         Transferability and Nonnegotiability of
Warrant. The Warrants may
not be transferred or assigned in whole or in part without compliance with all
applicable federal and state securities laws by the transferor and the
transferee. Subject to compliance with such laws, title to the Warrants may be
transferred by endorsement (by the Holder executing an Assignment Form
reasonably acceptable to the Company) and delivery in the same manner as a
negotiable instrument transferable by endorsement and delivery.

 

SECTION
22.         Exchange of Warrant Upon a Transfer.  On
surrender of the Warrant Certificate for exchange, properly endorsed on the
Assignment Form and subject to the provisions of this Agreement with respect to
compliance with applicable securities laws and with the limitations on
assignments and transfers and contained in SECTION 21, the Company at its
expense shall issue to or on the order of the Holder a new Warrant Certificate
of like tenor, in the name of the Holder or as the Holder may direct, for the
number of shares issuable upon exercise hereof.

 

16

 

SECTION
23.         Compliance with Securities Laws.  The
Holder agrees that the Holder will not offer, sell or otherwise dispose of this
Warrant or any shares of Common Stock to be issued upon exercise hereof except
under circumstances that will not result in a violation of the federal or any
state securities laws.  Prior to any
proposed transfer of this Warrant, the holder thereof shall give written notice
to the Company of its intention to effect such transfer.  Each such notice shall describe the manner
of the proposed transfer and, if requested by the Company, shall be accompanied
by an opinion of counsel reasonably satisfactory to the Company to the effect
that the proposed transfer may be effected without registration under the
Securities Act, whereupon the Holder shall be entitled to transfer this Warrant
in accordance with the terms of its notice; provided, however, that no such
opinion of counsel shall be required for a transfer to one or more partners of
the transferor (in the case of a transferor that is a partnership) or to an
affiliated corporation (in the case of a transferor that is a
corporation).  Each Warrant transferred
as above provided shall bear the legend set forth at the beginning of the form
Warrant Certificates annexed hereto as Annex A and B, as the case may be.

 

SECTION
24.         Benefits of This Agreement.  Nothing
in this Agreement shall be construed to give to any person or corporation other
than the Company, the Holder and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Holder and the registered holders of the Warrant Certificates.

 

SECTION
25.         Counterparts. 
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.

 

Signature
page follows.

 

17

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.

 

	
   

  	
  IMCOR
  Pharmaceutical Co.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Taffy
  J. Williams, Ph.D., President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Brooks
  Boveroux, Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [PURCHASER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
									

 

18

 

Annex
A

 

[Form of Warrant Certificate]

 

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

 

EXERCISABLE ON OR BEFORE
              ,
2009

 

	
  No.
         

  	
   

  	
              Warrants

  

 

Warrant Certificate

 

IMCOR PHARMACEUTICAL CO.

 

This
Warrant Certificate certifies that [PURCHASER]
or registered assigns (“Holder”), is the registered holder of Warrants expiring
                ,
2009 (the “Warrants”) to purchase Common Stock, par value $0.001 per share (the
“Common Stock”), of IMCOR PHARMACEUTICAL CO., a Nevada corporation (the
“Company”).  Each Warrant entitles the
Holder upon exercise to receive from the Company at any time from the date
hereof and on or before 5:00 p.m. Pacific Time on
                  ,
2009 (the “Expiration Date”), one fully paid and nonassessable share of Common
Stock (a “Warrant Share”) at the initial exercise price (the “Exercise Price”)
of $1.00 per share payable in accordance with that certain Warrant Agreement
dated as of
                       ,
2004 (the “Warrant Agreement”) between the Company and the original Holder of
this Warrant Certificate upon surrender of this Warrant Certificate and payment
of the Exercise Price, in accordance with the terms and conditions set forth
herein and in the Warrant Agreement. 
The Exercise Price and number of Warrant Shares issuable upon exercise
of the Warrants are subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement.

 

No
Warrant may be exercised after 5:00 p.m., Pacific Time on the Expiration Date,
and to the extent not exercised by such time such Warrants shall become void.

 

This
Warrant Certificate shall be governed and construed in accordance with the
internal laws of the State of New York, provided,
however, that if, as a result of the Company’s incorporation in the
State of Nevada the corporate laws of that State should govern a particular
issue, the internal laws of the State of Nevada shall govern that issue.

 

The
Warrants evidenced by this Warrant Certificate are part of a duly authorized
issue of Warrants expiring on the Expiration Date entitling the Holder on
exercise to receive shares of Common Stock, par value $0.001 per share, of the
Company (the “Common Stock”), and are issued or to be issued

 

B - 1

 

pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company, the Holder and the Holders.  A
copy of the Warrant Agreement may be obtained by the Holder upon written
request to the Company.

 

Warrants
may be exercised at any time on or before the Expiration Date.  The Holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon completed and executed,
together with payment of the Exercise Price in accordance with the Warrant
Agreement.  In the event that upon any
exercise of Warrants evidenced hereby the number of Warrants exercised shall be
less than the total number of Warrants evidenced hereby, there shall be issued
to the Holder or its assignee a new Warrant Certificate evidencing the number
of Warrants not exercised.

 

The
Warrant Agreement provides that upon the occurrence of certain events the
Exercise Price set forth on the face hereof may, subject to certain conditions,
be adjusted.  If the Exercise Price is
adjusted, the Warrant Agreement provides that the number of shares of Common
Stock issuable upon the exercise of each Warrant shall be adjusted.  No fractions of a share of Common Stock will
be issued upon the exercise of any Warrant, but the Company will pay the cash
value thereof determined as provided in the Warrant Agreement.

 

Warrant
Certificates, when surrendered at the office of the Company by the registered
holder thereof may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor
evidencing in the aggregate a like number of Warrants.

 

Upon
due presentation for registration of transfer of this Warrant Certificate at
the office of the Company a new Warrant Certificate or Warrant Certificates of
like tenor and evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant Certificate, subject
to the limitations provided in the Warrant Agreement, without charge except for
any tax or other governmental charge imposed in connection therewith.

 

The
Company may deem and treat the registered Holder as the absolute owner of this
Warrant Certificate (notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise hereof, of any
distribution to the Holder hereunder, and for all other purposes, and the
Company shall not be affected by any notice to the contrary other than as
delivered by or on behalf of the Holder. 
Neither the Warrants nor this Warrant Certificate entitles the Holder
hereof to any rights of a stockholder of the Company.

 

B - 2

 

IN
WITNESS WHEREOF, IMCOR Pharmaceutical Co. has caused this Warrant Certificate
to be signed by its President and by its Secretary.

 

 

	
  Dated:

  	
   

  	
  ,
  2004

  	
   

  
	
   

  	
   

  
	
   

  	
  IMCOR
  PHARMACEUTICAL CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:
  Taffy J. Williams, Ph.D.

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:
  Brooks Boveroux

  
	
   

  	
  Title:  Secretary

  

 

B - 3

 

[EXERCISE
NOTICE]

 

The
undersigned hereby elects to exercise the right, represented by this Warrant
Certificate, to receive
                  
shares of Common Stock and herewith and tenders payment for such shares in
cash, by certified or official bank check payable or through the use of the
cashless exercise provisions of the Warrant Agreement relating to this Exercise
Notice, in accordance with the Warrant Agreement.

 

The
undersigned requests that a certificate for such shares be registered in the
name of                      ,
whose address is
                                                                               
and that such shares be delivered to
                    
whose address is                                                                                .  If said number of shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant Certificate representing the remaining balance of such shares be
registered in the name of
                    ,
whose address is
                                                               
and that such Warrant Certificate be delivered to                     ,
whose address is
                    .

 

 

Dated:

 

	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
  (Signature
  must confirm in all respects to name of holder

  as specified on the face of the Warrant Certificate.)

  

 

B - 4

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