Document:

ex-10_2.htm

    
      

      

    

    
      Adamis Pharmaceuticals Corporation
8-K

      

      

      Exhibit
10.2

      
 

    

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED TO AN ACCREDITED INVESTOR IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

    

    Original
Issue Date:  January 11, 2010

    Original
Conversion Price (subject to adjustment herein): $0.20

    

    Original
Principal Amount:  $____________

    

    ADAMIS
PHARMACEUTICALS CORPORATION

    10%
SENIOR SECURED CONVERTIBLE NOTE

    

    THIS NOTE
is one of a series of duly authorized and validly issued 10% Senior Secured
Convertible Notes of ADAMIS PHARMACEUTICALS CORPORATION, a Delaware corporation
(the “Company”), having its
principal place of business at 2658 Del Mar Heights Rd., #555, Del Mar, CA
92014, designated as its 10% Senior Secured Convertible Notes (this Note, the
“Note” and,
collectively with the other Notes of such series, the “Notes”).

    

    FOR VALUE
RECEIVED, the Company promises to pay to the order of _____________________ or
its registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of
US$_______________ on the date which is nine (9) months following the Original
Issue Date hereof (the “Maturity Date”) or
such earlier date as this Note is required or permitted to be repaid as provided
hereunder, and to pay accrued and unpaid interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note in accordance
with the provisions hereof.

    

    The
Company’s obligations under this Note shall be, effective as of the Original
Issue Date, secured by the Collateral (as defined in the Security Agreement),
pursuant to the terms of the Security Documents.  This Note shall
constitute “Senior Indebtedness” under and as defined in the G-Max
Note.

    

    This Note
is subject to the following additional provisions:

    

    Section
1.             Definitions.  For
the purposes hereof, in addition to the terms defined elsewhere in this Note (a)
initially capitalized terms not otherwise defined herein shall have the meanings
set forth in the Purchase Agreement (including without limitation those
incorporated therein by reference) and (b) the following terms shall have the
following meanings:

    
      
         

      

      
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    “Alternate
Consideration” shall have the meaning set forth in Section
5(e).

    

    “Buy-In” shall have
the meaning set forth in Section 4(d)(v).

    

    “Common Stock
Equivalents” mean Convertible Securities and/or Options.

    

    “Conversion Date”
shall have the meaning set forth in Section 4(a).

    

    “Conversion Price”
shall have the meaning set forth in Section 4(b).

    

    “Conversion Shares”
means, collectively, the shares of Common Stock issued or issuable upon
conversion or redemption of this Note in accordance with the terms hereof,
including without limitation shares of Common Stock issued or issuable as
interest hereunder or as damages under the Transaction Documents.

    

    “Default Conversion
Price” shall mean the lesser of (a) the Conversion Price otherwise in
effect at the time of the applicable Conversion Date and (b) 50% of the average
of the three (3) lowest Closing Bid Prices during the twenty (20) consecutive
Trading Days immediately preceding the applicable Conversion Date.

    

    “Event of Default”
shall have the meaning set forth in Section 8.

    

    “G-Max Note” means that certain convertible
promissory note issued by the Company on or about December 29, 2009 to The G-Max
Trust in the original principal amount of $500,000.

    

    “Late Fees” shall have
the meaning set forth in Section 2(b).

    

    “Mandatory Default
Amount”  means the sum of (i) the greater of (A) 120% of the
outstanding principal amount of this Note, plus 100% of accrued and unpaid
interest hereon, or (B) the outstanding principal amount of this Note, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date
the Mandatory Default Amount is either (a) demanded (if demand or notice is
required to create an Event of Default) or otherwise due or (b) paid in full,
whichever has a lower price, multiplied by the VWAP on the date the Mandatory
Default Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of this Note.

    

    “New York Courts”
shall have the meaning set forth in Section 9(d).

    

    “Note Register” shall
have the meaning set forth in Section 2(a).

    

    “Notice of Conversion”
shall have the meaning set forth in Section 4(a).

    

    “Original Issue Date”
means the date of the issuance of this Note, regardless of any transfers of any
Note and regardless of the number of instruments which may be issued to evidence
this Note.

    
      
         

      

      
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    “Permitted
Indebtedness” means (a) the indebtedness evidenced by the Notes, (b) the
Indebtedness existing on the Closing Date, provided that the terms of any such
Indebtedness have not been changed in a manner substantially adverse to either
the Company or the Holder from the terms existing on the Closing Date, (c) lease
obligations and purchase money indebtedness of up to $200,000, in the aggregate,
incurred in connection with the acquisition of capital assets and lease
obligations with respect to newly acquired or leased assets, and (d) Indebtedness
that (i) is expressly subordinate to the Notes pursuant to a written
subordination agreement with the Purchasers that is acceptable to the Requisite
Purchasers in their sole and absolute discretion, (ii) matures on a date no
earlier than 91 days following the Maturity Date, (iii) is unsecured, and (iv)
is approved in advance in writing by the Requisite Purchasers (which approval
may be denied in the Purchasers’ sole and absolute discretion, provided that the
Purchasers shall not unreasonably withhold approval for up to $500,000 in the
aggregate of such Indebtedness incurred after the Original Issue
Date).

    

    “Permitted Lien” means
the individual and collective reference to the following: (a) Liens for taxes,
assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of the Company’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Company’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien; and (c) Liens created pursuant to the Security
Documents entered into in connection with the issuance of the
Notes.

     

    “Purchase Agreement”
means the Securities Purchase Agreement pursuant to which this Note was issued,
dated on or about the date hereof, among the Company and the original purchasers
of Notes, as amended, modified or supplemented from time to time in accordance
with its terms.

    

    “Share Delivery Date”
shall have the meaning set forth in Section 4(d).

    

    Section
2.             Interest; Late
Fees.

    

    a)           Interest.  Interest
shall accrue daily and compound monthly on the outstanding principal amount of
this Note at a rate per annum equal to 10% and shall be due and payable on the
first Business Day of each month in cash.  On the Maturity Date, the
Company shall pay to the Holder all accrued but unpaid interest
hereunder.  Interest shall be calculated on the basis of a 360-day
year and actual days elapsed.  Interest hereunder will be paid to the
Person in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the “Note
Register”).

    
      
         

      

      
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    b)           Late
Fees.  All overdue accrued and unpaid amounts to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 24%
per annum or the maximum rate permitted by applicable law (“Late Fees”) which
shall accrue daily from the date such amount is due hereunder through and
including the date of actual payment in full.

    

    Section
3.             Registration of Transfers
and Exchanges.

     

    a)           Different
Denominations. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same.  No service charge will be payable for
such exchange.

     

    b)           Investment
Representations.  This Note has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred, assigned, pledged or exchanged only in
compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.

    

    c)           Reliance on Note
Register.  Prior to due presentment for transfer to the Company
of this Note, the Company and any agent of the Company may treat the Person in
whose name this Note is duly registered on the Note Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note is overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.

    

    Section
4.             Conversion.

     

    a)           Voluntary Conversion.
At any time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible, in whole or in part, into shares of
Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(c)
hereof).  The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached hereto as Annex A (a “Notice of
Conversion”), specifying therein the principal amount of this Note to be
converted, including accrued but unpaid interest thereon, and the date on which
such conversion shall be effected (such date, which date shall be no earlier
than the date on which the Company is deemed to receive the Notice of
Conversion, the “Conversion
Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder.  To effect conversions hereunder, the
Holder shall not be required to physically surrender this Note to the Company
unless the entire principal amount of this Note, plus all accrued and unpaid
interest thereon, has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Note in an amount
equal to the applicable conversion.  The Holder and the Company shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s).  In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder, and any assignee by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note may be less than the amount stated on the face
hereof.

     
 

    
      
         

      

      
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    b)           Conversion
Price.  The conversion price shall be equal to $0.20, subject
to adjustment herein (the “Conversion
Price”).

    

    c)           Conversion Limitation –
Holder’s Restriction on Conversion. Notwithstanding anything to the
contrary contained herein, the Company shall not effect any conversion of this
Note, and the Holder shall not have the right to convert any portion of this
Note (or otherwise acquire Conversion Shares with respect to this Note), to the
extent that after giving effect to the issuance of Common Stock upon such
conversion (or other issuance), the Holder Group would beneficially own in
excess of the Maximum Ownership Percentage of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock upon such conversion (including for such purpose the shares of
Common Stock issuable upon such conversion or issuance) (“Beneficial Ownership
Limitation”).  For purposes of calculating the Beneficial
Ownership Limitation, the number of shares of Common Stock beneficially owned by
the Holder Group shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder (including
without limitation Regulation 13D-G), provided, however, that such
beneficial ownership shall exclude any shares of Common Stock issuable upon
conversion, exchange or exercise of (or purchase of Common Stock under) any
Convertible Securities or Options outstanding at the time of determination and
beneficially owned by the Holder Group which contain a limitation on conversion,
exchange, exercise or purchase analogous to the Beneficial Ownership Limitation
contained herein.  To the extent that the Beneficial Ownership
Limitation contained herein applies, the determination of whether and to what
extent this Note is convertible (vis-à-vis other Convertible Securities or
Options, including without limitation other Notes, beneficially owned by the
Holder Group) shall be on the basis of first submission to the Company for
conversion, exchange, exercise or purchase, as the case may be, or as otherwise
determined in the sole discretion of the Holder, and the submission of a Notice
of Conversion shall be deemed to be the Holder’s determination of whether and to
what extent this Note is convertible (vis-à-vis such other Convertible
Securities or Options), in each case subject to the Beneficial Ownership
Limitation.  In determining the number of outstanding shares of Common
Stock for purposes of calculating the Beneficial Ownership Limitation, the
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (i) the Company’s most recent Periodic Report containing such information,
(ii) a more recent public announcement by the Company, or (iii) any other notice
or disclosure by the Company or the Company’s Transfer Agent setting forth the
number of shares of Common Stock outstanding, and the Holder may rely on
knowledge it may have concerning any shares of Common Stock issued which are not
reflected in the preceding clauses (i) through (iii) (e.g., issuances to the Holder
upon a prior Note conversion since the date as of which such number of
outstanding shares of Common Stock was reported).  Upon the written or
oral request of the Holder, the Company shall within two (2) Business Days
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding.  Each delivery of a Notice of Conversion by the
Holder will constitute a representation by the Holder that it has evaluated the
limitation set forth in this Section 4(c) and determined, based on this Section
4(c), that the issuance of the full
number of Conversion Shares requested in such Notice of Conversion is permitted
under this Section 4(c), and the Company shall have no obligation to verify or
confirm such determination.  No conversion of this Note in violation of
this Section 4(c) but otherwise in accordance with this Note shall affect the
status of the Conversion Shares as validly issued, fully-paid and
nonassessable.  By written notice to the Company, the Holder may at
any time and from time to time increase or decrease the Maximum Ownership
Percentage to any other percentage specified in such notice (or specify that the
Beneficial Ownership Limitation shall no longer be applicable), provided, however, that (A)
any such increase (or inapplicability) shall not be effective until the
sixty-first (61st) day after such notice is delivered to the Company, (B) any
such increase or decrease shall apply only to the Holder and not to any other
holder of Notes, and (C) the Maximum Ownership Percentage shall not be less than
4.9%.  The provisions of this Section 4(c) shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 4(c) to correct this provision (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or desirable to
properly give effect to such limitation.  The Beneficial Ownership
Limitation contained in this Section shall apply to a successor Holder of this
Note.  If at any time the Beneficial Ownership Limitation makes this
Note unconvertible in whole or in part, the Company shall not by reason thereof
be relieved of its obligation to issue shares of Common Stock at any time or
from time to time thereafter upon conversion of this Note as and when shares of
Common Stock may be issued in compliance with such
limitation.

     

    
      d)   Mechanics of
Conversion.

    

     

     

    
      
        
        

      

      
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    i.           Conversion Shares Issuable
Upon Conversion of Principal Amount.  The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of this Note to be
converted plus any accrued but unpaid interest thereon, by (y) the Conversion
Price.

    

    ii.          Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the
Holder a certificate or certificates representing the Conversion Shares which,
on or after the Legend Removal Date and provided that the Conversion Shares may
be sold without restrictions pursuant to the provisions of Rule 144, shall be
free of restrictive legends and trading restrictions (other than those which may
then be required by the Purchase Agreement) representing the number of
Conversion Shares being acquired upon the conversion of this Note.  On
or after the date which is six months following the Original Issue Date on which
this Note is issued (or six months following the date that the New Note is
issued, in the event the Merger occurs and the holding period for this Note may
not be tacked to the holding period of the New Note under applicable securities
laws), the Company shall use its best efforts to deliver any certificate(s) or
shares required to be delivered by the Company under this Section 4
electronically through the Depository Trust Company or another established
clearing corporation performing similar functions (provided
that to the extent reasonably requested the Holder may be required to covenant
to the Company in writing that it will sell such shares only in compliance with
Rule 144 or Section 4(1) of the Securities Act if such shares are not registered
for resale under the Securities Act).  The Company’s obligation in the
immediately preceding sentence shall not apply with respect to a Holder that is
an Affiliate.

     

    iii.         Failure to Deliver
Certificates.  If in the case of any Notice of Conversion such
certificate(s) or shares are not delivered to or as directed by the applicable
Holder by the third Trading Day after the Conversion Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to the Company the
Common Stock certificates representing the principal amount of this Note
unsuccessfully tendered for conversion to the Company.

     

    iv.         Obligation Absolute; Partial
Liquidated Damages.  The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Note in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of such Conversion Shares; provided, however, that such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder.  In the event the Holder of this
Note shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or anyone associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to the Holder, restraining and or enjoining conversion of all
or part of this Note shall have been sought and obtained, and the Company posts
a surety bond for the benefit of the Holder in the amount of 150% of the
outstanding principal amount of this Note, which is subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation
of the underlying dispute and the proceeds of which shall be payable to the
Holder to the extent it obtains judgment.  In the absence of such
injunction, the Company shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion.  If the Company fails for any
reason to deliver to the Holder such certificate(s) or shares pursuant to
Section 4(d)(ii) by the second Trading Day after the Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, for each $1,000 of principal
amount being converted, $10 per Trading Day (increasing to $20 per Trading Day
on the fifth Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such second Trading Day after the Share Delivery Date until
such certificates are delivered.  Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event of Default pursuant
to Section 8 hereof for the Company’s failure to deliver Conversion Shares
within the period specified herein and the Holder shall have the right to pursue
all remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief.  The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.

    
      
         

      

      
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    v.          Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate(s) or shares by the Share Delivery Date
pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder
is required by its brokerage firm to purchase (in an open market transaction or
otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Conversion
Shares which the Holder was entitled to receive upon the conversion relating to
such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any other remedies
available to or elected by the Holder) the amount by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that the Holder was entitled to receive from the conversion at
issue multiplied by (2) the actual sale price at which the sell order giving
rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Note in a principal amount equal to the principal amount of
the attempted conversion or deliver to the Holder the number of shares of Common
Stock that would have been issued if the Company had timely complied with its
delivery requirements under Section 4(d)(ii).  For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of this Note with respect to
which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000
under clause (A) of the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000.  The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Company, evidence of the amount of such
loss.  Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to the
terms hereof, provided that the liquidated damages provided for in subsection
4(d)(iv) above
with respect to Conversion Shares subject to a Buy-In shall cease accruing on
the date on which the Company pays the Holder such Buy-In amount payable
pursuant to this paragraph if the Holder elects to then cancel such conversion
pursuant to clause (B) above.

     

    vi.         Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock for the sole purpose of issuance upon conversion of this Note and payment
of interest on this Note, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of Persons other than the Holder
(and the other holders of the Notes), not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments of Section 5) upon the conversion of the outstanding principal
amount of this Note and payment of interest hereunder.  The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid and
nonassessable.

    

    vii.        Fractional Shares. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of this Note.  As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such conversion, the Company
shall at its election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Conversion Price
or round up to the next whole share.

    

    viii.       Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Note shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Note and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.

    

    Section
5.             Certain
Adjustments.

     

    a)           Stock Dividends and Stock
Splits.  If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock as a
class or any Common Stock Equivalents (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon conversion of, or
payment of interest on, the Notes); (B) subdivides outstanding shares of Common
Stock into a larger number of shares; (C) combines (including by way of a
reverse stock split) outstanding shares of
Common Stock into a smaller number of shares; or (D) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event.  Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

    
      
         

      

      
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    b)           Subsequent Equity
Sales.  The Conversion Price is subject to Full Ratchet
Anti-Dilution Adjustment.  Any issuance of any La Jolla Common Stock
pursuant to or contemplated by the Merger Agreement, and the Reverse Stock Split
(as defined in the Merger Agreement), shall constitute and be deemed a
Subsequent Issuance of Company Common Stock for purposes of the Full Ratchet
Anti-Dilution Adjustment, and the Subsequent Issuance Price in connection
therewith shall equal the Adamis Discounted Share Price (as defined in the
Merger Agreement) (e.g., if the Adamis
Discounted Share Price is less than the Conversion Price, the Conversion Price
shall be reduced to equal such Adamis Discounted Share Price).

     

    c)           Subsequent Rights
Offerings.  If the Company, at any time while the Note is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the VWAP on the record date
referenced below, then the Conversion Price shall be multiplied by a fraction of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares
issued (assuming delivery to the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

     

    d)           Pro Rata
Distributions. If the Company, at any time while this Note is
outstanding, distributes to all holders of Common Stock (and not to the Holders
in their capacity as holders of Notes) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or
purchase any security (other than the Common Stock, which shall be subject to
Section 5(b)), then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP
on such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
1 outstanding share of the Common Stock as determined by the Board of Directors
of the Company in good faith.  In either case the adjustments shall be
described in a statement delivered to the Holder describing the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to 1 share of Common Stock.  Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date mentioned above.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     
 

    e)           Fundamental
Transaction. If, at any time while this Note is outstanding, the Company
effects or there otherwise occurs a Fundamental Transaction, then, upon any
subsequent conversion of this Note, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of 1 share of
Common Stock (the “Alternate
Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of 1 share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration.  If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of this
Note following such Fundamental Transaction.  To the extent necessary
to effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a new
Note consistent with the foregoing provisions and evidencing the Holder’s right
to convert such Note into Alternate Consideration.  The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this Section 5(e) and insuring that this Note (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.  Without limiting the
foregoing, the Company shall cause La Jolla, effective immediately the upon the
consummation of the Merger in accordance with the terms of the Merger Agreement,
to (i) assume all obligations under this Note (provided that the Company shall
remain liable hereunder), (ii) issue to the Holder a new Note payable by La
Jolla and convertible into La Jolla Common Stock in substitution and exchange
for this Note (“New
Note”), (iii) enter into a security agreement and such other security
documents (including without limitation UCC-1 financing statements) as may
reasonably requested by the Requisite Purchasers to cause the New Note to be
secured by a first priority perfected lien on all the assets of La Jolla and its
subsidiaries (in addition to the assets of the Company and its Subsidiaries
other than Biosyn), and (iv) cause each of its subsidiaries to enter into a
security agreement and such other security documents (including without
limitation UCC-1 financing statements) and a subsidiary guarantee as
may
reasonably requested by the Requisite Purchasers to cause the New Note to be
guaranteed by, and secured by a first priority perfected lien on, all the assets
of La Jolla’s subsidiaries (including without limitation the Company and its
Subsidiaries other than Biosyn).  Such New Note shall be identical to
this Note in all respects except that the Common Stock into which the New Note
is convertible shall refer to the La Jolla Common Stock and the Conversion Price
shall equal the Conversion Price in effect at such time (subject to any Full
Ratchet Anti-Dilution Adjustment pursuant to Section 5(b) above), provided that
such Conversion Price shall be further appropriately and equitably adjusted to
provide the Holder with the same economic effect as contemplated by this Note
before the Merger.  Any New Note issued hereunder is in substitution
for and not in satisfaction of this Note.  Such New Note shall not
constitute a novation or satisfaction and accord of this Note.  The
Company (and La Jolla following the Merger) hereby acknowledges and agrees that
such New Note shall amend, restate, modify, renew and continue the terms and
provisions contained in the Note and shall not extinguish or release the
Company, La Jolla or any of their Subsidiaries under any Transaction Document or
otherwise constitute a novation of their obligations thereunder.  To
the extent permitted under applicable securities laws, the holding period of the
New Note shall be tacked to the holding period of this Note for purposes of Rule
144.  The Company shall not amend the Merger Agreement or any document
entered into in connection therewith with the prior written consent of the
Requisite Purchasers.

     

    f)           Calculations.  All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.  For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

    

    g)           Notice to the
Holder.

    

    i.           Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.

     

    ii.          Notice to Allow Conversion
by Holder.  If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock as a class, (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock as a class, (C) the Company shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of this Note, and shall cause to be delivered to the Holder at its
last address as it shall appear upon the Note Register, at least 15 calendar
days prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required
to be specified in such notice.  The Holder is entitled to convert
this Note during the 15-day period commencing on the date of such notice through
the effective date of the event triggering such notice.

     
 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Section
6.             No
Prepayment/Redemption.  The Company may not prepay or redeem this Note in
whole or in part without the prior written consent of the Holder, and to the
extent the Company agrees with any other holder of Notes to prepay or redeem
such holder’s Notes in whole or in part, the Company shall offer such prepayment
or redemption of this Note on a pro rata basis on the same terms and conditions
as agreed upon for such other Notes.  Notwithstanding anything
contained herein, the Company shall redeem this Note to the extent required
pursuant to Section 7(d)(ii)(D) of the Purchase Agreement.

    

    Section
7.             Negative Covenants.
As long as any portion of this Note remains outstanding, unless the holders of
at least 67% in principal amount of the then outstanding Notes shall have
otherwise given prior written consent, the Company shall not, and shall not
permit any of its subsidiaries (whether or not a Subsidiary on any Closing Date)
to, directly or indirectly:

    

    a)           other than Permitted Indebtedness, enter into, create,
incur, assume, guarantee or suffer to exist any Indebtedness for of any kind,
including but not limited to, a guarantee, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom;

     

    b)           other than Permitted Liens, enter into, create, incur,
assume or suffer to exist any Liens of any kind, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom;

     

    c)           amend its charter documents, including, without
limitation, its certificate of incorporation and bylaws, in any manner that
materially and adversely affects any rights of the Holder (for clarification,
amendments effected as necessary or appropriate to consummate the Merger as
contemplated on the Original Issue Date in connection with the Merger shall not
constitute changes materially and adversely affecting the
Holders);

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    d)           repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than as to the
Conversion Shares as permitted or required under the Transaction Documents and
other than the repurchase of shares at a nominal price from current or former
officers, directors or key employees of the Company pursuant to the terms of
written agreements existing on the Original Issue Date of this
Note;

    

    e)           repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness
(except for the Notes in accordance with the terms of the Notes), other than
regularly scheduled principal and interest payments as such terms are in effect
as of the Closing Date;

     

    f)           repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness
to any current or former employees, officers or directors of the
Company;

     

    g)           pay
cash dividends or distributions on any equity securities of the
Company;

    

    h)           enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the directors of the Company other than the Affiliate who is a party
to the transaction (even if less than a quorum otherwise required for board
approval); or

    

    i)           enter
into any agreement with respect to any of the foregoing.

     

    Section
8.             Events of
Default.

    

    a)           “Event of Default”
means, wherever used herein, any of the following events (whatever the reason
for such event and whether such event shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

    

    i.           any
default in the payment of (A) the principal amount of any Note or (B) interest,
liquidated damages and other amounts owing to a Holder on any Note, as and when
the same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise) which default, solely in the case
of an interest payment or other default under clause (B) above, is not cured
within 5 Trading Days;

     
 

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    ii.          the
Company shall fail to observe or perform in any material respect any other
covenant or agreement contained in the Notes (other than a breach by the Company
of its obligations to deliver shares of Common Stock to the Holder upon
conversion, which breach is addressed in clause (xiii) below) which failure is
not cured, if possible to cure, within the earlier to occur of (A) 10 Trading
Days after notice of such failure sent by the Holder or by any other Holder and
(B) 10 Trading Days after the Company has become or should have become aware of
such failure, or the Company shall be in default under the G-Max
Note;

    

    iii.         a
material default or material event of default (subject to any grace or cure
period provided in the applicable agreement, document or instrument) shall occur
under any of the Transaction Documents;

    

    iv.         any
representation or warranty made in this Note, any other Transaction Document,
any written statement pursuant hereto or thereto or any other report, financial
statement or certificate made or delivered to the Holder or any other Holder
shall be untrue or incorrect in any material respect as of the date when made or
deemed made;

    

    v.          the
Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;

     

    vi.         the
Company or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any Indebtedness, or money due under any long term
leasing or factoring arrangement, including without limitation the G-Max Note,
that (a) involves an obligation greater than $100,000, whether such Indebtedness
now exists or shall hereafter be created, and (b) results in such Indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable;

    

    vii.        if
at any time the capital stock issuable upon conversion of this Note shall not be
eligible for listing or quotation for trading on an Eligible Market and shall
not be eligible to resume listing or quotation for trading thereon within five
(5) Trading Days;

    

    viii.       the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33% of its
assets (other than inventory in the ordinary course of business) in one
transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction), except for the Merger provided the
terms hereof and the other Transaction Documents are complied
with;

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    ix.          if
at any time after three months following the Closing Date the Company (or La
Jolla following the Merger assuming this Note is then convertible into shares of
La Jolla Common Stock) is not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act or has failed to file all reports required to be
filed thereunder during the then preceding 12 months (or such shorter period
that the Company was required to file such reports);

    

    x.           if
at any time after six months following the Closing Date, all the shares of
Common Stock (or La Jolla Common Stock following the Merger) issued or issuable
upon conversion of this Note (including any New Note for which this Note is
exchanged) are not either (i) freely tradable pursuant to an effective
Registration Statement which contains a current and available Prospectus
covering the resale of such shares by the Holder, or (ii) freely tradable
pursuant to Rule 144 without any volume restrictions, manner of sale
requirements or notice requirements (or may be sold pursuant to Rule 144 with
volume restrictions, manner of sale requirements or notice requirements if the
Holder is an Affiliate of the Company), which shall be confirmed by counsel to
the Company (reasonably acceptable to the Holder) in a legal opinion in form and
substance typically provided under Rule 144 and reasonably acceptable to the
Holder;

    

    xi.          if
any of the Security Documents ceases to be in full force and effect (including
failure to create a valid and perfected first priority  lien
(except  money, deposit accounts and insurance policies may not be
perfected) on and security interest in substantially all the Collateral (as
defined in the Security Agreement) and Intellectual Property of the Company and
its Subsidiaries) at any time for any reason;

    

    xii.         any
material adverse change in the value of a material portion of the Collateral or
Intellectual Property from the value as of the Closing Date;

    

    xiii.        the
Company shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date pursuant to Section 4(d) or the
Company shall provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor requests for
conversions of any Notes in accordance with the terms hereof;

    

    xiv.        any
monetary judgment, writ or similar final judicial or arbitration process shall
be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $100,000, and such judgment,
writ or similar final process shall remain unvacated, unbonded or unstayed for a
period of 45 calendar days; or

    

    xv.         if
Dennis J. Carlo ceases to (a) serve in the capacity with the Company in which he
serves as of the Closing Date and (b) perform the duties consistent with such
capacity for similarly situated companies, provided that if such
cessation is due to death, permanent disability, voluntary termination or
termination by the Company for cause, then (A) an Event of Default shall not be
deemed to have occurred unless and until the Company shall have failed to retain
a replacement reasonably acceptable to the Requisite Purchasers within 60 days
following such death, permanent disability, voluntary termination or termination
by the Company for cause, and (B) following any such acceptable replacement this
clause shall apply to such replacement in lieu of such person.

      

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    b)           Remedies Upon Event of
Default. While an Event of Default occurs and is continuing, the
outstanding principal amount of this Note, plus accrued but unpaid interest,
liquidated damages and other amounts owing in respect thereof through the date
of acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default Amount.  Notwithstanding any
such election to accelerate, upon any Event of Default (i) the outstanding
principal amount hereunder shall be automatically increased to equal 120% of the
outstanding principal hereunder, and (ii) the Conversion Price hereunder shall
be automatically adjusted to equal the Default Conversion
Price.  After the occurrence and during the continuance of any Event
of Default, the interest rate on this Note shall accrue at an interest rate
equal to the lesser of 24% per annum or the maximum rate permitted under
applicable law.  Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Note to or as directed by the
Company.  In connection with such acceleration described herein, the
Holder need not provide, and the Company hereby waives, any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law.  Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Note until such time, if any, as the Holder receives full payment
pursuant to this Section 8(b).  No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.  For clarification and without limiting any of the foregoing,
if an Event of Default occurs pursuant to Section 8(a)(x) above, the Conversion
Price hereunder shall automatically be irrevocably adjusted to equal the Default
Conversion Price and the outstanding principal amount hereunder shall be
automatically and irrevocably increased to equal 120% of the outstanding
principal hereunder.

    

    Section
9.             Miscellaneous.

     

    a)           Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, by email, or sent by a
nationally recognized overnight courier service, addressed to the Company, at
the address set forth above, or such other facsimile number, email address or
mailing address as the Company may specify for such purpose by notice to the
Holder delivered in accordance with this Section 9.  Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, by email
or sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile number or address of the Holder
appearing on the books of the Company, or if no such facsimile number or address
appears, at the principal place of business of the Holder.  Except as
may otherwise be provided herein, any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile or by email prior to 4:30 p.m. (New York City time) on a Trading
Day, with
electronic confirmation of such delivery, (ii) the first Trading Day immediately
following the date of transmission, if such notice or communication is delivered
via facsimile or by email not on a Trading Day or between 4:30 p.m. (New York
City time) and  11:59 p.m. (New York City time) on any date, with
electronic confirmation of such delivery, (iii) the second Business Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.  The address, facsimile and email address for
such notices and communications shall be as set forth on the signature pages
attached to the Purchase Agreement.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     
 

    b)           Absolute Obligation.
Except as expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, liquidated damages and accrued interest, as applicable, on
this Note at the time, place, and rate, and in the coin or currency, herein
prescribed.  This Note is a direct debt obligation of the
Company.  This Note ranks pari passu with all other
Notes now or hereafter issued under the terms set forth herein.

     

    c)           Lost or Mutilated
Note.  If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, reasonably satisfactory to the Company.

    

    d)           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof.  Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York
Courts”).  Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Note and agrees that such service shall constitute good and sufficient service
of process and notice thereof.  Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Note or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Note, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
reasonable attorney’s fees and other reasonable costs and expenses reasonably
incurred in the investigation, preparation and prosecution of such action or
proceeding.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    e)           Waiver.  Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note.  The
failure of the Company or the Holder to insist upon strict adherence to any term
of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note.  Any waiver by the Company
or the Holder must be in writing.

     

    f)           Severability.  If
any provision of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances.  If it shall be found that any interest or
other amount deemed interest due hereunder violates the applicable law governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under applicable law.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Note as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been
enacted.

     

    g)           Next Business
Day.  Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

    h)           Headings.  The
headings contained herein are for convenience only, do not constitute a part of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.

    

    i)           Assumption.  Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Note and the other Transaction Documents pursuant to
written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new Note of such successor entity evidenced by a written instrument
substantially similar in form and substance to this Note, including, without
limitation, having a principal amount and interest rate equal to the principal
amount and the interest rate of this Note and having similar ranking to this
Note, which shall be reasonably satisfactory to the Holder (any such approval
not to be unreasonably withheld or delayed).  The provisions of this
Section 9(i) shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any limitations of this
Note.

    

    j)           Usury.  This
Note shall be subject to the anti-usury limitations contained in the Purchase
Agreement.

    

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

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly
authorized officer as of the date first above indicated.

    

    

    
      	 
      	 
      	
              ADAMIS
      PHARMACEUTICALS CORPORATION

            
	 
      	 
      	 
      
	 
      	 
      	
              By:

            	
              
                /s/
      Dennis J. Carlo

              

            
	 
      	 
      	
              Name:

            	
              Dennis
      J. Carlo

            
	 
      	 
      	
              Title:

            	
              CEO

            

    

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
A

    

    NOTICE
OF CONVERSION

    

    

    The
undersigned hereby elects to convert principal under the 10% Senior Secured
Convertible Note due _______________________ of ADAMIS PHARMACEUTICALS
CORPORATION, a Delaware corporation (the Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the issuance shall comply with the transfer
restrictions in the Purchaser Agreement and the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

    

    By the
delivery of this Notice of Conversion the undersigned represents and warrants to
the Company that its ownership of the Common Stock does not exceed the amounts
specified under Section 4 of this Note, as determined in accordance with Section
13(d) of the Exchange Act.

    

    The
undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock pursuant to any prospectus.

    

    
      
        Conversion
calculations:

        
          	 
      	
                  Date
      to Effect Conversion:

                	 
      

        

        

        
          	 
      	
                  Principal
      Amount of Note to be Converted:

                	 
      

        

        

        
          	 
      	
                  Interest
      Accrued on Account of
      Conversion at Issue:

                	 
      

        

        

        
          	 
      	
                  Number
      of shares of Common Stock to be issued:

                	 
      

        

        

        
          	 
      	 
      

        

        

        
          	 
      	
                  Signature:

                	 
      

        

        

        
          	 
      	
                  Name:

                	 
      

        

        

        
          	 
      	
                  Address
      for Delivery of Common Stock
Certificates:

                

        

        

        
          	 
      	 
      

        

        

        
          	 
      	 
      

        

        

        

        
          	 
      	
                  Or

                   

                  DWAC
      Instructions:

                

        

        

        
          	 
      	
                  Broker
      No:

                	 
      

        

        

        
          	 
      	
                  Account
      No:ex-10_3.htm

    
      
        

        

      

      
        Adamis Pharmaceuticals Corporation
8-K

         

         

        Exhibit
10.3

         

      

       

      EXHIBIT B

       

      SECURITY
AGREEMENT

      

      This
SECURITY AGREEMENT, dated as of January 11, 2010 (this “Agreement”), is
among Adamis
Pharmaceuticals Corporation, a Delaware corporation (the “Company”), each of
the Subsidiaries of the Company other than Biosyn, Inc. and Cellegy Holdings,
Inc. (such Subsidiaries, the “Guarantors”, and together
with the Company, collectively the “Debtor” or “Debtors”), in favor
of GEMINI STRATEGIES, LLC, as collateral agent (“Agent”) for all the holder(s)
of the Company’s 10% Senior Secured Convertible Notes issued or to be issued in
the original aggregate principal amount of up to $1,500,000 (the “Notes”) pursuant to
the Purchase Agreement (as defined below) (collectively, together with their
endorsees, transferees and assigns, the “Secured Parties”, and
each individually, a “Secured
Party”).

      

      W
I T N E S S E T H:

      

      WHEREAS,
pursuant to that certain Securities Purchase Agreement dated on or about the
date hereof between the Debtor and the Secured Parties (the “Purchase Agreement”),
the Secured Parties have severally agreed to extend the loans to the Debtor
evidenced by the Notes;

      

      WHEREAS,
pursuant to the terms hereof the Guarantors
jointly and severally agree to guarantee and act as surety for payment of such
Notes;

      

      WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Notes, each Debtor has agreed to execute and deliver to the Secured Parties this
Agreement and to grant the Secured Parties a security interest in certain
property of such Debtor to secure the prompt payment, performance and discharge
in full of all of the Company’s obligations under the Notes and other
Transaction Documents; and

      

      WHEREAS,
the rights of each Secured Party hereunder shall be pari passu with each other
Secured Party and enforced through the agent for the Secured Parties appointed
pursuant to Section 18 hereunder;

      

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

      

      1.           Certain Definitions. As used
in this Agreement, the following terms shall have the meanings set forth in this
Section 1.  Terms used but not otherwise defined in this Agreement
that are defined in Article 9 of the UCC (such as “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the
UCC.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      (a)           “Collateral” means the
collateral in which the Secured Parties are granted a security interest by this
Agreement and which shall include the following personal property of the Debtor,
whether presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and accounts
thereof, including without limitation all proceeds from the sale or transfer of
the Collateral and of insurance covering the same and of any tort claims in
connection therewith, and all dividends, interest,
cash, notes, securities, equity interest or other property at any time and from
time to time acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities (as defined
below):

      

      (i)           All
goods, including without limitation (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with the Debtor’s
businesses and all improvements thereto; and (B) all inventory;

      

      (ii)          All
contract rights and other general intangibles, including without limitation, all
Intellectual Property, all partnership interests, membership interests, stock or
other securities,  licenses,
distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by the Debtor), computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, and income tax
refunds;

      

      (iii)         All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;

      

      (iv)         All
documents, letter-of-credit rights, instruments and chattel paper;

      

      (v)          All
commercial tort claims;

      

      (vi)         All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);

      

      (vii)        All
investment property;

      

      (viii)       All
supporting obligations;

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (ix)          All
files, records, books of account, business papers, and computer programs,
including without limitation and all
files, records, books, ledger cards, correspondence, computer programs, tapes,
disks, digital storage  media and related data processing software
that at any time evidence or contain information relating to any of the
Collateral set forth in clauses (i)-(viii) above or are otherwise necessary or
helpful in the collection thereof or realization thereupon; and

      

      (x)           the
products, profits and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(ix) above, and all payments under insurance (whether or not the
Secured Party is the loss payee thereof) or under any indemnity, warranty or
guaranty, payable by reason or loss or damage to, or otherwise with respect to,
any of the foregoing Collateral set forth in clauses (i)-(ix)
above.

      

      Without limiting the generality of the foregoing, the
“Collateral” shall include all investment property and general
intangibles respecting ownership and/or other equity interests in each
Subsidiary, including, without limitation, the shares of capital stock and the
other equity interests listed on Schedule H hereto (as the same may be modified from time to time
pursuant to the terms hereof), and any other shares of capital stock and/or
other equity interests of any other direct or indirect subsidiary of the Debtor
obtained in the future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights, options, warrants,
stock, other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing
and all rights arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and
cash.

       

      Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such
asset.

      

      (b)           “Intellectual
Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including without limitation
(i) all copyrights arising under the laws of the United States, any other
country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished, all registrations and recordings thereof,
and all applications in connection therewith, including without limitation all
registrations, recordings and applications in the United States Copyright
Office, (ii) all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof, and all
applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing, whether
verbal or in writing, regardless of whether Debtor is a licensee or licensor
under any such license agreement, including without limitation that certain
License Agreement dated as of July 28, 2006 between Adamis and Nevagen LLC, a
Nevada corporation, pursuant to which Adamis licensed certain patents specified
therein, among other things, as amended on December 29, 2008  and
(vii) all causes of action for infringement of the
foregoing.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      (c)           “Majority in
Interest” means, at any time of
determination, at least 67% in interest (based on then-outstanding principal
amounts of Notes at the time of such determination) of the Secured
Parties.

      

      (d)           “Necessary
Endorsement” means undated stock powers
endorsed in blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Agent (as that term is defined below)
may reasonably request.

      

      (e)           “Obligations” means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing to, of the Debtor to the Secured
Parties under this Agreement, the Notes, any guarantee of the Notes, the other
Transaction Documents and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, whether now or
hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time.  Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of and interest
on the Notes and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the Debtor from time to
time under or in connection with this Agreement, the Notes, any guarantee of the
Notes, the other Transaction Documents and any other instruments, agreements or
other documents executed and/or delivered in connection herewith or therewith;
and (iii) all amounts (including
but not limited to post-petition interest) in respect of the foregoing that
would be payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the
Debtor.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      (f)           
“Organizational
Documents” means with respect to any Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including without
limitation any certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

      

      (g)           “Pledged Securities”
shall have the meaning ascribed to such term in Section 4(i).

      

      (h)           “Transaction
Documents” shall have the meaning ascribed to such term in the Purchase
Agreement.

      

      (i)           
“UCC” means the
Uniform Commercial Code of the State of New York and/or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement from time to time.  It is
the intent of the parties that defined terms in the UCC should be construed in
their broadest sense so that the term “Collateral” will be construed in its
broadest sense.  Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.

      

      2.           Grant of Security Interest in
Collateral. As an inducement for the Secured Parties to extend the loans
as evidenced by the Notes and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a first priority security interest in
and to, a lien upon and a right of set-off against all of their respective
right, title and interest of whatsoever kind and nature in and to, the
Collateral (a “Security Interest”
and, collectively, the “Security
Interests”).

      

      3.           Delivery of Certain
Collateral.  As requested by the
Collateral Agent, the Debtor shall deliver or cause to be delivered to the Agent
(a) any and all certificates and other instruments representing or evidencing
the Pledged Securities, together with all Necessary Endorsements, and (b) any
and all certificates and other instruments or documents representing any of the
other Collateral, in each case, together with all Necessary
Endorsements.  The Debtor is, contemporaneously with the execution
hereof, delivering to the Agent, or has previously delivered to the Agent, a
true and correct copy of each Organizational Document governing any of the
Pledged Securities.

      

      4.           Representations, Warranties,
Covenants and Agreements of the Debtors. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Secured
Parties concurrently herewith (the “Disclosure
Schedules”), which
Disclosure Schedules shall be deemed a part hereof, each Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties as
follows:

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

      (a)           Each
Debtor has the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder.  The execution, delivery and
performance by each Debtor of this Agreement and the filings contemplated
therein have been duly authorized by all necessary action on the part of such
Debtor and no further action is required by such Debtor.  This
Agreement has been duly executed by each Debtor.  This Agreement
constitutes the legal, valid and binding obligation of each Debtor, enforceable
against each Debtor in accordance with its terms.

      

      (b)           The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  No Debtor owns any real property.  Except as
disclosed on Schedule
A, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.

      

      (c)           Except
for Permitted Liens (as defined in the Notes) and except as set forth on Schedule B attached
hereto, the Debtors are the sole owner of the Collateral, free and clear of any
liens, security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interests.  Except as set forth on
Schedule B
attached hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than
those that will be filed in favor of the Secured Parties pursuant to this
Agreement) covering or affecting any of the Collateral, and the lien search
reports provided to Gemini counsel on or about December 21, 2009 contain all
financing statements on record against the Debtors.  Except as set
forth on Schedule
B attached hereto and except pursuant to this Agreement, as long as any
Note is outstanding, the Debtors shall not execute and shall not authorize or
knowingly permit to exist on file in any such office or agency any other
financing statement or other document or instrument (except to the extent filed
or recorded in favor of the Secured Parties pursuant to the terms of this
Agreement) without the prior written consent of a
Majority-in-Interest.

      

      (d)           No
written claim has been received that any material Collateral or Debtor's use of
any material Collateral violates the rights of any third party. There has been
no adverse decision to any Debtor's claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to any Debtor's right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

      

      Each
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached
hereto and may not relocate such books of
account and records or tangible Collateral unless it delivers to the Secured
Parties at least 30 days prior to such relocation (i) written notice of such
relocation and the new location thereof (which must be within the United States)
and (ii) evidence that appropriate financing statements under the UCC and other
necessary documents have been filed and recorded and other steps have been taken
to perfect the Security Interests to create in favor of the Secured Parties a
valid, perfected and continuing first priority lien in all the Collateral
(except for the perfection of money, deposit accounts and insurance policies
unless requested by the Secured Parties). 

        

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      (e)           This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral, subject only to Permitted Liens (as defined in the Notes)
securing the payment and performance of the Obligations.  Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected.  The execution and delivery of this Agreement and the
filing of the Uniform Commercial Code financing statements in forms attached
hereto and with the descriptions contained therein of the Collateral will create
valid Security Interests in the Collateral and perfect such Security Interest to
the extent such Security Interests may be perfected by the filing of Uniform
Commercial Code financing statements.  Without limiting the generality
of the foregoing, other than such execution, delivery and filings no further
consent of any third parties and no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for (i) the execution, delivery and performance of this Agreement,
(ii) the creation or perfection of the Security Interests created hereunder in
the Collateral other than Collateral that consists of money, deposit accounts,
insurance policies or vehicles, or (iii) the enforcement of the rights of the
Agent and the Secured Parties hereunder.

      

      (f)           The
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.

      

      (g)           The
execution, delivery and performance of this Agreement by the Debtor does not (i)
violate any of the provisions of any Organizational Documents of the Debtor or
any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to the Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing the Debtor's debt or otherwise) or other understanding to
which the Debtor is a party or by which any property or asset of the Debtor is
bound or affected.  All required consents (including without
limitation from stockholders or creditors of the Debtor) necessary for the
Debtor to enter into and perform its obligations hereunder have been
obtained.

      

      (h)           The capital stock and other equity interests listed on
Schedule
H hereto (the “Pledged
Securities”) represent all of the capital
stock and other equity interests of the Subsidiaries, and represent all capital
stock and other equity interests owned, directly or indirectly, by the
Company.  All of the Pledged Securities are validly issued, fully paid
and nonassessable, and the Company is the legal and beneficial owner of the
Pledged Securities, free and clear of any lien, security interest or other
encumbrance except for the security interests created by this Agreement, other
Permitted Liens (as defined in the Notes) and any transfer restrictions required
by applicable securities law.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      

      (i)           
The ownership and other equity interests in
partnerships and limited liability companies (if any) included in the Collateral (the “Pledged
Interests”) by their express terms do not
provide that they are securities governed by Article 8 of the UCC and are not
held in a securities account or by any financial
intermediary.

      

      (j)           
Except for Permitted Liens (as defined in the Notes), until no Notes are
outstanding, each Debtor shall at all times maintain in favor of the Secured
Parties the liens and Security Interests provided for hereunder as valid and
perfected first priority liens and security interests in all the
Collateral.  Each Debtor hereby agrees to defend the same against the
claims of any and all persons and entities.  Each Debtor shall
safeguard and protect in a reasonable manner all Collateral for the account of
the Secured Parties.  At the request of the Agent, each Debtor will
sign and deliver to the Agent on behalf of the Secured Parties at any time or
from time to time one or more financing statements pursuant to the UCC in form
reasonably satisfactory to the Agent and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the Agent to be,
necessary or desirable to effect the rights and obligations provided for
herein.  Without limiting the generality of the foregoing, each Debtor
shall pay all fees, taxes and other amounts necessary to maintain the Collateral
and the Security Interests hereunder, and each Debtor shall obtain and furnish
to the Agent from time to time, upon demand, such releases and/or subordinations
of claims and liens which may be required to maintain the priority of the
Security Interests hereunder.

      

      (k)           While
any Note is outstanding no Debtor will transfer, pledge, hypothecate, encumber,
license, sell or otherwise dispose of any of the Collateral, other than, so long
as there is no Event of Default, (i) licenses granted by a Debtor in the
ordinary course of business or sales of inventory or other obsolete assets in
the ordinary course of business, or (ii) the use of cash by the Company and its
Subsidiaries in the ordinary course of business, (iii) the use of cash to
satisfy Indebtedness  to the extent
due before the Maturity Date, which Indebtedness exists on the Original Issue
Date and is described on a schedule to the Purchase Agreement (so long as such terms have not been amended since
the Closing Date), (iv) transfers of such assets or rights by the Company
and its Subsidiaries that, in the aggregate, do not have a fair market value in
excess of $25,000, or (v) transfers between Debtors (as long as the Secured
Parties maintain the same security interest (including the priority and
perfection of such security interest) in all such Collateral that the Secured
Parties maintained before such transfer), without the prior written consent of
all the Secured Parties.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      (l)           
Each Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any material portion of such Collateral (or cause to be operated or located) in
any area excluded from insurance coverage.

      

      (m)           Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds and in the
amounts customarily insured against by entities of established reputation having
similar properties similarly situated and in such amounts as are customarily
carried under similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof.  If requested by the Agent, each Debtor shall cause each
insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Agent, that (a) the Agent will be named as
lender loss payee and additional insured under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default.  Copies of any such policies or the related
certificates, in each case, naming the Agent as lender loss payee and additional
insured shall be delivered to the Agent at least annually and at the time any
new policy of insurance is issued.

      

      (n)           Each
Debtor shall promptly, but no later than ten (10) days after obtaining knowledge
thereof, advise the Secured Parties, through the Agent, in sufficient detail of
any material change in the Collateral and of the occurrence of any event which
would have a material adverse effect on the value of the Collateral or on the
Secured Parties’ security interest therein.

      

      (o)           Each
Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Agent may from time to time reasonably request and may in its reasonable
discretion deem necessary to perfect, protect or enforce the Secured Parties’
security interest in the Collateral including without limitation, if applicable,
the execution and delivery of a separate security agreement with respect to the
Debtor’s Intellectual Property (“Intellectual Property
Security Agreement”) in which the Secured Parties have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
the Agent, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.

      

      (p)           Each
Debtor shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time, provided that Agent and its representatives
agree to treat and hold any non-public information which the Debtors indicate is
confidential as confidential information of the Debtors (except to the extent
required to be disclosed pursuant to legal process).

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      

      (q)           Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.

      

      (r)           
Each Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially and adversely affect the value of the Collateral, the
Security Interests or the rights and remedies of the Secured Parties
hereunder.

      

      (s)           All
information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is and will be
accurate and complete in all material respects as of the date
furnished.

      

      (t)           
The Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.

      

      (u)           No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.

      

      (v)           Except
in the ordinary course of business, no Debtor may consign any of its inventory
or sell any of its inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the Agent which shall
not be unreasonably withheld.

      

      (w)           No
Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and
so long as, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.

      

      (x)           Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule D attached
hereto, which Schedule
D sets forth each Debtor’s organizational identification number or, if
any Debtor does not have one, states that one does not exist.

      

      (y)           (i)
The actual name of each Debtor is the name set forth in Schedule D attached
hereto; (ii) no Debtor has any trade names except as set forth on Schedule E attached
hereto; (iii) no Debtor has used any name other than that stated in
the preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on Schedule
E.

      
        
           

        

        
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      (z)           At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the Security Interest created hereby, the applicable
Debtor shall notify the Agent of such Collateral and, promptly following Agent’s
request, deliver such Collateral to the Agent.

      

      (aa)          Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and instructions of the Agent regarding the
Pledged Interests consistent with the terms of this Agreement without the
further consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC.  Further, each Debtor agrees that it shall not
enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or entity while any Notes
are outstanding.  For
clarification, nothing in this paragraph is intended to prohibit the Merger
(provided that upon Closing of the Merger, the Company, La Jolla and its
subsidiaries shall enter into such Security Agreement and Guarantees and file
such financing statements as may be necessary or appropriate to ensure the
continued first priority perfected liens against the Collateral in favor of the
Secured Parties) (except for the perfection of money, deposit accounts
and insurance policies unless requested by the Secured Parties).

       

      (bb)          Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement.  To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

      

      (cc)           If
there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall, promptly upon written request of the Agent following
the occurrence of an Event of Default, cause such an account control agreement,
in form and substance in each case satisfactory to the Agent, to be entered into
and delivered to the Agent for the benefit of the Secured Parties.

      

      (dd)          To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall, promptly upon written request of the Agent following
the occurrence of an Event of Default, cause the issuer of each underlying
letter of credit to consent to an assignment of the proceeds thereof to the
Secured Parties.

      

      (ee)           To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall notify the Agent (unless such possession occurs in the
ordinary course of business) and, following Agent’s request, join with the Agent
in notifying such third party of the Secured Parties’ security interest in such
Collateral
and shall use its reasonable best efforts to obtain an acknowledgement and
agreement from such third party with respect to the Collateral, in form and
substance reasonably satisfactory to the Agent. 

        

      

      
        
           

        

        
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      (ff)           
If any Debtor shall at any time hold or acquire a commercial tort claim in an
amount exceeding $50,000, such Debtor shall promptly notify the Agent in a
writing signed by such Debtor of the particulars thereof and grant to the
Secured Parties in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to the Agent.

      

      (gg)           Each
Debtor shall immediately provide written notice to the Secured Parties of any
material accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Agent an assignment of claims for such accounts and cooperate
with the Agent in taking any other steps required, in its judgment, under the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule to perfect or continue the perfected status of the Security Interests in
such accounts and proceeds thereof.

      

      (hh)           Each
Debtor shall cause each subsidiary of such
Debtor to immediately become a party hereto (an “Additional Debtor”),
by executing and delivering an Additional Debtor Joinder in substantially the
form of Annex A
attached hereto and comply with the provisions hereof applicable to the
Debtors.  Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in
effect.  The Additional Debtor shall also deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably
request.  Upon delivery of the foregoing to the Agent, the Additional
Debtor shall be and become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.

      

      (ii)           
Each Debtor shall vote the Pledged Securities to
comply with the covenants and agreements set forth herein and in the
Notes.

      

      (jj)           
Each Debtor shall register the pledge of the
applicable Pledged Securities on the books of such Debtor.  Each
Debtor shall notify each issuer of Pledged Securities to register the pledge of
the applicable Pledged Securities in the name of the Secured Parties on the
books of such issuer.  Further, if requested by Agent and except with
respect to certificated securities delivered to the Agent, the applicable Debtor
shall deliver to the Agent an acknowledgement of pledge (which, where
appropriate, shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed
by the issuer of the applicable Pledged Securities, which acknowledgement shall
confirm that: (a) it has registered the pledge on its books and records; and (b)
at any time directed by the Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such Pledged
Securities into the name of any designee of the Agent, will take such steps as
may be necessary to effect the transfer, and will comply with all other
instructions of the Agent regarding such Pledged Securities without the further
consent of the applicable Debtor.

      
        
           

        

        
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      (kk)           In the event that, upon an occurrence of an Event of
Default, the Agent shall sell all or any of the Pledged Securities to another
party or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged
Securities, each Debtor shall, to the extent applicable: (i) deliver to the
Agent or the Transferee, as the case may be, the articles of incorporation,
bylaws, minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the Pledged
Securities by the Agent and allow the Transferee or the Agent to continue the
business of the Debtors and their direct and indirect
subsidiaries.

       

      (ll)           
Without limiting the generality of the other obligations of the Debtor
hereunder, Debtor shall promptly (i) cause the security interest contemplated
hereby with respect to all Intellectual Property registered at the United States
Patent and Trademark Office to be duly recorded at the applicable office, and
(ii) give the Agent notice whenever it acquires (whether absolutely or by
license) or creates any additional material Intellectual Property.

      

      (mm)         Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Agent
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this
Agreement.

      

      (nn)          Schedule F attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any Debtor as of
the date hereof.  Schedule F lists all
material licenses in favor of the Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.  Adamis
Laboratories, Inc. owns all the registered trademarks set forth on Schedule F, which
were acquired by such
Debtor pursuant to a purchase and assignment; the Company and such Debtor agree
to cause such assignment of such trademarks to such Debtor to be recorded in the
United States Patent and Trademark Office within 30 days following the Closing
Date, with evidence thereof forwarded to the Agent within 60 days following the
Closing Date.

      
        
           

        

        
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      (oo)          Except
as set forth on Schedule G attached
hereto, none of the account debtors or other persons or entities obligated on
any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute or rule
in respect of such Collateral.

      

      5.           Effect of Pledge on Certain
Rights. If any of the Collateral subject to this Agreement
consists of nonvoting equity or ownership interests (regardless of class,
designation, preference or rights) that may be converted into voting equity or
ownership interests upon the occurrence of certain events (including without
limitation upon the transfer of all or any of the other stock or assets of the
issuer), it is agreed that the pledge of such equity or ownership interests
pursuant to this Agreement or the enforcement of any of the Agent’s rights
hereunder shall not be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is
party.

      

      6.           Defaults. The following events
shall be “Events of
Default”:

      

      (a)           
The occurrence of an Event of Default (as defined in the Notes) under the
Notes;

      

      (b)           Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;

      

      (c)           The
failure by any Debtor to observe or perform any of its obligations hereunder for
ten (10) business days after delivery to such Debtor of notice of such failure
by or on behalf of a Secured Party unless such default is capable of cure but
cannot be cured within such time frame and such Debtor is using best efforts to
cure same in a timely fashion; or

      

      (d)           
If any material provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by
any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any liability or obligation purported to be created under
this Agreement.

      
        
           

        

        
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      7.           Duty to Hold in
Trust.

      

      (a)           
Upon and during the continuance of any Event of Default, each Debtor shall, upon
receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interests, whether payable
pursuant to the Notes or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Parties and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Parties, pro-rata
in proportion to their respective then-currently outstanding principal amount of
Notes for application to the satisfaction of the Obligations.

      

      (b)           
If any Debtor shall become entitled to receive or
shall receive any securities or other property (including without limitation
shares of Pledged Securities or instruments representing Pledged Securities
acquired after the date hereof, or any options, warrants, rights or other
similar property or certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase or reduction
of capital, or issued in connection with any reorganization of such Debtor or
any of its direct or indirect subsidiaries) in respect of the Pledged Securities
(whether as an addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise) and Debtor owns such securities, such Debtor agrees to
hold in trust for the Secured Parties and deliver any and all certificates or
instruments evidencing the same to the Agent on or before the close of business
on the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by the
Agent subject to the terms of this Agreement as Collateral; provided, however,
that such securities shall be subject to the same restrictions on transfer and
voting that would be applicable to such Debtor.

      

      8.           Rights and Remedies Upon
Default.

      

      (a)           
Upon and during the continuance of any Event of Default, the Secured Parties,
acting through the Agent, shall have the right to exercise all of the remedies
conferred hereunder and under the Notes,  the Guarantees and other
Transaction Documents, and the Secured Parties, acting through the Agent, shall
have all the rights and remedies of a secured party under the
UCC.  Without limitation, the Agent, for the benefit of the Secured
Parties, shall have the following rights and powers:

      

       (i)           The
Agent shall have the right to take possession of the Collateral and, for that
purpose, enter, with the aid and assistance of any person, any premises where
the Collateral, or any part thereof, is or may be placed and remove the same,
and each Debtor shall assemble the Collateral and make it available to the Agent
at places which the Agent shall reasonably select, whether at such Debtor's
premises or elsewhere, and make available to the Agent, without rent, all of
such Debtor’s respective premises and facilities for the purpose of the Agent
taking possession of, removing or putting the Collateral in saleable or
disposable form.

      
        
           

        

        
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       (ii)          Upon notice to the Debtors by the Agent, all rights of
each Debtor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to receive the
dividends and interest which it would otherwise be authorized to receive and
retain, shall cease.  Upon such notice, the Agent shall have the right
to receive, for the benefit of the Secured Parties, any interest, cash dividends
or other payments on the Collateral and, at the option of the Agent, to exercise
in such Agent’s discretion all voting rights pertaining
thereto.  Without limiting the generality of the foregoing, the Agent
shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner thereof,
including without limitation to vote and/or to exchange, at its sole discretion,
any or all of the Collateral in connection with a merger, reorganization,
consolidation, recapitalization or other readjustment concerning or involving
the Collateral or any Debtor or any of its direct or indirect
subsidiaries.

      

       (iii)         The
Agent shall have the right to operate the business of each Debtor using the
Collateral and shall have the right to assign, sell, lease or otherwise dispose
of and deliver all or any part of the Collateral, at public or private sale or
otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such time
or times and at such place or places, and upon such terms and conditions as the
Agent may deem commercially reasonable, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand upon or
notice to any Debtor or right of redemption of a Debtor, which are hereby
expressly waived.  Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent, for the benefit of the Secured Parties, may,
unless prohibited by applicable law which cannot be waived, purchase all or any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of any Debtor, which are hereby waived
and released.

      

       (iv)         The
Agent shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly
to the Agent, on behalf of the Secured Parties, and to enforce the Debtors’
rights against such account debtors and obligors.

      

       (v)          The
Agent, for the benefit of the Secured Parties, may (but is not obligated to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.

      

       (vi)         The
Agent may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of the Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any
designee or any purchaser of any Collateral.

      
        
           

        

        
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      (b)           The Agent shall comply with any applicable law in
connection with a disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.  The Agent may sell the Collateral without giving any
warranties and may specifically disclaim such warranties.  If the
Agent sells any of the Collateral on credit, the Debtors will only be credited
with payments actually made by the purchaser.  In addition, each
Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including without limitation the Agent’s right following an Event of Default to
take immediate possession of the Collateral and to exercise its rights and
remedies with respect thereto.

       

      (c)           
For the purpose of enabling the Agent to further exercise rights and remedies
under this Section 8 or elsewhere provided by agreement or applicable law, the
Debtor hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

      

      9.           Inter
Secured Party Rights; Transaction/Applications of Proceeds.

      

      (a)           All
Obligations owed to the Secured Parties shall rank in the order of priority
paripassu and pro-rata in proportion to
each Secured Party’s outstanding principal amount of Notes at any given time
that a determination needs to be made of pro-rata holdings. If
an Event of Default occurs and any party hereto collects proceeds pursuant to
its rights under any Obligations, the Agent shall be immediately notified and
such payment shall be shared with all of the other Secured Parties as set forth
above. Notwithstanding
anything to the contrary contained in the Purchase Agreement or any document
executed in connection with the Obligations and irrespective of: (i) the time,
order or method of attachment or perfection of the security interests created in
favor of Secured Parties; (ii) the time or order of filing or recording of
financing statements or other documents filed or recorded to perfect security
interests in any Collateral; (iii) anything contained in any filing or agreement
to which any Secured Party now or hereafter may be a party; and (iv) the rules
for determining perfection or priority under the Uniform Commercial Code or any
other law governing the relative priorities of secured creditors, each of the
Secured Parties acknowledges that (x) all other Secured Parties have a valid
security interest in the Collateral and (y) the security interests of the
Secured Parties in any Collateral pursuant to any outstanding Obligations shall
be pari passu with each other
and enforced pursuant to the terms of this Agreement through the Agent. 
Each Secured Party, severally and not jointly with the other Secured Parties,
shall indemnify, defend, and hold harmless the other Secured Parties against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies,
including interest, penalties, and reasonable professional and attorneys’ fees,
including those arising from settlement negotiations, that the other Secured
Parties shall incur or suffer, which arise, result from, or relate to a breach
of, or failure by such Secured Party to perform under this Agreement.

        

      

      
        
           

        

        
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      (b)           The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including without limitation any taxes, fees and other costs incurred in
connection therewith) of the Collateral, then to the reasonable attorneys’ fees
and expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, then to satisfaction of the Obligations pro rata among the Secured
Parties (based on then-outstanding principal amounts of Notes at the time of any
such determination), and then to the payment of any other amounts required by
applicable law.  If, upon the sale, license or other disposition of
the Collateral, the proceeds thereof are insufficient to pay all amounts to
which the Secured Parties are legally entitled, the Debtors will be liable for
the deficiency, together with interest thereon, at the rate of 24% per annum or
the lesser amount permitted by applicable law (the “Default Rate”), and the
reasonable fees of any attorneys employed by the Secured Parties to collect such
deficiency.  To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Parties arising out
of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.

      

      10.           Securities
Law Provision.  Each Debtor recognizes that the Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“Securities Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof.  Each Debtor agrees that sales so
made may be at prices and on terms less favorable than if the Pledged Securities
were sold to the public and that the Agent has no obligation to delay the sale
of any Pledged Securities for the period of time necessary to register the
Pledged Securities for sale to the public under the Securities
Laws.  Each Debtor shall cooperate with the Agent in its attempt to
satisfy any requirements under the Securities Laws (including without limitation
registration thereunder if requested by the Agent) applicable to the sale of the
Pledged Securities by the Agent.

       

      11.           Costs and Expenses. Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Agent.  The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Agent are reasonably likely to prejudice, imperil or otherwise
adversely affect the Collateral or the Security
Interests therein.  The Debtors will also, upon demand, pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the Agent,
for the benefit of the Secured Parties, may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Notes.  Until so paid, any fees payable hereunder shall be added
to the principal amount of the Notes and shall bear interest at the Default
Rate.

      
        
           

        

        
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      12.           Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.  Without limiting the generality of the
foregoing, (a) neither the Agent nor any Secured Party (i) has any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder.  Neither the Agent nor any Secured Party shall have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Agent or any Secured Party
of any payment relating to any of the Collateral, nor shall the Agent or any
Secured Party be obligated in any manner to perform any of the obligations of
any Debtor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Agent or any
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or times.

      

      13.           Security Interests Absolute.
All rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Notes, any other Transaction Documents
or any agreement entered into in connection with the foregoing, or any portion
hereof or thereof; (b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the Notes, any
other Transaction Documents or any other agreement entered into in connection
with the foregoing; (c) any exchange, release or nonperfection of any of the
Collateral, or any release or amendment or waiver of or consent to departure
from any other collateral for, or any guarantee, or any other security, for all
or any of the Obligations; (d) any action by the Secured Parties to obtain,
adjust, settle and cancel in its sole discretion any insurance claims or matters
made or arising in connection with the Collateral; or (e) any other circumstance
which might otherwise constitute any legal or equitable defense available to a
Debtor, or a discharge of all or any part of the Security Interests granted
hereby.  Until the Obligations shall have been paid and performed in
full, the rights of the Secured Parties shall continue even if the Obligations
are barred for any reason, including without limitation the running of the
statute of limitations or bankruptcy.  Each Debtor expressly waives
presentment, protest, notice of protest, demand, notice of nonpayment and demand
for performance.  In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Parties, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof.  Each Debtor
waives all right to require the Secured Parties to proceed against any other
person or  to apply any Collateral
which the Secured Parties may hold at any time, or to marshal assets, or to
pursue any other remedy.  Each Debtor waives any defense arising by
reason of the application of the statute of limitations to any obligation
secured hereby.

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      

      14.           Term of Agreement. This
Agreement and the Security Interests shall terminate, automatically and without any action on the part of
the Agent or Secured Parties, on the date on which all payments under the
Notes have been indefeasibly paid in full and no Notes are outstanding;
provided, however, that all indemnities of the parties hereto contained in this
Agreement (including without limitation Annex B hereto) shall
survive and remain operative and in full force and effect regardless of the
termination of this Agreement; and provided further that this Agreement and the
Security Interests hereunder shall be reinstated and in full force and effect in
the event any repayment of the Notes is subject to being invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company or any
other Person.  The Agent and Secured
Parties shall, at Debtor’s request and expense, take any and all action required
to discharge any and all security interests
and release to Debtor any and all Collateral in the Agent’s or Secured Parties’
possession or control.  The Secured Parties hereby agree that the
Debtor shall have the right to take all necessary action to cause the
termination and release of all security interests granted hereunder upon
termination of this Agreement.

      

      15.           Power of Attorney; Further
Assurances.

      

      (a)           
Each Debtor authorizes the Agent, and does hereby make, constitute and appoint
the Agent and its officers, agents, successors or assigns with full power of
substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Agent; (ii) sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) demand, collect, receive, compromise, settle and
sue for monies due in respect of the Collateral; (v) transfer any Intellectual
Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Agent, and at the expense of the Debtors, at any
time, or from time to time, execute and deliver any and all documents and
instruments and do all acts and things which the Agent deems necessary to
protect, preserve and realize upon the Collateral and the Security Interests
granted therein in order to effect the intent of this Agreement, the Notes and
other Transaction Documents all as fully and effectually as the Debtors might or
could do; and each Debtor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof.  This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be
outstanding.  The designation set forth
herein shall be deemed to amend and supersede any inconsistent provision in the
Organizational Documents or other documents or agreements to which the Debtor is
subject or to which the Debtor is a party.  Without limiting the generality of the
foregoing, after the occurrence and during the continuance of an Event of
Default, each Secured Party is specifically authorized to execute and file any
applications for or instruments of transfer and assignment of any patents,
trademarks, copyrights or other Intellectual Property with the United States
Patent and Trademark Office and the United States Copyright Office.

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      

      (b)           On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies in
any jurisdiction, including without limitation the jurisdictions indicated on
Schedule C
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by the
Agent, to perfect the Security Interests granted hereunder and otherwise to
carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Agent the grant or perfection of a perfected security interest
in all the Collateral under the UCC.

      

      (c)           
Each Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Agent’s discretion, to
take any action and to execute any instrument which the Agent may deem necessary
or advisable to accomplish the purposes of this Agreement (including without
limitation the perfection of the security interests granted herein), including
the filing, in its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of such Debtor where permitted by law, which financing statements may
(but need not) describe the Collateral as “all assets” or “all personal
property” or words of like import, and ratifies all such actions taken by the
Agent.  This power of attorney is coupled with an interest and shall
be irrevocable for the term of this Agreement.

      

      16.           Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement.

      

      17.           Other Security. To the extent
that the Obligations are now or hereafter secured by property other than the
Collateral or by the guarantee, endorsement or property of any other person,
firm, corporation or other entity, then the Agent shall have the right, in its
sole discretion, to pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any of
the Secured Parties’ rights and remedies hereunder.

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      

      18.           Appointment of
Agent.  The Secured Parties hereby appoint Gemini Strategies,
LLC or its appointed agent to act as their agent (“Gemini” or “Agent”) for purposes
of exercising any and all rights and remedies of the Secured Parties hereunder.
Such appointment shall continue until revoked in writing by a Majority in Interest, at which time a Majority in
Interest shall appoint a new Agent.  The Agent shall have the
rights, responsibilities and immunities set forth in Annex B
hereto.

       

      19.           Miscellaneous.

      

      (a)           
No course of dealing between the Debtors and the Secured Parties, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Parties, any right, power or privilege hereunder or under the Notes shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.

      

      (b)           All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Notes or by any other
agreements, instruments or documents or by law, shall be cumulative and may be
exercised singly or concurrently.

      

      (c)           
This Agreement, together with the exhibits and schedules hereto, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
this Agreement and the exhibits and schedules hereto.  No provision of
this Agreement may be waived, modified, supplemented or amended except in a
written instrument signed, in the case of an amendment, by the Debtors and a
Majority in Interest or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.

      

      (d)           
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

      

      (e)           
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

      

      (f)           
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company and the
Guarantors may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Secured Party (other than by
merger).  Any Secured Party may assign any or all of its rights under
this Agreement to any Person to whom such Secured Party assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of this Agreement that apply to
the “Secured Parties.”

      

      (g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

      

      (h)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.  Each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Notes (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court or that such proceeding is improper.  Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated
hereby.  If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall
be reimbursed by the other party for its reasonable attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such proceeding.

      

      (i)           
This Agreement may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement.  In the
event that any signature is delivered by facsimile transmission or e-mail
transmission, such signature shall create a valid binding obligation of the
party executing the same (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile signature were the original
thereof. 

        

      

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

       

      (j)           All
Debtors (including without limitation any Additional Debtor joined hereto) shall
be jointly and severally be liable for the obligations of each Debtor to the
Secured Parties hereunder.

      

      (k)           Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from any violation of the terms or provisions of this Agreement or the
agreements underlying the Obligations or the negligence or willful misconduct of
the Indemnitee.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Notes, the
Purchase Agreement or any other agreement, instrument or other document executed
or delivered in connection herewith or therewith.

      

      (l)           
Nothing in this Agreement shall be construed to
subject the Agent or any Secured Party to liability as a partner or member in or
of any Debtor or any of its direct or indirect subsidiaries, nor shall the Agent
or any Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any of its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant
hereto.

      

      (m)           To the extent that the grant of the security interest in
the Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor or any
direct or indirect subsidiary of any Debtor or compliance with any provisions of
any of the Organizational Documents, the Debtors hereby grant such consent and
approval and waive any such noncompliance with the terms of said
documents.

      

      [SIGNATURE
PAGES FOLLOW]

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      

       
 

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

      

      

      
        	
                ADAMIS
      PHARMACEUTICALS CORPORATION

              	 
      
	 
      	 
      	 
      
	
                By:

              	
                
                  /s/
      Dennis J. Carlo

                

              	 
      
	
                Name:

              	
                Dennis
      J. Carlo

              	 
      
	
                Title:

              	
                CEO

              	 
      

      

      

      

      
        	
                ADAMIS
      CORPORATION

              	 
      
	 
      	 
      	 
      
	
                By:

              	
                
                  /s/
      Dennis J. Carlo

                

              	 
      
	
                Name:

              	
                Dennis
      J. Carlo

              	 
      
	
                Title:

              	
                CEO

              	 
      

      

      

      

      
        	
                ADAMIS
      LABORATORIES, INC.

              	 
      
	 
      	 
      	 
      
	
                By:

              	
                
                  /s/
      Richard L. Aloi

                

              	 
      
	
                Name:

              	
                Richard
      L. Aloi

              	 
      
	
                Title:

              	
                President

              	 
      

      

      

      

      
        	
                ADAMIS
      VIRAL THERAPIES, INC.

              	 
      
	 
      	 
      	 
      
	
                By:

              	
                
                  /s/
      Dennis J. Carlo

                

              	 
      
	
                Name:

              	
                Dennis
      J. Carlo

              	 
      
	
                Title:

              	
                CEO

              	 
      

      

      

      

      [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      [SIGNATURE
PAGE OF HOLDERS TO ADMP SECURITY AGREEMENT]

      

      
      

      
        	
                GEMINI
      MASTER FUND, LTD.

              	 
      
	
                By:

              	
                GEMINI
      STRATEGIES, LLC, as investment
manager

              

      

      

      
        	
                By:

              	/s/
      Steven Winters	 
      
	 
      	
                Steven
      Winters, Managing Member

              	 
      

      

      

      

      GEMINI STRATEGIES, LLC, as
Agent

      

      
        	
                By:

              	/s/
      Steven Winters	 
      
	 
      	
                Steven
      Winters, Managing Member

              	 
      

      

      

      

      KINGSBROOK
OPPORTUNITIES MASTER FUND LP

      
        	
                By:

              	
                KINGSBROOK
      OPPORTUNITIES GP LLC, its general
partner

              

      

      

      
        	
                By:

              	/s/
      Adam J. Chill	 
      
	 
      	
                Adam
      J. Chill, Managing Member

              	 
      

      

      

      

      ALPHA
CAPITAL ANSTALT

      

      
        	
                By:

              	/s/
      Yosef
      Milgrom	 
      
	 
      	
                Yosef
      Milgrom

              	 
      

      

      

      

      WHALEHAVEN
CAPITAL FUND LTD.

      

      
        	
                By:

              	/s/
      Brian
      Mazzella	 
      
	 
      	
                Brian
      Mazzella

              	 
      

      

      

      

      MICRO
PIPE FUND I, LLC

      
        	
                By:

              	
                MICHAELSON
      INVESTMENT MANAGEMENT, LLC

              

      

      

      
        	
                By:

              	/s/
      David Mickelson	 
      
	 	David
      Mickelson	 

      

      

      

      CRANSHIRE
CAPITAL, L.P.

      
        	
                By:

              	
                DOWNSVIEW
      CAPITAL, INC.

              

      

      

      
        	
                By:

              	/s/
      Mitchell Kopin	 
      
	 
      	
                Mitchell
      Kopin, President

              	 
      

      

      

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

      ANNEX
A

      to

      SECURITY
AGREEMENT

      

      
        	
                 
      

              	
                FORM
      OF ADDITIONAL DEBTOR JOINDER

              

      

      

      Security
Agreement dated as of January 11, 2010 made by

      ADAMIS
PHARMACEUTICALS CORPORATION

      and its
subsidiaries party thereto from time to time, as Debtors

      to and in
favor of

      the
Secured Parties identified therein (the “Security
Agreement”)

      

      Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.

      

      The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above (or the Agent on their behalf), the
undersigned shall (a) be an Additional Debtor under the Security Agreement, (b)
have all the rights and obligations of the Debtors under the Security Agreement
as fully and to the same extent as if the undersigned was an original signatory
thereto, and (c) be deemed to have made the representations and warranties set
forth therein as of the date of execution and delivery of this Additional Debtor
Joinder.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN
THE COLLATERAL OWNED BY IT AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND
ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH
THEREIN.

      

      Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.  An executed copy of this Joinder shall be delivered to
the Secured Parties (or the Agent on their behalf), and the Secured Parties may
rely on the matters set forth herein on or after the date
hereof.  This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

      

      IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the
name and on behalf of the undersigned.

      

      

      
        	 
      	 
      	
                [Name
      of Additional Debtor]

              
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              	 
      
	 
      	 
      	
                Title:

              	 
      
	 
      	 
      	
                Address:

              	 
      

      

      

      
         
Dated:

      

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

      ANNEX
B

      to

      SECURITY
AGREEMENT

      

      THE
AGENT

      

      1.  Appointment. The Secured Parties
(all capitalized terms used herein and not otherwise defined shall have the
respective meanings provided in the Security Agreement to which this Annex B is
attached (the "Agreement")), by
their acceptance of the benefits of the Agreement, hereby designate Gemini
Strategies, LLC (“Gemini” or “Agent”) as the Agent
to act as specified herein and in the Agreement.  Each Secured Party
shall be deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of the Agreement and any other Transaction Document
(as such term is defined in the Notes) and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto.  The Agent may perform any of its
duties hereunder by or through its agents or employees.

      

      2.  Nature of Duties.  The Agent shall
have no duties or responsibilities except those expressly set forth in the
Agreement.  Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent
jurisdiction.  The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and therein. At the
expense of the Company, promptly following the Closing the Agent shall file such
UCC-1 financing statements with such filing offices as may be reasonably
requested by the Requisite Purchasers, including without limitation UCC-1
financing statements covering the Collateral in the jurisdictions indicated on
Schedule C to the Agreement.

      

      3.  Lack of Reliance on the
Agent.  Independently and without reliance upon the Agent, each
Secured Party, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such Secured
Party’s investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter.  The Agent shall not be responsible to the
Debtors or any Secured Party for any recitals, statements, information,
representations or warranties herein or
in any document, certificate or other writing delivered in connection herewith,
or for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectability, priority or sufficiency of the Agreement or any
other Transaction Document, or for the financial condition of the Debtors or the
value of any of the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of the Agreement or any other Transaction Document, or the financial
condition of the Debtors, or the value of any of the Collateral, or the
existence or possible existence of any default or Event of Default under the
Agreement, the Notes or any of the other Transaction
Documents.

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

      

      4.  Certain Rights of the
Agent.  The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured
Parties.  To the extent practical, the Agent shall request
instructions from the Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of Secured Parties holding a majority in
principal amount of Notes (based on then-outstanding principal amounts of Notes
at the time of any such determination); if such instructions are not provided
despite the Agent’s request therefor, the Agent shall be entitled to refrain
from such act or taking such action, and if such action is taken, shall be
entitled to appropriate indemnification from the Secured Parties in respect of
actions to be taken by the Agent; and the Agent shall not incur liability to any
person or entity by reason of so refraining.  Without limiting the
foregoing, (a) no Secured Party shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the terms of the Agreement or any other Transaction
Document, and the Debtors shall have no right to question or challenge the
authority of, or the instructions given to, the Agent pursuant to the foregoing,
and (b) the Agent shall not be required to take any action which the Agent
believes (i) could reasonably be expected to expose it to personal liability or
(ii) is contrary to this Agreement, the Transaction Documents or applicable
law.

      

      5.  Reliance.  The Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it, and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected by
it.  Anything to the contrary notwithstanding, the Agent shall have no
obligation whatsoever to any Secured Party to assure that the Collateral exists
or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently or
lawfully created, perfected, or enforced or are entitled to any particular
priority.

      

      6.  Indemnification.  To the extent
that the Agent is not reimbursed and indemnified by the Debtors, the Secured
Parties will jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective principal amounts of Notes,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
performing its duties hereunder or under the Agreement or any other Transaction
Document, or in any way relating to or arising out of the Agreement or any other
Transaction Document except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to have resulted
solely from the Agent's own gross negligence or willful
misconduct.  Prior to taking any action hereunder as Agent, the Agent
may require each Secured Party to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

      

      7.  Resignation by the Agent.

      

      (a)           The
Agent may resign from the performance of all its functions and duties under the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties.  Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.

      

      (b)           Upon
any such notice of resignation, the Secured Parties, acting by a Majority in Interest, shall appoint a successor
Agent hereunder.

      

      (c)           If
a successor Agent shall not have been so appointed within said 30-day period,
the Agent shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as the Secured Parties appoint a successor Agent as provided
above.  If a successor Agent has not been appointed within such 30-day
period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.

      

      (d)           Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the
Agreement.  After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex B shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent.

      

      8.  Rights with respect to
Collateral.  Each Secured
Party agrees with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its security
interest in the Collateral, whether pursuant to any other agreement or otherwise
(other than pursuant to this Agreement), or take or institute any action against
the Agent or any of the other Secured Parties in respect of the Collateral or
its rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with respect to
the Collateral other than as set forth in this Agreement and the other
Transaction Documents.

      

    30

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