Document:

Severance Agreement / Tracy Caswell

 

Exhibit
10.2

SEVERANCE
AGREEMENT

THIS
SEVERANCE AGREEMENT (the “Severance Agreement”) is made and entered into as of
the 26th day of May, 2005, by and between TRACY CULVER CASWELL, an individual
resident of the State of Georgia (the “Employee”), and THERAGENICS CORPORATION,
a Delaware Corporation (the “Company”).

W I T N E S S E T H:

WHEREAS,
the Employee and the Company entered into that certain Amended Employment
Agreement dated as of July 6, 2001 (the “Amended Employment Agreement”, at which
time Employee was known as Tracy M. Culver), pursuant to which the Company has
employed the Employee in the capacity of General Counsel (the “General Counsel
Position”); and 

WHEREAS,
the Employee has resigned from the General Counsel Position, and in connection
therewith, the parties desire to set forth herein the terms and conditions
pertaining to such resignation and the Severance Period (as hereinafter
defined);

NOW,
THEREFORE, for and in consideration of the premises and mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

AGREEMENT:

	1)  	
      Resignation;
      To be Treated as Termination Without Cause Pursuant to the Amended
      Employment Agreement.

	a)  
        	
      Effective
      as of May 8, 2005, the Employee has voluntarily and permanently resigned
      from the General Counsel Position and any other employment with the
      Company or its subsidiaries. For purposes of this Severance Agreement, the
      Employee’s resignation shall be treated as a termination without “Cause”
      (as that term is defined in the Amended Employment Agreement), pursuant to
      Section 4(b)(iv) of the Amended Employment Agreement.

	2)  	
      Payment
      and Benefits.

	a)   
       	
      Incentive
      Compensation.
      Notwithstanding Section 1 hereof and as exclusive consideration for the
      releases in Section 4(c ) herein, the Employee shall be compensated as if
      the Employee had been terminated without Cause pursuant to the Amended
      Employment Agreement. The parties hereby agree that the Employee’s right
      to salary continuation, long-term incentives, and other compensation is as
      set forth below:

 

	i)  
        	
      Employee
      shall receive a certificate for 2,667 shares of common stock of the
      Company (the
      “Shares”), issuable as soon as administratively practicable following
      December 31, 2005, in payment of the Company’s grant of 5,000 Restricted
      Stock Rights pursuant to the Company’s Stock Incentive Plan to the
      Employee on 

 

 

August 10, 2004, prorated in the proportion of
271 (the number of days elapsed from August 10, 2004 through May 8, the date the
Employee resigned from employment with the Company) to 508 (the number of days
elapsed from August 10, 2004 through December 31, 2005). Any resulting
fractional shares will be disregarded and will not be issued. The Company’s
obligation to issue the share certificate will be subject to Exhibit
A
hereto.

 

	ii)   
       	
      Employee
      shall receive a share certificate for a number of shares of common stock
      of the Company, in payment of the Company’s grant of 5,000 Performance
      Restricted Stock Rights pursuant to the Company’s Stock Incentive Plan
      granted to the Employee by the Company on June 21, 2004, payable at the
      time set forth in, determined in accordance with, and subject to
      Exhibit
      B
      hereto.

 

	iii)   
       	
      Employee
      shall receive a share certificate for a number of shares of common stock
      of the Company, in payment of the Company’s grant of 5,000 Performance
      Restricted Stock Rights pursuant to the Company’s Stock Incentive Plan
      granted to the Employee by the Company on February 8, 2005, payable at the
      time set forth in, determined in accordance with, and subject to
      Exhibit
      C
      hereto.

 

	iv)   
       	
      Employee
      has an option to purchase up to 5,000 shares of the Company’s common stock
      pursuant to the Incentive Stock Option Award granted September 8, 2000 and
      an option to purchase up to 4,000 shares of the Company’s common stock
      pursuant to the Incentive Stock Option Award granted December 20, 2002, in
      each case to the extent permitted by, for the time period allowed, and
      subject to all the terms and conditions of such Incentive Stock Option
      Awards.

 

	b)   
       	
      Salary
      Continuation.
      In accordance with Section 4(e) of the Amended Employment Agreement, the
      Company shall pay to the Employee the equivalent amount of her annual base
      salary of $180,000 per year for a period of one (1) year after termination
      of the Employee’s employment with the Company (the “Severance Period”),
      for a total gross sum of $180,000, subject to normal deductions and
      withholdings for payroll taxes and any other legally required deductions
      and withholdings in effect at the time of the payment made hereunder. The
      Company shall pay the sum of $180,000 (less all required deductions and
      withholdings determined with respect to this gross amount, and less
      $19,579.20 in attorneys’ fees and expenses previously incurred by the
      Employee and paid by the Company) in a lump sum payment to the Employee,
      made on the Effective Date of this Severance Agreement.

	c)  
        	
      Unused
      Vacation.
      On the Effective Date of this Severance Agreement, the Company will pay
      the Employee for the Employee’s accrued unused vacation time in the total
      amount of $ 1,517.75 (subject to required deductions and withholdings), in
      accordance with the Amended Employment Agreement and the Company’s
      existing policies and procedures concerning unused vacation time. The
      Employee shall not accrue any additional vacation time during the
      Severance Period.

	d)  
        	
      No
      Other Payments or Benefits.
      The Employee acknowledges and agrees that, other than (1) the payments
      described specifically in this Severance Agreement, (2) benefits, if
      any,

 

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 payable under the terms of the Company’s 401(k)
Plan, (3) unpaid claims for benefits, if any, that are payable under the terms
of the Company’s Group Health Insurance Plans, (4) benefits, if any, payable
from the Company's Insured Security Option Plan, and (5) the right to any shares
payable to Employee, if any, under the terms of the Company's Employee Stock
Purchase Plan, the Employee shall not be entitled to receive any other benefits,
payments, bonuses, severance, termination benefits, or compensation of any kind
or for any reason, specifically including but not limited to any wages, bonuses,
payments, benefits, commission payments, stock options (whether vested or
unvested), stock or any other payment or compensation of any kind or from any
source. All payments provided for in this Severance Agreement will be reported
as taxable wages to the Employee. Nothing in this Severance Agreement shall
affect the Employee’s rights to COBRA continuation coverage as to any
Company-provided medical, dental or vision plan in which Employee participated
during her employment, or Employee’s right to indemnification under the
Company’s Certificate of Incorporation (as amended) or the Directors and
Officers Indemnification Agreement.

 

	3)  	
      The
      Amended Employment Agreement.

	a)  
        	
      The
      terms of the Severance Agreement shall control and shall be deemed to
      modify, amend or supersede the terms of the Amended Employment Agreement.
      Except for the rights, duties and obligations reflected in sections 1, 5
      through 9, and 11 thereof, which shall continue in full force in
      accordance with their terms, the Amended Employment Agreement is hereby
      terminated and replaced by the Severance
Agreement.

	4)  	
      Release
      and Covenant Not to Sue

	a)  
        	
      Employee
      Representations. Employee
      represents and agrees that she has had a full and adequate opportunity to
      discuss and consider her claims, if any. Further, Employee represents and
      agrees that:

	i)  
        	
      This
      Agreement is written in a manner that Employee understands;

       

	ii)  
        	
      This
      Agreement and the promises made in this Agreement by Employee are granted
      in exchange for consideration which is in addition to anything of value to
      which she is entitled;

	iii)    	
      Employee
      has been advised to and has had the opportunity to consult with an
      attorney prior to deciding whether to enter into this Agreement;
      and

	iv)    	
      Employee
      has no existing claims to any benefits, rights, entitlements or payments
      from the Company other than those specifically identified in this
      Severance Agreement, including any claims for
    indemnification.

	b)  
       	
      Effective
      Date.
      The Severance Agreement shall become effective immediately after both
      parties hereto have signed the Severance Agreement (“the Effective Date”).
      

 

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	c)  
       	
      Release
      of Claims by the Employee.As
      a material inducement to the Company to enter into the Severance
      Agreement, the Employee hereby irrevocably releases the Company and each
      of the owners, stockholders, predecessors, successors, directors,
      officers, employees, representatives, attorneys, subsidiaries and
      affiliates (and agents, directors, officers, employees, representatives
      and attorneys of such subsidiaries and affiliates) of the Company, and all
      persons acting by, through, under or in concert with them, including
      without limitation, M. Christine Jacobs, Bruce Smith, Otis W. Brawley,
      M.D., Orwin L. Carter, Ph. D., Earnest W. Deavenport, Jr., Patrick L.
      Flinn, John V. Herndon, Peter A.A. Saunders F.R.S.A., Philip A. Incarnati,
      Richard H. Miller, Eliot W. Robinson, Powell Goldstein LLP and its
      partners, members and employees, Edward J. Hardin, and Rogers & Hardin
      LLP and its partners, members and employees (collectively, the
      “Releasees”), from any and all charges, claims, liabilities, agreements,
      damages, causes of action, suits, costs, losses, debts and expenses
      (including attorneys’ fees and costs actually incurred) of any nature
      whatsoever, known or unknown, including, but not limited to, any claim of
      breach of fiduciary duty, rights arising out of alleged violations of any
      contracts, express or implied, any covenant of good faith and fair
      dealing, express or implied, or any tort, or any legal restrictions on the
      Company’s right to terminate employees, or any federal, state or other
      governmental statute, regulation, or ordinance, including, without
      limitation: 

 

	(1)
        	
          Title
      VII of the Civil Rights Act of 1964, as amended by the Civil
      Rights

                 
      Act
      of 1991 (race, color, religion, sex, and national origin discrimination);
      

	(2)
        	
          the
      Employee Retirement Income Security Act (“ERISA”);

	(3)
        	
          42
      U.S.C. § 1981 (discrimination); 

	(4)
        	
          Section
      806 of the Sarbanes-Oxley Act, 18 U.S.C. Section 1514A;

	(5)
        	
          the
      Americans with Disabilities Act (disability discrimination);
    

	(6)
        	
          the Age
      Discrimination in Employment Act; 

	(7)   	
          the
      Older Workers Benefit Protection Act; 

	 (8)   	
          the
      Equal Pay Act; 

	(9) 
 	    Executive Order
      11246 (race, color, religion, sex, and national origin discrimination);
      

	(10)  	
          Executive Order
      11141 (age discrimination); 

	(11)  	
          Section
      503 of the Rehabilitation Act of 1973 (disability discrimination);
      

	(12)  	
          the
      Family and Medical Leave Act;

	(13)  	
          the
      Consolidated Omnibus Budget Reconciliation Act
  (“COBRA”);

	(14)  	
          the
      Occupational Safety and Health Act;

	(15)  	
          the
      National Labor Relations Act;

	(16)  	
          negligence;
      

	(17)  	
          negligent
      hiring and/or negligent retention; 

	(18)  	
          intentional or
      negligent infliction of emotional distress or outrage;

	(19)  	
          defamation;
      

	(20)  	
          interference
      with employment; 

	(21)  	
          wrongful
      discharge; 

	(22)  	
          invasion of
      privacy; 

	(23)  	
          the
      Georgia AIDS Confidentiality Act;

	(24)  	
          Georgia’s Law
      Regarding Equal Pay, O.C.G.A. § 34-5-1 et
seq.;

 

 

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	(25)  	
          the
      Georgia Equal Employment for Persons with Disabilities Code;
      or

	       (26)    
    	 
      violation of any other legal or contractual duty arising under the laws of
      the State of Georgia or the laws of the United States (“Claim” or
      “Claims”),

 

which the
Employee now has, or claims to have, or which the Employee at any time
heretofore had, or claimed to have, or which the Employee at any time
hereinafter may have, or claim to have, against each or any of the Releasees, in
each case as to acts or omissions by each or any of the Releasees occurring up
to and including the Effective Date. The Employee covenants and agrees not to
institute, or participate in any way in anyone else’s actions involved in
instituting, any action against any of the Releasees with respect to any Claim
released herein, except as required by any subpoena, court order, or other
compulsory process. Notwithstanding the foregoing, the Severance Agreement shall
not release (1) the payments described specifically in this Severance Agreement,
(2) benefits, if any, payable under the terms of the Company’s 401(k) Plan, (3)
unpaid claims for benefits, if any, that are payable under the terms of the
Company’s Group Health Insurance Plans, (4) benefits, if any, payable from the
Company's Insured Security Option Plan, (5) the right to any shares payable to
Employee, if any, under the terms of the Company's Employee Stock Purchase Plan,
(6) rights to COBRA continuation coverage as to any Company-provided medical,
dental or vision plan in which Employee participated during her employment, and
(7) rights to indemnification under the Company’s Articles of Incorporation (as
amended) or the Directors and Officers Indemnification Agreement.

	d) 
        	
      Release
      of Claims by the Company.
      The Company hereby irrevocably releases the Employee from any and all
      charges, claims, liabilities, agreements, damages, causes of action,
      suits, costs, losses, debts and expenses (including attorneys’ fees and
      costs actually incurred) of any nature whatsoever, known or unknown,
      including, but not limited to, any claim of breach of fiduciary duty,
      rights arising out of alleged violations of any contracts, express or
      implied, any covenant of good faith and fair dealing, express or implied,
      or any tort or violation of any other legal or contractual duty
      arising under the laws of the State of Georgia or the laws of the United
      States (“Claim” or “Claims”), which the Company now has, or claims to
      have, or which the Company at any time heretofore had, or claimed to have,
      or which the Company at any time hereinafter may have, or claim to have,
      against the Employee, in each case as to acts or omissions by the Employee
      occurring up to and including the Effective Date. The Company covenants
      and agrees not to institute, or participate in any way in any action
      against the Employee with respect to any Claim released herein, except as
      required by any subpoena, court order, or other compulsory process.
      Notwithstanding the foregoing, the Severance Agreement shall not release
      any Claims based on any rights, duties or obligations reflected in or
      deriving from sections 1, 5 through 9, and 11 thereof of the Amended
      Employment Agreement, as described in Section 3(a)
  above.

	e)  
       	
      Employee’s
      Warranty of No Wrongful Acts. As
      a material inducement to the Company to release its Claims against the
      Employee, the Employee represents and warrants that she has committed no
      wrongful acts with respect to the Company, and that no wrongful acts
      

 

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have been committed with respect to the Company at
her direction, to her knowledge, or with her assent (either explicit or
implicit). For purposes of this subsection, “wrongful acts” include, but are not
limited to, violations of any state, federal or local law, regulation, or
ordinance, actions that could give rise to civil or criminal liability of the
Company or of any Releasee, and conduct that breaches any legal duty owed by the
Employee to the Company. The Employee hereby agrees that a breach of the
foregoing representations and warranties shall render the Release of Claims by
the Company (Section 4(d)) and the Covenant Not to Sue to the extent given by
the Company (Section 4(f)) voidable at the election of the Company only with
respect to any such alleged wrongful act, and shall enable the Company to pursue
any claims against the Employee that it may have only with respect to any such
alleged wrongful act.

 

	f)  	
      Covenant
      Not to Sue. Except
      as necessary to enforce the terms of this Severance Agreement, Employee
      covenants and agrees not to sue or otherwise assert a claim against the
      Company or the Releasees concerning any of the Claims released by the
      Employee pursuant to Section 4(c), including, without limitation, any
      matters arising out of the Employee’s employment with the Company. Except
      as necessary to enforce the terms of this Severance Agreement or the
      provisions of the Amended Employment Agreement specified in Section 3(a)
      above, the Company covenants and agrees not to sue or otherwise assert a
      claim against the Employee concerning any of the Claims released by the
      Company pursuant to Section 4(d), including, without limitation, any
      matters arising out of the Employee’s employment with the Company. In the
      event that any party hereto sues another or Employee sues a Releasee
      concerning any of the Claims released by this Severance Agreement, the
      party bringing suit shall (i) provide to the other parties or Releasee, as
      applicable, at least ten (10) days prior to filing suit, written notice of
      such suit or proceeding and a copy of the Complaint or other document by
      which such lawsuit is to be initiated; (ii) file the Complaint or other
      legal document by which the suit is commenced only in the United States
      District Court for the Northern District of Georgia or, if such Court does
      not have subject-matter jurisdiction, then in the Superior Court of Fulton
      County, Georgia, as the parties consent to personal jurisdiction in that
      county; and (iii) hold the sued party or Releasee, as applicable, harmless
      from any claim asserted in such lawsuit and indemnify the sued party or
      Releasee, as applicable, from all costs and expenses, including attorneys’
      fees, arising from the defense of such claim. In the event that said suit
      is brought by the Employee, Employee shall be obligated to repay to the
      Company all of the amounts paid to Employee pursuant to Section 2, unless
      any suit is solely brought under the ADEA. Further, should any party sue
      or otherwise assert a claim against any of the other parties or Releasees,
      as applicable, the party suing agrees that injunctive relief is available
      to the parties or Releasees sued in addition to the legal relief described
      above and that any obligations under Section 2 shall cease.
    

	g)  	
      Representation
      of No Pending Actions.
      The Employee warrants and represents that she has not filed any
      administrative action or claim against the Company or the Releasees with
      any local, state or federal agency. The Company warrants and represents
      that it has not filed any administrative action or claim against Employee
      with any local, state or federal agency. The Employee and the Company
      further warrant and represent that they are not plaintiffs in any law suit
      or any other action filed in any jurisdiction against the
  

 

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Company or any other party or Releasee. If any of the
warranties and representations of the Employee in this Section 4(g) is
inaccurate in any respect as of the date made, the Company shall be excused from
its obligations under Sections 2 and 4 of this Agreement. If any of the
warranties and representations of the Company in this Section 4(g) are
inaccurate in any respect as of the date made, the Employee shall be excused
from her obligations under Section 4 of this Agreement. Further, the parties or
Releasees, as applicable, shall be indemnified and held harmless by the
breaching party for any breach of the warranties and representations contained
in this Section, and shall be entitled to recover from the breaching party all
costs and expenses incurred as a result of that breach of the warranty and
representation contained in this Section, and all costs and expenses incurred in
defending any breaching legal or administrative proceeding in which the Company
or any other party or Releasee is named. Costs and expenses, for purposes of
this Section, shall include, but not be limited to, attorneys’ fees and other
legal costs.

 

	5)  	
      No
      Disparagement.

	a)  
       	
      By
      the Employee.
      The Employee further agrees that, as part of the consideration for the
      Severance Agreement, and for a period of five (5) years from the Effective
      Date, she will not, directly or indirectly, in any capacity or manner,
      make, cause, encourage or assist to be made any statements, comments or
      remarks, whether oral, verbal, in writing, or electronically transmitted,
      which might reasonably be considered to be derogatory, defamatory or
      critical of, or negative towards, or to malign, harm, defame, disparage or
      damage the reputation and good name of the Company, its subsidiaries or
      affiliates, their respective officers, directors, agents or employees, or
      the Releasees. Provided, however, that if the Employee is required by any
      applicable law, regulation, statute, subpoena, court order, or other
      compulsory process to disclose information related to her Employment with
      the Company, such disclosure of truthful information shall not constitute
      a breach of this section or of the Severance
Agreement.

	b) 
        	
      By
      the Company.
      The Company further agrees that, as part of the consideration for the
      Severance Agreement, and for a period of five (5) years from the Effective
      Date, the members of the Board of Directors, and all Company officers
      covered by Section 16(a) of the Securities Exchange Act of 1934, as
      amended, will not, directly or indirectly, in any capacity or manner,
      make, cause, encourage or assist to be made any statements, comments or
      remarks, whether oral, verbal, in writing or electronically transmitted,
      which might reasonably be considered to be derogatory, defamatory or
      critical of, or negative towards, or to malign, harm, defame or damage the
      reputation and good name of the Employee, nor will they authorize,
      condone, or encourage any such disparagement from others. The Company will
      advise the members of the Board of Directors, all Company officers covered
      by Section 16(a) of the Securities Exchange Act of 1934, as amended, and
      all employees of the Company who reported directly to the Employee
      (collectively, the “Persons to be Advised”), that a non-disparagement
      agreement is in effect, and will use reasonable efforts to enforce
      compliance with this agreement. The Company shall also direct the Persons
      to be Advised not to make, cause, encourage or assist to be made any
      statements, comments, or remarks, whether oral, verbal, in writing or
      electronically transmitted, which might reasonably be considered to be
      derogatory, 

 

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defamatory, or critical of, or negative towards, or to
malign, harm, defame or damage the reputation and good name of the Employee.
Notwithstanding the foregoing agreement, the parties hereto recognize and
acknowledge that the Company will not be liable for unauthorized remarks by
individuals employed by or otherwise associated with the Company, other than the
members of the Board of Directors and the Company officers covered by Section
16(a) of the Securities Exchange Act of 1934, as amended. Provided, however,
that if the Company, the Releasees, or the CEO are required by any applicable
law, regulation, statute, subpoena, court order, or other compulsory process to
disclose information related to the Employee’s employment, such disclosure of
truthful information shall not constitute a breach of the Severance Agreement.
Moreover, this subsection 5(b) shall not apply to any communications (1) between
the Company and its independent public auditors; (2) necessary to comply fully
with all applicable requirements and policies of federal and state laws, stock
exchange rules, and the rules and regulations of the Securities and Exchange
Commission and other federal and state agencies; (3) necessary to cooperate
fully with any investigation or request for information from any state or
federal governmental agency, stock exchange, or regulatory organization; (4)
necessary in the course of preparing and filing appropriate tax returns or
dealing with federal or state taxing authorities; (5) necessary in the
performance of personal or business financial planning; (6) necessary in
connection with any party hereto or any Releasee obtaining advice from counsel;
or (7) made in connection with any judicial or administrative proceeding or
arbitration with respect to which such communications are relevant.

 

	6)  	
      Third-Party
      Beneficiaries.

	a) 
        	
      The
      Employee and the Company hereby acknowledge and agree that the Releasees
      described above are intended third-party beneficiaries for the purpose of
      providing them, and each of them, with enforceable rights under Sections
      4(c), 4(f), and 5(a) hereunder.

	7)  	
      No
      Admission; No Further Uses.

	a) 
        	
      The
      Employee and the Company acknowledge and agree that the Severance
      Agreement is the result of a compromise and shall never at any time or for
      any purpose be construed as an admission by any party to the Severance
      Agreement of any wrongdoing or any liability or responsibility to the
      other party to the Severance Agreement (or to any other person), and each
      of the parties to the Severance Agreement specifically and vigorously
      disclaims any wrongdoing or any liability or responsibility to the other
      party to the Severance Agreement (or to any other person). The Severance
      Agreement shall not be used in any legal proceeding or for any purpose
      except to enforce the provisions hereof or as otherwise required by
      applicable law. All negotiations, proceedings and statements made in
      connection herewith shall be made without prejudice to any party hereto
      and shall not be deemed or construed to be admissions by any party of any
      act, omission, matter or proposition.

 

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	8)  	
      No
      Additional Reliance.

 

	a)  
        	
      The
      Employee and the Company acknowledge and agree that, in executing the
      Severance Agreement, they did not rely upon and have not relied upon any
      representations or statements not expressly a part hereof that have been
      made by the other party to the Severance Agreement or by the agents,
      representatives or attorneys of the other party hereto with regard to the
      subject matter, basis or effect hereof. Without limiting the general
      applicability of the foregoing statement, the parties expressly
      acknowledge that the Company has made no representation regarding the tax
      effect of any payment or other benefit conferred
  hereunder.

	9)  	
      No
      Assignments.

	a)  
        	
      Each
      of the parties hereto represents that such party has not heretofore
      assigned or transferred, or purported to assign or transfer, to any person
      or entity, any claim or any portion thereof or interest therein, and
      agrees to indemnify, defend and hold the other party hereto harmless from
      any and all claims based on or arising out of any such assignment or
      transfer, or purported assignment or transfer, of any Claims or any
      portion thereof or interest therein.

	10)  	
      Further
      Assurances.

	a)  
        	
      Each
      party hereto covenants and agrees, without the necessity of any further
      consideration, to execute and deliver any and all such further documents
      and take any and all such other actions, including, without limitation,
      any and all resignations, substitutions, and designations as may be
      necessary and appropriate to carry out the intent and purposes of the
      Severance Agreement and to consummate the transactions contemplated
      hereby.

	11)  	
      Binding
      Effect.
      

	a)  
        	
      The
      Severance Agreement shall be binding upon and inure to the benefit of the
      parties hereto and upon their respective heirs, personal representatives,
      administrators, successors and assigns, as the case may be.
    

	12)  	
      No
      Waiver.

	a)  
        	
      Failure
      by either party to insist upon strict compliance with any term of the
      Severance Agreement shall not be construed as a waiver thereof or of any
      right or remedy resulting from any breach of the Severance
      Agreement.

 

 

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	13)  	
      Governing
      Law.
      

	a)  
        	
      The
      Severance Agreement shall be governed by, construed and enforced in
      accordance with the laws of the State of Georgia, without giving effect to
      any principles of conflicts of laws.

	14)  	
      Specific
      Performance; Attorneys’ Fees.

	a)  
        	
      The
      Severance Agreement may be specifically enforced, and injunctive relief
      may be granted to prevent a breach of the Severance Agreement since there
      is no adequate remedy at law. The prevailing party in any proceeding
      brought to obtain specific performance or injunctive relief pursuant to
      this Severance Agreement shall be entitled to an award of its reasonable
      costs and expenses, including, without limitation, attorneys’
      fees. 

	15)  	
      Severability.
      

	a)  
        	
      Except
      for Section 4(c)
      should any part, term or provision of the Severance Agreement be declared
      or determined by any court to be illegal, invalid or otherwise
      unenforceable, the legality, validity and enforceability of the remaining
      parts, terms or provisions hereof shall be deemed not to be affected, and
      the Severance Agreement shall be interpreted and enforced as if such
      illegal, invalid or unenforceable part, term or provision, to the extent
      possible, is not contained herein. If Section 4(c) is declared illegal,
      invalid or otherwise unenforceable, the Company may, at its option,
      declare this entire Severance Agreement null and
void.

	16)  	
      Construction.
      

	a)  
        	
      As
      used in the Severance Agreement, the masculine shall include the feminine
      or neuter gender, and the singular shall include the plural, whenever the
      context so indicates or requires. Both parties acknowledge and agree that
      they participated jointly in the negotiation and drafting of this
      Agreement and the rule of construction that ambiguities are construed
      against the drafter is hereby waived.

	17)  	
      No
      Release from Future Actions or Inactions.

	a)  
        	
      Nothing
      contained herein shall be construed as a release by either of the parties
      hereto of, or an agreement by either of the parties hereto not to sue on
      any claims, manner of actions, causes of action, whether at law or in
      equity, suits, judgments, debts, liens, contracts, agreements, promises,
      liabilities, demands, damages, losses, costs, expenses or disputes
      (including attorneys’ fees and costs) arising out of any act, omission,
      matter, cause, conduct, claim, event or thing whatsoever which may occur
      after the Effective Date of this Severance Agreement to the end of
      time.

 

 

Page 10 of
23

 

	18)  	
      Entire
      Agreement.

	a)     	
      The
      Severance Agreement, including those provisions of the Amended Employment
      Agreement incorporated herein by Section 3(a) above, sets forth the
      complete and exclusive statement of the terms of the agreement between the
      parties hereto and fully supersedes any and all prior agreements or
      understandings between the parties hereto pertaining to the subject matter
      hereof.

	19)  	
      Amendment.

	a)  
        	
      The
      Severance Agreement may not be modified, amended, supplemented, or
      terminated except by a written instrument executed by the parties
      hereto.

	20)  	
      Notice.

	b)    	
      All
      notices, requests, demands, and other communications required hereunder
      shall be in writing and shall be deemed to have been duly given if
      delivered or if mailed, by United States certified or registered mail,
      postage prepaid, to the party to which the same is directed at the
      following addresses (or at such other addresses as shall be given in
      writing by the parties to one another):

If to the
Company:     Theragenics
Corporation

5203
Bristol Industrial Way

Buford,
Georgia 30518

Attn:
Chief Executive Officer

and

Richard
H. Miller

Powell
Goldstein LLP

One
Atlantic Center - Fourteenth Floor 

1201 West
Peachtree Street, NW 

Atlanta,
GA 30309-3488

If to the
Employee:     Tracy
Culver Caswell

604
Dalmore Drive

Duluth,
GA  30097

and

Walter E.
Jospin

Elizabeth
Noe

Paul,
Hastings, Janofsky & Walker LLP

600
Peachtree Street, N.E.

Suite
2400

Atlanta,
GA 30308

 

 

Page 11 of
23

 

Notices
shall be deemed to be effective upon delivery, or in the case of notice by mail,
receipt of the notice, in each case by either the party to be notified or a
designated attorney for that party. Each party has the right to rely upon the
foregoing addresses and designated attorneys unless and until notified in
writing by the other party of a change.

	21)  	
      Counterparts.
      

	a) 
        	
      The
      Severance Agreement may be executed in one or more counterparts, each of
      which shall be an original, and all of which together shall be deemed to
      be one and the same Severance Agreement. Executed counterparts may be
      delivered via facsimile transmission.

	22)  	
      Arbitration.

	a) 
        	
      Any
      controversy or claim arising out of or relating to the Severance
      Agreement, or the breach thereof, shall be adjudicated through binding
      arbitration before a single arbitrator in accordance with the Commercial
      Arbitration Rules of the American Arbitration Association (the “AAA”) in
      Atlanta, Georgia, with the Company bearing financial responsibility for
      the filing costs charged by the AAA for such arbitration. However, the
      provisions of this section will not prevent the Company or the Employee
      from instituting an action in a court of law under the Severance Agreement
      for specific performance of the Severance Agreement or temporary or
      permanent injunctive relief. The parties hereto agree that the exclusive
      venue for any such lawsuit will be in the United States District Court for
      the Northern District of Georgia or, if such Court does not have
      subject-matter jurisdiction, then in the Superior Court of Fulton County,
      Georgia, and the Company and the Employee consent to the exercise of
      personal jurisdiction by either court for purposes of such
      lawsuit.

	b) 
        	
      Any
      party who desires to submit a claim to arbitration in accordance with this
      Section shall file its demand for arbitration with the AAA within thirty
      (30) days of the event or incident giving rise to the claim. A copy of
      said demand shall be served on the other party in accordance with the
      notice provisions of the Severance Agreement. The parties agree that they
      shall attempt in good faith to select an arbitrator by mutual agreement
      within twenty (20) days after the responding party’s receipt of the demand
      for arbitration. If the parties do not agree on the selection of an
      arbitrator within that timeframe, the selection shall be made pursuant to
      the rules from the panels of arbitrators maintained by the AAA. If the
      Employee (or the Employee’s estate in the event of her death) prevails in
      the dispute, the Company will pay and be financially responsible for all
      costs, expenses, and reasonable attorneys’ fees incurred by the Employee
      in connection with the dispute, including but not limited to the
      reasonable expenses of the arbitrator incurred by the Employee. Any award
      rendered by the arbitrator shall be accompanied by a written opinion
      providing the reasons for the award. The arbitrator’s award shall be final
      and non-appealable. Nothing in this Section shall prevent the parties from
      settling any dispute or controversy by mutual agreement at any time.
      

 

Page 12 of
23

 

	23)  	
      Participation
      in Negotiations.

EACH OF
THE UNDERSIGNED PARTIES ACKNOWLEDGES AND AGREES THAT SUCH PARTY HAS PARTICIPATED
IN THE NEGOTIATION OF AND CAREFULLY READ EACH OF THE TERMS AND PROVISIONS OF
THIS SEVERANCE AGREEMENT AND UNDERSTANDS ITS CONTENTS, AND THAT SUCH PARTY
EXECUTED THIS SEVERANCE AGREEMENT AS SUCH PARTY’S OWN FREE ACT AND
DEED.

(Signatures
On Next Page)

 

 

 

Page 13 of
23

 

THERAGENICS
CORPORATION

By:

Title:

 

Tracy
Culver Caswell

Page 14 of
23

EXHIBIT
A

	  1. 	The
      Employee (the “Recipient”) must deliver to the Company, within ten (10)
      days after written notification from the Company as to the amount of the
      tax withholding that is due, either(i) cash, or (ii) a certified check
      payable to the Company, in the amount of all tax withholding obligations
      imposed on the Company by reason of the vesting of the Shares, or (iii) by
      tendering a number of whole shares of Common Stock of the Company (“Common
      Stock”) which, when multiplied by the Fair Market Value (determined in
      accordance with the Company’s 2000 Stock Incentive Plan) of the Common
      Stock on the vesting date, is sufficient to satisfy the minimum amount of
      the required tax withholding obligations imposed on the Company (the
      “Stock Tendering Election”); provided, however, the Compensation Committee
      of the Board of Directors of the Company (the “Committee”) may in its sole
      discretion, disapprove and give no effect to the Stock Tendering Election
      by giving written notice to the Recipient within ten (10) days after
      receipt of the Stock Tendering Election, in which event the Recipient must
      deliver, within ten (10) days after receiving such notice, the tax
      withholding in the manner provided in clause (i) or (ii). If the Recipient
      does not timely satisfy payment of the tax withholding obligation, the
      Recipient will forfeit the Shares.

 

	  2. 	In
      lieu of paying the tax withholding obligation as described in Paragraph 1,
      the Recipient may elect to have the actual number of Shares reduced by the
      number of whole shares of Common Stock which, when multiplied by the Fair
      Market Value of the Common Stock on the vesting date, is sufficient to
      satisfy the minimum amount of the required tax obligations imposed on the
      Company by reason of the vesting of the Shares (the “Withholding
      Election”). Recipient may make a Withholding Election only if all of the
      following conditions are met:-

 

        (i)    the
Withholding Election must be made within ten (10) days after the Recipient
receives written notification from the Company as to the amount of the tax

withholding
that is due (the “Tax Notice Date”), by executing and delivering to the Company
a properly completed Notice of Withholding Election, in the form provided by the
Company; and

 

        (ii)    any
Withholding Election made will be irrevocable; however, the Committee may, in
its sole discretion, disapprove and give no effect to any Withholding

Election,
by giving written notice to the Recipient no later than ten (10) days after the
Company’s receipt of the Notice of Withholding Election, in which event the
Recipient must deliver to the Company, within ten (10) days after receiving such
notice, the amount of the tax withholding pursuant to Paragraph 1.

 

	  3. 	The
      Restricted Stock Rights are subject to the terms of the Company’s 2000
      Stock Incentive Plan.

 

Page 15 of
23

 

EXHIBIT
B

 

SCHEDULE
OF SHARES OF COMMON STOCK TO BE ISSUED

PURSUANT
TO PERFORMANCE RESTRICTED STOCK RIGHTS

 

	
      A.
	
      The
      number of shares of Common Stock of the Company (“Common Stock”) to be
      issued to the Employee (the “Recipient”) for each Performance Restricted
      Stock Right will be determined pursuant to the following schedule, but the
      resulting number will be multiplied by a fraction, the numerator of which
      is 492 (the number of days of the Recipient’s employment by the Company
      and its Affiliates from January
      1, 2004,
      through the date the Employee resigned from the Company, and the
      denominator of which is 1096 (the number of days from and including
      January
      1, 2004
      through December
      31,
      2006).
      Fractional shares will be disregarded and will not be
    issued.

 

	 	 
	
      Company
      Total 

      Shareholder
      Return Peer 

      Percentile
      Raking
	
       

      Number
      of Shares of Performance 

      Common
      Stock to be issued for each 

      Restricted
      Stock Right

	
      >
      85th

       

      ≥
      75th
      to < 85
      th

       

      ≥
      50th
      to < 75
      th

       

      <
      30th
      to < 50th 

       
	
      2

       

      *
      1.5

       

      *
      1

       

      *
      0.30

	
      
	
      *  
      Plus a number of shares of Common Stock for each Performance Restricted
      Stock Right determined by interpolation for Company Total Shareholder
      Return Peer Percentile Ranking that falls between 30th
      and 50th,
      50th
      and 75th,
      or 75th
      and 85th.
      (For example, a Company Total Shareholder Return Peer Percentile Ranking
      of 40th
      would result in 0.65 of one share of Common Stock to be issued for each
      Restricted Stock Right.)

 

	
      B.
	
      “Company
      Total Shareholder Return Peer Percentile” shall mean the percentile
      ranking of the Company’s total shareholder return for the period beginning
      January 1, 2004, and ending December 31, 2006, as compared to the total
      shareholder return (where publicly available) for each of the following
      peer companies: ArQule, Inc., Cell Genesys, Inc., Corixa Corporation,
      Digene Corporation, Oscient Pharmaceuticals Corporation, Hybridon, Inc.,
      Ilex Oncology, Inc., Medarex, Inc., Mentor Corporation, Myriad Genetics,
      Inc., Neogen Corporation, North American Scientific, Inc., Novoste
      Corporation, Nuvelo, Inc., OSI Pharmaceuticals, Inc., Protein Design Labs,
      Inc., Quidel Corporation, Synovis Life Technologies, Inc., Third Wave
      Technologies, Inc., Transkaryotic Therapies, Inc., Xoma Ltd.,
      Zymogenetics, Inc. In the event that any of

 

 

Page 16 of
23

 

the above companies ceases to exist, shall cease to be a peer company (as
determined by the Compensation Committee of the Board of Directors (the
“Compensation Committee”) in its sole discretion), or shall be merged into
another company, the Committee may make such adjustment to the list of peer
companies as it determines in its sole discretion to be appropriate. Total
shareholder return will be determined using a consistent methodology determined
in the sole discretion of the Committee.

 

	
      C.
	
      Notwithstanding
      any other provision of this Schedule, if a Change in Control occurs before
      December 31, 2006, then 492/1096 of one share of Common Stock will be
      issuable as of the date of the Change of Control for each Performance
      Restricted Stock Right and the Performance Restricted Stock Rights will
      terminate as of such date. Fractional shares will be disregarded and will
      not be issued.

 

	
      D.
	
      “Change
      in Control” means any one of the following events which occurs following
      the date of grant:

 

        (1)    the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the

“Exchange
Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of voting securities of the corporation
where such acquisition causes such person to own thirty-five percent (35%) or
more of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however, that for purposes
of this Subsection (1), the following acquisitions shall not be deemed to result
in a Change in Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with clauses (i), (ii) and
(iii) of Subsection (3) below; and provided, further, that if any Person’s
beneficial ownership of the Outstanding Company Voting Securities reaches or
exceeds thirty-five percent (35%) as a result of a transaction described in
clause (i) or (ii) above, and such Person subsequently acquires beneficial
ownership of additional voting securities of the Company, such subsequent
acquisition shall be treated as an acquisition that causes such Person to own
thirty-five percent (35%) or more of the Outstanding Company Voting Securities;
or

 

        (2)    individuals
who as of the date hereof, constitute the Board of Directors of the Company (the
“Incumbent Board”) cease for any reason to constitute at least a 

majority
of the Board of Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with

 

Page 17 of
23

 

respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors; or

 

        (3)    the
approval by the shareholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets 

of the
Company (“Business Combination”) or, if consummation of such Business
Combination is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however, such a
Business Combination pursuant to which (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, thirty-five percent (35%) or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

 

        (4)    approval
by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

Notwithstanding
the foregoing, no Change in Control shall be deemed to have occurred by reason
of any actions or events in which the Recipient participates. 

. 

	
      E.
	
      A
      share certificate shall be issued as soon as reasonably practicable after
      the Company determines the number of shares to be issued, subject to
      Section G below.

 

	
      F.
	
      If
      the Company declares a dividend (other than a stock dividend) payable to
      shareholders of Common Stock and if the dividend is payable to
      shareholders of record before a share certificate for Common Stock has
      been issued hereunder, the number of Performance Restricted Stock Rights
      shall be increased by a number equal to the amount of the dividend per
      share, multiplied by the number of Performance Restricted Stock Rights
      (before adjustment), divided by the Fair Market Value per share of Common
      Stock as of the dividend declaration date.

 

Page 18 of
23

 

G.    (a)    The
Recipient must deliver to the Company, within ten (10) days after written
notification from the Company as to the amount of the tax withholding that is
due, 

either
(i) cash, or (ii) a certified check payable to the Company, in the amount of all
tax withholding obligations imposed on the Company by reason of the earning of
the shares of Common Stock issuable hereunder, except as provided in Section
G(b), or (iii) by tendering a number of whole shares of Common Stock which, when
multiplied by the Fair Market Value (as defined in the Company’s 2000 Stock
Incentive Plan) of the Common Stock on the date the Common Stock is issuable to
the Recipient, is sufficient to satisfy the minimum amount of the required tax
withholding obligations imposed on the Company (the “Stock Tendering Election”);
provided, however, the Compensation Committee may in its sole discretion,
disapprove and give no effect to the Stock Tendering Election by giving written
notice to the Recipient within ten (10) days after receipt of the Stock
Tendering Election, in which event the Recipient must deliver, within ten (10)
days after receiving such notice, the tax withholding in the manner provided in
clause (i) or (ii). If the Recipient does not timely satisfy payment of the tax
withholding obligation, the Recipient will forfeit the Performance Restricted
Stock Rights and shares of Common Stock issuable hereunder.

 

        (b)    In lieu
of paying the tax withholding obligation as described in Section G(a), Recipient
may elect to have the actual number of shares of Common Stock issuable

hereunder
reduced by the number of whole shares of Common Stock which, when multiplied by
the Fair Market Value of the Common Stock on the date the Common Stock is
issuable to the Recipient, is sufficient to satisfy the minimum amount of the
required tax obligations imposed on the Company by reason of the earning of the
shares (the “Withholding Election”). Recipient may make a Withholding Election
only if all of the following conditions are met:

 

                
(i)    the
Withholding Election must be made within ten (10) days after the Recipient
receives written notification from the Company as to the amount of the

tax
withholding that is due (the “Tax Notice Date”), by executing and delivering to
the Company a properly completed Notice of Withholding Election, in the form
provided by the Company; and

 

              (ii)    any
Withholding Election made will be irrevocable; however, the Committee may, in
its sole discretion, disapprove and give no effect to any 

Withholding
Election, by giving written notice to the Recipient no later than ten (10) days
after the Company’s receipt of the Notice of Withholding Election, in which
event the Recipient must deliver to the Company, within ten (10) days after
receiving such notice, the amount of the tax withholding pursuant to Section
G(a).

	H.  	
      The
      Performance Restricted Stock Rights are subject to the terms of the
      Company’s 2000 Stock Incentive Plan.

 

Page 19 of
23

 

EXHIBIT
C

SCHEDULE
OF SHARES OF COMMON STOCK TO BE ISSUED

PURSUANT
TO PERFORMANCE RESTRICTED STOCK RIGHTS

 

	
      A.
	
      The
      number of shares of Common Stock of the Company (“Common Stock”) to be
      issued to the Employee (the “Recipient”) for each Performance Restricted
      Stock Right will be determined pursuant to the following schedule, but the
      resulting number will be multiplied by a fraction, the numerator of which
      is 126 (the number of days of the Recipient’s employment by the Company
      and its Affiliates from January
      1, 2005,
      through the date the Employee resigned from the Company, and the
      denominator of which is 1095 (the number of days from and including
      January
      1, 2005
      through December
      31,
      2007).
      Fractional shares will be disregarded and will not be
    issued.

 

 

		 
	
      Company
      Total 

      Shareholder
      Return Peer 

      Percentile
      Raking
	
       

      Number
      of Shares of Performance 

      Common
      Stock to be issued for each 

      Restricted
      Stock Right

	
      >
      85th

       

      ≥
      75th
      to < 85
      th

       

      ≥
      50th
      to < 75
      th

       

      <
      30th
      to < 50th 

       
	
      2

       

      *
      1.5

       

      *
      1

       

      *
      0.30

 

	
      
	
      *
      Plus a number of shares of Common Stock for each Performance Restricted
      Stock Right determined by interpolation for Company Total Shareholder
      Return Peer Percentile Ranking that falls between 30th
      and 50th,
      50th
      and 75th,
      or 75th
      and 85th.
      (For example, a Company Total Shareholder Return Peer Percentile Ranking
      of 40th
      would result in 0.65 of one share of Common Stock to be issued for each
      Restricted Stock Right.)

 

	
      B.
	
      “Company
      Total Shareholder Return Peer Percentile” shall mean the percentile
      ranking of the Company’s total shareholder return for the period beginning
      January 1, 2005, and ending December 31, 2007, as compared to the total
      shareholder return (where publicly available) for each of the following
      peer companies: ArQule, Inc., Cell Genesys, Inc., Corixa Corporation,
      Digene Corporation, Oscient Pharmaceuticals Corporation, Hybridon, Inc.,
      Ilex Oncology, Inc., Medarex, Inc., Mentor Corporation, Myriad Genetics,
      Inc., Neogen Corporation, North American Scientific, Inc., Novoste
      Corporation, Nuvelo, Inc., OSI Pharmaceuticals, Inc., Protein Design Labs,
      Inc., Quidel Corporation, Synovis Life Technologies, Inc., Third Wave
      Technologies, Inc., Transkaryotic Therapies, Inc., Xoma Ltd.,
      Zymogenetics, Inc. In the event that any of

 

Page 20 of
23

 

the above companies ceases to exist, shall cease to
be a peer company (as determined by the Compensation Committee of the Board of
Directors (the “Compensation Committee”) in its sole discretion), or shall be
merged into another company, the Committee may make such adjustment to the list
of peer companies as it determines in its sole discretion to be appropriate.
Total shareholder return will be determined using a consistent methodology
determined in the sole discretion of the Committee.

 

	
      C.
	
      Notwithstanding
      any other provision of this Schedule, if a Change in Control occurs before
      December 31, 2007, then 126/1095 of one share of Common Stock will be
      issuable as of the date of the Change of Control for each Performance
      Restricted Stock Right and the Performance Restricted Stock Rights will
      terminate as of such date. Fractional shares will be disregarded and will
      not be issued.

 

	
      D.
	
      “Change
      in Control” means any one of the following events which occurs following
      the date of grant:

 

        (1)    the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the

“Exchange
Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of voting securities of the corporation
where such acquisition causes such person to own thirty-five percent (35%) or
more of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however, that for purposes
of this Subsection (1), the following acquisitions shall not be deemed to result
in a Change in Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with clauses (i), (ii) and
(iii) of Subsection (3) below; and provided, further, that if any Person’s
beneficial ownership of the Outstanding Company Voting Securities reaches or
exceeds thirty-five percent (35%) as a result of a transaction described in
clause (i) or (ii) above, and such Person subsequently acquires beneficial
ownership of additional voting securities of the Company, such subsequent
acquisition shall be treated as an acquisition that causes such Person to own
thirty-five percent (35%) or more of the Outstanding Company Voting Securities;
or

 

        (2)    individuals
who as of the date hereof, constitute the Board of Directors of the Company (the
“Incumbent Board”) cease for any reason to constitute at least a 

majority
of the Board of Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors; or

 

Page 21 of
23

 

        (3)    the
approval by the shareholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets 

of the
Company (“Business Combination”) or, if consummation of such Business
Combination is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however, such a
Business Combination pursuant to which (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, thirty-five percent (35%) or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

 

        (4)    approval
by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

Notwithstanding
the foregoing, no Change in Control shall be deemed to have occurred by reason
of any actions or events in which the Recipient participates. 

 

	
      E.
	
      A
      share certificate shall be issued as soon as reasonably practicable after
      the Company determines the number of shares to be issued, subject to
      Section G below.

 

	
      F.
	
      If
      the Company declares a dividend (other than a stock dividend) payable to
      shareholders of Common Stock and if the dividend is payable to
      shareholders of record before a share certificate for Common Stock has
      been issued hereunder, the number of Performance Restricted Stock Rights
      shall be increased by a number equal to the amount of the dividend per
      share, multiplied by the number of Performance Restricted Stock Rights
      (before adjustment), divided by the Fair Market Value per share of Common
      Stock as of the dividend declaration date.

 

 

Page 22 of
23

 

G.    (a)    The
Recipient must deliver to the Company, within ten (10) days after written
notification from the Company as to the amount of the tax withholding that is
due, 

either
(i) cash, or (ii) a certified check payable to the Company, in the amount of all
tax withholding obligations imposed on the Company by reason of the earning of
the shares of Common Stock issuable hereunder, except as provided in Section
G(b), or (iii) by tendering a number of whole shares of Common Stock which, when
multiplied by the Fair Market Value (as defined in the Company’s 2000 Stock
Incentive Plan) of the Common Stock on the date the Common Stock is issuable to
the Recipient, is sufficient to satisfy the minimum amount of the required tax
withholding obligations imposed on the Company (the “Stock Tendering Election”);
provided, however, the Compensation Committee may in its sole discretion,
disapprove and give no effect to the Stock Tendering Election by giving written
notice to the Recipient within ten (10) days after receipt of the Stock
Tendering Election, in which event the Recipient must deliver, within ten (10)
days after receiving such notice, the tax withholding in the manner provided in
clause (i) or (ii). If the Recipient does not timely satisfy payment of the tax
withholding obligation, the Recipient will forfeit the Performance Restricted
Stock Rights and shares of Common Stock issuable hereunder.

 

       
(b)    In lieu
of paying the tax withholding obligation as described in Section G(a), Recipient
may elect to have the actual number of shares of Common Stock issuable hereunder
reduced by the number of whole shares of Common Stock which, when multiplied by
the Fair Market Value of the Common Stock on the date the Common Stock is
issuable to the Recipient, is sufficient to satisfy the minimum amount of the
required tax obligations imposed on the Company by reason of the earning of the
shares (the “Withholding Election”). Recipient may make a Withholding Election
only if all of the following conditions are met:

 

                (i)    the
Withholding Election must be made within ten (10) days after the Recipient
receives written notification from the Company as to the amount of 

the tax
withholding that is due (the “Tax Notice Date”), by executing and delivering to
the Company a properly completed Notice of Withholding Election, in the form
provided by the Company; and

 

                (ii)    any
Withholding Election made will be irrevocable; however, the Committee may, in
its sole discretion, disapprove and give no effect to any 

Withholding
Election, by giving written notice to the Recipient no later than ten (10) days
after the Company’s receipt of the Notice of Withholding Election, in which
event the Recipient must deliver to the Company, within ten (10) days after
receiving such notice, the amount of the tax withholding pursuant to Section
G(a).

	
      H.
	
      The
      Performance Restricted Stock Rights are subject to the terms of the
      Company’s 2000 Stock Incentive Plan.

 

 

Page 23
of 23Form of Common Stock Purchase Warrant

 Exhibit 10.41 
  
 COMMON STOCK PURCHASE WARRANT 
  

To Purchase              Shares of Common Stock of 
  
 HOLLIS-EDEN PHARMACEUTICALS, INC. 
  
 THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received,              (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at
any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the fourth year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Hollis-Eden Pharmaceuticals, Inc., a Delaware corporation (the “Company”), up to              shares (the “Warrant Shares”)
of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). 
  
 Section 1. Definitions. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in that certain Stock Purchase Agreement (the “Purchase Agreement”), dated June 1, 2005, among the Company and the purchasers signatory thereto. 
  
 Section 2. Exercise. 
  
 a) Exercise of Warrant. Exercise of the purchase
rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of
Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, within 5 Trading
Days of the date said Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier’s check drawn on a United States bank. 
  
 b) Exercise Price. The exercise price of the Common Stock under this Warrant shall be $10.00 per share, subject to adjustment hereunder (the “Exercise Price”). 
  
 c) Cashless Exercise. If at any time after one year
from the date of issuance of this Warrant there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means
of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where: 
  
 (A) = the VWAP on the Trading Day immediately preceding the
date of such election; 
  
 (B) = the Exercise
Price of this Warrant, as adjusted; and 

	

	(X)	 	= the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

	

	d)	 	Exercise Limitations. Holder’s Restrictions. A Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent
that after giving effect to such issuance after exercise, such Holder (together with such Holder’s affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to such issuance. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by such Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other shares of Shares or
Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act, it being acknowledged by a Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the 1934
Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by such Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify
or confirm the accuracy of such determination. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by such Holder or its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The provisions of this Section 2(d) may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company, and the provisions of this Section 2(d) shall continue to
apply until such 61st day (or such later date, as determined by such Holder, as may be specified in such notice of
waiver). 

	e)	 	Mechanics of Exercise. 

  

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

  

	ii.	 	Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account
of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above (“Warrant Share
Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any,
pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid. 

  

	iii.	 	Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

  

	iv.	 	Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section
2(e)(iv) by the date that is two business days after the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise. 

  

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

	vi.	 	Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and
the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. 

  

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

  
 Section 3. Certain Adjustments. 
  

	a)	 	Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification. 

  

	b)	 	RESERVED. 

  

	c)	 	RESERVED. 

  

	d)	 	Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock
are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively

	    	 	converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, upon exercise of this
Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such
exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to
comply with the provisions of this Section 3(d) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. 

  

	e)	 	Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. 

  

	f)	 	RESERVED. 

  

	g)	 	Notice to Holders. 

  

	i.	 	Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. 

  

	ii.	 	Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any

	    	 	rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

  
 Section 4. Transfer of Warrant. 
  

	a)	 	Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the
Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a
new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. 

  

	b)	 	New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying
the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the

	    	 	Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

  

	c)	 	Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of
the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary. 

  

	d)	 	Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered
pursuant to an effective registration statement under the 1933 Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration
under the 1933 Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the 1933 Act or a qualified institutional buyer as defined in Rule 144A(a) under the 1933 Act. 

  
 Section 5. Miscellaneous. 
  

	a)	 	Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder are transferable,
in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an
investment letter in form and substance reasonably satisfactory to the Company. 

  

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

  

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

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

  

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

  

	f)	 	Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement. 

  

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

  

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

  

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

  

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

  

	k)	 	Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under
this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the 

	    	 	provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 

  

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

  

	m)	 	Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. 

  

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

  

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

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

  
 IN WITNESS
WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. 
  
 Dated: June             , 2005 
  

			
	HOLLIS-EDEN PHARMACEUTICALS, INC. 
		
	 By:
	 	

	 	 	 Name:
 Title:

 NOTICE OF EXERCISE 
  
 To: HOLLIS-EDEN PHARMACEUTICALS 
  
 (1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. 
  
 (2) Payment shall take the form of (check applicable box): 
  
 [            ] in lawful money of the United States; or 
  
 [            ] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect
to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c). 
  
 (3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified
below: 
  

  
 The Warrant Shares shall be delivered to the following: 
  

  

  

  
 (4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended. 
  
 [SIGNATURE OF HOLDER] 
  
 Name of Investing Entity:
                                        
                                        
                                        
                             
 Signature of Authorized Signatory of Investing Entity:
                                        
                                        
                     
 Name of Authorized Signatory:
                                        
                                        
                                        
                 
 Title of Authorized Signatory:
                                        
                                        
                                        
                     
 Date:
                                        
                                        
                                        
                                        
                     

 ASSIGNMENT FORM 
  
 (To assign the foregoing warrant, execute 
 this form and supply required information. 
 Do not use this form to exercise the warrant.) 
  
 FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to 
  
                                       
                                   whose address is 
  
                                       
                                        
                                        
                  . 
  
                                       
                                        
                                        
                  . 
  
 Dated:             ,
             
  
 Holder’s Signature:
                                        
             
  
 Holder’s Address:
                                        
             
  
 Signature Guaranteed:
                                        
                     
  
 NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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