Document:

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                                                                    EXHIBIT 10.3

                                 ENDOCARE, INC.

                    CONSULTING AND CONFIDENTIALITY AGREEMENT

        This Consulting Agreement is entered into as of June 1, 2001 (the
"Effective Date") between Michael Strauss, M.D. ("Consultant") and ENDOCARE,
INC., a Delaware corporation ("Corporation"). In consideration of the mutual
covenants set forth in this Agreement, the parties agree as follows:

1.      TERM OF RETENTION AS CONSULTANT

        Corporation hereby agrees to retain Consultant, and Consultant agrees to
act as a consultant to Corporation until either party cancels this Agreement
with notice pursuant to Section 8 below.

2.      NATURE OF CONSULTING RELATIONSHIP

        Consultant will provide general recruiting and hiring advice and
services to Corporation and assist Corporation in developing company strategies
related to obtaining governmental and private insurance cover-age and payment
for the costs associated with patients' use of Corporation's medical device
products as specified in Exhibit A attached to this Agreement. In addition,
Corporation may ask Consultant to provide additional services as needed; in such
event, company will specify the additional services requested in a written
letter to Consultant.

3.      COMPENSATION

        As consideration for his services, Consultant shall receive from
Corporation 10,000 Endocare Nonstatutory Stock Options (hereinafter "Options"),
in accordance with the Endocare, Inc. 1995 Stock Option Plan as amended. The
vesting of said options shall occur as follows: 2,500 shares shall vest upon
signing of this Agreement. On the last day of any subsequent calendar-year
quarters in which the Consultant has remaining shares that are not yet vested
(beginning with September 30, 2001), an additional 2,500 shares shall vest as
long as the Consultant has provided an additional 24-48 hours of time on
required duties (as set forth in Exhibit A) since any previous vesting of
shares.

4.      EXPENSES

        Corporation shall reimburse Consultant for reasonable out-of-pocket
expenses incurred by Consultant in connection with Corporation's business, but
only if the incurring of any such expenses is approved by an executive officer
of Corporation and Consultant provides Corporation with such substantiating
receipts or other documentation as Corporation may reasonably require.

5.      CONSULTANT'S DUAL ROLE AS DIRECTOR AND CONSULTANT OF CORPORATION

        The parties hereto recognize and agree that Consultant is also a
Director of Corporation on its Board of Directors and that nothing in this
Agreement shall be construed to limit, change or otherwise alter Consultant's
on-going fiduciary obligations as a Director of Corporation.

6.      CONFIDENTIAL INFORMATION

        (a) As used in this Agreement, the term "Confidential Information"
refers to any and all valuable information of a confidential, proprietary or
secret nature related to the present or future business of Corporation, the
research and development activities of Corporation or the business of any
customer, supplier, or contractor to Corporation. Confidential Information is to
be broadly construed and includes, without limitation: (i) information disclosed
by Corporation or its customers, suppliers or contractors ("together,
"Contractors") to Consultant in the course of his/her retention by Corporation
as well as information developed or learned by Consultant during the course of
his/her retention; (ii) information that has or could have commercial value or
other utility in the business in which Corporation or its Contractors are
engaged or contemplate being engaged; (iii) information of which the
unauthorized

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disclosure could be detrimental to the interests of Corporation or its
Contractors, whether or not such information is identified as Confidential
Information by Corporation or its Contractors; and (iv) trade secrets, such as
internal operations, services, physician practices, surgical operation
procedures, computer programs, designs, technology, ideas, compositions,
processes, formulas, data, source code, know-how, improvements, inventions
(whether patentable or not), works of authorship, business and product
development plans, techniques, test results, specifications,. costs and pricing
data, employee information, terms of Corporation's agreements, production and
marketing plans and strategies, customers, and other information concerning
Corporation or its actual or anticipated business, research or development, or
information which is received in confidence by Corporation.

        (b) Consultant acknowledges and agrees that Confidential Information is
a valuable and unique asset of Corporation, and Consultant will, at all times
during the period of his retention by Corporation and thereafter, keep in
confidence and trust all Confidential Information.

        (c) Consultant acknowledges and agrees that during the period of his
retention by Corporation and thereafter, he/she will not directly or indirectly
use or exploit the Confidential Information other than in the course of
performing duties as a consultant of Corporation.

        (d) Consultant acknowledges and agrees that he will directly or
indirectly discloses any Confidential Information to any person or entity
without the prior written consent of Corporation.

        (e) Consultant agrees to abide by Corporation's policies and
regulations, as established from time to time, for the protection of its
Confidential Information;

        (f) Consultant agrees to use reasonable efforts to ensure that
Corporation's confidential information, and any records or documents containing
such information, will not be exposed to theft, embezzlement or unauthorized
reproduction or disclosure,

7.      COMPANY OWNERSHIP OF INNOVATIONS

        (a) As used in this Agreement, "Developments" means all inventions,
discoveries, written or printed materials, trade secrets, designs, techniques,
know-how, data or other technical developments which Consultant makes,
conceives, reduces to practice or learns of, either individually or jointly with
others, during the term of this Agreement, and which are related to or useful in
the business of Corporation or result from Consultant's retention by Corporation
or from the use of premises owned, leased or otherwise used or acquired by
Corporation.

        (b) Subject to the terms of this Agreement, Consultant agrees that any
and all Developments are and will be the exclusive property of Corporation.
Consultant hereby assigns to Corporation all right, title and interest
Consultant may have or may acquire in and to all Developments. Consultant shall
execute any assignments to Corporation or other documents requested by
Corporation to evidence such assignment or Corporation's ownership of all such
Developments and otherwise agrees to cooperate fully with and aid Corporation in
establishing, enforcing and disposing of Corporation's patent and other
proprietary rights with respect to all Developments. In the event Corporation is
unable to secure Consultant's signature on any document necessary to apply for,
prosecute, obtain or enforce any patent, copyright or other right or protection
relating to any Development, whether due to mental or physical incapacity or any
other cause, Consultant hereby irrevocably designates and appoints Corporation
and each of its duly authorized officers as his/her agent and attorney-in-fact,
to act for and in his/her behalf and stead to execute and file such document and
to do all other lawfully permitted acts to further the prosecution, issuance and
enforcement of such patents, copyrights or other rights or protections with the
same force and effect as if executed and delivered by Consultant.

        (c) Except with respect to inventions which are to be assigned to or
owned by the United States under contracts between Corporation and departments
or agencies of the United States, the foregoing assignment to Corporation of
Developments will not apply to any invention that Consultant develops entirely
on his/her own time without using Corporation's equipment, supplies, facilities
or trade

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secret information, except for those inventions that either (i) relate at the
time of conception or reduction to practice of the invention to Corporation's
business or to its actual or demonstrably anticipated research or development;
or (ii) result from any work performed by Consultant for Corporation.

        (d) Consultant will make full and prompt disclosure to Corporation of
all Developments made, conceived, reduced to practice or learned by Consultant,
either individually or jointly with others, during the term of this Agreement.
Consultant shall attach to this Agreement a schedule containing a complete
listing of any Developments relevant to his retention by Corporation that were
made, conceived or first reduced to practice by Consultant alone or jointly with
others prior to his retention by Corporation, or which are covered by the
exclusion set forth in (c) above, and that Consultant desires to remove from the
operation of this Agreement. Corporation agrees to hold any disclosure in such
schedule in confidence.

8.      CANCELLATION

        Either party may terminate this Agreement at such party's discretion
with or without cause, by giving at least seven (7) days prior written notice of
the termination to the other party. Upon termination of this Agreement for any
reason, Consultant shall provide Company with all work in progress, or portions
thereof, including all incomplete work, as required by Section 9 below. The
termination of this Agreement pursuant to this Section shall not release either
party from any obligation to pay any sum to the other party (whether then or
thereafter payable) or operate to discharge any liability incurred prior to the
termination date. In addition, the confidentiality obligations set forth under
Paragraph 4 below shall survive the termination of this Agreement.

9.      RETURN OF COMPANY MATERIALS UPON TERMINATION

        Upon the termination of this Agreement for any reason, Consultant agrees
to promptly and without request deliver to Corporation all originals and copies
of notebooks, documents, reports, files, samples, mailing lists, computer
programs and other records and data which are then in Consultant's possession or
under his/her control and which pertain to his/her retention by Corporation or
include Confidential Information or Developments, and to return to Corporation
any other tangible personal property owned by Corporation, unless such return is
waived in writing by Corporation. Consultant may retain copies of any such
records required to be retained by Consultant to satisfy tax reporting or other
legal requirements if permitted by Corporation. Consultant recognizes that the
unauthorized taking of any of Corporation's trade secrets is a crime and could
also result in civil liability to Corporation.

10.     REMEDIES

        Consultant acknowledges that his/her services under this Agreement and
his. agreements in Sections 5-7 are of a special, unique, unusual, extraordinary
and/or intellectual character, which give them particular value, that his/her
violation of this Agreement could substantially injure the Corporation's
business and directly and irreparably harm the company. Consultant further
acknowledges and agrees that the his/her disclosure of any Confidential
Information could substantially injure Corporation's business, impair its
investments and goodwill, and jeopardized the Corporation's relationships with
its customers and suppliers. The parties recognize that a remedy at law for any
breach of this Agreement would necessarily be inadequate, and therefore
stipulate that, in the event of any such breach, they shall be entitled to seek
appropriate equitable relief, including, but not limited to, injunctive relief
or specific performance, in addition to monetary damages. The parties waive the
posting of a bond or other security as a condition to the entry of any
injunction.

11.     CONFLICTING AGREEMENTS

        Consultant represents that his/her retention by Corporation under this
Agreement and related actions have not breached, and will not breach, any
covenant to keep in confidence proprietary information or any other agreement
with a third party. Consultant has not entered into, and agrees that he/she will
not enter into, any agreement either written or oral in conflict with this
Agreement.

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12.     MISCELLANEOUS

               i.     GOVERNING LAW

               All questions with respect to the construction of this Agreement
and the rights and liabilities of the parties shall be governed by the laws of
the State of California, excluding its conflict of laws rules.

               ii. MANDATORY ARBITRATION

               Any controversy or claim arising out of or relating to the
interpretation, enforcement, or breach of this Agreement or the relationship
between the parties hereto (other than actions for equitable relief) shall be
resolved by final and binding arbitration venued in a Southern California office
of the American Arbitration Association ("AAA") and conducted in accordance with
the Commercial Arbitration Rules of the AAA. This paragraph shall be
specifically enforceable under the Federal Arbitration Act. The award rendered
by the arbitrator(s) may be entered and enforced in any court of competent
jurisdiction.

               iii. SUCCESSORS AND ASSIGNS

               This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns. Consultant may not
assign or otherwise transfer any of his rights or obligations under this
Agreement without Corporation's prior written consent and any such transfer in
violation of this paragraph shall be void.

               iv. ENTIRE AGREEMENT

               This Agreement contains all of the terms and conditions agreed
upon by the parties, and supersedes any prior agreements or understandings, with
respect to the subject matter of this Agreement.

               v. AMENDMENT OR MODIFICATION OF AGREEMENT

               This Agreement may be modified, altered or amended only by the
written agreement of both the parties.

               vi. ATTORNEYS' FEES AND COSTS

               In any legal proceeding to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees
and costs and necessary disbursements in addition to any other relief to which
it or he may be entitled.

               vii. COUNTERPARTS

               This Agreement may be executed in one or more counterparts, each
of which shall be a valid original agreement.

               viii. SEVERABILITY

               If any provision of this Agreement or its application to any
person or circumstance is held invalid or unenforceable to any extent, the
remainder of this Agreement and its other application shall not be affected and
shall be enforceable to the fullest extent permitted by law.

               ix. WAIVERS

               Any provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument executed by the
party or by a duly authorized officer of the party.

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No waiver of any of the provisions of this Agreement will be deemed, or will
constitute, a waiver of any other provision, whether or not similar, nor will
any waiver constitute a continuing waiver.

               x. NOTICES

               Any notice or other communication to a party provided for in this
Agreement shall be deemed to have been duly given if delivered personally in
writing to the party or on the date of its delivery, in writing addressed to the
party, at such party's address determined in accordance with this paragraph. The
address of Consultant shall be: 11012 Rosemont Dr., Rockeville, MD 20852. The
address of Corporation shall be: 7 Studebaker, Irvine, California 92618. Either
party may change its or his address for purposes of this Agreement by a notice
given to the other party in accordance with this paragraph.

               xi. INDEPENDENT CONTRACTOR

               Consultant is retained by Corporation only for the purposes and
to the extent set forth in this Agreement, and all services performed by
Consultant pursuant to this Agreement shall be deemed to be services performed
by Consultant as an independent contractor. Consultant shall not be considered
as having employee status or as being entitled to participate in any plans,
arrangements or distributions by Corporation pertaining to any pension, stock,
bonus, profit sharing or similar benefits for Corporation's employees.
Corporation shall not withhold any of Consultant's compensation payments for
income tax purposes and shall not have any obligations with regard to Social
Security payments for Consultant, insurance or workers' compensation coverage
for Consultant, or any similar items. Nothing contained in this Agreement shall
be deemed or construed to constitute a relationship of partnership, joint
venture, principal and agent, employer and employee, franchisor and franchisee,
or any other association between the parties.

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EXECUTED at Irvine, California as of the date first written above.

                                        CORPORATION:

                                        ENDOCARE, INC.,
                                        a Delaware corporation

                                        By:    /s/ Holly Williams
                                           -------------------------------------
                                        Vice President, Human Resources and
                                        General Counsel.

                                        CONSULTANT:

                                               /s/ Michael Strauss
                                        ----------------------------------------
                                        Signature

                                        ----------------------------------------
                                        Michael Strauss, PhD

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                                    EXHIBIT A

                                     DUTIES

-   Recruiting: Consultant will assist Corporation in identifying, recruiting
    and interviewing potential candidates for employment, in particular
    candidates who are being considered for senior management positions and
    candidates being considered for a position as a specialist in the area of
    obtaining government and private insurance coverage and payment for the
    costs associated with patients' use of Corporation's medical device
    products.

-   Insurance Reimbursement Strategies: Consultant will assist Corporation in
    developing the company strategies to enhance the likelihood of governmental
    and private insurance coverage for all costs associated with patients' use
    of Corporation's medical device products. Consultant also will provide
    strategic advice and consultation for marketing and reimbursement staff,
    including organizing and attending meetings with policy experts and
    executives, as appropriate.

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                                                                    EXHIBIT 10.4

                                 PROMISSORY NOTE

$50,000.00                                                        April 25, 2001
                                                              Irvine, California

        WHEREAS, Endocare, Inc. loaned Paul Mikus (Maker) $50,000.00 in order
for Maker to exercise and obtain proceeds from his Endocare, Inc. stock options.

        WHEREAS, Endocare, Inc. seeks to regain the capital costs and accrued
interest associated with loaning the $50,000 within a two-year period.

        FOR VALUE RECEIVED, the undersigned Maker promises to pay to the order
of Endocare Inc. (the "Company"), at its principal offices at 7 Studebaker,
Irvine, California 92618, the principal sum of Fifty Thousand and Zero Cents
($50,000.00), together with accrued interest thereon, upon the terms and
conditions specified below. . This Note represents a full recourse obligation of
the Maker.

        1. Principal. The entire principal balance of this Note shall become due
and payable in one lump sum on April 25, 2003.

        2. Interest. Interest shall accrue on the unpaid balance from time to
time outstanding under this Note at the rate of 12.00% per annum, compounded
semi-annually. All accrued interest shall become due and payable in one lump sum
on the date the principal balance of this Note becomes due.

        3. Application of Payment. Payment shall be made in lawful tender of the
United States and shall be applied first to the payment of all accrued and
unpaid interest and then to the payment of principal. Prepayment of the
principal balance of this Note, together with all accrued and unpaid interest,
may be made in whole or in part at any time without penalty.

        4. Events of Acceleration. The entire unpaid principal sum of this Note,
together with all accrued and unpaid interest, shall become immediately due and
payable upon one or more of the following events:

        A.      the date the Maker ceases employment with the Company; or

        B.      the insolvency of the Maker, the commission of any act of
                bankruptcy by the Maker, the execution by the Maker of a general
                assignment for the benefit of creditors, the filing by or
                against the Maker of any petition in bankruptcy or any petition
                for relief under the provisions of the federal bankruptcy act or
                any other state or federal law for the relief of debtors and the
                continuation of such petition without dismissal for a period of
                thirty (30) days or more, the appointment of a receiver or
                trustee to take possession of any property or assets of the
                Maker, or the attachment of or execution against any property or
                assets of the Maker.

        5. Employment Requirement. For purposes of applying the provisions of
this Note, the Maker shall be considered to remain in the employ of the Company
for so long as the Maker renders services as a full-time employee of the Company
or one or more of its 50%-or-more owned (directly or indirectly) subsidiaries.

        6. Collection. If action is instituted to collect this Note, the Maker
promises to pay all costs and expenses (including reasonable attorney fees)
incurred in connection with such action.

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        7. Waiver. No previous waiver and no failure or delay by the Company in
acting with respect to the terms of this Note shall constitute a waiver of any
breach, default, or failure of condition under this Note. A waiver of any term
of this Note must be made in writing and shall be limited to the express terms
of such waiver. The Maker hereby waives presentment; demand; notice of dishonor;
notice of default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses or losses and interest thereon; notice of
interest on interest; and diligence in taking any action to collect any sums
owing under this Note or in proceeding against any of the rights or interests in
or to properties securing payment of this Note.

        8. Conflicting Agreements. In the event of any inconsistencies between
the terms of this Note and the terms of any other document related to the loan
evidenced by the Note, the terms of this Note shall prevail.

        9. Governing Law. This Note shall be construed in accordance with the
laws of the State of California.

   /s/
---------------------------------------
MAKER: Paul W. Mikus

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                              SANARUS MEDICAL, INC.

                             -----------------------

                       NOTE AND WARRANT PURCHASE AGREEMENT

                             -----------------------

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                              SANARUS MEDICAL, INC.

                       NOTE AND WARRANT PURCHASE AGREEMENT

        THIS NOTE AND WARRANT PURCHASE AGREEMENT is made as of the 20th day of
April, 2001 (the "EFFECTIVE DATE") by and among SANARUS MEDICAL, INC., a
Delaware corporation (the "COMPANY"), and the persons and entities named on the
Schedule of Purchasers attached hereto (individually, a "PURCHASER" and
collectively, the "PURCHASERS").

        WHEREAS, the Company desires to borrow up to $850,000 from certain
Purchasers in exchange for the issuance of convertible promissory notes and
warrants, as described herein (the "Bridge Loan"), and the Purchasers desire to
lend such amount to the Company on the terms and conditions set forth in this
Agreement;

        WHEREAS, the Company plans to borrow an initial $500,000 at a first
closing from certain Purchasers (the "INITIAL PURCHASERS"), and will offer to
its eligible holders of Preferred Stock the right to participate in the Bridge
Loan, as required by the Right of First Refusal contained in those certain
Series A Preferred Stock Purchase Agreements (the "PURCHASE AGREEMENTS") between
the Company and such holders of Preferred Stock, and the Initial Purchasers have
agreed to proportionately reduce their participation in the Bridge Loan, such
that the total subscriptions to participate in the Bridge Loan do not exceed
$850,000;

        NOW, THEREFORE, the parties hereby agree as follows:

1.      AMOUNT AND TERMS OF THE LOAN; ISSUANCE OF WARRANTS

        1.1 THE LOAN. Subject to the terms of this Agreement, each Purchaser
agrees to lend to the Company up to $850,000 (the "LOAN AMOUNT"), in the amounts
set forth opposite each such Purchaser's name on the Schedule of Purchasers
(each, an "INDIVIDUAL LOAN AMOUNT") against the issuance and delivery by the
Company of a convertible promissory note for the Individual Loan Amount in
substantially the form attached hereto as Exhibit A (each, a "NOTE" and
collectively, the "NOTES"). Each Note shall automatically be converted into
Series B Preferred Stock as provided in such Note upon the closing of the
Company's proposed sale of Series B Preferred Stock (the "FINANCING") or shall
otherwise be repaid as provided herein. The Loan Amounts are hereinafter
referred to collectively as the "LOAN."

        1.2 ISSUANCE OF WARRANTS. Each Purchaser will have the right to purchase
a warrant to purchase the number of shares of Series B Preferred Stock equal to
the quotient of (A) 25% percent multiplied by the outstanding principal balance
of such Purchaser's Individual Loan Amount, divided by (B) the per share price
of the Series B Preferred Stock sold in the Financing, subject to adjustment as
provided in the warrant. In the event that the Company is required to reduce the
Individual Loan Amounts to the Initial Purchasers, as required under Section
5.1, such Initial Purchasers shall surrender such Warrants and the Company shall
promptly issue new Warrants to the Initial Purchasers under this section using
the reduced Individual Loan Amount. In the event the Financing has not occurred
on or before the date six (6) months from the Effective Date, the Purchaser's
warrant shall be converted into a warrant to purchase the number

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of shares of Series A Preferred Stock equal to the quotient of (C) 25% percent
multiplied by the outstanding principal balance of such Purchaser's Individual
Loan Amount, divided by (D) $1.50, subject to adjustment as provided in-the
warrant. The issuance of shares of Series A Preferred Stock pursuant to such
warrant shall be conditioned on the Company's ability to obtain the necessary
stockholder approval to amend the Company's Certificate of Incorporation to
authorize such additional number of shares of Series A Preferred Stock as may be
necessary for conversion of the warrant. If a Financing has not occurred on or
before the date six months following the Effective Date or if, at any time
before such date, the Company has reason to believe such Financing is not likely
occur, the Company shall immediately use its reasonable best efforts to promptly
obtain such stockholder approval and shall execute and deliver such documents
and instruments, and do such acts and things necessary in order to promptly
effect such amendment to the Certificate of Incorporation.

        The warrants shall be in substantially the form attached hereto as
Exhibit B (each, a "WARRANT" and collectively the "WARRANTS"). Prior to issuance
of the Warrants, if any, each Purchaser hereby agrees to pay to the Company the
Aggregate Warrant Purchase Price as set forth opposite such Purchaser's name on
the Schedule of Purchasers.

               (a) The Company and the Purchasers, having adverse interests and
    as a result of arm's length bargaining, agree that:

                   (i)    Neither the Purchaser nor any affiliated company has
                          rendered any services to the Company in connection
                          with this Agreement;

                   (ii)   The Warrants are not being issued as compensation;

                   (iii)  The aggregate fair market value of the Notes, if
                          issued apart from the Warrants, is $850,000.00, and
                          the aggregate fair market value of the Warrants, if
                          issued apart from the Notes, is $850.00; and

                   (iv)   All tax returns and other information return of each
                          party relative to this Agreement and the Notes and
                          Warrants issued pursuant hereto shall consistently
                          reflect the matters agreed to in (i) through (iii)
                          above.

2.      THE CLOSING

        2.1 CLOSING DATE. The closing of the purchase and sale of the Notes and
Warrants (the "INITIAL CLOSING") shall be held on the Effective Date, or at such
other time as the Company and the Purchasers shall agree (the "INITIAL CLOSING
DATE").

        2.2 SUBSEQUENT CLOSINGS. At any time on or before the 90th day following
the Initial Closing, the Company may issue and deliver Notes representing the
balance of the Loan Amount not issued at the Initial Closing (the "ADDITIONAL
PURCHASERS"). All such issuances made at any additional closings (each a
"SUBSEQUENT CLOSING" and together with the Initial Closing, the "CLOSING"), (i)
shall be made on the terms and conditions set forth in this Agreement, (ii) the

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representations and warranties of the Company set forth in Section 3 hereof
shall speak as of the Subsequent Closings and the Company shall have no
obligation to update any such disclosure, and (iii) the representations and
warranties of the Additional Purchasers in Section 4 shall speak as of such
Subsequent Closings. This Agreement, including without limitation, the Schedule
of Purchasers, may be amended by the Company without the consent of the
Purchasers to include any Additional Purchasers. Any Notes issued and delivered
pursuant to this Section 2.2 shall be deemed to be "Notes" for all purposes
under this Agreement and any Additional Purchasers thereof shall be deemed to be
"Purchasers" for all purposes under this Agreement.

        2.3 DELIVERY. At the Closing (i) each Purchaser will deliver to the
Company a check or wire transfer funds in the amount of such Purchaser's Loan
Amount plus the Aggregate Warrant Purchase Price as indicated on the Schedule of
Purchasers; (ii) the Company shall issue and deliver to each Purchaser a Note in
favor of such Purchaser payable in the principal amount of such Purchaser's Loan
Amount; and (iii) the Company shall issue and deliver to each Purchaser a
Warrant having the terms and conditions described above.

3.      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

        The Company hereby represents and warrants to each Purchaser as follows:

        3.1 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement and to carry out
and perform its obligations under the terms of this Agreement.

        3.2 AUTHORIZATION. All corporate action on the part of the Company, its
directors and its shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder, including the issuance and delivery of the
Notes and Warrants and the reservation of the equity securities issuable upon
exercise of the Warrants or conversion of the Notes has been taken or will be
taken prior to the issuance of such equity securities. This Agreement, the Notes
and the Warrants, when executed and delivered by the Company, shall constitute
valid and binding obligations of the Company enforceable in accordance with
their terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors and, with respect to rights to indemnity,
subject to federal and state securities laws. The Preferred Stock or other
equity securities of the Company, when issued in compliance with the provisions
of this Agreement, the Notes or the Warrants, will be validly issued, fully paid
and nonassessable and free of any liens or encumbrances.

        3.3 GOVERNMENTAL CONSENTS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Notes, the Warrants and the equity securities
issuable upon exercise of the Warrants, conversion of the Note or the
consummation of any other transaction contemplated hereby shall have been
obtained and will be effective at the Closing or, in respect of the Warrants,
prior to the issuance of the Warrants, except for notices

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required or permitted to be filed with certain state and federal securities
commissions, which notices will be filed on a timely basis.

        3.4 OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, issue,
and sale of the Notes and Warrants are and will be exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933, as amended
(the "1933 ACT"), and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.

4.      REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

        4.1 PURCHASE FOR OWN ACCOUNT. Each Purchaser represents that it is
acquiring the Notes, the equity securities issuable upon conversion of the
Notes, the Warrants and the equity securities issuable upon exercise of the
Warrants (collectively, the "SECURITIES") solely for its own account and
beneficial interest for investment and not for sale or with a view to
distribution of the Securities or any part thereof, has no present intention of
selling (in connection with a distribution or otherwise), granting any
participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.

        4.2 INFORMATION AND SOPHISTICATION. Without lessening or obviating the
representations and warranties of the Company set forth in Section 3, each
Purchaser hereby: (i) acknowledges that it has received all the information it
has requested from the Company and it considers necessary or appropriate for
deciding whether to acquire the Securities, (ii) represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities and to obtain any
additional information necessary to verify the accuracy of the information given
the Purchaser and (iii) further represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risk of this investment.

        4.3 ABILITY TO BEAR ECONOMIC RISK. Each Purchaser acknowledges that
investment in the Securities involves a high degree of risk, and represents that
it is able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment.

        4.4 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, each Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:

            (a) There is then in effect a Registration Statement under the 1933
Act covering such :proposed disposition and such disposition is made in
accordance with such Registration Statement; or

            (b) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by the Company, such

                                       4
<PAGE>   8

Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration under the 1933 Act or any applicable state securities laws,
provided that no such opinion shall be required for dispositions in compliance
with Rule 144, except in extraordinary circumstances.

            (c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by such Purchaser to a shareholder or partner (or retired partner) of
such Purchaser, or transfers by gift, will or intestate succession to any spouse
or lineal descendants or ancestors, if all transferees agree in writing to be
subject to the terms hereof to the same extent as if they were Purchasers
hereunder.

        4.5 ACCREDITED INVESTOR STATUS. Each Purchaser is an "ACCREDITED
INVESTOR" as such term is defined in Rule 501 under the Securities Act.

        4.6 FURTHER ASSURANCES. Each Purchaser agrees and covenants that at any
time and from time to time it will promptly execute and deliver to the Company
such further instruments and documents and take such further action as the
Company may reasonably require in order to carry out the full intent and purpose
of this Agreement.

5.      ADDITIONAL COVENANTS OF THE COMPANY AND INITIAL PURCHASERS.

        5.1 SUBSEQUENT OFFERINGS. Within sixty (60) days following the Initial
Closing, the Company shall offer to its eligible holders of Series A Preferred
Stock the right to participate in the Bridge Loan, on a pro rata basis, as
provided by the Right of First Refusal described in the Purchase Agreements. To
the extent that such stockholders have subscribed to purchase convertible
promissory notes in excess of the remaining and available $350,000, the Company
shall proportionately reduce the "Individual Loan Amount" loaned by the Initial
Purchasers (such reduced amount shall be referred to as the "Revised Loan
Amount") and shall i) cancel the Notes issued to such Initial Purchasers at the
Initial Closing; ii) repay the difference between such Initial Purchaser's
Individual Loan Amount and the portion of the Revised Loan Amount attributable
to such Initial Purchaser; and iii) issue and deliver convertible promissory
notes for the Revised Loan Amounts in substantially the form previously provided
to such Initial Purchasers, such that the total outstanding principal of the
Notes as of each Subsequent Closing shall not exceed $850,000. The Initial
Purchasers shall surrender the Warrants issued at the Initial Closing, and shall
receive new Warrants reflecting the Revised Loan Amount, as provided in Section
1.2. If the Company is unable to obtain the requisite approval of its
stockholders to borrow $850,000, as required by Section 2.6 of the Company's
Amended and Restated Investor Rights Agreement, then the amount to be borrowed
under the Bridge Loan shall not exceed $500,000, and each participating
Purchaser's Individual Loan Amount shall be reduced proportionately in the
manner provided herein.

6.      MISCELLANEOUS

        6.1 BINDING AGREEMENT. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any third party any rights,

                                       5
<PAGE>   9

remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

        6.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.

        6.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

        6.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

        6.5 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at 5673 W. Las Positas Blvd., Suite 218, Pleasanton, CA 94588 and to Purchaser
at the address set forth on the Schedule of Purchasers attached hereto or at
such other address as the Company or Purchaser may designate by ten (10) days
advance written notice to the other parties hereto.

        6.6 MODIFICATION; WAIVER. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by the Company and the Purchasers of a majority in interest
of the outstanding Loan Amount.

        6.7 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the full and entire understanding and. agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other party
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein.

        6.8 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement and shall reimburse the reasonable fees and expenses of Brobeck,
Phleger & Harrison LLP, (fees not to exceed $6,000) incurred in connection with
the negotiation, execution and delivery of this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       6
<PAGE>   10

        IN WITNESS WHEREOF, the parties have executed this NOTE AND WARRANT
PURCHASE Agreement as of the date first written above.

                                   COMPANY:

                                   SANARUS MEDICAL, INC.

                                   By:           /s/ Glenn Foy
                                      ------------------------------------------
                                          Glenn Foy
                                          President and Chief Executive Officer

                                   PURCHASER(S):

                                   ENDOCARE, INC.

                                   By:       /s/ William R. Hughes
                                      ------------------------------------------

                                   Name:         William R. Hughes
                                        ----------------------------------------

                                   Title:        SVP & CFO
                                         ---------------------------------------

                                   TECHNOLOGY FUNDING PARTNERS III, L.P.
                                   TECHNOLOGY FUNDING VENTURE PARTNERS IV,
                                   AN AGGRESSIVE GROWTH FUND, L.P.

                                   By:    Technology Funding Inc.,
                                          Managing General Partner

                                   By:       /s/ Michelle Lockwood
                                      ------------------------------------------

                                   Name:         Michelle Lockwood
                                        ----------------------------------------

                                   Title:        Vice President
                                         ---------------------------------------

                                       7
<PAGE>   11

                             SCHEDULES AND EXHIBITS

Schedule of Purchasers

Exhibit A: Form of Convertible Promissory Note

Exhibit B: Form of Warrant

<PAGE>   12

                             SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>

           NAME & ADDRESS                          LOAN AMOUNT           AGGREGATE
           --------------                          -----------            WARRANT
                                                                      PURCHASE PRICE
                                                                      --------------
<S>                                              <C>                  <C>
Endocare, Inc.                                   $   250,000.00           250.00
7 Studebaker
Irvine, CA 92618
Attn: William Hughes

Technology Funding Partners III, L.P.                195,000.00           195.00
2000 Alameda de Las Pulgas
Suite 250
San Mateo, CA 94403
Attn: Peter Bernardoni

Technology Funding Venture Partners IV,               55,000.00            55.00
L.P., an Aggressive Growth Fund
2000 Alameda de Las Pulgas
Suite 250
San Mateo, CA 94403
Attn: Peter Bernardoni

TOTAL                                            $   500,000.00       $   500.00
                                                 --------------       ----------
</TABLE>

<PAGE>   13

THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

                           CONVERTIBLE PROMISSORY NOTE

$250,000.00                                                       April 20, 2001
                                                          Pleasanton, California

        For value received SANARUS MEDICAL, INC., a Delaware corporation
("PAYOR") promises to pay to ENDOCARE, INC. or its assigns ("HOLDER") the
principal sum of $250,000 with interest on the outstanding principal amount at
the rate of 8% per annum, compounded annually based on a 365-day year. Interest
shall commence with the date hereof and shall continue on the outstanding
principal until paid in full.

        1. This note (the "NOTE") is issued as part of a series of similar notes
(collectively, the "NOTES") to be issued pursuant to the terms of that certain
Note and Warrant Purchase Agreement (the "AGREEMENT") of even date herewith to
the persons listed on the Schedule of Purchasers thereof (collectively, the
"HOLDERS").

        2. All payments of interest and principal shall be in lawful money of
the United States of America and shall be made pro rata among all Holders. All
payments shall be applied first to accrued interest, and thereafter to
principal.

        3. In the event that Payor issues and sells shares of its Series B
Preferred Stock (the "Series B Stock") to investors (the "Investors") on or
before 180 days (the "Maturity Date"), then the outstanding principal balance of
this Note shall automatically convert in whole without any further action by the
Holders into the Series B Stock at a conversion price equal to the price per
share paid by the Investors purchasing the Series B Stock on the same terms and
conditions as given to the Investors. Any unpaid accrued interest on this Note
shall be paid to the Holder in cash at the time of such conversion.

        4. Unless this Note has been converted in accordance with the terms of
Section 3 above, or repaid in accordance with Section 5.1 of the Agreement, the
entire outstanding principal balance and all unpaid accrued interest shall
become fully due and payable on the Maturity Date.

        5. In the event of any default hereunder, Payor shall pay all reasonable
attorneys' fees and court costs incurred by Holder in enforcing and collecting
this Note.

        6. Payor hereby waives demand, notice, presentment, protest and notice
of dishonor.

                                       1
<PAGE>   14

        7. The terms of this Note shall be construed in accordance with the laws
of the State of California, as applied to contracts entered into by California
residents within the State of California, and to be performed entirely within
the State of California.

        8. Any term of this Note may be amended or waived with the written
consent of Payor and Holders of a majority in interest of the outstanding.
principal amount of all Notes, as provided in the Note and Warrant Purchase
Agreement. Holder acknowledges that because this Note may be amended with the
consent of such majority in interest of the outstanding principal amount of the
Notes, Holder's rights hereunder (including, without limitation, Holder's right
to receive principal and interest as due) may be amended or waived without
Holder's consent.

                                     SANARUS MEDICAL, INC

                                     By:
                                         ---------------------------------------
                                           Glenn Foy
                                           President and Chief Executive Officer

                                       2

<PAGE>   15

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                              SANARUS MEDICAL, INC.

                  WARRANT TO PURCHASE SERIES B PREFERRED STOCK

NO. PBW-1                                                         APRIL 20, 2001

                            VOID AFTER APRIL 20, 2006

        THIS CERTIFIES THAT, for value received, ENDOCARE, INC. or its assigns
(the "Holder"), is entitled to subscribe for and purchase at the Exercise Price
(defined below) from SANARUS MEDICAL, INC., a Delaware corporation, with its
principal office at 5673 W. Las Positas Blvd., Suite 218, Pleasanton, CA 94588
(the "Company") of shares of the Series B Preferred Stock (the "Preferred
Stock") of the Company having an aggregate Exercise Price of Sixty-Two Thousand
Five Hundred Dollars ($62,500) (the "Aggregate Exercise Price").

        Immediately prior to the closing of the Company's initial public
offering, this warrant shall become exercisable for that number of shares of
Common Stock of the Company into which the shares of Preferred Stock issuable
under this warrant would then be convertible, so long as such shares, if this
warrant has been exercised prior to such offering, would have been converted
into shares of the Company's Common Stock pursuant to the automatic conversion
provisions (or otherwise) of the Company's Certificate of Incorporation.

        In the event that the Company has not sold and issued shares of Series B
Preferred Stock (the "Financing") within 6 months of the date of this Warrant,
this Warrant shall immediately become a Warrant to purchase the number of shares
of the Company's Series A Preferred Stock equal to i) the Aggregate Exercise
Price, divided by ii) $1.50, exercisable upon the terms and conditions set forth
herein. The issuance of shares of Series A Preferred Stock pursuant to such
warrant shall be conditioned on the Company's ability to obtain the necessary
stockholder approval to amend the Company's Certificate of Incorporation to
authorize such additional number of shares of Series A Preferred Stock as may be
necessary for conversion of the warrant. If a Financing has not occurred on or
before the date six months following the Effective Date or if, at any time
before such date, the Company has reason to believe such Financing is not likely
occur, the Company shall immediately use its reasonable best efforts to promptly
obtain such stockholder approval and shall execute and deliver such documents
and instruments, and do such acts and things necessary in order to promptly
effect such amendment to the Certificate of Incorporation.

        1. DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:

                                       1
<PAGE>   16

           (a) "Exercise Period" shall mean the period commencing with the date
hereof and ending five years from the date hereof, unless sooner terminated as
provided below.

           (b) "Exercise Price" shall mean the price per share at which the
Company issues and sells shares of Preferred Stock in the Company's proposed
Series B Preferred Stock Financing, subject to adjustment pursuant to Section 5
below. In the event that the Warrant shall convert into a Warrant to purchase
Series A Preferred Stock, as described above, the "Exercise Price" shall be set
at $1.50, subject to adjustment pursuant to Section 5, below.

           (c) "Exercise Shares" shall mean the shares of the Company's
Preferred Stock issuable upon exercise of this Warrant.

        2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):

           (a) An executed Notice of Exercise in the form attached hereto;

           (b) Payment of the Exercise Price either (i) in cash or by check, or
(ii) by cancellation of indebtedness; and

           (c) This Warrant.

        Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised.

        The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the, next succeeding date on which the
stock transfer books are open.

        2.1 NET EXERCISE. Notwithstanding any provisions herein to the contrary,
if the fair market value of one share of the Company's Preferred Stock is
greater than the Exercise Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant by payment of cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Notice of Exercise in
which event the Company shall issue to the Holder a number of shares of
Preferred Stock computed using the following formula:

                                       2
<PAGE>   17

                      X = Y (A-B)
                          -------
                             A

Where   X = the number of shares of Preferred Stock to be issued to the Holder

        Y = the number of shares of Preferred Stock purchasable under the
            Warrant or, if only a portion of the Warrant is being exercised, the
            portion of the Warrant being canceled (at the date of such
            calculation)

        A = the fair market value of one share of the Company's Preferred Stock
            (at the date of such calculation)

        B = Exercise Price (as adjusted to the date of such calculation)

        For purposes of the above calculation, the fair market value of one
share of Preferred Stock shall be determined by the Company's Board of Directors
in good faith; provided, however, that in the event that this Warrant is
exercised pursuant to this Section 2.1 in connection with the Company's initial
public offering of its Common Stock, the fair market value per share shall be
the product of (i) the per share offering price to the public of the Company's
initial public offering, and (ii) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise.

        3. COVENANTS OF THE COMPANY.

           3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and agrees
that all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Preferred Stock to provide for the exercise of the rights
represented by this Warrant. If at any time during the Exercise Period the
number of authorized but unissued shares of Preferred Stock shall not be
sufficient to permit exercise of this Warrant, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Preferred Stock to such number of shares
as shall be sufficient for such purposes.

           3.2 NO IMPAIRMENT. Except and to the extent as waived or consented to
by the Holder, the Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer-of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.

                                       3
<PAGE>   18
           3.3 NOTICES OF RECORD DATE. In the event of any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to the Holder, at least
ten (10) days prior to the date specified herein, a notice specifying the date
on which any such second is to be taken for the purpose of such dividend or
distribution.

        4. REPRESENTATIONS OF HOLDER.

           4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder
represents and warrants that it is acquiring the Warrant solely for its account
for investment and not with a view to or for sale or distribution of said
Warrant or any part thereof The Holder also represents that the entire legal and
beneficial interests of the Warrant and Exercise Shares the Holder is acquiring
is being acquired for, and will be held for, its account only.

           4.2 SECURITIES ARE NOT REGISTERED.

               (a) The Holder understands that the Warrant and the Exercise
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act") on the basis that no distribution or public offering of the stock of
the Company is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention.

               (b) The Holder recognizes that the Warrant and the Exercise
Shares must be held indefinitely unless they are subsequently registered under
the Act or an exemption from such registration is available. The Holder
recognizes that the Company has no obligation to register the Warrant or the
Exercise Shares of the Company, or to comply with any exemption from such
registration.

               (c) The Holder is aware that neither the Warrant nor the Exercise
Shares may be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale following the required holding period under Rule
144 and the number of shares being sold during any three month period not
exceeding specified limitations. Holder is aware that the conditions for resale
set forth in Rule 144 have not been satisfied and that the Company presently has
no plans to satisfy these conditions in the foreseeable future.

           4.3 DISPOSITION OF WARRANT AND EXERCISE SHARES.

               (a) The Holder further agrees not to make any disposition of all
or any part of the Warrant or Exercise Shares in any event unless and until:

                                       4
<PAGE>   19

                   (i) The Company shall have received a letter secured by the
Holder from the Securities and Exchange Commission stating that no action will
be recommended to the Commission with respect to the proposed disposition; or

                   (ii) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or

                   (iii) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Company, the Holder shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, for the
Holder to the effect that such disposition will not require registration of such
Warrant or Exercise Shares under the Act or any applicable state securities
laws.

               (b) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:

        THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
        1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
        PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
        SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

        5. ADJUSTMENT OF EXERCISE PRICE. In the event of changes in the
outstanding Preferred Stock of the Company by reason of stock dividends,
split-ups, recapitalizations, reclassifications, combinations or exchanges of
shares, separations, reorganizations, liquidations, or the like, the number and
class of shares available under the Warrant in the aggregate and the Exercise
Price shall be correspondingly adjusted to give the Holder of the Warrant, on
exercise for the same aggregate Exercise Price, the total number, class, and
kind of shares as the Holder would have owned had the Warrant been exercised
prior to the event and had the Holder continued to hold such shares until after
the event requiring adjustment; provided, however, that such adjustment shall
not be made with respect to, and this Warrant shall terminate if not exercised
prior to, the events set forth in Section 7 below. The form of this Warrant need
not be changed because of any adjustment in the number of Exercise Shares
subject to this Warrant.

        6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to

                                       5
<PAGE>   20

the product resulting from multiplying the then current fair market value of an
Exercise Share by such fraction.

        7. EARLY TERMINATION. In the event of, at any time during the Exercise
Period, an initial public offering of securities of the Company registered under
the Act, or any capital reorganization, or any reclassification of the capital
stock of the Company (other than a change in par value or from par value to no
par value or no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Company with or into another corporation (other than a merger solely to
effect a reincorporation of the Company into another state), or the sale or
other disposition of all or substantially all the properties and assets of the
Company in its entirety to any other person, the Company shall provide to the
Holder twenty (20) days advance written notice of such public offering,
reorganization, reclassification, consolidation, merger or sale or other
disposition of the Company's assets, and this Warrant shall terminate unless
exercised prior to the date such public offering is closed or the occurrence of
such reorganization, reclassification, consolidation, merger or sale or other
disposition of the Company's assets.

        8. MARKET STAND-OFF AGREEMENT. Holder shall not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
any Common Stock (or other securities) of the Company held by Holder, for a
period of time specified by the managing underwriter(s) (not to exceed one
hundred eighty (180 days) following the effective date of a registration
statement of the Company filed under the Securities Act of 1933. Holder agrees
to execute and deliver such other agreements as may be reasonably requested by
the Company and/or the managing underwriter(s) which are consistent with the
foregoing or which are necessary to give further effect thereto. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to such Common Stock (or other securities) until the
end of such period. The underwriters of the Company's stock are intended third
party beneficiaries of this Section 8 and shall have the right, power and
authority to enforce the provisions hereof as though they were a party hereto.

        9. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company.

        10. TRANSFER OF WARRANT. Subject to applicable laws and the restriction
on transfer set forth on the first page of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance satisfactory to the Company.

        11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation

                                       6
<PAGE>   21

of the Company, whether or not the allegedly lost, stolen, mutilated or
destroyed Warrant shall be at any time enforceable by anyone.

        12. NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address listed on the signature page and to Holder at 7 Studebaker,
Irvine, CA 92618 or at such other address as the Company or Holder may designate
by ten (10) days advance written notice to the other parties hereto.

        13. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.

        14. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by the laws of the State of California.

                                       7
<PAGE>   22

        IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of April 20, 2001.

                                    SANARUS MEDICAL, INC.

                                    By:
                                        ----------------------------------------
                                           Glenn Foy
                                           President and Chief Executive Officer

                                    Address:   Sanarus Medical, Inc.
                                               5673 W. Las Positas Blvd.
                                               Pleasanton, CA 94588

                                       8
<PAGE>   23

                               NOTICE OF EXERCISE

TO: SANARUS MEDICAL, INC.

        (1) [ ] The undersigned hereby elects to purchase _________ shares of
the Series _______ Preferred Stock of SANARUS MEDICAL, INC. (the "Company")
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.

            [ ] The undersigned hereby elects to purchase _________ shares of
the Series _______ Preferred Stock of SANARUS MEDICAL, INC. (the "Company")
pursuant to the terms of the net exercise provisions set forth in Section 2.1 of
the attached Warrant, and shall tender payment of all applicable transfer taxes,
if any.

        (2) Please issue a certificate or certificates representing said shares
of Series ________ Preferred Stock in the name of the undersigned or in such
other name as is specified below:

                             -----------------------
                                     (Name)

                             -----------------------

                             -----------------------
                                    (Address)

        (3) The undersigned represents that (i) the aforesaid shares of Series
_____ Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares; (ii) the undersigned is aware of the
Company's business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
regarding its investment in the Company; (iii) the undersigned is experienced in
making investments of this type and has such knowledge and background in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of this investment and protecting the undersigned's own
interests; (iv) the undersigned understands that the shares of Series _____
Preferred Stock issuable upon exercise of this Warrant have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), by reason
of a specific exemption from the registration provisions of the Securities Act,
which exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Securities Act, they must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (v) the undersigned is aware that the aforesaid
shares of Series _____ Preferred Stock may not be sold pursuant to Rule 144
adopted under the Securities Act unless certain conditions are met and until the
undersigned has held the shares for the number of years prescribed by Rule 144,
that among the conditions for use of the Rule is the availability of current
information to the public about the Company and the

<PAGE>   24

Company has not made such information available and has no present plans to do
so; and (vi) the undersigned agrees not to make any disposition of all or any
part of the aforesaid shares of Series ______ Preferred Stock unless and until
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement, or the undersigned has provided the Company
with an opinion of counsel satisfactory to the Company, stating that such
registration is not required.

------------------------------------      --------------------------------------
(Date)                                    (Signature)

                                          --------------------------------------
                                          (Print name)

                                       2
<PAGE>   25

                                 ASSIGNMENT FORM

                      (To assign the foregoing Warrant, execute this form
                      and supply required information. Do not use this
                      form to purchase shares.)

        FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

Name:___________________________________________________________________________
                                 (Please Print)

Address:________________________________________________________________________
                                 (Please Print)

Dated: ______________________, 20___

Holder's
Signature: ____________________________________

Holder's
Address: ______________________________________

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 whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

                                       3

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