Document:

SALARY CONTINUATION AGREEMENT-SHAW

 Exhibit 10(vi) 
  
 EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN 
 AGREEMENT 
  
 THIS
AGREEMENT is made and entered into as of this 11 day of March, 2004 by and between the New Century Bank, a bank organized and existing under the laws of the State of North Carolina (the “Bank”), and John Q. Shaw, Jr., President and
Chief Executive Officer of the Bank (the “Executive”). 
  
 WHEREAS, the Executive is an executive officer of the Bank and has for many years faithfully served the Bank. It is the consensus of the Bank’s Board of Directors (the “Board”) that the Executive’s services have
been of exceptional merit, in excess of the compensation paid, and an invaluable contribution to the profits and position of the Bank. The Board further believes that the Executive’s experience, knowledge of corporate affairs, reputation, and
industry contacts are of such value, and the Executive’s continued services so essential to the Bank’s future growth and profits, that it would suffer severe financial loss if the Executive’s service were terminated; 
  
 ACCORDINGLY, the Board has adopted the New Century Bank Executive
Supplemental Retirement Plan (the “Executive Plan”), and the Bank and the Executive desire to enter into this Agreement under which the Bank agrees to make certain payments to the Executive after the Executive’s retirement or to the
Executive’s beneficiary(ies) after the Executive’s death; 
  
 FURTHERMORE, the Bank and the Executive intend that this Executive Plan be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and be considered a non-qualified
benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Executive is fully advised of the Bank’s financial status and has had substantial input in the design and operation of this
benefit plan, and 
  
 NOW THEREFORE, in consideration of
services the Executive has performed in the past and those to be performed in the future, and based upon the mutual promises and covenants herein contained, the Bank and the Executive agree as follows: 
  

	I.	DEFINITIONS 

  

	 	[A]	Effective Date: 

  
 The Effective Date of the Executive Plan is July 31, 2003. 
  

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	 	[B]	Plan Year: 

  
 Plan Year means a calendar year from January 1st to December 31st. In the year of implementation, the term “Plan Year” shall
mean the period from July 31, 2003 through December 31, 2003. 
  

	 	[C]	Retirement Date: 

  
 Retirement Date means retirement from service with the Bank that becomes effective on the first day of the calendar month following the
month in which the Executive reaches the Normal Retirement Age (Subparagraph I [I]) or such later date as the Executive actually retires. 
  

	 	[D]	Termination of Service: 

  
 Termination of Service means the Executive’s voluntary resignation of service or the Bank’s discharge of the Executive without
cause before the Normal Retirement Age (Subparagraph I [I]). If there is a dispute about the employment status of the Executive or the date of the Executive’s Termination of Service, the Bank shall have the sole and absolute right to decide the
dispute unless a Change in Control shall have occurred. 
  

	 	[E]	Index Retirement Benefit: 

  
 The Index Retirement Benefit for a Plan Year equals the excess (if any) of the Index (Subparagraph I [F]) for that Plan Year over the Cost
of Funds Expense (Subparagraph I [G]) for that Plan Year, divided by a factor equal to 1.36 minus the marginal tax rate. 
  

	 	[F]	Index: 

  
 The Index for any Plan Year is the aggregate annual after-tax income from the life insurance contract(s) described hereinafter, as defined
by FASB Technical Bulletin 85-4. This Index shall be applied as if such insurance contract(s) were purchased on the Effective Date of the Executive Plan. 
  

			
	Insurance Company:	 	Massachusetts Mutual Life Insurance Company
	Policy Form:	 	Flexible Premium Adjustable Life Insurance
	Policy Name:	 	SL11B - 9900
	Insured’s Age and Sex:	 	62 / Male
	Riders:	 	None
	Ratings:	 	None
	Option:	 	Level Death Benefit
	Face Amount:	 	$1,783,600
	Premiums Paid:	 	$980,000
	Number of Premium Payments:	 	Single Premium Payment

  

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	Assumed Purchase Date:	 	July 28, 2003
	Insurance Company:	 	Jefferson Pilot Life Insurance Company
	Policy Form:	 	Flexible Premium Adjustable Life Insurance
	Policy Name:	 	ESP100
	Insured’s Age and Sex:	 	62 / Male
	Riders:	 	None
	Ratings:	 	None
	Option:	 	Level Death Benefit
	Face Amount:	 	$807,000
	Premiums Paid:	 	$430,000
	Number of Premium Payments:	 	Single Premium Payment
	Assumed Purchase Date:	 	July 28, 2003

  
 If
the contract or contracts of life insurance are actually purchased by the Bank, the actual policies as of the dates they were actually purchased shall be used in calculations under this Executive Plan. If the contract or contracts of life insurance
are not purchased or subsequently are surrendered or lapse, the Bank shall receive annual policy illustrations that assume the above-described policies were purchased or had not subsequently surrendered or lapsed. The illustration shall be received
from the respective insurance companies and will indicate the increase in policy values for purposes of calculating the amount of the Index. 
  
 In either case, references to the life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to
purchase life insurance and, if purchased, the Executive and the Executive’s beneficiary(ies) shall have no ownership interests in such policy or policies and shall always have no greater interest in the benefits under this Executive Plan than
that of an unsecured creditor of the Bank. 
  

	 	[G]	Cost of Funds Expense: 

  
 The Cost of Funds Expense for any Plan Year is calculated by taking the sum of the amount of premiums for the life insurance policies
described in the definition of “Index” plus the amount of any after-tax benefits paid to the Executive under the Executive Plan (Paragraph II hereinafter) plus the amount of all previous years after-tax Costs of Funds Expense, and
multiplying that sum by the Average After-Tax Cost of Funds (Subparagraph I [K]). 
  

	 	[H]	Change in Control: 

  
 The term “Change in Control” shall have the same meaning specified in any severance or employment agreement existing on the date
hereof or hereafter entered into between the Executive and the Bank. If the Executive is not a party to a severance or 

  

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employment agreement containing a definition of Change in Control, Change in Control means any of the following events occur: 
  
 [i] Merger: New Century Bancorp, Inc., a North
Carolina corporation of which the Bank is a wholly owned subsidiary (the “Company”), merges into or consolidates with another corporation, or merges another corporation into the Company, and as a result less than a majority of the combined
voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation, 
  
 [ii] Acquisition of Significant Share Ownership:
After the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule
discloses that the filing person or persons acting in concert has or have become the beneficial owner of twenty-five percent (25%) or more of the combined voting power of the Company’s voting securities outstanding (but this clause [ii] shall
not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of the Company or any subsidiary[ies]). For purposes of this Agreement,
“subsidiary” means an entity in which the Company beneficially owns fifty percent (50%) or more of the outstanding voting securities, whether the Company owns the shares directly or owns the shares indirectly through an intermediate
subsidiary, 
  
 [iii] Change in Board
Composition. During any period of two consecutive years, individuals who constitute the Company’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however,
that - for purposes of this clause [iii] - each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds ( 2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or

  
 [iv] Sale of Assets: The
Company sells to a third party all or substantially all of the Company’s assets. For this purpose, sale of all or substantially all of the Company’s assets includes sale of the shares or assets of the Bank alone. 
  

	 	[I]	Normal Retirement Age: 

  
 Normal Retirement Age means age sixty-seven (67). 
  

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	 	[J]	Benefit Accounting: 

  
 The Bank shall account for the benefit provided herein using the regulatory accounting principles of the Bank’s primary federal
regulator. The Bank shall establish an accrued liability retirement account for the Executive into which appropriate reserves shall be accrued. 
  

	 	[K]	Average After-Tax Cost of Funds: 

  
 Average After-Tax Cost of Funds means, at any particular time, a ratio, the numerator of which is the total interest expense, as set forth
on Schedule RI-Income Statement of the Bank’s most recently filed Consolidated Report of Condition and Income (the “Call Report”), and the denominator of which is an amount equal to: (i) the amount of deposits in domestic offices,
from Schedule RC-K of the Call Report, plus (ii) the amount of Federal funds purchased and securities sold under agreements to repurchase and borrow, as set forth on Schedule RC-Balance Sheet of the Call Report, times the inverse of the Bank” s
combined marginal income tax rate (or times the inverse of the highest personal federal and state, in the State where the Bank is located, income tax rate as determined by law, if the Bank is taxed as an S-Corporation). 
  

	 	[L]	Disability: 

  
 “Disability” means the Executive suffers a sickness, accident or injury determined by the carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the plan administrator (Paragraph VI) of
the carrier’s or Social Security Administration’s determination upon the request of the plan administrator. 
  

	II.	INDEX BENEFITS 

  

	 	[A]	Normal Retirement Age Benefits: 

  
 Subject to Subparagraph II [D] hereinafter, an Executive who remains in the employ of the Bank until the Normal Retirement Age
(Subparagraph I [I]) shall be entitled to receive an annual benefit amount equal to the amount set forth in Exhibit A-1. Said payments shall be made monthly (1/12th of the annual benefit) beginning thirty (30) days after the Executive’s
retirement and shall continue until the Executive attains age seventy-nine (79). Subject to Subparagraph II [A] [i], after attaining age seventy-nine (79) the Index Retirement Benefit (Subparagraph I [E]) for each Plan Year after the Plan Year in
which the Executive attains seventy-nine (79), and for the portion of the Plan 

  

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Year after which the Executive attains seventy-nine (79), shall be paid to the Executive until the Executive’s death. 
  

	 	[i]	The Index Retirement Benefit Adjustment: 

  
 The Index Retirement Benefit payment for the first Plan Year after the Executive attains seventy-nine (79) shall be adjusted according to
a number equal to the aggregate of the Index Retirement Benefit (Subparagraph I [E]) for each Plan Year from the Effective Date of this Agreement until the Plan Year after the Executive attains seventy-nine (79) over the aggregate of the benefit
payments the Executive actually received under the terms of this Executive Plan through that date. As an illustration, if the Executive retires at age sixty-seven (67) and the aggregate annual benefits received by the Executive until the Plan Year
the Executive attains seventy-nine (79) is $900,000, and the aggregate Index Retirement Benefits for each Plan Year from the Effective Date of this Agreement to the Plan Year the Executive attains seventy-nine (79) is $1,000,000, then the
Executive’s Index Retirement Benefit in the first Plan Year said payment is payable to the Executive would be increased by $100,000. If said number is a deficit, then the Index Retirement Benefit for the Plan Year when the Executive attains
seventy-nine (79) and each subsequent Plan Year’s benefit (if necessary) shall be reduced until the entire deficit has been recovered by the Bank. For each year thereafter, the Index Retirement Benefit payment shall be paid as set forth in
Subparagraph I [E]. For example, if the Executive retires at age sixty-seven (67) and the aggregate annual benefits received by the Executive until the Plan Year the Executive attains seventy-nine (79) is $1,000,000, but the aggregate Index
Retirement Benefits for each Plan Year from the Effective Date of this Agreement to the Plan Year the Executive attains seventy-nine (79) is $900,000 and the Executive’s Index Retirement Benefit was $90,000 in the first year, then the Executive
would not receive any Index Retirement Benefit in the first year, and the second year’s Index Retirement benefit would be reduced by $10,000. 
  

	 	[B]	Benefits for Termination of Service Before Normal Retirement Age: 

  
 If the Executive suffers a Termination of Service, the Executive shall be entitled to receive an annual benefit amount, or a percentage
(indicated below) of that annual benefit amount if the Executive has not had four (4) full years of employment with the Bank, based on the accrued liability retirement account balance at the end of the Plan Year preceding the date on which
Termination of Service occurred. Payment of benefits under this Subparagraph II [B] shall commence thirty (30) days after the Executive’s Normal Retirement Age (Subparagraph I [I]) and shall continue until the Executive attains seventy-nine
(79). Subject to Subparagraph II [A] [i], the following percentage of the Index Retirement Benefit for each Plan Year after the Plan Year in which the Executive attains seventy-nine (79), and for the portion of the Plan Year after which the 

  

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Executive attains seventy-nine (79), shall be paid to the Executive until the Executive’s death. 
  

			
	 Number of Full Years
of Employment from
the Date of First Employment

	  	Vested Percentage
(to a maximum of 100%)

	 Less than 1
	  	    0%
	 1
	  	  25%
	 2
	  	  50%
	 3
	  	  75%
	 4
	  	100%

  

	 	[C]	Death: 

  
 If the Executive dies while there is a balance in the Executive’s accrued liability retirement account, then the unpaid balance shall
be paid in a single lump sum to the individual or individuals designated in writing by the Executive filed with the Bank. In the absence of or a failure to designate a beneficiary, the unpaid balance shall be paid in a lump sum to the personal
representative of the Executive’s estate. If, upon death, the Executive shall have received the total balance of the Executive’s accrued liability retirement account, then no further benefit shall be due hereunder. In any event, upon the
death of the Executive, the Executive’s beneficiary shall not be entitled to receive any Index Retirement Benefit. 
  

	 	[D]	Discharge for Cause: 

  
 Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement and this
Agreement shall terminate if Termination of Service is a result of discharge for Cause. The term “Cause” means: 
  
 [i] A determination by the Bank, in good faith, that the Executive [a] has breached in any material respect any of the terms or conditions
of this Agreement, or [b] is engaging or has engaged in willful misconduct or conduct which is detrimental to the business prospects of the Bank or which has had or likely will have a material adverse effect on the Bank’s business or
reputation. The Executive shall not be deemed to have been discharged for Cause for purposes of this Subparagraph II [D] [i] unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative
vote of at least three-fourths (3⁄4) of the directors of the Bank then in office at a meeting of the board of directors called and held for such purpose, which resolution shall (a) contain findings that, in the good faith opinion of the board,
the Executive has committed an act constituting Cause and (b) specify the particulars thereof. Notice of that meeting and the proposed termination for 

  

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Cause shall be given to the Executive a reasonable amount of time before the board’s meeting. The Executive and his counsel (if the Executive chooses to
have counsel present) shall have a reasonable opportunity to be heard by the board at the meeting. Nothing in this Agreement limits the Executive’s or his beneficiaries’ right to contest the validity or propriety of the board’s
determination of Cause, and they shall have the right to contest the validity or propriety of the board’s determination of Cause even if that right does not exist under any employment agreement of the Executive, 
  
 [ii] The violation by the Executive of any applicable
federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any governmental agency or authority having jurisdiction over the Bank or any of its affiliates or subsidiaries (a “Regulatory
Authority,” including without limitation the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks), which results from the Executive’s gross negligence, willful misconduct, or intentional disregard of such
law, rule, regulation, order, or policy statement and results in any substantial damage, monetary or otherwise, to the Bank or any of its affiliates or subsidiaries or to the Bank’s reputation, 
  
 [iii] The commission in the course of the Executive’s
employment with the Bank of an act of fraud, embezzlement, or theft or proven personal dishonesty (whether or not resulting in criminal prosecution or conviction), 
  
 [iv] The conviction of the Executive of any felony or any criminal offense involving dishonesty or breach of
trust, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies the Executive from serving as an employee or executive officer of, or a party affiliated with,
the Bank or its bank holding company, 
  
 [v] The
Executive becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of the Bank’s affairs (or if proceedings for that purpose are commenced) by any Regulatory Authority, and, 
  
 [vi] The occurrence of any event believed by the Bank, in
good faith, to have resulted in the Executive being excluded from coverage, or having coverage limited as to the Executive as compared to other covered officers or employees, under the Bank’s then current “blanket bond” or other
fidelity bond or insurance policy covering its directors, officers or employees. 
  

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	 	[E]	Death Benefit: 

  
 Except as set forth above, there is no death benefit provided under this Agreement. 
  

	 	[F]	Disability Benefit: 

  
 If the Executive’s employment is terminated because of Disability before Normal Retirement Age, the Executive shall be one hundred
percent (100%) vested in the accrued liability retirement account balance on the date of said Disability upon submission to the Bank of written documentation and verification of Disability. The accrued liability retirement account shall be credited
with interest annually at a rate of two percent (2%) plus the prime interest rate each Plan Year. The annual benefit under this Subparagraph II [F] shall be calculated based on the accrued liability retirement account balance on the date of
Disability. Payment of the annual benefit shall be made monthly (1/12th of the annual benefit) beginning thirty (30) days after the Executive’s Termination of Service and shall continue until the Executive attains seventy-nine (79). Subject to
Subparagraph II [A] [i] of this Agreement, the following percentage of the Index Retirement Benefit for each Plan Year after the Plan Year in which the Executive attains seventy-nine (79), and for the portion of the Plan Year after which the
Executive attains seventy-nine (79), shall be paid to the Executive until the Executive’s death. 
  

			
	 Number of Full Years
of Employment from
the Date of First Employment

	  	Vested Percentage
(to a maximum of 100%)

	 Less than 1
	  	    0%
	 1
	  	  25%
	 2
	  	  50%
	 3
	  	  75%
	 4
	  	100%

  

	III.	RESTRICTIONS UPON FUNDING 

  
 The Bank shall have no obligation to set aside, earmark, or entrust any fund or money with which to pay its obligations under this Executive Plan. The
Executive, the Executive’s beneficiary(ies), or any successor in interest shall be and remain simply a general creditor of the Bank in the same manner as any other creditor having a general claim for matured and unpaid compensation. 

 
 The Bank reserves the absolute right, in its sole discretion, to fund the
obligations undertaken by this Executive Plan or to refrain from funding the same and to determine the extent, nature, and method of such funding. If the Bank elects to fund this Executive Plan in whole or in part through the purchase of life
insurance, mutual funds, disability policies, or annuities, the Bank reserves the absolute right, in its sole discretion, to terminate such funding at 

  

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any time in whole or in part. At no time shall any Executive be deemed to have any lien, nor right, title, or interest in or to any specific funding
investment or to any assets of the Bank. 
  
 If the Bank elects to
invest in a life insurance, disability, or annuity policy upon the life of the Executive, the Executive shall assist the Bank by freely submitting to a physical exam and supplying such additional information necessary to obtain such insurance or
annuities. 
  

	IV.	CHANGE IN CONTROL 

  

	 	[A]	Accelerated Payment of Normal Retirement Age Accrued Liability Retirement Account Balance if Termination of Service Occurs Within 12 Months: 

  
 If a Change in Control (Subparagraph I [H]) occurs and if
Termination of Service (Subparagraph I [D]) occurs within twelve (12) months thereafter other than for Cause, the Executive shall receive the Normal Retirement Age accrued liability retirement account balance Four Hundred Sixty Four Thousand One
Hundred Ninety Nine and 00/100th Dollars ($464,199.00) without reduction for the time value of money or other
discount. The Bank shall pay the Change in Control benefit under this Subparagraph IV [A] to the Executive in one lump sum within three days after the Executive’s Termination of Service. 
  

	 	[B]	Gross Up for Taxes: 

  

	 	[i]	Additional Payment to Account for Excise Taxes: 

  
 If as a result of a Change in Control the Executive becomes entitled to acceleration of benefits under this Agreement or under any other
plan or agreement of or with the Bank or its affiliates (together, the “Total Benefits”), and if any of the Total Benefits will be subject to the Excise Tax as set forth in sections 280G and 4999 of the Internal Revenue Code of 1986 (the
“Excise Tax”), the Bank shall pay to the Executive the following additional amounts, consisting of (1) a payment equal to the Excise Tax payable by the Executive on the Total Benefits under section 4999 of the Internal Revenue Code (the
“Excise Tax Payment”), and (2) a payment equal to the amount necessary to provide the Excise Tax Payment net of all income, payroll and excise taxes. Together, the additional amounts described in clauses (1) and (2) are referred to in this
Agreement as the “Gross-Up Payment Amount.” 
  
 [a] Calculating the Excise Tax. For purposes of determining whether any of the Total Benefits will be subject to the Excise Tax and for purposes of determining the amount of the Excise Tax, 
  

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 [1] Determination of “Parachute Payments” Subject to the Excise Tax:
any other payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive’s Termination of Employment (whether under the terms of this Agreement or any other agreement or any other
benefit plan or arrangement with the Bank, any person whose actions result in a Change in Control, or any person affiliated with the Bank or such person) shall be treated as parachute payments within the meaning of section 280G(b)(2) of the Internal
Revenue Code, and all “excess parachute payments” within the meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of the certified public accounting firm that is retained by the Bank as of the
date immediately before the Change in Control (the “Accounting Firm”) such other payments or benefits do not constitute (in whole or in part) parachute payments, or such excess parachute payments represent (in whole or in part) reasonable
compensation for services actually rendered within the meaning of section 280G(b)(4) of the Internal Revenue Code in excess (as defined in section 280G(b)(3) of the Internal Revenue Code), or are otherwise not subject to the Excise Tax, 

 
 [2] Calculation of Benefits Subject to Excise
Tax: the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Benefits reduced by the amount of such Total Benefits that in the opinion of the
Accounting Firm are not parachute payments, or (b) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (1), above), and 
  
 [3] Value of Noncash Benefits and Deferred Payments: the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Accounting Firm in accordance with the principles of sections 280G(d)(3) and (4) of the Internal Revenue Code. 
  
 [b] Assumed Marginal Income Tax Rate. For purposes of determining the amount of the Gross-Up Payment
Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar years in which the Gross-Up Payment Amount is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive’s residence on the date of termination of employment, net of the reduction in federal income taxes that can be obtained from deduction of such state and 

  

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local taxes (calculated by assuming that any reduction under Section 68 of the Internal Revenue Code in the amount of itemized deductions allowable to the
Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive, and applicable federal FICA and Medicare withholding taxes). 
  
 [c] Return of Reduced Excise Tax Payment or Payment of
Additional Excise Tax. If the Excise Tax is later determined to be less than the amount taken into account hereunder when the Executive’s employment terminated, the Executive shall repay to the Bank - when the amount of the reduction in
Excise Tax is finally determined - the portion of the Gross-Up Payment Amount attributable to the reduction (plus that portion of the Gross-Up Payment Amount attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare
withholding taxes imposed on the Gross-Up Payment Amount being repaid by the Executive to the extent that the repayment results in a reduction in Excise Tax, FICA, and Medicare withholding taxes and/or a federal, state, or local income tax
deduction). 
  
 If the Excise Tax is later
determined to be more than the amount taken into account hereunder when the Executive’s employment terminated (due, for example, to a payment whose existence or amount cannot be determined at the time of the Gross-Up Payment Amount), the Bank
shall make an additional Gross-Up Payment Amount to the Executive for that excess (plus any interest, penalties, or additions payable by the Executive for the excess) when the amount of the excess is finally determined. 
  

	 	[ii]	Responsibilities of the Accounting Firm and the Bank: 

  
 [a] Determinations Shall Be Made by the Accounting Firm. Subject to the provisions of Subparagraph IV [B] [i], all determinations
required to be made under this Subparagraph IV [B] [ii] B including whether and when a Gross-Up Payment Amount is required, the amount of the Gross-Up Payment Amount and the assumptions to be used to arrive at the determination (collectively, the
“Determination”) shall be made by the Accounting Firm, which shall provide detailed supporting calculations both to the Bank and the Executive within fifteen (15) business days after receipt of notice from the Bank or the Executive that
there has been a Gross-Up Payment Amount, or such earlier time as is requested by the Bank. 
  

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 [b] Fees and Expenses of the Accounting Firm and Agreement with the Accounting
Firm. All fees and expenses of the Accounting Firm shall be borne solely by the Bank. The Bank shall enter into any agreement requested by the Accounting Firm in connection with the performance of its services hereunder. 
  
 [c] Accounting Firm’s Opinion. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, the Accounting Firm shall furnish the Executive with a written opinion to that effect, and to the effect that failure to report Excise Tax, if any, on the Executive’s
applicable federal income tax return will not result in the imposition of a negligence or similar penalty. 
  
 [d] Accounting Firm’s Determination Is Binding; Underpayment and Overpayment. The Determination by the Accounting Firm shall
be binding on the Bank and the Executive. Because of the uncertainty in determining whether any of the Total Benefits will be subject to the Excise Tax at the time of the Determination, it is possible that a Gross-Up Payment Amount that should have
been made will not have been made by the Bank (“Underpayment”), or that a Gross-Up Payment Amount will be made that should not have been made by the Bank (“Overpayment”). If, after a Determination by the Accounting Firm, the
Executive is required to make a payment of additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred. The Underpayment [together with interest at the rate provided in section 1274(d)(2)(B) of the
Internal Revenue Code] shall be paid promptly by the Bank to or for the benefit of the Executive. If the Gross-Up Payment Amount exceeds the amount necessary to reimburse the Executive for his Excise Tax according to Subparagraph IV [B] [i], the
Accounting Firm shall determine the amount of the Overpayment that has been made. The Overpayment [together with interest at the rate provided in section 1274(d)(2)(B) of the Internal Revenue Code] shall be paid promptly by the Executive to or for
the benefit of the Bank. Provided that his expenses are reimbursed by the Bank, the Executive shall cooperate with any reasonable requests by the Bank in any contests or disputes with the Internal Revenue Service relating to the Excise Tax.

  
 [e] Accounting Firm Conflict of
Interest. If the Accounting Firm is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control, the Executive may appoint another nationally recognized public accounting firm to make the Determinations
required hereunder (in which case the term “Accounting Firm” as used in 

  

 13 

 
this Agreement shall be deemed to refer to the accounting firm appointed by the Executive under this paragraph). 
  

	V.	MISCELLANEOUS 

  

	 	[A]	Alienability and Assignment Prohibition: 

  
 Neither the Executive, nor the Executive’s surviving spouse, nor any other beneficiary(ies) under this Executive Plan shall have any
power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts,
judgments, alimony, or separate maintenance owed by the Executive or the Executive’s beneficiary(ies), nor be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise. If the Executive or any beneficiary attempts
assignment, commutation, hypothecation, transfer, or disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease and terminate. 
  

	 	[B]	Binding Obligation of the Bank and any Successor in Interest: 

  
 No sale, merger, or consolidation of the Company or the Bank shall occur unless the new or surviving entity expressly acknowledges the
obligations under this Executive Plan and agrees in writing to assume and discharge the duties and obligations of the Bank under this Executive Plan. This Executive Plan shall be binding upon the parties hereto, their successors, beneficiaries,
heirs, and personal representatives. 
  

	 	[C]	Amendment or Revocation: 

  
 Subject to Paragraph VII, it is agreed by and between the parties hereto that, during the lifetime of the Executive, this Executive Plan
may be amended or revoked at any time or times, in whole or in part, by the mutual written consent of the Executive and the Bank. 
  

	 	[D]	Gender: 

  
 Whenever in this Executive Plan words are used in the masculine or neuter gender, they shall be read and construed as in the masculine,
feminine, or neuter gender, whenever they should so apply. 
  

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	 	[E]	Effect on Other Bank Benefit Plans: 

  
 Nothing contained in this Executive Plan shall affect the right of the Executive to participate in or be covered by any qualified or
non-qualified pension, profit-sharing, group, bonus or other supplemental compensation or fringe benefit plan constituting a part of the Bank’s existing or future compensation structure. 
  

	 	[F]	Headings: 

  
 Headings and subheadings in this Executive Plan are inserted for reference and convenience only and shall not be deemed a part of this
Executive Plan. 
  

	 	[G]	Applicable Law: 

  
 The laws of the State of North Carolina shall govern the validity and interpretation of this Agreement. 
  

	 	[H]	12 U.S.C. section 1828(k): 

  
 Any payments made to the Executive under this Executive Plan or otherwise are subject to and conditioned upon their compliance with 12
U.S.C. Section 1828(k) or any regulations promulgated thereunder. 
  

	 	[I]	Partial Invalidity: 

  
 If any term, provision, covenant, or condition of this Executive Plan is determined by an arbitrator or a court, as the case may be, to be
invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant, or condition invalid, void, or unenforceable, and the Executive Plan shall remain in full force and effect notwithstanding such partial
invalidity. 
  

	 	[J]	Employment: 

  
 No provision of this Executive Plan shall be deemed to restrict or limit any existing employment agreement by and between the Bank and the
Executive, nor shall any conditions herein create specific employment rights to the Executive nor limit the right of the Employer to discharge the Executive with or without cause. In a similar fashion, no provision shall limit the Executive’s
right to voluntarily sever employment at any time. 
  

 15 

	 	[K]	Legal Expenses After a Change in Control: 

  
 The Bank is aware that upon the occurrence of a Change in Control, management of the Bank may cause or attempt to cause the Bank to refuse
to comply with its obligations under this Agreement, or may cause or attempt to cause the Bank to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny
Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Bank that the Executive not be required to incur the expenses associated with the enforcement of
his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any settlement of his
rights hereunder under threat of incurring such expenses. Accordingly, if after a Change in Control it appears to Executive that: (a) the Bank has failed to comply with any of its obligations under this Agreement; or (b) the Bank or any other person
has taken any action to declare this Agreement void or unenforceable or instituted any litigation or other legal action designed to deny, diminish or to recover from, Executive the benefits intended to be provided to Executive hereunder, the Bank
irrevocably authorizes Executive from time to time to retain counsel of his choice at the Bank’s expense as provided in this Subparagraph V [K], to represent Executive in connection with the initiation or defense of any litigation or other
legal action, whether by or against the Bank or any director, officer, stockholder or other person affiliated with the Bank, in any jurisdiction. The fees and expenses of counsel selected from time to time by Executive as herein above provided shall
be paid or reimbursed to Executive by the Bank on a regular, periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with such counsel’s customary practices, up to a maximum aggregate
amount of Five Hundred Thousand and 00/100th Dollars ($500,000.00). The Bank’s obligation to pay the
Executive’s legal fees provided by this Subparagraph V [K] operates separately from, and in addition to, any legal fee reimbursement obligation the Bank or the Company may have with the Executive under any employment, severance, or other
agreement with the Executive. 
  

	VI.	ERISA PROVISION 

  

	 	[A]	Named Fiduciary and Plan Administrator: 

  
 The “Named Fiduciary and Plan Administrator” of this Executive Plan shall be New Century Bank until its resignation or removal
by the Board. As Named Fiduciary and Plan Administrator, the Bank shall be responsible for the management, control and administration of the Executive Plan. The Named Fiduciary may delegate to others certain aspects of the management and operation
responsibilities of the Executive Plan including the employment of advisors and the delegation of ministerial duties to qualified individuals. 
  

 16 

	 	[B]	Claims Procedure: 

  
 If a dispute arises over benefits under this Executive Plan and benefits are not paid to the Executive (or to the Executive’s
beneficiary(ies) in the case of the Executive’s death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Named Fiduciary and Plan Administrator named above within 90 days from the date
payments are refused. The Named Fiduciary and Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, they shall provide in writing within 90 days of receipt of such claim the specific reasons for such
denial, reference to the provisions of this Executive Plan upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the Named Fiduciary and Plan Administrator fail to take any action within the 90-day period. 
  
 If claimants desire a second review they shall notify the
Named Fiduciary and Plan Administrator in writing within 90 days of the first claim denial. Claimants may review this Executive Plan or any documents relating thereto and submit any written issues and comments they may feel appropriate. In its sole
discretion, the Named Fiduciary and Plan Administrator shall then review the second claim and provide a written decision within 90 days of receipt of such claim. This decision shall likewise state the specific reasons for the decision and shall
include reference to specific provisions of the Plan Agreement upon which the decision is based. 
  

	VII.	TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE LAW, RULES OR REGULATIONS 

  
 The Bank is entering into this Agreement upon the assumption that certain existing tax laws, rules and regulations will
continue in effect in their current form. If any said assumptions should change and said change has a detrimental effect on this Executive Plan, then the Bank reserves the right to terminate or modify this Agreement accordingly. Upon a Change in
Control (Subparagraph I [H]), this paragraph shall become null and void effective immediately upon the Change in Control. 
  

 17 

 IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read this Agreement and
executed the original thereof as of date first set forth above, and that upon execution each has received a conforming copy. 
  

									
	 	 	 	 	 NEW CENTURY BANK
 Dunn, North Carolina

				
	/s/ Brenda B. Bonner	 	 	 	By:	 	 /s/ C L. Tart,

	
	 	 	 	 	 	

	 Witness
	 	 	 	 Its:
	 	 Chairman

			
	 	 	 	 	EXECUTIVE
			
	 	 	 	 	 /s/ John Q. Shaw, Jr

	 	 	 	 	 	

	 	 	 	 	 John Q. Shaw, Jr.

  

 18 

 BENEFICIARY DESIGNATION FORM FOR THE EXECUTIVE SUPPLEMENTAL 
 RETIREMENT PLAN AGREEMENT 
  

	I.	PRIMARY DESIGNATION 

  
 (You may refer to the beneficiary designation information prior to completion of this form.) 
  

	 	A.	Person(s) as a Primary Designation: 

  
 (Please indicate the percentage for each beneficiary.) 
  
 Name:
                                        
                                        
Relationship:
                                        
                 /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  
 Name:
                                        
                                        
Relationship:
                                        
                 /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  
 Name:
                                        
                                        
Relationship:
                                        
                 /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  
 Name:
                                        
                                        
Relationship:
                                        
                 /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  

	 	B.	Estate as a Primary Designation: 

  
 My Primary Beneficiary is The Estate of
                                        
as set forth in the last will and testament dated the              day of
                            ,
                 and any codicils thereto. 
  

	 	C.	Trust as a Primary Designation: 

  
 Name of the Trust:
                                        
                                        
                                        
                                     
 Execution Date of the Trust:                 
/                 / 
 Name of the Trustee:
                                        
                                        
                                        
                                 
 Beneficiary(ies) of the Trust (please indicate the percentage for each beneficiary): 
  
 _____________________________________________________________________________________________ 
  
 _____________________________________________________________________________________________ 
  
 Is this an Irrevocable Life Insurance Trust?                  Yes
                     No 
 (If yes
and this designation is for a Split Dollar Agreement, an Assignment of Rights form should be completed.) 
  

 19 

	II.	SECONDARY (CONTINGENT) DESIGNATION 

  

	 	A.	Person(s) as a Secondary (Contingent) Designation: 

  
 (Please indicate the percentage for each beneficiary.) 
  
 Name:
                                        
                                        
Relationship:
                                       
                  /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  
 Name:
                                        
                                        
Relationship:
                                        
                 /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  
 Name:
                                        
                                        
Relationship:
                                        
             /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  
 Name:
                                        
                                        
Relationship:
                                        
                 /              % 
  
 Address:
                                        
                                        
                                        
                                        
             
   (Street)                                   
                         (City)              
              (State)                         
       (Zip) 
  

	 	B.	Estate as a Secondary (Contingent) Designation: 

  
 My Secondary Beneficiary is The Estate of
                                        
as set forth in the last will and testament dated the              day of
                            ,
                 and any codicils thereto. 
  

	 	C.	Trust as a Secondary (Contingent) Designation: 

  
 Name of the Trust:
                                        
                                        
                                        
                                     
 Execution Date of the Trust:                  /
                 /                 
 Name of the Trustee:
                                        
                                        
                                        
                                 
 Beneficiary(ies) of the Trust (please indicate the percentage for each beneficiary): 
  
 _____________________________________________________________________________________________ 
  
 _____________________________________________________________________________________________ 
  
 All sums payable under the Executive Supplemental Retirement Plan Agreement by reason of my death shall be paid to the Primary Beneficiary(ies), if he or
she survives me, and if no Primary Beneficiary(ies) shall survive me, then to the Secondary (Contingent) Beneficiary(ies). This beneficiary designation is valid until the Executive notifies the Bank in writing. 
  

					
			
	  	 	 	 	  
	
	 	 	 	

	 John Q. Shaw, Jr.
	 	 	 	 Date

  

 20 

 EXHIBIT “A-1” 
 For 
 John Q. Shaw, Jr. 
  

					
	 	  	End of
Year Age:

	  	Benefit
Amount

	 John Q. Shaw, Jr.
	  	67	  	$17,149
	 	  	68	  	$53,133
	 	  	69	  	$54,134
	 	  	70	  	$55,174
	 	  	71	  	$56,118
	 	  	72	  	$57,198
	 	  	73	  	$58,457
	 	  	74	  	$59,779
	 	  	75	  	$61,057
	 	  	76	  	$62,159
	 	  	77	  	$63,358
	 	  	78	  	$64,249

  

 21Warrant for Common Stock

 Exhibit 4.2 
  
 ENTROPIN, INC. 
 COMMON STOCK WARRANT

  
 NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS. 
  
 This certifies that Navidec Financial Services, Inc., a Colorado corporation (the “Holder”), for value received, is entitled to purchase from Entropin, Inc., a Delaware corporation (the “Company”),
subject to the terms set forth below, up to 1,000,000 shares of the Company’s Common Stock, no par value (the “Warrant Shares”), at a price of $0.25 per share (the “Exercise Price”) at any time or from time to time up to and
including 5:00 p.m. (Pacific Time) on January 1, 2009 (the “Expiration Date”) upon surrender to the Company at its principal office (or at such other location as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly completed and signed and upon payment of the aggregate Exercise Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof.
The number of Warrant Shares and the Exercise Price are subject to adjustment as provided in Section 3 of this Warrant. This Warrant is issued pursuant to that certain Business Consulting Agreement, dated December 11, 2003 (the
“Agreement”), by and between the Company and the Holder. 
  
 This Warrant is issued subject to the following terms and conditions: 
  
 1.    Vesting Schedule.    Notwithstanding anything to the contrary in this Warrant, the Holder may only exercise prior to the Expiration Date that number of Warrant
Shares that are Vested Warrant Shares. The Warrant Shares shall become Vested Warrant Shares as follows: (a) 50% of the Warrant Shares shall become Vested Warrant Shares on January 31, 2004, provided the Agreement has not been terminated on or
before such date; and (b) the remaining 50% of the Warrant Shares shall become Vested Warrant Shares on March 31, 2004, provided the Agreement has not been terminated on or before such date. 
  
 2.    Exercise, Issuance of
Certificates.    The Holder may exercise this Warrant on or prior to the Expiration Date, at any time or from time to time following, for all or any part of the Vested Warrant Shares (but not for a fraction of a share) which
may be purchased hereunder, as that number may be adjusted pursuant to Section 5 of this Warrant. The Company agrees that the Warrant Shares purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the record owner
of such Warrant Shares as of the close of business on the date 

 on which this Warrant shall have been surrendered, properly endorsed, the completed and executed Form of Subscription
delivered, and payment made for such Warrant Shares (such date, a “Date of Exercise”). Certificates for the Warrant Shares so purchased, together with any other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the Company’s expense as soon as practicable after the rights represented by this Warrant have been so exercised. In case of a purchase of less than all the Warrant Shares
which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver to the Holder hereof within a reasonable time a new Warrant or Warrants of like tenor for the balance of the Warrant Shares purchasable under
the Warrant surrendered upon such purchase. 
  
 3.    Payment of Exercise Price.    The Holder shall pay the Exercise Price by cash or immediately available funds, or the Holder may notify the Company in the Form of Subscription of its
election to utilize cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: 
  
 X = Y [(A-B)/A] 
  
 where: 
  
 X = the number of Warrant Shares to be issued to the Holder. 
  
 Y = the number of Warrant Shares with respect to which this Warrant is being exercised. 
  
 A = the Fair Market Value of one share of Common Stock.

  
 B = the per share Exercise Price. 

 
 For purposes of Rule 144 promulgated under the Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was
originally issued. For purposes of the above calculation, the Fair Market Value of one share of Common Stock shall be determined by the Company’s Board of Directors in good faith; provided, however, that where there exists a public market for
the Company’s Common Stock at the time of such exercise the Fair Market Value per share shall be equal to the average of the closing bid and asked prices of Common Stock quoted in the over-the-counter market summary or the last reported sale
price of Common Stock or the closing price quoted on the Nasdaq National Market System or on any exchange on which Common Stock is listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the five
(5) trading days prior to the date of determination of Fair Market Value. 
  
 4.    Shares to be Fully Paid; Reservation of Shares.    The Company covenants and agrees that all Warrant Shares, will, upon issuance and, if applicable, payment of the
applicable Exercise Price, be duly authorized, validly issued, fully paid and nonassessable, and free of all preemptive rights, liens and encumbrances, except for restrictions on transfer provided for 
  

 2 of 14 

 herein. The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely
for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to this Warrant, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. 
  
 5.    Adjustment of Exercise Price and Number of
Shares.    The Exercise Price and the total number of Warrant Shares shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 5. Upon each adjustment of the Exercise
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment. 
  
 5.1    Subdivision or Combination of Stock.    In the event the outstanding
shares of the Company’s Common Stock shall be increased by a stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction occurring after the date hereof into a greater number of shares of Common Stock, the
Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares issuable hereunder proportionately increased. Conversely, in the event the outstanding shares of the Company’s
Common Stock shall be decreased by reverse stock split, combination, consolidation, or other similar transaction occurring after the date hereof into a lesser number of shares of Common Stock, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares issuable hereunder proportionately decreased. 
  
 5.2    Reclassification.    If any reclassification of the capital stock of the Company or any
reorganization, consolidation, merger, or any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of the business and/or assets of the Company (the
“Reclassification Events”) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property, then, as a condition of such Reclassification Event lawful and adequate
provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities, or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any Reclassification Event, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the
end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of Warrant Shares), shall thereafter be applicable, as nearly as may be, in relation to any shares of stock,
securities, or assets thereafter deliverable upon the exercise hereof. 
  

 3 of 14 

 5.3    Notice of Adjustment.    Upon any adjustment of the
Exercise Price or any increase or decrease in the number of Warrant Shares, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the registered Holder of this Warrant at the address of such Holder as shown
on the books of the Company. The notice shall be prepared and signed by the Company’s Chief Financial Officer and shall state the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 
  
 6.    No Voting or Dividend Rights.    Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof the right to vote or to consent to receive notice as a stockholder of the Company on any other matters or any rights whatsoever as a stockholder of the Company. No dividends or interest shall
be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised. 
  
 7.    Compliance with Securities
Act.    The Holder hereby represents and warrants to and for the benefit of the Company, with knowledge that the Company is relying thereon in issuing this Warrant to the Holder, as follows: 
  
 7.1    Purchase Entirely for Own
Account.    The Holder hereby confirms that the Warrant and the Common Stock issuable upon exercise of the Warrant (collectively, the “Securities”) will be acquired for investment for the Holder’s own account,
not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this
Agreement, the Holder further represents that the Holder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to the person or to any third person, with respect to any of the
Securities. The Holder represents that the Holder has full power and authority to enter into this Agreement. 
  
 7.2    Investment Experience.    The Holder is an investor in securities of companies in the development
stage and acknowledges that the Holder is able to fend for itself, can bear the economic risk of its investment and has the knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the
investment in the Securities. 
  
 7.3    Holder Status.    The Holder is an “accredited investor” within the meaning of Securities and Exchange Commission Rule 501 of Regulation D, as presently in effect. 

 
 7.4    Restricted
Securities.    The Holder understands that the Securities the Holder is and will be purchasing are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act, only in certain limited 
  

 4 of 14 

 circumstances. In this connection, the Holder represents that the Holder is familiar with Rule 144
promulgated under the Act, as now in effect, and understands the resale limitations imposed thereby and by the Act. 
  
 7.5    Investment Intent Upon Exercise.    Unless a current registration statement under the Act, shall be
in effect with respect to the securities to be issued upon exercise of this Warrant, the Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, the Holder shall deliver to the Company a written statement that
the securities acquired by the Holder upon exercise hereof are for the account of the Holder for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and are being acquired
with no present intention (at any such time) of offering or distributing such securities (or any portion thereof). 
  
 8.    Restrictions on Disposition.    Without in any way limiting the representations set forth above, the
Holder further agrees not to make any disposition of all or any portion of the Securities unless and until: 
  
 8.1    Securities Registered.    There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such registration statement; or 
  
 8.2    Registration Not Required.    (a) Such Holder shall have notified the Company in writing of the
proposed disposition and shall have furnished the Company in writing with a detailed statement of the circumstances surrounding the proposed disposition, (b) if requested by the Company, such Holder shall have furnished the Company with an opinion
of counsel, satisfactory to the Company, that such disposition will not require registration of such shares under the Act and (c) the transferee shall agree in writing to be bound by this Section 8 as if an original Holder. It is agreed that the
Company will not require opinions of counsel pursuant to Section 8.2(b) for dispositions made pursuant to Rule 144, except (a) in unusual circumstances or (b) at the request of the Company’s transfer agent. 
  
 8.3    Securities
Legend.    Each stock certificate so delivered upon exercise shall be registered in the name of such Holder and issued with the following legend, unless the Warrant Shares have previously been registered under the Act.

  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, 
  

 5 of 14 

 THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS. 
  
 9.    Registration
Rights.    Until such time as the Warrant Shares may be sold under Rule 144(k) under the Act without volume limitations (at which time, the Company shall thereafter have no further obligations under this Section 9), the
Holder shall have the following rights to have the Warrant Shares registered under the Act. 
  
 9.1    Piggyback Registration.    Subject to Section 9.5, if the Company files a registration statement under the Act (other than a registration statement on Form S-4 or
S-8 or any successor or similar forms (including forms for small business issuers) or an offering to be made on a delayed or continuous basis under Rule 415 under the Act) registering an underwritten offering of Common Stock for cash consideration
on any form that also would permit the registration of the Warrant Shares and any shares of common stock that may be issued or distributed with respect to, or in exchange for, the Warrant Shares (the “Registrable Securities”) and such
filing is to be on its behalf and/or on behalf of selling holders of the Company’s securities, the Company shall each such time promptly give the Holder written notice of its intent to make such filing, setting forth the date on which the
Company proposes to file such registration statement, and advising the Holder of its right to have Registrable Securities included in such registration. The Company will select the managing underwriter and all other underwriters in any underwritten
offering pursuant to this Section 9.1. Upon the written request of the Holder received by the Company no later than ten (10) days after the date of the Company’s notice, the Company shall use commercially reasonable efforts to cause to be
registered under the Act all of the Registrable Securities that the Holder has so requested to be registered; provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give
written notice of such determination to the Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. If, in the written opinion of the managing underwriter, the total
amount of such securities to be so registered, including such Registrable Securities, will exceed the maximum amount of the Company’s securities that can be marketed either (a) at a price reasonably related to the then current market value of
such securities, or (b) without otherwise materially and adversely affecting the entire offering, then the Company shall include in such registration first, all the securities the Company proposes to sell for its own account or is required to
register on behalf of any third party exercising demand registration rights and without having the adverse effect referred to above, and second, all Registrable Securities requested to be included in such registration by the Holder pursuant to this
Section 9.1 and all shares of Common Stock requested to be included by third parties exercising the rights similar to those granted in this Section 9.1, up to the number which the Company has been advised can be sold in such offering without having
either of the adverse effects referred to above. The number of such Registrable Securities requested to be included in such registration by the Holder pursuant to this Section 9.1 shall be limited to such extent and shall be allocated pro rata

  

 6 of 14 

 among the Holder and third parties exercising rights similar to those granted in this Section 9.1 on the
basis of the relative number of Registrable Securities the Holder has requested to be included in such registration and the number of shares of Common Stock requested to be included in such registration by such third parties. 
  
 9.2    Obligations of the
Company.    Whenever the Company has filed a registration statement pursuant to Section 9.1 that registers Registrable Securities under the Act, the Company will: 
  
 (a)    furnish the Holder with a reasonable numbers of copies of the Registration Statement and any
Prospectus included therein (including each preliminary Prospectus and any amendments or supplements thereto (including all exhibits and documents incorporated by reference) in conformity with the requirements of the Act); 
  
 (b)    use commercially reasonable efforts to register
or qualify the Registrable Securities covered by such Registration Statement under such other securities or Blue Sky laws of such jurisdictions within the United States as the Holder shall request for the distribution of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business in or to file a general consent to service of process in any
jurisdiction wherein it would not but for the requirements of this paragraph be obligated to do so; 
  
 (c)    promptly notify the Holder (1) when such Registration Statement, amendment, supplement or post-effective amendment has been
filed, and, with respect to such Registration Statement or any post-effective amendment, when the same has become effective, (2) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or the
initiation or threatening of any proceedings for that purpose, or (3) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and 
  
 (d)    use commercially reasonable efforts to list the Registrable Securities covered by such Registration Statement with any securities exchange on which the Common Stock of the Company is then listed, if applicable.

  
 9.3    Furnish
Information.    It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Warrant that the Holder shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities as the Company shall reasonably request in writing and as shall be required in connection with the action to be taken by the Company. 
  
 9.4    Expenses of
Registration.    All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications of 
  

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 Registrable Securities pursuant to Section 9.1, including without limitation all registration, filing and
qualification fees, word processing, duplicating, printers’ and accounting fees (including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance), listing fees,
messenger and delivery expenses, all fees and expenses of complying with state securities or Blue Sky laws, and fees and disbursements of counsel for the Company, shall be borne by the Company. The Holder shall bear and pay the underwriting
commissions and discounts applicable to the Registrable Securities offered for its account in connection with any regulations, filings and qualifications made pursuant to this Warrant. 
  
 9.5    Underwriting Requirements.    In connection with any underwritten
offering, the Company shall not be required under Section 9.1 to include Registrable Securities in such underwritten offering unless the Holder accepts the terms of the underwriting of such offering that have been reasonably agreed upon between the
Company and the underwriters selected by the Company in accordance with the terms of this Warrant. 
  
 9.6    Indemnification. 
  
 (a)    For the purpose of this Section 9.6: 
  

(i)    the term “Selling Stockholder” shall include the Holder and any “affiliate” (as such term is defined in
Rule 144) of the Holder, and their respective permitted transferees and assigns; 
  
 (ii)    the term “untrue statement” shall, with respect to any Registration Statement, include any untrue statement or alleged untrue statement of a material fact contained in the related
Registration Statement, or any omission or alleged omission to state in the related Registration Statement a material fact required to be stated therein or necessary to make the statements therein, not misleading, and, with respect to any
Prospectus, include any untrue statement or alleged untrue statement of a material fact contained in the related Prospectus, or any omission or alleged omission to state in the related Prospectus a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 
  
 (b)    The Company agrees to indemnify and hold harmless the Selling Stockholder (and each person, if any, who controls the Selling
Stockholder within the meaning of Section 15 of the Act, each officer of the Selling Stockholder and each director of the Selling Stockholder) from and against any losses, claims, damages or liabilities to which the Selling Stockholder (or any such
officer, director or controlling person) may become subject (under the Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (i) any untrue statement
or (ii) any failure by the Company to fulfill any undertaking included in the related Registration Statement, provided, however, that the Company shall not be liable 
  

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 in any such case to the extent that such loss, claim, damage or liability (A) arises out of, or is based
upon, an untrue statement made in conformity with written information furnished to the Company by the Selling Stockholder specifically for use in preparation of the Registration Statement or Prospectus (which has not been subsequently corrected or
supplemented), (B) results from the failure of the Selling Stockholder to satisfy its prospectus delivery requirements under the Act, or (C) arises out of any statement or omission in any Prospectus that is corrected in any subsequent Prospectus
that was delivered to the Selling Stockholder prior to the pertinent sale or sales by the Selling Stockholder. 
  
 (c)    The Selling Stockholder agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Act, each officer of the Company and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may
become subject (under the Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement if such untrue statement was made in conformity
with written information furnished by the Selling Stockholder specifically for use in preparation of the Registration Statement or Prospectus, provided, however, that the Selling Stockholder need not indemnify any of the aforementioned
indemnitees for such losses, claims, damages or liabilities arising from any statement or omission in any Prospectus that is corrected in any subsequent Prospectus if the subsequent Prospectus was furnished to the person or entity asserting the
loss, claim, damage or liability prior to the pertinent transaction or transactions giving rise to the loss, claim, damages or liabilities. 
  
 (d)    Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this Section 9.6, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 9.6 (except to the extent that such omission materially and adversely affects the indemnifying party’s ability to defend
such action) or from any liability otherwise than under this Section 9.6. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict 
  

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 of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for
the same counsel to represent both the indemnified person and such indemnifying person or any “affiliate” or “associate” (as those terms are defined in Rule 405 promulgated under the Act) thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person
is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject
matter of such proceeding. 
  
 (e)    If the
indemnification provided for in this Section 9.6 is unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Selling Stockholder on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the
one hand or the Selling Stockholder on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Selling Stockholder agree that it would not be
just and equitable if contribution pursuant to this subsection were determined by pro rata allocation (even if Selling Stockholder were treated as one entity for such purpose) or by any other method of allocation which does not take into account the
equitable considerations referred to above in this subsection. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection shall be
deemed to include any reasonable legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. 
  

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 9.7    Information Available.    So long as a Registration
Statement is effective covering the resale of Warrant Shares owned by the Holder, the Company will furnish to the Holder, upon its request: 
  
 (a)    one copy of its most recent Annual Report on Form 10-K and one copy of each subsequent Quarterly Report on Form 10-Q and
amendments thereto, if any (the foregoing, in each case, excluding exhibits, unless specifically requested by the Holder); and 
  
 (b)    an adequate number of copies of the Prospectuses to supply to any other party requiring such Prospectuses. 
  
 9.8    Termination of Registration
Rights.    The registration rights set forth in this Section 9 shall terminate upon the earlier of (a) the closing of (i) any bona fide sale, conveyance or disposition of all or substantially all of the Company’s
assets (including, without limitation, a grant of an exclusive license or exclusive licenses to all or substantially all of the Company’s intellectual property) or (ii) the acquisition of the Company by means of consolidation, merger or other
form of corporate reorganization by a single or related series of transactions in which the outstanding shares of the corporation are converted or exchanged for securities or other consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary, unless the Company’s stockholders of record as constituted immediately prior to such sale, conveyance, disposition or acquisition will hold more than a majority of the voting power of the surviving entity
immediately following such sale, conveyance, disposition or acquisition. 
  
 10.    Market Stand-Off. 
  
 10.1    Market-Standoff Period; Agreement.    Subject to the Holder’s rights under Section 9 above, the Holder hereby agrees that, during the period of duration
specified by the Company and an underwriter of Common Stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company held by it at any time during such period except Common Stock included in such registration; provided, however, that such market stand-off time period shall not exceed 90 days from the effective date of registration.

  
 10.2    Stop-Transfer
Instructions.    In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of the Holder. 
  
 11.    Transfer of Warrant.    This Warrant shall not be transferable or
assignable in any manner and no interest shall be pledged or otherwise encumbered by Holder without the express written consent of the Company, and any such attempted disposition of this Warrant or any portion hereof shall be of no force or effect.
Notwithstanding the prior sentence, Holder may 
  

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 transfer to any wholly-owned subsidiary, parent or affiliate (as such term is defined under the Act) provided that the
Holder provides prior written notice of such transfer to the Company and such transferee agrees in writing to be bound by the terms of this Warrant. 
  
 12.    Amendment, Modification and Waiver.    This Warrant and any provision hereof may be amended,
changed, waived, discharged, or terminated only by an instrument in writing signed by the party against whom enforcement of the same is sought. 
  
 13.    Notices.    Any notice, request, or other document required or permitted to be given or delivered to
the Holder hereof or the Company shall be delivered by hand or messenger or shall be sent by certified mail, postage prepaid, or by overnight courier to each such Holder at its address as shown on the books of the Company or to the Company at its
principal place of business or such other address as either may from time to time provide to the other. Each such notice or other communication shall be treated as effective or having been given: (i) when delivered if delivered personally, (ii) if
sent by registered or certified mail, at the earlier of its receipt or three business days after the same has been registered or certified as aforesaid, or (iii) if sent by overnight courier, on the next business day after the same has been
deposited with a nationally recognized courier service. 
  
 14.    Governing Law.    All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with
the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. If either party shall commence a legal proceeding to enforce any provisions of this Warrant, then the prevailing party in such legal proceeding
shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such legal proceeding. 
  
 15.    Lost or Stolen
Warrant.    Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant. 
  
 16.    Fractional
Shares.    No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of issuing any fractional share, pay the Holder entitled to such fraction a sum in cash equal to such fraction
(calculated to the nearest 1/100th of a share) multiplied by the then effective Exercise Price on the date the Form of Subscription is received by the Company. 
  

17.    Successors and Assigns.    This Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors and assigns of the Holder. 
  

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 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officer, thereunto
duly authorized on this 1st day of January, 2004. 
  

			
	 Entropin, Inc.,
 a Delaware corporation
  
  

		
	By:	 	/s/    THOMAS G. TACHOVSKY
	 	 	

	 	 	 Thomas G. Tachovsky
 President and Chief Executive Officer

  

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 EXHIBIT A 
  

FORM OF SUBSCRIPTION 
  
 (To be executed by the Holder upon exercise of the Warrant in whole or in part) 
  

To: ENTROPIN, INC. 
  
 The undersigned, whose Tax ID Number is
                    , hereby irrevocably elects the right of purchase represented by the within Warrant for, and to purchase thereunder,
                     shares of Common Stock provided for therein and 
  
 Check: 
  
              tenders payment herewith to the order of ENTROPIN, INC. in the amount
of $                        ; or 
  

             elects to exercise its cashless exercise rights as set forth in
Section 3 of the Warrant. 
  
 The undersigned requests that certificates for such
shares be issued as follows: 
  

			
	 Name:
	  	 
	 	 	

		
	 Address:
	  	 
	 	 	

		
	 Deliver to:
	  	 
	 	 	

		
	 Address:
	  	 
	 	 	

  
 and, if said number of shares shall
not be all the shares purchasable hereunder, that a new Warrant for the balance remaining of the shares purchasable under the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below: 
  

			
		
	 Address:
	  	 
	 	 	

  

									
	 	 	 	 	 
				
	Dated:                     , 200    	 	 	 	Signature:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	(Signature must conform in all respects to the name of the Holder as specified on the face of the Warrant, without alteration, enlargement or any change whatsoever)

  

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