Document:

Exhibit
4.1

Exhibit A
to

Securities Purchase Agreement

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT
THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER,
SALE OR TRANSFER. SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED OR HYPOTHECATED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS
WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT.

WARRANT TO PURCHASE
COMMON STOCK

OF

LIPID
SCIENCES, INC.

Issue
Date:  August 8, 2006                                                                                                                    Warrant
No. 2006-       

THIS CERTIFIES that                       
(the “Holder”) of this
Warrant (this “Warrant”),
has the right to purchase from LIPID SCIENCES, INC., a Delaware corporation
(the “Company”), up to             
fully paid and nonassessable shares of the Company’s common stock, par value
$0.001 per share (the “Common
Stock”), subject to adjustment as provided herein, at a price
per share equal to the Exercise Price (as defined below), at any time during
the period commencing on the first Business Day following the six month
anniversary of the date on which this Warrant is issued (the “Issue Date”) and ending at
5:00 p.m., New York City time, on the date that is the fifth (5th) anniversary
of such commencement date (the “Expiration
Date”).  This Warrant is
issued pursuant to a Securities Purchase Agreement, dated as of August 8,
2006 (the “Securities Purchase
Agreement”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Securities Purchase Agreement.

1.             Exercise.

(a)           Right
to Exercise; Exercise Price.  Subject
to the terms and conditions set forth herein, the Holder shall have the right
to exercise this Warrant at any time and from time to time during the period
commencing on the six month anniversary of the Issue Date and ending on the
Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the “Warrant
Shares”).  The “Exercise Price”
for each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be equal to $1.51 (subject to adjustment for the events specified in Section 4
of this Warrant).

(b)           Exercise
Notice.  In order to exercise this
Warrant, the Holder shall deliver, at any time prior to 5:00 p.m. New York City
time on the Business Day on which the Holder wishes to effect such

 

exercise (the “Exercise Date”), to the Company an executed
copy of the notice of exercise in the form attached hereto as Exhibit A
(the “Exercise Notice”)
and the Exercise Price (by delivery of immediately available funds).  The Exercise Notice shall also state the name
or names (with address) in which the shares of Common Stock that are issuable
on such exercise shall be issued.  After
delivery of the Exercise Notice, the Holder shall promptly deliver the original
warrant to the Company for cancellation. 
In the case of a dispute as to the calculation of the Exercise Price or
the number of Warrant Shares issuable hereunder (including, without limitation,
the calculation of any adjustment pursuant to Section 4 of this
Warrant), the Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and shall submit the disputed calculations to a
certified public accounting firm of national recognition (other than the
Company’s independent accountants) promptly following the date on which the
Exercise Notice is delivered to the Company. The Company shall cause such
accountant to calculate the Exercise Price and/or the number of Warrant Shares
issuable hereunder and to notify the Company and the Holder of the results in
writing no later than ten (10) Business Days following the day on which such
accountant received the disputed calculations (the “Dispute Procedure”). Such accountant’s
calculation shall be deemed conclusive absent manifest error.  The fees of any such accountant shall be
borne by the party whose calculations were most at variance with those of such
accountant.

(c)           Holder
of Record.  The Holder shall, for all
purposes, be deemed to have become the holder of record of the Warrant Shares
specified in an Exercise Notice as of 5:00 p.m. New York City time on the
Exercise Date, irrespective of the date of delivery of such Warrant
Shares.  Except as specifically provided
herein, nothing in this Warrant shall be construed as conferring upon the
Holder hereof any rights as a stockholder of the Company prior to the Exercise
Date.

(d)           Cancellation
of Warrant.  This Warrant shall be
canceled upon its exercise and, if this Warrant is exercised in part, the
Company shall, at the time that it delivers Warrant Shares to the Holder
pursuant to such exercise as provided herein, issue a new warrant, and deliver
to the Holder a certificate representing such new warrant, with terms identical
in all respects to this Warrant (except that such new warrant shall be
exercisable into the number of shares of Common Stock with respect to which
this Warrant shall remain unexercised); provided, however, that
the Holder shall be entitled to exercise all or any portion of such new warrant
at any time following the time at which this Warrant is exercised, regardless
of whether the Company has actually issued such new warrant or delivered to the
Holder a certificate therefor.

(e)           Redemption
Right.  Should the Company’s Common
Stock trade at $2.52 or greater per share (as appropriately adjusted for stock
splits, stock dividends, combinations, recapitalizations and the like) for
thirty (30) consecutive Trading Days, on the basis of closing prices of the
Common Stock quoted on the Principal Market as reported by the Wall Street Journal (or, if the Wall Street
Journal is not then representing such prices, by a comparable
reporting service of national reputation selected by the Company), the Company
may, at its sole option, redeem the Warrant by repurchasing it from the Holder
for a purchase price of $0.01 per Share (as appropriately adjusted for stock
splits, stock dividends, combinations, recapitalizations and the like);
provided that the Company shall give the Holder thirty (30) days’ prior written
notice, and the Holder shall have the right to exercise the Warrant during such
notice period.

2.             Delivery of Warrant Shares Upon
Exercise.  Upon exercise pursuant to Section 1
of this Warrant, the Company shall issue and deliver or caused to be delivered
to the Holder the number of Warrant Shares as shall be determined as provided
herein within a reasonable time, not exceeding (A) the close of business
on the third (3rd) Business Day following the Exercise Date and (B) with
respect to Warrant Shares that are the subject of a Dispute Procedure, the
close of business on the third (3rd) Business Day following the determination
made pursuant to Section 1(b) of this Warrant (each of the dates
specified in (A) and (B) being referred to as a “Delivery Date”).  The Company shall effect delivery 

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of Warrant Shares to the
Holder by, as long as the Transfer Agent participates in the Depository Trust
Company (“DTC”)
Fast Automated Securities Transfer program (“FAST”), crediting the account of the
Holder or its nominee at DTC (as specified in the applicable Exercise Notice)
with the number of Warrant Shares required to be delivered, no later than the
close of business on such Delivery Date. 
In the event that the Transfer Agent is not a participant in FAST, or if
the Warrant Shares are not otherwise eligible for delivery through FAST, or if
the Holder so specifies in an Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares
by delivering to the Holder or its nominee physical certificates representing
such Warrant Shares, no later than the close of business on such Delivery
Date.  The certificates representing the
Warrant Shares may bear legends in accordance with the Securities Purchase
Agreement or applicable law.

3.             Failure to Deliver Warrant
Shares.

(a)           In
the event that the Company fails for any reason to deliver to the Holder the
number of Warrant Shares specified in the applicable Exercise Notice on or
before the Delivery Date therefor (an “Exercise Default”),
the Company shall pay to the Holder payments (“Exercise Default Payments”) in the amount of
(i) (N/365) multiplied by (ii) the aggregate Exercise Price of the
Warrant Shares which are the subject of such Exercise Default multiplied by
(iii) the lower of twelve percent (12%) per annum and the maximum rate
permitted by applicable law (the “Default
Interest Rate”), where “N” equals the number of days elapsed
between the original Delivery Date of such Warrant Shares and the date on which
all of such Warrant Shares are issued and delivered to the Holder.  Cash amounts payable hereunder shall be paid
on or before the fifth (5th) Business Day of each calendar month following the
calendar month in which such amount has accrued.

(b)           In
the event that the Holder has not received certificates representing the
Warrant Shares on or before the Delivery Date, the Holder may, upon written
notice to the Company (an “Exercise Default Notice”), regain on the date
of such notice the rights of the Holder under the exercised portion of this
Warrant that is the subject of such Exercise Default.  In such event, the Holder shall retain all of
the Holder’s rights and remedies with respect to the Company’s failure to
deliver such Warrant Shares (including without limitation the right to receive
the cash payments specified in Section 3(a) of this Warrant).

(c)           The
Holder’s rights and remedies hereunder are cumulative, and no right or remedy
is exclusive of any other.  In addition
to the amounts specified herein, the Holder shall have the right to pursue all
other remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).  Nothing herein shall limit the Holder’s right
to pursue actual damages for the Company’s failure to issue and deliver Warrant
Shares on the applicable Delivery Date.

4.             Anti-Dilution Adjustments;
Distributions; Other Events.  The
Exercise Price and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section 4.

(a)           Subdivision
or Combination of Common Stock.  If
the Company, at any time after the Issue Date, subdivides (by any stock split,
stock dividend, recapitalization, reorganization, reclassification or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, then after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced.  If the Company,
at any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record
for effecting such combination, the Exercise Price in effect immediately prior
to such combination will be proportionally increased.

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(b)           Distributions.  If the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend or otherwise (including any
dividend or distribution to the Company’s stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary) (a “Distribution”),
the Company shall deliver written notice of such Distribution (a “Distribution Notice”)
to the Holder at least twenty (20) Business Days prior to the earlier to occur
of (i) the record date for determining stockholders entitled to such
Distribution (the “Record
Date”) and (ii) the date on which such Distribution is made
(the “Distribution Date”).  The Holder shall be entitled to a reduction
in the Exercise Price as of the Record Date therefor, such reduction to be
effected by reducing the Exercise Price in effect on the Business Day
immediately preceding the Record Date by an amount equal to the fair market
value of the assets to be distributed divided by the number of shares of
Common Stock as to which such Distribution is to be made, such fair market
value to be reasonably determined in good faith by the independent members of
the Company’s Board of Directors.

(c)           Dilutive
Issuances.

(i)            Adjustment
Upon Dilutive Issuance.  If, at any
time after the Issue Date, the Company issues or sells, or in accordance with Section 4(c)(ii)
of this Warrant, is deemed to have issued or sold, any shares of Common Stock
for no consideration or for a consideration per share less than the Exercise
Price on the date of such issuance or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then the
Exercise Price shall be adjusted as follows:

(A)          If such Dilutive Issuance occurs prior
to the Effective Date (as defined in the Registration Rights Agreement), then
effective immediately upon the Dilutive Issuance, the Exercise Price shall be
adjusted so as to equal the consideration received or receivable by the Company
(on a per share basis) for the additional shares of Common Stock so issued,
sold or deemed issued or sold in such Dilutive Issuance (which, in the case of
a deemed issuance or sale, shall be calculated in accordance with Section 4(c)(ii)
of this Warrant).  Notwithstanding the
foregoing, prior to the Effective Date, the Company shall not engage in any
transaction that would result in the issuance or deemed issuance of shares of
Common Stock (other than Excluded Securities (as defined below) for no
consideration.

(B)           If such Dilutive Issuance occurs on
or after the Effective Date, then effective immediately upon the Dilutive
Issuance, the Exercise Price shall be adjusted so as to equal an amount
determined by multiplying such Exercise Price by the following fraction:

N0 + N1

N0 + N2

where:

N0 =                        the number
of shares of Common Stock outstanding immediately prior to the issuance, sale
or deemed issuance or sale of such additional shares of Common Stock in such
Dilutive Issuance (without taking into account any shares of Common Stock
issuable upon conversion, exchange or exercise of any securities or other
instruments which are convertible into or exercisable or exchangeable for
Common Stock (“Convertible Securities”)
or options, warrants or other rights to purchase or subscribe for Common Stock
or Convertible Securities (“Purchase
Rights”), including, without limitation, the Warrants);

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N1 =                        the number
of shares of Common Stock which the aggregate consideration, if any, received
or receivable by the Company for the total number of such additional shares of
Common Stock so issued, sold or deemed issued or sold in such Dilutive Issuance
(which, in the case of a deemed issuance or sale, shall be calculated in
accordance with Section 4(c)(ii) of this Warrant) would purchase at
the Exercise Price in effect immediately prior to such Dilutive Issuance; and

N2 =   the number of such additional shares of
Common Stock so issued, sold or deemed issued or sold in such Dilutive
Issuance.

Notwithstanding the foregoing, no adjustment shall be made pursuant
hereto if such adjustment would result in an increase in the Exercise Price.

(ii)           Effect
On Exercise Price of Certain Events. 
For purposes of determining the adjusted Exercise Price under Section 4(c)(i)
of this Warrant, the following will be applicable:

(A)          Issuance of Purchase Rights.  If the Company issues or sells any Purchase
Rights, whether or not immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Purchase Rights (and
the price of any conversion of Convertible Securities, if applicable) is less
than the Exercise Price in effect on the date of issuance or sale of such
Purchase Rights, then the maximum total number of shares of Common Stock issuable
upon the exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable) shall, as of the
date of the issuance or sale of such Purchase Rights, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share.  For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Purchase Rights” shall be determined by dividing (x) the
total amount, if any, received or receivable by the Company as consideration
for the issuance or sale of all such Purchase Rights, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Purchase Rights, plus, in the case of Convertible
Securities issuable upon the exercise of such Purchase Rights, the minimum
aggregate amount of additional consideration payable upon the conversion,
exercise or exchange of all such Convertible Securities (determined in accordance
with the calculation method set forth in Section 4(c)(ii)(B) of
this Warrant), by (y) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Purchase Rights (assuming full
conversion, exercise or exchange of Convertible Securities, if
applicable).  Except as provided in Section 4(c)(ii)(C)
of this Warrant, no further adjustment to the Exercise Price shall be made upon
the actual issuance of such Common Stock upon the exercise of such Purchase
Rights or upon the conversion, exercise or exchange of Convertible Securities
issuable upon exercise of such Purchase Rights.

(B)           Issuance of Convertible Securities.  If the Company issues or sells any
Convertible Securities, whether or not immediately convertible, exercisable or exchangeable,
and the price per share for which Common Stock is issuable upon such
conversion, exercise or exchange is less than the Exercise Price in effect on
the date of issuance or sale of such Convertible Securities, then the maximum
total number of shares of Common Stock issuable upon the conversion, exercise
or exchange of all such Convertible Securities shall, as of the date of the
issuance or sale of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share.  If the Convertible Securities so issued or
sold do not have a fluctuating conversion or exercise price or exchange ratio,
then for the purposes of the immediately preceding sentence, the “price per
share for which Common 

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Stock is
issuable upon such conversion, exercise or exchange” shall be determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion, exercise or exchange of all
such Convertible Securities (determined in accordance with the calculation
method set forth in this Section 4(c)(ii)(B)), by (B) the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities.  If the Convertible Securities so issued or
sold have a fluctuating conversion or exercise price or exchange ratio (a “Variable Rate Convertible Security”),
then for purposes of the first sentence of this Section 4(c)(ii)(B),
the “price per share for which Common Stock is issuable upon such conversion,
exercise or exchange” shall be deemed to be the lowest price per share which
would be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have been
satisfied) if the conversion price of such Variable Rate Convertible Security
on the date of issuance or sale thereof were seventy-five percent (75%) of the
actual conversion price on such date (the “Assumed Variable Market
Price”), and, further, if the conversion price of such Variable
Rate Convertible Security at any time or times thereafter is less than or equal
to the Assumed Variable Market Price last used for making any adjustment under
this Section 4(c) with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to
equal the Exercise Price which would have resulted if the Assumed Variable
Market Price at the time of issuance of the Variable Rate Convertible Security
had been seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the adjustment
required by this sentence.  No further
adjustment to the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion, exercise or exchange of such Convertible Securities.

(C)           Change In Option Price or Conversion
Rate; Expiration of Cancellation.  If
there is a change at any time in (x) the amount of additional
consideration payable to the Company upon the exercise of any Purchase Rights;
(y) the amount of additional consideration, if any, payable to the Company
upon the conversion, exercise or exchange of any Convertible Securities the
adjustment for which is not otherwise covered under Section 4(c)(ii)(B)
of this Warrant; or (z) the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Stock, then in any
such case, the Exercise Price in effect at the time of such change shall be
readjusted to the Exercise Price which would have been in effect at such time
had such Purchase Rights or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion, exercise or
exchange rate, as the case may be, at the time initially issued or sold.  In addition, if the Purchase Rights or Convertible
Securities shall expire or be cancelled, the Exercise Price in effect at the
time of such expiration or cancellation shall be readjusted to the Exercise
Price which would have been in effect had an adjustment been made upon the
issuance of such Purchase Rights or Convertible Securities on the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise or conversion of such Purchase Rights or Convertible Securities prior
to such expiration or cancellation.

(D)          Calculation of Consideration Received.  If any Common Stock, Purchase Rights or
Convertible Securities are issued or sold for cash, the consideration received
therefor will be the amount received by the Company therefor, after deduction
of all underwriting discounts or allowances in connection with such issuance,
grant or sale.  In case any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, including in the
case of a strategic or similar arrangement in which the other entity will
provide services to the Company, purchase services from the 

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Company or
otherwise provide intangible consideration to the Company, the amount of the
consideration other than cash received by the Company (including the net present
value of the consideration expected by the Company for the provided or
purchased services) shall be the fair market value of such consideration,
except where such consideration consists of marketable securities, in which
case the amount of consideration received by the Company will be the average of
the last sale prices thereof on the principal market for such securities during
the period of ten Trading Days immediately preceding the date of receipt.  In case any Common Stock, Purchase Rights or
Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Purchase Rights or Convertible Securities,
as the case may be.  The independent
members of the Company’s Board of Directors shall calculate reasonably and in
good faith, using standard commercial valuation methods appropriate for valuing
such assets, the fair market value of any consideration other than cash or
securities; provided, however, that if the Holder does not agree to such fair
market value calculation within three Business Days after receipt thereof from
the Company, then such fair market value shall be determined in good faith by
an investment banker or other appropriate expert of national reputation
selected by the Holder and reasonably acceptable to the Company, with the costs
of such appraisal to be borne equally by the Company and the Holder.

(iii)          Exceptions
To Adjustment of Exercise Price. 
Notwithstanding the foregoing, no adjustment to the Exercise Price shall
be made pursuant to this Section 4(c) upon the issuance of any
Excluded Securities and in no event shall the Exercise Price be adjusted
pursuant to Section 4(c) to a price less than $1.20 per Warrant
Share.  For purposes hereof, “Excluded Securities” means
(I) securities purchased under the Securities Purchase Agreement;
(II) securities issued upon exercise of the Warrants; (III) shares of
Common Stock issuable or issued to employees, consultants or directors from
time to time upon the exercise of options, in such case granted or to be
granted in the discretion of the Board of Directors pursuant to one or more
stock option plans or restricted stock plans in effect as of the Issue Date;
(IV) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization of the Company; (V) securities issued
in connection with bona fide licensing or other strategic transactions not for
the primary purpose of raising equity capital approved by the Board of
Directors; and (VI) shares of Common Stock issued in connection with the
acquisition by the Company of any corporation or other entity occurring after
the Effective Date and as long as a fairness opinion with respect to such
acquisition is rendered by an investment bank of national recognition.

(iv)          Notice
Of Adjustments.  Upon the occurrence
of each adjustment or readjustment of the Exercise Price pursuant to this Section 4(c)
resulting in a change in the Exercise Price by more than one percent (1%), or
any change in the number or type of stock, securities and/or other property
issuable upon exercise of this Warrant, the Company, at its expense, shall
promptly compute such adjustment or readjustment or change and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment or change and showing in detail the facts upon which such
adjustment or readjustment or change is based. 
The Company shall, upon the written request at any time of the Holder,
furnish to the Holder a like certificate setting forth (i) such adjustment
or readjustment or change, (ii) the Exercise Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon exercise
of this Warrant.

(d)           Major
Transactions.  In the event of a
merger, consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a
result of which shares of Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities or other assets of the Company or another entity or the Company
shall sell all or substantially all of its assets (each of the foregoing being
a “Major 

 7
 

 

Transaction”),
the Company will give the Holder at least twenty (20) Trading Days’ written
notice prior to the earlier of (I) the closing or effectiveness of such
Major Transaction and (II) the record date for the receipt of such shares
of stock or securities or other assets, and the Holder shall be permitted to exercise
this Warrant in whole or in part at any time prior to the record date for the
receipt of such consideration and shall be entitled to receive, for each share
of Common Stock issuable to the Holder upon such exercise, the same per share
consideration payable to the other holders of Common Stock in connection with
such Major Transaction.  If and to the
extent that the Holder retains this Warrant or any portion hereof following
such record date, the Company will cause the surviving or, in the event of a sale
of assets, purchasing entity, as a condition precedent to such Major
Transaction, to assume the obligations of the Company with respect to this
Warrant, with such adjustments to the Exercise Price and the securities covered
hereby as may be necessary in order to preserve the economic benefits of this
Warrant to the Holder.  The failure to
give any notice required by this Section 4(d) or any defect therein
shall not affect the legality or validity of any Major Transaction or the vote
upon any such action.

(e)           Adjustments;
Additional Shares, Securities or Assets. 
In the event that at any time, as a result of an adjustment made
pursuant to this Section 4, the Holder of this Warrant shall, upon
exercise of this Warrant, become entitled to receive securities or assets
(other than Common Stock) then, wherever appropriate, all references herein to
shares of Common Stock shall be deemed to refer to and include such shares
and/or other securities or assets; and thereafter the number of such shares
and/or other securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as practicable to the
provisions of this Section 4. 
Any adjustment made herein that results in a decrease in the Exercise
Price shall also effect a proportional increase in the number of shares of
Common Stock into which this Warrant is exercisable.

(f)            Board
Discretion.  Notwithstanding any
provision in this Warrant to the contrary, subject to the prior written consent
of the Holder, the Board of Directors has the right to reduce the Exercise
Price and/or increase the number of Warrant Shares issuable under this Warrant
at any time or from time to time in its sole and absolute discretion.

5.             Fractional Interests.

No fractional shares or scrip representing fractional
shares shall be issuable upon the exercise of this Warrant.  If, on exercise of this Warrant, the Holder
hereof would be entitled to a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, the Company shall, in lieu of
issuing any such fractional share, pay to the Holder an amount in cash equal to
the product resulting from multiplying such fraction by the closing price of
the Company’s Common Stock as of the Exercise Date.

6.             Transfer of this Warrant.

The Holder may sell, transfer, assign, pledge or
otherwise dispose of this Warrant, in whole or in part, as long as such sale or
other disposition is made pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act, and
applicable state securities laws, and is otherwise made in accordance with the
applicable provisions of the Securities Purchase Agreement.  Upon such transfer or other disposition, the
Holder shall deliver this Warrant to the Company together with a written notice
to the Company, substantially in the form of the Transfer Notice attached
hereto as Exhibit B
(the “Transfer Notice”),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred, the number of Warrant Shares
to be covered by the part of this Warrant to be transferred to each such
person.  Within three (3) Business Days
of receiving a Transfer Notice and the original of this Warrant, the Company
shall deliver to the transferee designated by the Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of 

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Warrant Shares and, if
less than all this Warrant is transferred, shall deliver to the Holder a
Warrant for the remaining number of Warrant Shares.

7.             Benefits of this Warrant.

This Warrant shall be for the sole and exclusive
benefit of the Holder of this Warrant and nothing in this Warrant shall be
construed to confer upon any person other than the Holder of this Warrant any legal
or equitable right, remedy or claim hereunder.

8.             Loss, Theft, Destruction or
Mutilation of Warrant.

Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of indemnity reasonably satisfactory to the Company, and
upon surrender of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.

9.             Notice or Demands.

Any notice, demand or request required or permitted to
be given by the Company or the Holder pursuant to the terms of this Warrant
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such delivery is made on a day
that is not a Business Day, in which case such delivery will be deemed to be
made on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to a reputable overnight courier and (iii) on the Business Day
actually received if deposited in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed as follows:

If to
the Company:

Lipid Sciences, Inc.

7068 Koll Center Parkway

Suite 401

Pleasanton, CA 94566

Attn:  Sandra Gardiner

Chief Financial Officer

Tel:  (925)
249-4000

Fax:  (925) 249-4080

with a
copy (which shall not constitute notice) to:

Allen Matkins Leck Gamble Mallory & Natsis

Three Embarcadero Center, 12th Floor

San Francisco, CA 94111-4074

Phone: (415) 837-1515

Fax: (415) 837-1516

Attn:  Roger S. Mertz, Esq.

Tel: (415) 273-7441

Fax: (415) 837-1516

 9
 

 

and if to the Holder, to such address as shall be designated by the
Holder in writing to the Company.

10.           Applicable Law.

This Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of California applicable to contracts made and to be performed entirely within
the State of California.

11.           Amendments.

No amendment, modification or other change to, or
waiver of any provision of, this Warrant may be made unless such amendment,
modification or change is (A) set forth in writing and is signed by the
Company and the Holder and (B) agreed to in writing by the holders of at
least seventy-five percent (75%) of the number of shares into which the
Warrants are exercisable (without regard to any limitation contained herein on
such exercise), it being understood that upon the satisfaction of the
conditions described in (A) and (B) above, each Warrant (including any Warrant
held by the Holder who did not execute the agreement specified in (B) above)
shall be deemed to incorporate any amendment, modification, change or waiver
effected thereby as of the effective date thereof.

12.           Entire Agreement.

This Warrant and the other Transaction Documents
constitute the entire agreement and supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.

13.           Headings.

The headings in this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

14.           Restrictions.

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

15.           Successors and Assigns.

Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of the Holder.

[Signature Page to Follow]

 10
 

 

IN WITNESS WHEREOF, the Company has duly executed and
delivered this Warrant as of the Issue Date.

	
   

  	
  LIPID SCIENCES, INC.

  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
							

 

 11

 

EXHIBIT A to WARRANT

EXERCISE NOTICE

The undersigned Holder hereby irrevocably exercises
the right to purchase                  of
the shares of Common Stock (“Warrant Shares”) of LIPID SCIENCES, INC.
evidenced by the attached Warrant (the “Warrant”), and tenders herewith
payment of the purchase price in full, together with all applicable transfer
taxes, if any.  Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth
in the Warrant.

	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Name of
  Registered Holder

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
        Name:

  
	
        Title:

  
						

 

 -1-
 

 

EXHIBIT B to
WARRANT

TRANSFER NOTICE

FOR VALUE RECEIVED, the
undersigned Holder of the attached Warrant hereby sells, assigns and transfers
unto the person or persons named below the right to purchase            
shares of the Common Stock of LIPID SCIENCES, INC. evidenced by the attached
Warrant.  By signing this Transfer
Notice, the transferee agrees to be legally bound by the terms of the attached
Warrant and of the related Securities Purchase Agreement and Registration
Rights Agreement applicable to an Investor.

	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Name of
  Registered Holder

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
        Name:

  
	
        Title:

  
						

Accepted and Agreed:

	
   

  	
   

  
	
  

  	
   

  
	
  Transferee Name

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
        Name:

  
	
        Title:

  
	
   

  
	
  Address:

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				

 

 -1-Exhibit
4.2

REGISTRATION RIGHTS
AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of August 8, 2006, is by and between LIPID SCIENCES, INC, a
Delaware corporation (the “Company”),
and each of the entities whose names appear on the signature pages hereof.  Such entities are each referred to herein as
an “Investor” and, collectively, as the “Investors.”

The Company has agreed, on the terms and subject to
the conditions set forth in the Securities Purchase Agreement, dated as of
August 8, 2006 (the “Securities Purchase
Agreement”), to issue and sell to each Investor named therein
shares (“Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common
Stock”), and a Warrant in the form attached to the Securities
Purchase Agreement as Exhibit A
thereto (each, a “Warrant” and, collectively
with the other Warrants issued thereunder, the “Warrants”).  The shares of Common Stock into which the
Warrants are exercisable are referred to herein as the “Warrant
Shares,” and the Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”

In order to induce each Investor to enter into the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the “Securities Act”), and under
applicable state securities laws.

In consideration of each Investor entering into the
Securities Purchase Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

1.                                       DEFINITIONS.

For purposes of this Agreement, the following terms
shall have the meanings specified:

“Business Day” means any day
other than a Saturday, a Sunday or a day on which the Commission is closed or
on which banks in the City of New York are authorized by law to be closed.

“Commission” means the
Securities and Exchange Commission.

“Effective Date” means the
date on which the Registration Statement is declared effective by the
Commission.

“Filing Deadline” means the
thirtieth (30th) calendar day following the Closing Date.

“Holder” means any person
owning or having the right to acquire, through exercise of the Warrants or
otherwise, Registrable Securities, including initially each Investor and
thereafter any permitted assignee thereof.

“Registrable Securities” means
the Shares and the Warrant Shares and any other shares of Common Stock issuable
pursuant to the terms of the Securities Purchase Agreement or the Warrants, and
any shares of capital stock issued or issuable from time to time (with any
adjustments) in replacement of, in exchange for or otherwise in respect of the
Shares or the Warrant Shares.

“Registration Deadline” means
the earlier to occur of (i) the ninetieth (90th) calendar day following
the Closing Date and (ii) the fifth (5th) Business Day following the day
on which the Commission informs the Company that no review of the Registration
Statement will be made by the staff of the Commission or that the staff of the
Commission has no further comments on the Registration Statement.

“Registration Period” has the
meaning set forth in Section 2(c) of this Agreement.

“Registration Statement” means
a registration statement or statements prepared in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act (“Rule 415”) or any successor
rule providing for the offering of securities on a continuous or delayed basis.

Capitalized terms used herein and not otherwise
defined shall have the respective meanings specified in the Securities Purchase
Agreement.

2.                                       REGISTRATION.

(a)           Filing of Registration Statement.  On or before the Filing Deadline, the Company
shall prepare and file with the Commission a Registration Statement on Form S-3
as a “shelf” registration statement under Rule 415 covering the resale of
the Registrable Securities.  Such
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon the exercise of the Warrants
in order to prevent dilution resulting from stock splits, stock dividends,
recapitalization, reorganization reclassification or other event that
subdivides all of the outstanding shares of Common Stock.

(b)           Effectiveness.  The Company shall use commercially reasonable
efforts to cause the Registration Statement to become effective as soon as
practicable following the filing thereof, but in no event later than the
Registration Deadline.  The Company shall
respond promptly to any and all comments made by the staff of the Commission
with respect to the Registration Statement, and shall submit to the Commission,
within three (3) Business Days after the Company learns that no review of the
Registration Statement will be made by the staff of the Commission or that the
staff of the Commission has no further comments on the Registration Statement,
as the case may be, a request for acceleration of the effectiveness of such
Registration Statement to a time and date not later than two (2) Business Days
after the submission of such request. 
The Company will maintain the effectiveness of each Registration
Statement filed pursuant to this Agreement until the earlier to occur of
(i) the date on which all of the Registrable Securities eligible for
resale thereunder have been publicly sold pursuant to either the Registration
Statement or Rule 144, and (ii) the date on which all of the Registrable
Securities remaining to be sold under such Registration Statement may be immediately
sold to the public under Rule 144(k) under the Securities Act (“Rule 144(k)”) or any successor
provision (the period beginning on the Closing Date and ending on the earlier
to occur of (i) or (ii) above being referred to herein as the “Registration Period”).

(c)           For a total of no more than
twenty-five (25) Business Days in any twelve (12) month period, the Company
may, due to the existence of material non-public information concerning the
Company, suspend the use of any Prospectus included in any registration
statement contemplated by this Section if, in the good faith opinion of the
Company following consultation with legal counsel, such information would be
required to be disclosed in such Prospectus and the disclosure of such
information at such time would have a Material Adverse Effect upon the Company
(an “Allowed Delay”); provided that the Company shall promptly
(a) notify the Holders in writing of the existence of (but in no event, 

 2
 

 

without the prior written consent of a Holder, shall the Company
disclose to such Investor any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay, (b) advise the
Investors in writing to cease all sales under the Registration Statement until
the end of the Allowed Delay and (c) use reasonable best efforts to
terminate an Allowed Delay as promptly as practicable.

(d)           Registration Default.  If (i) the Registration Statement is not
filed on or before the Filing Deadline or declared effective by the Commission
on or before the Registration Deadline, (ii) after the Registration
Statement has been declared effective by the Commission, other than during an
Allowed Delay, sales of Registrable Securities (other than such Registrable
Securities as are then freely saleable pursuant to Rule 144(k)) cannot be made
by a Holder under a Registration Statement for any reason not within the
exclusive control of such Holder or (iii) other than during an Allowed
Delay, an amendment or supplement to a Registration Statement, or a new registration
statement, required to be filed pursuant to the terms of this Agreement is not
filed as required hereunder (each of the events described in the foregoing
clauses (i), (ii) and (iii) being referred to herein as a “Registration Default”), the Company
shall make cash payments to each Holder equal to two percent (2%) of the
aggregate Purchase Price paid by such Holder for such Holder’s Registrable
Securities for each thirty (30) day period in which a Registration Default
exists. Each such payment shall be paid exclusively with respect to the Shares
only, and for the avoidance of doubt, not with respect to the Warrant Shares or
any shares of Common Stock issuable pursuant to the terms of the Warrants.  Each such payment shall be required to be
made under this Section 2(d) shall be made within five (5) Business
Days following the last day of each calendar month in which a Registration
Default exists.  Any such payment shall
be in addition to any other remedies available to each Holder at law or in
equity, whether pursuant to the terms hereof, the Securities Purchase Agreement
or otherwise.

(e)           Allocation of Warrant Shares.  The initial number of Shares and Warrant
Shares included in any Registration Statement and each increase in the number
thereof included therein shall be allocated pro
rata among the Holders based on the aggregate number of Registrable
Securities issued or issuable to each Holder at the time the Registration
Statement covering such initial number of Registrable Securities or increase thereof
is declared effective by the Commission (such number to be determined using the
Exercise Price in effect at such time and without regard to any restriction on
the ability of a Holder to exercise such Holder’s Warrant as of such
date).  In the event that a Holder sells
or otherwise transfers any of such Holder’s Registrable Securities, each
transferee shall be allocated the portion of the then remaining number of
Registrable Securities included in such Registration Statement allocable to the
transferor.

(f)            Registration of Other Securities.  During the period beginning on the date
hereof and ending on the Effective Date, the Company shall refrain from filing
any registration statement (other than (i) a Registration Statement filed
hereunder, (ii) a registration statement on Form S-8 with respect to stock
option plans and agreements and stock plans currently in effect and disclosed
in the Securities Purchase Agreement or the schedules thereto, or (iii) a
registration statement on Form S-4 with respect to an acquisition or other
business combination involving the Company). In no event shall the Company
include any securities other than Registrable Securities, and such
indeterminate number of additional shares of Common Stock as may become
issuable upon the exercise of the Warrants in order to prevent dilution
resulting from stock splits, stock dividends, recapitalization, reorganization
reclassification or other event that subdivides all of the outstanding shares
of Common Stock on any Registration Statement filed by the Company on behalf of
the Holders pursuant to the terms hereof

3.                                       OBLIGATIONS
OF THE COMPANY.

In addition to performing its obligations hereunder,
including, without limitation, those pursuant to Section 2 of this
Agreement, the Company shall, with respect to each Registration Statement:

 

(a)           prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act or to maintain the effectiveness of such Registration Statement
during the Registration Period, or as may be reasonably requested by a Holder
in order to incorporate information concerning such Holder or such Holder’s intended
method of distribution;

(b)           promptly following the Closing,
secure the listing on the Principal Market of the Shares and all Registrable
Securities issuable upon exercise of the Warrants;

(c)           so long as a Registration Statement
is effective covering the resale of the applicable Registrable Securities owned
by a Holder, furnish to each Holder such number of copies of the prospectus
included in such Registration Statement, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such Holder may reasonably request in order to facilitate the
disposition of such Holder’s Registrable Securities;

(d)           use reasonable best efforts to
register or qualify the Registrable Securities under the securities or “blue
sky” laws of such jurisdictions within the United States as shall be reasonably
requested from time to time by a Holder, and do any and all other acts or
things which may reasonably be necessary or advisable to enable such Holder to
consummate the public sale or other disposition of the Registrable Securities
in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction;

(e)           notify each Holder promptly after
becoming aware of the occurrence of any event (but shall not, without the prior
written consent of such Holder, disclose to such Holder any facts or
circumstances constituting material non-public information) as a result of
which the prospectus included in such Registration Statement, as then in
effect, contains an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and as
promptly as practicable prepare and file with the Commission and furnish to
each Holder a reasonable number of copies of a supplement or an amendment to
such prospectus as may be necessary so that such prospectus does not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;

(f)            use commercially reasonable efforts
to prevent the issuance of any stop order or other order suspending the
effectiveness of such Registration Statement and, if such an order is issued,
use commercially reasonable efforts to obtain the withdrawal thereof as
promptly as practicable and notify each Holder in writing of the issuance of
such order and the resolution thereof;

(g)           furnish to each Holder, on the date
that such Registration Statement, or any successor registration statement,
becomes effective, a letter, dated such date, signed by an officer of or
counsel to the Company and addressed to such Holder, confirming such
effectiveness and, to the knowledge of such officer or such counsel, the
absence of any stop order;

(h)           provide to each Holder and its
representatives the reasonable opportunity to conduct a reasonable inquiry of
the Company’s financial and other records during normal business hours and make
available during normal business hours and with reasonable advance notice its
officers, directors and employees for questions regarding information which
such Holder may reasonably request in order to fulfill any due diligence
obligation on its part; and

 

(i)            permit
counsel for each Holder to review such Registration Statement and all amendments
and supplements thereto, and any comments made by the staff of the Commission
concerning such Holder and/or the transactions contemplated by the Transaction
Documents and the Company’s responses thereto, within a reasonable period of
time prior to the filing thereof with the Commission (or, in the case of
comments made by the staff of the Commission, within a reasonable period of
time following the receipt thereof by the Company).

4.                                       OBLIGATIONS
OF EACH HOLDER.

In connection with the registration of Registrable
Securities pursuant to a Registration Statement, each Holder shall:

(a)           at least five (5) Business Days prior
to the first anticipated filing date of any Registration Statement, furnish to
the Company such information in writing regarding itself (including a
shareholder questionnaire) and the intended method of disposition of such
Registrable Securities as the Company shall reasonably request in order to
effect the registration thereof;

(b)           upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 2(c),
3(e) or 3(f) of this Agreement, immediately discontinue any sale
or other disposition of such Registrable Securities pursuant to such
Registration Statement until (i) in the case of any event described in Section 2(c),
notice from the Company that the Allowed Delay has ended and sales under the
Registration Statement may resume, (ii) the filing of an amendment or
supplement as described in Section 3(e) of this Agreement or
(iii) withdrawal of the stop order referred to in Section 3(f)
of this Agreement, and use reasonable best efforts to maintain the
confidentiality of such notice and its contents;

(c)           to the extent required by applicable
law, deliver a prospectus to the purchaser of such Registrable Securities;

(d)           in response to a request from the
Company, promptly disclose to the Company the number of Registrable Securities
then held by it; and

(e)           promptly notify the Company in the
event that any information supplied by such Holder in writing for inclusion in
such Registration Statement or related prospectus is untrue or omits to state a
material fact required to be stated therein or necessary to make such
information not misleading in light of the circumstances then existing;
immediately discontinue any sale or other disposition of such Registrable
Securities pursuant to such Registration Statement until the filing of an
amendment or supplement to such prospectus as may be necessary so that such
prospectus does not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
and use reasonable best efforts to assist the Company as may be appropriate to
make such amendment or supplement effective for such purpose.

5.                                       INDEMNIFICATION.

In the event that any Registrable Securities are
included in a Registration Statement under this Agreement:

(a)           To the extent permitted by law, the
Company shall indemnify and hold harmless each Holder, the officers, partners,
managers, members, shareholders, directors, employees, agents and
representatives of such Holder, and each person, if any, who controls such
Holder within the meaning of 

 

the Securities Act or the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), against any
and all losses, claims, damages and other liabilities (whether joint or
several) (collectively, including reasonable legal expenses or other
out-of-pocket expenses reasonably incurred in connection with investigating or
defending same, “Losses”), insofar as any such
Losses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement
under which such Registrable Securities were registered, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The foregoing indemnity
shall not apply to amounts paid in settlement of any Loss if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be obligated to indemnify any
person for any Loss to the extent that such Loss arises out of or is based upon
(i) any disclosure or any omission or alleged omission (to state a
material fact required to be stated therein or necessary to make statements
therein not misleading) that is based upon or in conformity with written
information furnished (or not furnished, in the case of an omission) by such
person expressly for use in such Registration Statement or (ii) a failure
of such person to deliver or cause to be delivered the final prospectus
contained in the Registration Statement and made available by the Company, if
such delivery is required by applicable law.

(b)           To the extent permitted by law, each
Holder who is named in such Registration Statement as a selling shareholder,
acting severally and not jointly, shall indemnify and hold harmless the
Company, the officers, directors, employees, agents and representatives of the
Company, and each person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act, against any and all Losses to the
extent (and only to the extent) that any such Losses arise out of or are based
upon (i) any disclosure or any omission or alleged omission (to state a
material fact required to be stated therein or necessary to make statements
therein not misleading) that is based upon or in conformity with written
information furnished (or not furnished, in the case of an omission) by such
person expressly for use in such Registration Statement, or (ii) a failure
of such Holder to deliver or cause to be delivered the final prospectus
contained in the Registration Statement and made available by the Company, if
such delivery is required under applicable law. 
The foregoing indemnity shall not apply to amounts paid in settlement of
any such Loss if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld, and may be withheld to the
extent that any settlement or compromise does not include as an unconditional
term thereof, a release of the indemnified party from all liability in respect
of such claim or litigation without any admission as to fault); provided, however, that, in no event shall
any indemnity under this Section 5(b) exceed the net proceeds
resulting from the sale of the Registrable Securities sold by such Holder under
such Registration Statement.

(c)           Promptly after receipt by an
indemnified party under this Section 5 of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5, promptly deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel selected by the indemnifying party and reasonably
acceptable to the indemnified party; provided,
however, that an indemnified party shall have the right to retain
its own counsel, with the reasonably incurred fees and expenses of one such
counsel for all indemnified parties to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate under applicable standards of
professional conduct due to actual or potential conflicting interests between
such indemnified party and any other party represented by such counsel in such
proceeding.  The failure to deliver
written notice to the indemnifying party within a reasonable time of the
delivery of notice of any such action, to the extent prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any liability
to the indemnified party under this Section 5 with respect 

 

to such action, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 5 or with
respect to any other action unless the indemnifying party is materially
prejudiced as a result of not receiving such notice.

(d)           In the event that the indemnity
provided in Sections 5(a) or 5(b) of this Agreement is
unavailable or insufficient to hold harmless an indemnified party for any
reason, the Company and each Holder agree, severally and not jointly, to
contribute to the aggregate Losses to which the Company or such Holder may be
subject in such proportion as is appropriate to reflect the relative fault of
the Company and such Holder in connection with the statements or omissions
which resulted in such Losses; provided,
however, that in no case shall such Holder be responsible for any
amount in excess of the net proceeds resulting from the sale of the Registrable
Securities sold by it under the Registration Statement.  Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Company or by such Holder.  The Company and each Holder agree that it
would not be just and equitable if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above.  Notwithstanding the provisions
of this Section 5(d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation.  For
purposes of this Section 5, each person who controls a Holder
within the meaning of either the Securities Act or the Exchange Act and each
officer, partner, manager, member, shareholder, director, employee, agent or
representative of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the meaning of
either the Securities Act or the Exchange Act and each officer, director,
employee, agent or representative of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this Section 5(d).

(e)           The obligations of the Company and
each Holder under this Section 5 shall survive the exercise of the Warrants
in full, the completion of any offering or sale of Registrable Securities
pursuant to a Registration Statement under this Agreement, or otherwise.

6.                                       REPORTS.

With a view to making available to each Holder the
benefits of Rule 144 and any other similar rule or regulation of the Commission
that may at any time permit such Holder to sell securities of the Company to
the public without registration, the Company agrees to:

(a)           make and keep public information
available, as those terms are understood and defined in Rule 144;

(b)           file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act; and

(c)           furnish to such Holder, so long as
such Holder owns any Registrable Securities, promptly upon written request
(i) a written statement by the Company, if true, that it has complied with
the reporting requirements of Rule 144 and the Exchange Act, (ii) to the
extent not publicly available through the Commission’s EDGAR database, a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company with the Commission, and
(iii) such other information as may be reasonably requested by such Holder
in connection with such Holder’s compliance with any rule or regulation of the
Commission which permits the selling of any such securities without
registration.

 

7.             MISCELLANEOUS.

(a)           Expenses of Registration.  Except as otherwise provided in the
Securities Purchase Agreement, all reasonable expenses, other than underwriting
discounts and commissions and fees and expenses of counsel and other advisors
to each Holder, incurred in connection with the registrations, filings or
qualifications described herein, including (without limitation) all
registration, filing and qualification fees, printers’ and accounting fees, the
fees and disbursements of counsel for the Company, and the fees and
disbursements incurred in connection with the opinion and letter described in Section 3(g)
of this Agreement, shall be borne by the Company.

(b)           Amendment; Waiver.  Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended or waived except pursuant to
a written instrument executed by the Company and the Holders of at least
seventy-five percent (75%) of the Registrable Securities that are either then
outstanding or are issuable on exercise of the Warrants then outstanding
(without regard to any limitation on such exercise). Any amendment or waiver
effected in accordance with this Section 7(b) shall be binding upon
each Holder, each future Holder and the Company.  The failure of any party to exercise any
right or remedy under this Agreement or otherwise, or the delay by any party in
exercising such right or remedy, shall not operate as a waiver thereof.

(c)           Notices.  Any notice, demand or request required or
permitted to be given by the Company or a Holder pursuant to the terms of this
Agreement shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission, unless such delivery is
made on a day that is not a Business Day, in which case such delivery will be
deemed to be made on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a reputable overnight courier and (iii)
on the Business Day actually received if deposited in the U.S. mail (certified
or registered mail, return receipt requested, postage prepaid), addressed as
follows:

If to
the Company:

Lipid Sciences,
Inc.

7068 Koll Center Parkway

Suite 401

Pleasanton, CA  94566

Attn:  Sandra Gardiner

Tel:  (925) 249-4000

Fax:  (925) 249-4080

with a
copy (which shall not constitute notice) to:

Roger S. Mertz,
Esq.

Allen Matkins Leck Gamble Mallory & Natsis LLP

Three Embarcadero Center, 12th Floor

San Francisco, California  94111-4074

Tel:  (415) 837-1515

Fax:  (415) 837-1516

and if to a Holder, to
such address as shall be designated by such Holder in writing to the Company.

(d)           Assignment.  Upon the transfer of any Warrant or
Registrable Securities by a Holder, the rights of such Holder hereunder with
respect to such securities so transferred shall be assigned automatically to
the transferee thereof, and such transferee shall thereupon be deemed to be a “Holder”

 

for purposes of this Agreement, as long as:  (i) the Company is, within a reasonable
period of time following such transfer, furnished with written notice of the
name and address of such transferee, (ii) the transferee agrees in writing
with the Company to be bound by all of the provisions hereof, and (iii) such
transfer is made in accordance with the applicable requirements of the
Securities Purchase Agreement or the Warrants, as applicable.

(e)           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same instrument.  This Agreement, once executed by a party, may
be delivered to any other party hereto by facsimile transmission.

(f)            Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and to be performed entirely within the State of California.

(g)           Holder of Record.  A person is deemed to be a Holder whenever
such person owns or is deemed to own of record such Registrable
Securities.  If the Company receives
conflicting instructions, notices or elections from two or more persons with
respect to the same Registrable Securities, the Company shall act upon the
basis of instructions, notice or election received from the record owner of
such Registrable Securities.

(h)           Entire Agreement.  This Agreement and the other Transaction
Documents constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. 
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This Agreement and the other Transaction
Documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.

(i)            Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

(j)            Third Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

(k)           Confidentiality.  The Company shall hold in confidence and not
make any disclosure of information concerning a Holder provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement
or any other agreement.  The Company
agrees that it shall, upon learning that disclosure of such information
concerning a Holder is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Holder and allow such Holder , at the Holder’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

[Signature Pages
to Follow]

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first-above written.

LIPID SCIENCES, INC.,

a Delaware corporation

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
						

 

 

IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date first-above written.

 

	
   

  	
    (INVESTOR NAME)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
    (Name of General Partner/Manager, if
  applicable)

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

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