8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

DATE OF REPORT (Date of earliest event reported): June 11, 2009

001-33635

(Commission file number)

CARDIUM THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-0075787
(State of incorporation)	(IRS Employer Identification No.)

12255 El Camino Real, Suite 250 San Diego, California 92130	(858) 436-1000
(Address of principal executive offices)	(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On June 11, 2009, Cardium Therapeutics, Inc., a Delaware corporation (“Cardium”), completed an unsecured debt financing pursuant to the terms of a Promissory Note and Warrant Purchase Agreement (“Purchase Agreement”) entered into by and among Cardium and certain accredited investors. Under the terms of the Purchase Agreement, Cardium issued notes in the aggregate principal amount of $600,000 to the investors, and five year warrants to purchase up to 402,000 shares of Cardium’s common stock, in the aggregate, at an exercise price of $2.00 per share (collectively, the “Financing”).

The notes bear interest at a fixed rate of 12% per annum, payable upon maturity. The maturity date of the notes is the earlier of June 27, 2009, or the closing of a Qualified Asset Monetization, Qualified Financing or Qualified Stock Sale. For purposes hereof, (i) a “Qualified Asset Monetization” means the sale, license or other transfer or disposition of assets of Cardium, or any of its subsidiaries, that results in gross proceeds of at least $10,000,000; (ii) a “Qualified Financing” means any equity or debt financing transaction consummated by Cardium, or any subsidiary, that results in gross proceeds of at least $10,000,000; and (iii) a “Qualified Stock Sale” means the sale of capital stock of any subsidiary that results in gross proceeds of at least $10,000,000. Upon maturity, each note holder will receive an origination fee in an amount equal to 3.33% of the principal amount of such holder’s note.

Pursuant to the terms of the warrants issued in the Financing, the exercise price is subject to adjustment in the event of certain specified issuances of equity securities or rights, distributions, or transactions. The warrants are not exercisable until the earlier to occur of (i) the date upon which an additional listing application for the shares issuable upon exercise of the warrants has been approved by the NYSE AMEX, the exchange on which Cardium’s shares are listed, or (ii) the date upon which Cardium’s common stock is delisted from the NYSE AMEX should any such delisting actually occur. If an additional listing application is not approved by NYSE AMEX, Mr. Reinhard, Cardium’s Chief Executive Officer, has agreed to assign and transfer to the holders of the warrants issued in the Financing a portion of a warrant issued to Mr. Reinhard in connection with Cardium’s November 2008 debt financing representing, in the aggregate, an equivalent number of warrant shares as the shares underlying the warrants issued in the Financing.

At the closing of the Financing, Cardium received aggregate gross proceeds of approximately $600,000 (before placement agent fees and offering expenses and excluding any proceeds that Cardium may receive upon exercise of the warrants). Of this amount, (i) Gabor Rubanyi, Cardium’s Chief Scientific Officer, invested $100,000 and received a warrant to purchase 67,000 shares of Cardium’s common stock; and (ii) Robert Engler, a consultant and Cardium’s Chief Medical Advisor, invested $150,000 and received a warrant to purchase 100,500 shares of Cardium’s common stock. The notes and warrants issued to Messrs. Rubanyi and Engler were on the same terms as those issued to the other investors in the Financing.

Empire Asset Management Company (“Empire”) served as non-exclusive placement agent for the Financing pursuant to the terms of a Placement Agency Agreement by and between Cardium and Empire and received from the gross proceeds of the Financing a commission equal to approximately $9,000, or 6.0% of the gross proceeds received by Cardium in the Financing from investors originated by Empire, and a warrant, substantially on the same terms as the warrants issued to the investors in the Financing, to purchase 6,030 shares of Cardium’s common stock, or 6.0% of the number of shares underlying the warrants issued in the Financing to investors originated by Empire.

In connection with the Financing, Tissue Repair Royalty Company, LLC agreed, in effect, to extend the maturity date on the $400,000 outstanding principal amount under the convertible promissory note issued by Cardium to TRC RC on February 23, 2009 until June 27, 2009 in exchange for the payment of a $12,000 fee.

The foregoing description of the Purchase Agreement, the notes, the warrants, and the Placement Agency Agreement do not purport to be complete and are qualified in their entirety by the form of note attached hereto as Exhibit 4.1, the form of warrant attached hereto as Exhibit 4.2, the form of Purchase Agreement attached hereto as Exhibit 10.1, and the Placement Agency Agreement attached hereto as Exhibit 10.2, each of which are incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information provided in Item 1.01 above is hereby incorporated by reference into this Item 2.03.

Item 3.02 Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 is hereby incorporated into this Item 3.02. The warrants to purchase common stock issued at the closing of the Financing and the shares of common stock underlying the warrants were offered and will be issued in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. Each investor represented to Cardium that it was an “accredited investor” as such term is defined under such Regulation D and the Financing did not involve any form of general solicitation or general advertising.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

4.1 Form of Promissory Note (a note in substantially this form was issued to the investors at the closing of the Financing)

4.2 Form of Common Stock Purchase Warrant (a warrant in substantially this form was issued to the investors and Empire at the closing of the Financing)

10.1 Form of Promissory Note and Warrant Purchase Agreement, dated as of June 11, 2009, by and among Cardium and each investor (an agreement on substantially this form was signed by each investor in the Financing)

10.2 Placement Agency Agreement dated June 5, 2009, by and between Cardium and Empire

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CARDIUM THERAPEUTICS, INC.
Date: June 16, 2009	By:	/s/ CHRISTOPHER J. REINHARD
		Christopher J. Reinhard Chief Executive Officer

EX-4.1

Exhibit 4.1

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM.

FORM OF PROMISSORY NOTE

$                     June 11, 2009 San Diego, California

FOR VALUE RECEIVED, CARDIUM THERAPEUTICS, INC., a Delaware corporation (the “Borrower”), promises to pay to the order of                                         , or its registered assigns (“Holder”), the principal sum of                          dollars ($                ) with interest on the outstanding principal amount at a rate of twelve percent (12%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 days) or, if less, at the highest rate of interest then permitted under applicable law; provided, however, upon any nonpayment of any principal hereof constituting an Event of Default under Section 5(a)(i) hereof, such unpaid amount shall bear interest from the date of such Event of Default until such amount is paid in full at eighteen percent (18%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 days) or, if less, at the highest rate permitted by applicable law (the “Default Rate”). Interest shall commence with the date hereof and shall continue on the outstanding principal of this Promissory Note (this “Note”) until paid in accordance with the provisions hereof.

1. Definitions. For purposes of this Note, the following terms shall have the following meanings (capitalized terms used herein but not otherwise defined shall have the meanings provided therefor in the Agreement (as defined below)):

“Act” means the Securities Act of 1933, as amended.

“Affiliate” shall mean with respect to any Person, any other Person (i) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (ii) which beneficially owns or holds 10% or more of any class of the voting stock of such first Person, or (iii) whereby 10% or more of the voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of such other Person is beneficially owned or held by such first Person or by a Subsidiary of such first Person.

“Business Day” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in San Diego, California.

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Change of Control” means any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 50% or more of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means generally accepted principles of good accounting practice in the United States, consistently applied.

“Material Adverse Effect” shall mean an event, matter, condition or circumstance which (i) has or would reasonably be expected to have a material adverse effect on the business, properties, results of operations or financial condition of the Borrower on a consolidated basis; (ii) would materially impair the ability of the Borrower or any other Person to perform or observe its obligations under or in respect of the Transaction Documents; or (iii) affects the legality, validity, binding effect or enforceability of any of the Transaction Documents.

“Organic Document” means, relative to any Person, its articles or certificate of incorporation, or certificate of limited partnership or formation, its bylaws, partnership or operating agreement or other organizational documents, and all stockholders agreements, voting trusts and similar arrangements applicable to any of its capital stock, partnership interests or other ownership interests.

“Qualified Asset Monetization” shall mean the sale, license or other transfer or disposition of assets of the Company or any Subsidiary which results in the Company or any Subsidiary receiving gross proceeds of at least $10,000,000 at the time of closing of such transaction.

“Qualified Financing” shall mean any equity or debt financing transaction consummated by the Company or any Subsidiary which results in the Company or any Subsidiary receiving gross proceeds of at least $10,000,000 at the time of closing of such transaction.

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“Qualified Stock Sale” shall mean the sale of capital stock of any Subsidiary which results in the receipt of gross proceeds of at least $10,000,000 at the time of closing of such transaction.

“Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Requisite Holders” mean holders of a majority of the aggregate principal amount of outstanding Notes as of a particular date.

“Subsidiary” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (a) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (b) that is, at any time any determination is made, otherwise Controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.

2. Note and Warrant Purchase Agreement. This note (the “Note”) is issued pursuant to the terms of that certain Promissory Note and Warrant Purchase Agreement (the “Agreement”) dated as of June 11, 2009, by and among the Company and the investors set forth in the Schedule of Investors attached thereto as Exhibit A. This Note is one of a series of notes (the “Notes”) having like tenor and effect (except for variations necessary to express the name of the holder, the principal amount of each of the Notes and the date on which each Note is issued) issued or to be issued by the Company in accordance with the terms of the Agreement. The Notes shall rank equally without preference or priority of any kind over one another, and all payments on account of principal and interest with respect to any of the Notes shall be applied ratably and proportionately on the outstanding Notes on the basis of the principal amount of the outstanding indebtedness represented thereby.

3. Maturity. Unless sooner paid in accordance with the terms hereof, the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable on the earlier of (i) June 27, 2009, (ii) the closing of a Qualified Asset Monetization, Qualified Financing Transaction or Qualified Stock Sale or (iii) the acceleration of the maturity of this Note by the Holder upon the occurrence of an Event of Default (such earlier date, the “Maturity Date”).

4. Payments.

(a) Form of Payment. All payments made hereunder shall be in lawful money of the United States of America to Holder, at the address specified in the Agreement, or at such other address as may be specified from time to time by Holder in a written notice delivered to the Company. Except as otherwise provided in the Collateral Documents, all payments shall be applied first to accrued interest, and thereafter to principal.

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(b) Interest Payments. The Company shall pay to Holder accrued interest and unpaid interest on the Maturity Date or on the prepayment date as applicable. Interest at the rate first set forth above shall accrue on any interest which has not been paid on the date on which it is payable until such time as payment therefor is actually delivered to Holder.

(c) Origination Fee. The Company shall pay to Holder an origination fee (“Origination Fee”) equal to the original principal amount of this Note multiplied by 0.0333. The Origination Fee shall be payable at the Maturity Date.

(d) Prepayment. The Company may at any time, without the consent of the Holder, prepay any amounts owing under this Note in whole or in part without penalty.

(e) Unsecured Nature of Note. The Company’s obligations hereunder shall be unsecured.

5. Default.

(a) Events of Default. For purposes of this Note, any of the following events which shall occur shall constitute an “Event of Default”:

(i) any indebtedness under this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration, thirty-five (35) days following notice of prepayment or otherwise, and any such amount shall remain unpaid for a period of 14 days after the due date thereof;

(ii) default shall occur in the observance or performance of (A) any covenant, obligation or agreement of the Company contained in this Note, or the Agreement and such default shall continue uncured for a period of 30 days after the Company knew of the event or circumstances giving rise to such default;

(iii) any representation, warranty or certification made by the Borrower herein or in the Agreement or in any certificate, report, document, agreement or instrument delivered pursuant to any provision hereof or thereof shall prove to have been false or incorrect in any material respect on the date or dates as of which made (any such falsity being a “Representation Default”) and, to the extent the event or circumstances giving rise to such Representation Default is amenable to being cured such that the Representation Default would no longer exist, such Representation Default shall continue uncured for a period of 30 days after the Borrower knew or should have known, exercising reasonable diligence, of the event or circumstances giving rise to such Representation Default;

(iv) the Borrower shall (A) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of itself or any part of its property, (B) become subject to the appointment of a receiver, trustee, custodian or liquidator for itself or any part of its property if such appointment is not terminated or dismissed within sixty (60) days, (C) make an assignment for the benefit of creditors, (D) or fail generally or admit in writing to its inability to pay its debts as they become due, (E) institute any proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally, or file a petition or

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answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law, or file an answer admitting the material allegations of a bankruptcy, reorganization or insolvency petition filed against it, or (F) become subject to any involuntary proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally, which proceeding is not dismissed within sixty (60) days of filing, or have an order for relief entered against it in any proceeding under the United States Bankruptcy Code;

(v) the Borrower shall (i) liquidate, wind up or dissolve (or suffer any liquidation, wind-up or dissolution), (ii) suspend its operations other than in the ordinary course of business, or (iii) take any action to authorize any of the actions or events set forth above in this Section 5(a)(v); or

(vi) a Change of Control of the Company has occurred.

(b) Consequences of Events of Default.

(i) If any Event of Default shall occur for any reason, whether voluntary or involuntary, and be continuing, the Requisite Holders may, upon notice or demand, declare the outstanding indebtedness under this Note to be due and payable, whereupon the outstanding indebtedness under this Note shall be and become immediately due and payable, and the Borrower shall immediately pay to Holder all such indebtedness. Upon the occurrence of an actual or deemed entry of an order for relief with respect to the Company under the United States Bankruptcy Code, then all indebtedness under this Note shall automatically be due immediately without notice of any kind. The Borrower agrees to pay Holder all out-of-pocket costs and expenses incurred by Holder in any effort to enforce, interpret, or collect indebtedness under, this Note, including reasonable attorneys’ and expert fees, and to pay interest at the lesser of (A) Default Rate hereunder and (B) the highest rate permitted by applicable law, on such costs and expenses to the extent not paid when demanded.

(ii) Holder shall also have any other rights which Holder may have been afforded under any contract or agreement at any time and any other rights which Holder may have pursuant to applicable law. Holder may exercise any and all of its remedies under the Collateral Documents and the other Transaction Documents contemporaneously or separately from the exercise of any other remedies hereunder or under applicable law.

6. Lost, Stolen, Destroyed or Mutilated Notes. In case any Note shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Note of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any mutilated Note, or in lieu of any Note lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Note.

7. Governing Law. This Note is to be construed in accordance with and governed by the laws of the State of California.

8. Amendment and Waiver. Any term of this Note and all Notes issued pursuant to the Agreement may be amended and the observance of any term of this Note and all Notes issued pursuant to the Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Requisite Holders. Any amendment or waiver effected in accordance with this Section shall be binding upon the Company, Holder and the holders of all Notes issued pursuant to the Agreement.

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9. Notices. Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Note shall be made in accordance with Section 7.6 of the Agreement.

10. Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of the Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

11. Assignment. The Company shall not have the right to assign its rights and obligations hereunder or any interest herein.

12. Remedies Cumulative; Failure or Indulgence Not a Waiver. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents. No failure or delay on the part of Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

13. Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of Holder as of the date of issuance hereof, shall initially be the address for Holder as set forth in the Agreement); provided that Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and Holder’s wire transfer instructions. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest.

14. Excessive Interest. Notwithstanding any other provision herein to the contrary, this Note is hereby expressly limited so that the interest rate charged hereunder shall at no time exceed the maximum rate permitted by applicable law. If, for any circumstance whatsoever, the interest rate charged exceeds the maximum rate permitted by applicable law, the interest rate shall be reduced to the maximum rate permitted, and if Holder shall have received an amount that would cause the interest rate charged to be in excess of the maximum rate permitted, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing hereunder (without charge for prepayment) and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal, such excess shall be refunded to the Company.

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15. Waiver of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Transaction Documents.

IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its officers, thereunto duly authorized as of the date first above written.

CARDIUM THERAPEUTICS, INC.
By:
Name:	Christopher J. Reinhard
Title:	Chief Executive Officer
By:
Name:	Tyler M. Dylan
Title:	Chief Business Officer, General Counsel, Executive Vice President and Secretary

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EX-4.2

Exhibit 4.2

COMMON STOCK PURCHASE WARRANT

CARDIUM THERAPEUTICS, INC.

Warrant Shares: _______                                                      Initial Exercise Date: **See Section 1**

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time commencing on the Initial Exercise Date and through and including June 11, 2014 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Cardium Therapeutics, Inc., a Delaware corporation (the “Company”), up to ______ shares (the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Notwithstanding anything herein to the contrary, this Warrant shall automatically become null and void immediately upon the occurrence of NYSE AMEX’s “rejection” of the Additional Listing Application as determined in accordance with Section 1.2(c) of the Purchase Agreement.

Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Note and Warrant Purchase Agreement (the “Purchase Agreement”), dated June 11, 2009, among the Company and the purchasers signatory thereto. In addition to the terms defined elsewhere in this Warrant, for all purposes of this Warrant, the following terms have the meanings set forth in this Section 1:

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of, or consultants or advisors to, the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Initial Closing, provided that such securities have not been amended since date of the Initial Closing to increase the number of such

securities or to decrease the exercise, exchange or conversion price of such securities, (c) securities issued in connection with acquisitions, sponsored research, collaborations, technology license, development, marketing or other similar agreements or strategic transactions approved by a majority of the disinterested directors of the Company (the primary purpose of which is not to raise equity capital), (d) shares of Common Stock by reason of a stock split, combination or dividend, (e) securities issued to banks, equipment lessors or other financial institutions in connection with loans made to the Company, and (f) securities issued to suppliers or third party service providers in connection with the provision of goods or services (the primary purpose of which is not to raise equity capital).

“Initial Exercise Date” shall mean the earliest to occur of (a) the date upon which the Additional Listing Application is approved by NYSE AMEX or (b) the date upon which the Company’s Common Stock is delisted from NYSE AMEX.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Trading Day” means a day on which NYSE AMEX is open for trading.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Shares then outstanding and reasonably acceptable to the Company, the reasonable fees and expenses of which shall be paid by the Company.

Section 2. Exercise.

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial

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Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company); and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $2.00, subject to adjustment hereunder (the “Exercise Price”).

c) Payment for Shares. The aggregate purchase price for Warrant Shares being purchased hereunder may be paid either (i) by cash or wire transfer of immediately available funds, (ii) by surrender of a number of Warrant Shares which have a fair market value equal to the aggregate purchase price of the Warrant Shares being purchased (“Net Issuance”) as determined herein, or (iii) any combination of the foregoing. If the Holder elects the Net Issuance method of payment, the Company shall issue to Holder upon exercise a number of shares of Warrant Shares determined in accordance with the following formula:

X=	Y(A-B)
	A

where: (X) =	the number of Warrant Shares to be issued to the Holder;
(A) =	the VWAP on the Trading Day immediately preceding the date of such election;
(B) =	the Exercise Price of this Warrant, as adjusted; and

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

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d) Exercise Limitations.

i) Holder’s Restrictions. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d)(i) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d)(i), in

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determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of this Section 2(d)(i) may be waived by the Holder upon prior notice to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d)(i) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

e. Mechanics of Exercise.

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

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2(e)(vi) prior to the issuance of such shares, have been paid. If the Company fails for any reason to deliver to the Holder certificates evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant 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 Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $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 Warrant Share Delivery Date until such certificates are delivered.

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

iii. Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker 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 Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the

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number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. 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 exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) 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 exercise of the Warrant as required pursuant to the terms hereof.

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

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

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

Section 3. Certain Adjustments.

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution or

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

b) Subsequent Equity Sales. Until the six-month anniversary of the Closing Date, if the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents (a “Subsequent Equity Sale”) entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to exercise this Warrant at the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.

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c) Subsequent Rights Offerings. If the Company, at any time while the Warrant 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 less than the VWAP at the record date mentioned below, then the Exercise 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 so offered (assuming receipt by 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 Warrant is outstanding, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends other than regular cash dividends paid out of earnings or earned surplus, determined in accordance with GAAP) or rights or warrants to subscribe for or purchase any security other than the Common Stock), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise 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 per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one 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.

e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the

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Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(e) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor entity shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, an amount of cash equal to the value of this Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction and (iii) an expected volatility equal to the 100 day volatility obtained from the “HVT” function on Bloomberg L.P. determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction.

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

g) Notice to Holder.

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i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company enters into a Variable Rate Transaction (as defined in the Purchase Agreement), despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of a Fundamental Transaction; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification or Fundamental Transaction is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.

Section 4. Transfer of Warrant.

a) Transferability. Subject to compliance with applicable federal and state securities laws and the transfer restrictions set forth in the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this

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Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

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

Section 5. Miscellaneous.

a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(e)(i).

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall include the posting of a bond if reasonably required by the Company), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

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

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d) Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

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

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

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

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

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

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

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

l) Amendment. This Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), only if such amendment, modification or waiver is in writing and only with the written consent of the Company and the Holder.

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

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

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

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

CARDIUM THERAPEUTICS, INC.
By:
	Tyler Dylan Chief Business Officer, General Counsel, Executive Vice President and Secretary

[Signature Page to Warrant]

NOTICE OF EXERCISE

TO: _______________________

(1) The undersigned hereby elects to purchase ___________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Payment shall take the form of (check applicable box):

¨ in lawful money of the United States; or

¨ the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

(4) The undersigned represents that it is acquiring such securities for its own account for investment and not with a view to or for sale in connection with any distribution thereof and in order to induce the issuance of such securities makes to the Company, as of the date hereof, the representations and warranties set forth in Section 3 of the Note and Warrant Purchase Agreement, dated as of June 11, 2009, by and among the Company and the investors listed on Exhibit A thereto.

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

________________________________________

________________________________________

________________________________________

SIGNED: ______________________________

Name of Individual Holder:

Name of Entity Holder:

Name of Authorized Signatory: 

Title of Authorized Signatory:

Date: _______________________

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [    ] all of or _______________ shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to:

_______________________________________________ whose address is:

Dated: ______________, _______

Holder’s Signature:

Holder’s Address:

Signature Guaranteed: _______________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-10.1

Exhibit 10.1

PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT

THIS PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is made as of June 11, 2009 by and between Cardium Therapeutics, Inc., a Delaware corporation (“Cardium” or the “Company” or the “Borrower”), and the individuals or entities listed on Schedule A hereto, each of which is herein referred to as a “Lender.”

THE PARTIES HEREBY AGREE AS FOLLOWS:

SECTION 1

ISSUANCE OF PROMISSORY NOTES

1.1 Issuance of Promissory Notes. Subject to the terms and conditions of this Agreement, at each Closing (as defined below), the Borrower shall issue and sell to each Lender participating in such Closing a 12% unsecured promissory note (each such note, a “Note” and collectively, the “Notes”) in the principal amount (the “Principal Amount”) equal to the amount set forth below Lender’s name on the signature page of this Agreement and on Schedule A attached hereto, against payment by such Lender to the Company of the Principal Amount. The Notes shall each be in the form of Exhibit A attached hereto. Capitalized but otherwise undefined terms used herein shall have the meanings provided therefor in the Notes.

1.2 Warrants.

(a) Issuance of Warrants. Subject to the terms and conditions of this Agreement, at each Closing, the Company shall issue to each Lender that has purchased a Note hereunder, with respect to each such Note, a warrant (the “Warrants”), in the form of Exhibit B attached hereto, representing the right to purchase up to that number of shares of Common Stock of the Company (the “Warrant Shares”) (as may be adjusted following the issuance of the Warrants on the terms provided therein) calculated as follows:

number of shares of Common Stock issuable upon exercise of the Warrant = Principal Amount of Note x 0.67

The Warrants shall, unless sooner terminated as provided therein, have a term of five years from the date of issuance and shall be exercisable at an exercise price (subject to adjustment as set forth in the Warrants) equal to the $2.00 per share.

(b) Exercisability of Warrants. The Warrants issued by the Company pursuant to subsection (a) above shall not be immediately exercisable, but shall only become exercisable immediately upon the earliest to occur of (i) the approval for listing of the Warrant Shares on NYSE AMEX or (ii) the delisting of the Company’s Common Stock from NYSE AMEX. In connection therewith, the Company hereby covenants to use its commercially reasonable best efforts to prepare, and within five business days following the final Closing hereunder file with NYSE AMEX, an application (the “Additional Listing Application”) to have the Warrant Shares approved for listing on NYSE AMEX.

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(c) Substitute Warrants. In the event NYSE AMEX rejects the Additional Listing Application, the Warrants delivered pursuant to subsection (a) above shall automatically become null and void, and the Company shall cause Christopher J. Reinhard, President and Chief Executive Officer of the Company (“Reinhard”), and Reinhard hereby agrees in such case, to transfer to each holder of such Warrants (“Voided Warrants”) a warrant (a “Substitute Warrant”) from the warrants obtained by Reinhard in connection with the Company’s offering of senior secured notes in November 2008 exercisable for the same number of shares of the Company’s Common Stock as such holder’s Voided Warrant but shall have an expiration date of November 5, 2013. The Substitute Warrants shall be subject to the terms and conditions set forth therein. The form of Substitute Warrant is attached hereto as Exhibit C. Each Lender hereby agrees that the delivery of a Substitute Warrant as contemplated herein shall constitute full satisfaction of the Company’s obligation to deliver Warrants pursuant to this Section 1.2. NYSE AMEX shall be deemed to have rejected the Additional Listing Application upon the occurrence of either of the following: (i) NYSE AMEX delivers notice to the Company rejecting the Additional Listing Application or (ii) NYSE AMEX does not otherwise approve the Additional Listing Application within forty-five (45) calendar days after the Company’s filing of such application, unless the Company’s Common Stock is no longer listed on the NYSE AMEX on such date. The Lenders acknowledge and agree that the Company shall be under no obligation to modify, or seek to modify, the terms of the Warrants or any other Transaction Documents (as defined in Section 2.3(g) below) in order to obtain NYSE AMEX approval of the Additional Listing Application, although it reserves the right to do so.

SECTION 2

CLOSINGS

2.1 Initial Closing. The initial closing of the purchase and sale of Notes hereunder (the “Initial Closing”) shall be held at the offices of K&L Gates LLP, 3580 Carmel Mountain Road, Suite 200, San Diego, California or remotely by facsimile transmission or other electronic means, on the date of this Agreement. There is no minimum principal amount of Notes that must be issued and sold at the Initial Closing or any other Closing hereunder.

2.2 Subsequent Closings. The Borrower may issue and sell Notes in the aggregate principal amount of up to $750,000 hereunder. Subsequent to the Initial Closing and subject to the foregoing limitation, the Borrower may issue and sell additional Notes to such additional investors as it shall select in its sole and absolute discretion. Any such additional investor shall execute and deliver a counterpart signature page to this Agreement, and thereby become a party to and be deemed a Lender hereunder. All additional Lenders and all additional Principal Amounts invested hereunder shall be reflected on Schedule A, which shall be automatically amended without any further action by any party hereto. The closing of the purchase and sale of such additional Notes hereunder shall be held at the offices of K&L Gates LLP, 3580 Carmel Mountain Road, Suite 200, San Diego, California or remotely by facsimile transmission or other electronic means (which closing, together with the Initial Closing, are designated as a “Closing”).

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2.3 Conditions. The several obligations of the Lenders to purchase the Notes on the date of the Initial Closing shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 2.3.

(a) Representations and Warranties Correct; Performance of Obligations. The representations and warranties made by Borrower contained herein shall be true and correct in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects), and Borrower shall have performed, satisfied and complied with all covenants, agreements and conditions herein required to be performed, satisfied or complied with by it at or prior to the Closing.

(b) Consents and Waivers. Borrower shall have obtained any and all consents (including all governmental or regulatory consents, approvals or authorizations required in connection with the valid execution and delivery of this Agreement), permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement.

(c) Judgments. No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated in this Agreement.

(d) Stop Orders. No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Company’s Common Stock.

(e) CEO/CFO Certificate. Borrower shall have delivered a Certificate, executed on behalf of Borrower by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b), (c) and (d) above. This item shall be applicable for all Subsequent Closings as well.

(f) Opinion of Borrowers’ Counsel. Lender shall have received from K&L Gates LLP, counsel to the Borrowers, an opinion dated the Closing Date and in substantially the form attached hereto as Schedule B. This item shall be applicable for all Subsequent Closings as well.

(g) Resolutions, etc. The Lenders shall have received (i) a certificate, dated the Closing Date, of an authorized signatory of each Borrower as of the date of the Initial Closing certifying (A) copies of the resolutions and other actions taken or adopted by the Borrowers authorizing the execution, delivery and performance of the Transaction Documents (as defined below) to which the Borrower is a party, and (B) the Organic Documents (as defined in the Note) of the Borrowers (which shall also be certified by the Secretary of State (or other appropriate Governmental Authority) of the state in which the Borrower is organized or formed

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(to the extent available)), (ii) a good standing certificate with respect to the Borrowers as of a date within 5 days of the Initial Closing from the Secretary of the State (or other appropriate Governmental Authority) of the state in which the Borrower is organized or formed, and (iii) evidence of qualification of the Borrowers to do business in California. As used herein, the “Transaction Documents” means this Agreement, the Notes, the Warrants and any other and all other certificates, documents, agreements and instruments delivered to the Lenders under or in connection with this Agreement.

(h) Substitute Warrant Transfer Documents. Borrower shall have delivered to K&L Gates LLP duly executed documents, in form and substance reasonably acceptable to Littman Krooks LLP, counsel to the Placement Agent, sufficient to transfer the Substitute Warrants to the Lenders in the event the Substitute Warrants are required to be delivered to the Lenders pursuant to Section 1.2(c).

2.4 Delivery. At each Closing (i) each Lender participating in such Closing shall deliver a check or wire transfer of immediately available funds in the amount of such Lender’s Principal Amount of Notes purchased with respect to such Closing payable to the Company for deposit in the segregated account maintained by the Company for the purposes of the transactions contemplated herein as follows: City National Bank, account of Cardium Therapeutics, Inc., ABA Number: 122016066, Account Number: 113066938 and (ii) the Borrower shall execute and deliver to each such Lender a Note reflecting the name of the Lender, a Principal Amount equal to such Lender’s principal amount and the date of such Closing, and the Company shall execute and deliver to each such Lender a Warrant as contemplated by Section 1.2. Each such Note shall be a binding obligation of the Borrower upon execution thereof by the Borrower and delivery thereof to a Lender. Each such Warrant shall be a binding obligation of the Company upon execution thereof by the Company and delivery thereof to a Lender.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF LENDERS

Each Lender hereby severally represents, warrants and covenants to the Borrower as follows:

3.1 Purchase for Own Account. Such Lender is acquiring the Notes, the Warrants and the Common Stock issuable upon exercise of the Warrants (collectively, the “Securities”) solely for investment for such Lender’s own account not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and such Lender has no present intention of selling, granting any participation in, or otherwise distributing the same. The acquisition by such Lender of any of the Securities shall constitute confirmation of the representation by such Lender that such Lender does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.

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3.2 Disclosure of Information. Such Lender has (i) received all the information it considers necessary or appropriate for deciding whether to acquire the Securities, and (ii) reviewed the documents filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from the end of its most recently completed fiscal year through the date hereof including, without limitation, its most recent reports on Form 10-K and Form 10-Q (together with all exhibits thereto) which are available for viewing on the SEC’s EDGAR website located at http://www.sec.gov or were furnished by the Company upon request. Such Lender further represents that it has had an opportunity to ask questions and receive answers from the Borrower regarding the terms and conditions of the offering of the Securities and the business, properties, prospects and financial condition of the Borrower.

3.3 Investment Experience. Either (i) such Lender or its officers, directors, managers or controlling persons has a preexisting personal or business relationship with the Company or its officers, directors or controlling persons, or (ii) such Lender, by reason of its own business and financial experience, has the capacity to protect its own interests in connection with the investment contemplated hereby. Such Lender represents that it is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. Such Lender acknowledges that any investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment. Such Lender further represents that it has reviewed the Risk Factors which are attached to this Agreement as Exhibit D hereto.

3.4 Accredited Lender. Such Lender represents that it is an “accredited investor” within the meaning of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as presently in effect and, for the purpose of Section 25102(f) of the California Corporations Code, he or she is excluded from the count of “purchasers” pursuant to Rule 260.102.13 thereunder.

3.5 Restrictions on Transfer. Such Lender understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the “Act”), only in certain limited circumstances. In this connection, such Lender represents that it is familiar with Rule 144 (as defined in Section 6.6), as presently in effect, and understands the resale limitations imposed thereby and by the Act. SUCH LENDER UNDERSTANDS AND ACKNOWLEDGES HEREIN THAT AN INVESTMENT IN THE COMPANY’S SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND MAY RESULT IN A COMPLETE LOSS OF HIS, HER OR ITS INVESTMENT. Such Lender understands that the Securities have not been and will not be registered under the Act and have not been and will not be registered or qualified in any state in which they are offered, and thus the Lender will not be able to resell or otherwise transfer his, her or its Securities unless they are registered under the Act and registered or qualified under applicable state securities laws, or an exemption from such registration or qualification is available. Such Lender has no immediate need for liquidity in connection with this investment and does not anticipate that it will need to sell his, her or its Securities in the foreseeable future.

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3.6 Further Limitations on Disposition. Without in any way limiting the representations set forth above, such Lender further agrees not to make any disposition of all or any portion of the Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 3 and any other agreement which the holders of Common Stock are required to execute and deliver, and:

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

(b) (i) such Lender shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if reasonably requested by the Company, such Lender shall have furnished the Company with an opinion of counsel reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances.

(c) Notwithstanding the provisions of subsections (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Lender that is a partnership or limited liability company to a partner of such partnership or a member of such limited liability company or a retired partner of such partnership who retires after the date hereof or a retired member of such limited liability company who retires after the date hereof, or to the estate of any such partner, retired partner, member or retired member or the transfer by gift, will or intestate succession by any partner or member to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or member or his or her spouse, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if he or she were an original Lender hereunder.

3.7 Certain Trading Activities. Other than with respect to this Agreement and the purchase or sales contemplated herein, since the time that such Lender was first contacted by the Company or the Placement Agent, neither such Lender nor any Affiliate (as defined by Rule 405 promulgated pursuant to the Act) of such Lender which (x) had knowledge of the transactions contemplated hereby, (y) has or shares discretion relating to such Lender’s investments and trading or information concerning such Lender’s investments and (z) is subject to such Lender’s review or input concerning such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Lender or Trading Affiliate, effected or agreed to effect any purchases or sales of securities of the Company. Such Lender hereby covenants and agrees not to, and shall cause its Trading Affiliates not to, engage, directly or indirectly, in any purchases or sales of securities of the Company during the period from the date hereof until such time as the transactions contemplated by this Agreement are first publicly announced.

3.8 Brokers and Finders. No Lender will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Borrower or any other Lender for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Lender. Lender acknowledges the fees payable by the Company to Empire Asset Management Company in connection with the transactions contemplated herein as described in Section 7.16.

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SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

Borrower hereby represents, warrants and covenants to each Lender that:

4.1 Organization, Good Standing and Qualification; Licenses. Borrower is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own and hold under lease its property and to carry on its business as currently conducted (and further with respect to the Company as described in the documents filed by the Company under the Exchange Act), except where the failure to hold any such licenses, permits, registrations and other approvals would not reasonably be expected to have a “Material Adverse Effect”. Borrower is qualified to do business and is in good standing in the State of California and in each jurisdiction in which it conducts business other than such jurisdictions where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

4.2 Authorization. Borrower has taken all action necessary for the authorization, execution and delivery of this Agreement, the performance of its obligations hereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Securities. Each of the Transaction Documents to which the Borrower is a party constitutes the valid and legally binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

4.3 Litigation. Except as described in the reports filed by the Company pursuant to the Exchange Act, there is no action, suit, proceeding or investigation pending or, to the knowledge of the Borrower, currently threatened against the Borrower that questions the validity of this Agreement, the right of the Borrower to enter into this Agreement, or to consummate the transactions contemplated hereby, or that has or could reasonably be expected to result, either individually or in the aggregate, in any Material Adverse Effect. Except as disclosed in the SEC Reports, there is no action, suit, proceeding or investigation by the Borrower currently pending or which the Borrower intends to initiate.

4.4 Absence of Required Consents; No Violations. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required in connection with the execution, delivery and performance by, or enforcement against, the Borrower of the Transaction Documents, except for such filing(s) pursuant to applicable state securities laws as may be necessary, which filings will be timely effected after the relevant Closing. The Borrower is not in violation or default (i) of any provision of its Organic Documents, or (ii) of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or, to the best of its knowledge, of any

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provision of any federal or state statute, rule or regulation which is, to the best of its knowledge, applicable to the Borrower, except in the case of this clause (ii) for such violations or defaults which do not, or could not reasonably be expected to result in a Material Adverse Effect. As of the Initial Closing, the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby will not, result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any Lien upon any material assets of the Borrower or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Borrower, its business or operations or any of its assets or properties, except for such results which could not reasonably be expected to result in a Material Adverse Effect.

4.5 Offering. Subject in part to the truth and accuracy of each Lender’s representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Notes and Warrants (and the Substitute Warrants, if so issued) as contemplated by this Agreement are exempt from the registration requirements of the Act and will not result in a violation of the qualification or registration requirements of the any applicable state securities laws.

4.6 Valid Issuance of Common Stock. The shares of Common Stock issuable upon exercise of the Warrants (or the Substitute Warrants, if so issued), when issued, sold and delivered in accordance with the terms of the Warrants (or the Substitute Warrants, if so issued) for the consideration expressed therein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement.

4.7 SEC Reports. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

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4.13 Liabilities. The Borrower has no material contingent liabilities, except current liabilities incurred in the ordinary course of business and liabilities disclosed in the SEC Reports.

4.17 No Brokers. Except as set forth in Section 7.16, the Borrower has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

4.18 Use of Proceeds. The proceeds of from the sale of the Notes shall be used only for general working capital purposes.

4.19 Disclosure. No representation, warranty or other statement made by the Borrower herein or in any certificate or written statement furnished to the Lenders contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading, it being recognized by the Lenders that any projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results. The Borrower confirms that, except with respect to this Agreement and the transactions contemplated thereby, neither it nor any other Person acting on its behalf has provided the Investors or their agents or counsel with any information that constitutes or might constitute material, nonpublic information.

SECTION 5

COVENANTS

5.1 Notice to Lenders. Borrower shall give prompt notice to Lenders of any change in the accuracy in any material respect of any of the representations and warranties provided in Section 4 above. The Company will advise the Lenders, promptly after it receives notice from NYSE AMEX as to the approval or rejection of the Additional Listing Application. The Company will also advise the Lenders, promptly after it receives notice of issuance by the Securities and Exchange Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.

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SECTION 6

REGISTRATION RIGHTS

6.1 Company Registration. If (but without any obligation to do so) the Company proposes to register any of its stock or other securities under the Act, whether for its own account or for the account of another stockholder (other than a registration relating solely to the sale of securities to participants in a Company stock plan for employees, consultants or directors on Form S-8, a registration relating to a corporate reorganization or other transaction under Rule 145, the Company shall, at such time, promptly give each Lender written notice of such registration. Upon the written request of a Lender given within twenty (20) days after mailing of such notice by the Company in accordance with Section 7.6, the Company shall, subject to the provisions of this Section 6, use commercially reasonable efforts to cause to be registered under the Act all of the Registrable Securities (as defined in Section 6.6) that a Lender has requested to be registered.

(a) The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 6 prior to the effectiveness of such registration whether or not any Lender has elected to include securities in such registration.

(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under this Section 6 to include any Lender’s securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it and enter into an underwriting agreement in customary form with an underwriter or underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders of the Company to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be allocated first, to the Company, and second, pro rata among the selling stockholders of the Company according to the total amount of securities held by such selling stockholders entitled to be included therein pursuant to registration rights held by such selling stockholders or in such other proportions as shall mutually be agreed to by such selling stockholders). For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder that is a partnership or corporation, the partners, retired partners and stockholders of such selling stockholder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling stockholder,” and any pro rata reduction with respect to such “selling stockholder” shall be based upon the aggregate amount of Registrable Securities owned by all such related entities and individuals. Notwithstanding any provision hereof to the contrary, as a condition to the reduction or exclusion of any such Lender securities in an offering, no securities held by or on account of any officer, director or Affiliate of the Company shall be included in such offering.

(c) Except as disclosed in the SEC Reports (as defined below), the Company has not granted any registration rights other than as contemplated herein. As used herein, “SEC Reports” means all reports, schedules, forms, statements and other documents required to be filed by the Company under the Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material), including the exhibits thereto and documents incorporated by reference therein.

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6.2 Furnish Information. It will be a condition precedent to the obligations of the Company to take any action pursuant to Section 6.1 hereof that Lenders will furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as will be required to effect the registration of their Registrable Securities.

6.3 Indemnification. In the event any Registrable Securities are included in a registration statement under Section 6.1 hereof:

(a) To the extent permitted by law, the Company will indemnify and hold harmless Lender, the partners, stockholders, officers and directors of Lender, any underwriter (as defined in the Act) for Lender and each Affiliate of Lender or underwriter against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon a Violation (as defined in Section 6.6), and the Company will reimburse Lender, partner, stockholder, officer or director, underwriter or Affiliate thereof for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 6.3(a) will not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld, delayed or conditioned), nor will the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs solely in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by Lender or partner, stockholder, officer, director, underwriter or controlling person of Lender.

(b) To the extent permitted by law, Lender will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each Affiliate of the Company, any underwriter and any other investor purchasing shares of Common Stock and warrants to purchase shares of Common Stock at the Closing that is selling securities under such registration statement or any of such other investor’s partners, directors, officers, stockholders or any person who controls such investor within the meaning of the Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such investor, partner or director, officer, stockholder or controlling person of such other investor may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation that arises solely as a result of written information furnished by Lender expressly for use in connection with such registration; and Lender will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other investor, partner, officer, director, stockholder or controlling person of such other investor in connection with investigating or defending any such loss, claim, damage, liability or action: provided, however, that the indemnity agreement contained in this Section 6.3(b) will not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of Lender, which consent will not be unreasonably withheld, delayed or conditioned; and provided further, that the total amounts payable in indemnity by Lender under this Section 6.3(b) in respect of any Violation will not exceed the aggregate net proceeds received by Lender upon the sale of the Registrable Securities.

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(c) Promptly after receipt by an indemnified party under this Section 6.3 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.3, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party will have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party will have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if (i) representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding or (ii) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to the indemnified party. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action will relieve such indemnifying party of liability, but only to the extent that the failure to give notice shall materially adversely affect the indemnifying party in the defense of such claim.

(d) If the indemnification provided for in Sections 6.3(a) or 6.3(b) hereof shall be unavailable to hold harmless an indemnified party in respect of any liability under the Act, then, and in each such case, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statement or omission that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided that in no event shall any contribution under this subsection (d) by Lender exceed the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6.3) received by it upon the sale of the Registrable Securities giving rise to such contribution. No person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person or entity that was not guilty of such fraudulent misrepresentation.

(e) The obligations of the Company and each Lender under this Section 6.3 will survive the completion of any offering of Registrable Securities in a registration statement, and otherwise.

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6.4 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Securities to the public without registration, while a public market exists for the Common Stock of the Company, the Company will:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144, at all times while Registrable Securities are outstanding;

(b) Use its commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act (at any time it is subject to such reporting requirements); and

(c) So long as Lender owns any Registrable Securities, furnish to Lender forthwith upon request a written statement by Lender to the Company as to its compliance with the reporting requirements of Rule 144, and of the Act and the Exchange Act (at any time it is subject to the reporting requirements of the Exchange Act), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as Lender may reasonably request in availing itself of any rule or regulation of the SEC allowing Lender to sell any such securities without registration (at any time the Company is subject to the reporting requirements of the Exchange Act).

6.5 Expenses. All fees and expenses (other than discounts and commissions) incident to the performance of or compliance with this Section 6 by the Company shall be borne by the Company whether or not any Registrable Securities are sold by Lender pursuant to a registration statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the Trading Market (as defined in Section 6.6) on which the Common Stock is then listed for trading, and (B) in compliance with applicable state securities or Blue Sky laws, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, and (iv) fees and disbursements of counsel and independent public accountants for the Company, (v) fees and disbursements of one counsel to the Lenders not to exceed $15,000 and (vi) filing fees and counsel fees of any placement agent (counsel fees not to exceed $5,000) if a determination is made that a FINRA Rule 2710 filing is required to be made with respect to such registration statement.

6.6 Definitions. The following definition shall be applicable to Section 6.

“Registrable Securities” shall mean the Warrant Shares; provided, that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the Act, or (B) such security becoming eligible for sale by the Lenders pursuant to Rule 144 without any restrictions.

“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“Trading Market” means whichever of the New York Stock Exchange, the NYSE AMEX, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

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“Violations” means (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such registration statement.

SECTION 7

MISCELLANEOUS

7.1 Survival of Representations, Warranties and Covenants. The warranties, representations and covenants of the Borrower and Lenders contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and all Closings and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Lenders or the Borrower.

7.2 Successors and Assigns. Except as otherwise provided therein, the terms and conditions of this Agreement and the other Transaction Documents shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Securities). The Securities shall be transferable upon obtaining the prior written consent of the Company and subject to compliance with applicable securities laws and Section 3. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

7.3 Governing Law; Venue; Jury Trial Waiver. This Agreement is to be construed in accordance with and governed by the laws of the State of California without regard to its conflicts of laws principles. Any action or proceeding arising out of or relating to this Agreement or arising out of or in any manner relating to the relationship between the parties shall only be brought in the state or federal courts in San Diego, California, and each of the parties hereto unconditionally submits to the personal jurisdiction of such court (and of the appropriate appellate courts wherever located) in any such action or proceeding, and selects the courts in San Diego, California for proper venue in any such action or proceeding. EACH OF THE LENDERS AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THIS AGREEMENT.

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7.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

7.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

7.6 Notices. Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party; (b) when sent by facsimile to the number set forth below a party’s name on the signature pages hereof if sent between 8:00 a.m. and 5:00 p.m. recipient’s local time on a Business Day, or on the next Business Day if sent by facsimile to the number set forth below a party’s name on the signature pages hereof if sent other than between 8:00 a.m. and 5:00 p.m. recipient’s local time on a Business Day; (c) three Business Days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party at the address set forth below a party’s name on the signature pages hereof; or (d) the next Business Day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties as set forth below a party’s name on the signature pages hereof with next Business Day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider. Each Person making a communication hereunder by facsimile shall promptly confirm by telephone to the Person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication. A party may change or supplement the addresses set forth below such party’s name on the signature pages hereof, or designate additional addresses, for purposes of this Section 7.6 by giving the other party written notice of the new address in the manner set forth above.

7.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only if such amendment, modification or waiver is in writing and only with the written consent of the Company and the Requisite Holders. Any amendment or waiver effected in accordance with this section shall be binding upon each holder of any Securities acquired under this Agreement at the time outstanding (including securities into which such Securities are convertible), each future holder of all such Securities, and the Company. In addition, the Company may at any time prior to the Initial Closing modify the anti-dilution provisions contained in the Warrants to satisfy any requirements that NYSE AMEX may impose under its rules without first obtaining the prior written consent of the Lenders. However, in such event, potential investors will be provided notice of any of such changes prior to the Initial Closing and, if such changes are material, potential investors may withdraw from the Initial Closing.

7.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

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7.9 Corporate Securities Law. THE SALE OF ANY SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

7.10 Expenses. Each party shall pay all of its own costs and expenses (including attorneys’ fees and disbursements) that it incurs with respect to the negotiation, execution and delivery of this Agreement.

7.11 Interpretation. In this Agreement and the other Transaction Documents, except to the extent the context otherwise requires: (i) any reference in this Agreement or other Transaction Document to a Section, a Schedule or an Exhibit is a reference to a Section thereof, a schedule thereto or an exhibit thereto, respectively, and to a subsection thereof or a clause thereof is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears; (ii) the words “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Agreement or other Transaction Document as a whole and not merely to the specific Section, subsection, paragraph or clause in which the respective word appears; (iii) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (iv) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto; (v) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; and (vi) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement or other Transaction Document.

7.12 Further Assurances. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurance as may be reasonably requested by any other party to evidence and reflect the transactions described in this Agreement and the other Transaction Documents and contemplated hereby and thereby and to carry into effect the intents and purposes of this Agreement and the other Transaction Documents.

7.13 Independent Nature of Lenders. The obligations of each Lender under any Transaction Document are several and not joint with the obligations of any other Lender, and no Lender shall be responsible in any way for the performance of the obligations of any other Lender under any Transaction Document. Each Lender shall be responsible only for its own representations, warranties, agreements and covenants hereunder. The decision of each Lender to purchase Securities pursuant to this Agreement has been made by such Lender independently of any other Lender and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries which may have been made or given by any other Lender or by any agent or employee of any other Lender, and

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no Lender or any of its agents or employees shall have any liability to any other Lender (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein or in any other Transaction Document, and no action taken by any Lender pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Lenders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Except as otherwise provided in any Transaction Document, each Lender shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

7.14 Confidentiality. The Lenders shall hold all non-public, proprietary or confidential information with respect to the Company obtained pursuant to or in connection with this Agreement in strict confidence. Notwithstanding the foregoing, such obligation of confidentiality shall not apply if the information or substantially similar information is or becomes part of the public domain other than as the result of a violation of this section.

7.15 Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.

7.16 Acknowledgment of Placement Agent and Fees. Each Lender acknowledges that it is aware that Empire Asset Management Company (the “Placement Agent”) will receive from the Company, in consideration of its services as non-exclusive placement agent in respect of the transactions contemplated hereby, (i) a success fee of 6% of the principal amount of Notes sold at each closing but only with respect to investments that it originates (“Empire Originated Investments”), payable in cash, (ii) a warrant to purchase a number of shares of Common Stock equal to 6% of the shares of Common Stock underlying warrants issued with respect of Empire Originated Investments, at each closing, at an exercise price of $2.00 per share, and (iii) reimbursement of reasonable documented out-of-pocket expenses.

7.17 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including, without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

*        *        *

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

LENDER

(Print Name of Individual or Entity)

By:

(Signature)

Name:

Title:

Address:

Social Security/Tax ID:

BORROWER:
CARDIUM THERAPEUTICS, INC.
By:
	Tyler Dylan, Chief Business Officer, General Counsel, Executive Vice President and Secretary
Address: 12255 El Camino Real; Suite 250 San Diego, California 92130 Attn: Tyler Dylan, Chief Business Officer
REINHARD:
As to Section 1.2(c) only:
Christopher J. Reinhard

Principal Amount

of Note Subscribed: $

By:

(Signature of Co-Lender)

Name:

(Co-Lender)

Principal Amount

of Note Issued:

Warrants:

EX-10.2

Exhibit 10.2

Empire Asset Management Company

2 Rector Street, 15th Floor

New York, NY 10006

June 5, 2009

Cardium Therapeutics, Inc.

12255 El Camino Real, Suite 250

San Diego, CA 92130

Re: Placement Agency Agreement

Gentlemen:

The undersigned, Cardium Therapeutics, Inc., a Delaware corporation (the “Cardium” or the “Borrower”), desires to offer for sale (the “Offering”) to certain “accredited investors” (each, an “Investor” and, collectively, the “Investors”) through Empire Asset Management Company as its non-exclusive placement agent (“Empire” or the “Placement Agent”) up to $750,000 of principal amount of Promissory Notes, with no minimum amount. Each Promissory Note is sometimes referred to as a “Note” and collectively as the “Notes”). In connection with its investment, Cardium will issue to the Investors warrants to purchase shares of its common stock, par value $0.0001 per share (the “Common Stock”) equal to Sixty Seven Percent (67%) of the Principal Amount of Notes purchased (each, a “Warrant” and collectively, the “Warrants”), subject to adjustment and other contingencies as further described in the Warrants. The Notes and Warrants are hereinafter collectively referred to as the “Securities.”

The offering of the Securities will be made by the Borrower pursuant to that certain Note and Warrant Purchase Agreement, inclusive of all exhibits and schedules thereto, and all amendments, supplements and appendices thereto (the “Transaction Documents/Offering Materials”). Unless otherwise defined, each term used in this Agreement will have the same meaning as set forth in the Note and Warrant Purchase Agreement.

1. Agreement to Act as Placement Agent. The Borrower hereby appoints Empire to act as its non-exclusive placement agent in connection with the Offering. Empire hereby agrees, as agent of the Borrower, to solicit offers to purchase the Securities on a “reasonable efforts” basis. There is no minimum amount of Securities required to be purchased and sold. The Offering will commence on the date hereof and will continue until June 11, 2009, unless extended by the Borrower and the Placement Agent until July 10, 2009 or terminated earlier as provided herein (the “Offering Period”). The date on which the Offering shall terminate shall be referred to as the “Termination Date.”

Empire Asset Management Company

June 5, 2009

Page 2 of 13

2. Representations and Warranties of the Borrower. The Borrower represents and warrants to the Placement Agent as follows:

(a) With respect to actions taken by the Borrower, the Securities will be offered and sold pursuant to the registration exemption provided by Regulation D (“Regulation D”) as promulgated under Section 4(2) of the Securities Act of 1933, as amended (the “Act”) and Section 4(2) and/or Section 4(6) of the Act as a transaction not involving a public offering and the requirements of any other applicable state securities laws and the respective rules and regulations thereunder in those jurisdictions in which the Placement Agent notifies Cardium that the Securities are being offered for sale. The Borrower has not taken nor will it take any action which conflicts with the conditions and requirements of, or which would make unavailable with respect to the Offering, the exemption(s) from registration available pursuant to Regulation D or Section 4(2) and/or Section 4(6) of the Act, and knows of no reason why any such exemption would be otherwise unavailable to it. The Borrower has not been subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently enjoining it for failing to comply with Section 503 of Regulation D.

(b) None of the statements, documents, certificates or other items prepared or supplied by the Borrower with respect to the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made. Through the Transaction Documents/Offering Materials and the SEC Reports, the Borrower has disclosed to potential investors all facts of which the Borrower is aware which materially and adversely affect or could reasonably be expected to materially and adversely affect the business prospects, financial condition, operations, property or affairs of the Borrower and its subsidiaries taken as a whole.

(c) Except as set forth in the Transaction Documents/Offering Materials, the Borrower is not obligated to pay, and has not obligated the Placement Agent to pay, a finder’s or origination fee in connection with the Offering to anyone other than the Placement Agent and hereby agrees to indemnify the Placement Agent from any such claim made by any other person. No other person has any right to participate in any offer, sale or distribution of the Borrower’s securities to which the Placement Agent’s rights, described herein, shall apply.

(d) Immediately prior to the Closing, the Agent’s Warrants (as defined in Section 3(e) hereof) will have been duly authorized. No holder of any of the Agent’s Warrants will be subject to personal liability solely by reason of being such a holder. None of the Agent’s Warrants are subject to preemptive or similar rights of any stockholder or security holder of Cardium or an adjustment under the antidilution or exercise rights of any holders of any outstanding shares of capital stock, options, warrants or other rights to acquire any securities of Cardium. Immediately prior to the Closing, a sufficient number of authorized but unissued shares of Cardium’s Common Stock will have been reserved for issuance upon the exercise of the Agent’s Warrants.

Empire Asset Management Company

June 5, 2009

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(e) The Borrower has all requisite corporate power and authority to (i) enter into and perform its obligations under this Agreement and (ii) issue, sell and deliver the Securities and the Agent’s Warrants. This Agreement has been duly authorized, executed and delivered and constitutes a valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect related to laws affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and except that no representation is made herein regarding the enforceability of the Borrower’s obligation to provide indemnification and contribution remedies under the securities laws and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity).

(f) For the benefit of the Placement Agent, the Borrower hereby incorporates by reference all of its representations and warranties as set forth in Section 4 of the Note and Warrant Purchase Agreement with the same force and effect as if specifically set forth herein.

3. Closing; Fees.

(a) Closing. Each prospective purchaser of Securities will be required to complete and execute one original of the Note and Warrant Purchase Agreement and the Investor Questionnaire in the forms provided to investors. The Placement Agent will direct that all funds for subscriptions from its investors received for the Offering to be deposited into the segregated account (the “Segregated Account”) established for such purpose with City National Bank, 4275 Executive Square, Suite 750, La Jolla California (the “Bank”). The Borrower will either accept or reject subscriptions for the purchase of Securities in a timely fashion and at each closing of the purchase and sale of the Securities (each, a “Closing”) will countersign the Transaction Documents and provide duplicate copies of such Transaction Documents (originals in the case of the Notes and Warrants) to the Placement Agent for distribution to the subscribers purchasing Securities through Empire (“Empire Subscribers”). If the Borrower and Placement Agent is satisfied that the funds for such Securities have been collected and all of the conditions set forth elsewhere in this Agreement and in the Note and Warrant Purchase Agreement are fulfilled, a Closing shall be held promptly with respect to the Securities sold. Thereafter, the remaining Securities will continue to be offered and sold until the Termination Date. Additional Closings may from time to time be conducted at times mutually agreeable with respect to additional Securities sold. The final Closing (the “Final Closing”) shall occur within ten (10) days from the earlier of the Termination Date or the Borrower’s acceptance of subscriptions for all Securities offered. Delivery of payment for the accepted subscriptions for Securities from the funds received in respect of such sales will be made at each Closing at such place as may be mutually agreed upon between Cardium and the Placement Agent against delivery of the Securities by the Borrower.

Empire Asset Management Company

June 5, 2009

Page 4 of 13

(b) Agents Fee. Cardium will pay a cash placement fee (the “Agent’s Fee”) to the Placement Agent at each Closing equal to six percent (6%) of the aggregate gross proceeds from the sale of all Securities to Empire Subscribers that are sold in the Offering.

(c) Agent’s Warrants. As additional compensation hereunder, at each Closing, Cardium will issue to the Placement Agent or its designees, warrants (the “Agent’s Warrants”) to purchase such number of shares of Common Stock equal to six percent (6%) of the shares of Common Stock initially issuable upon exercise of the Warrants issued to Empire Subscribers at such Closing. The Agent’s Warrants shall have an exercise price equal to the exercise price contained in the Warrants and shall contain the same provisions (including adjustment provisions) as those contained in the Warrants. At the Placement Agent’s election, Cardium may issue the Agent’s Warrants all at once at the Final Closing. For the benefit of the Placement Agent, Cardium hereby incorporates by reference the registration rights provisions as set forth in Section 6 of the Purchase Agreement with the same force and effect as if specifically set forth in the Agent’s Warrants. The Agent’s Warrants and the Agent’s Fee are sometimes collectively referred to herein as the “Agent’s Compensation.”

(d) Expenses. The Borrower shall bear all of its expenses in connection with the Offering as further described in section 4(a) below. Whether or not the Offering is successfully completed for any reason, Empire will be entitled, upon presentation of a written accounting therefor in reasonable detail, to prompt reimbursement of its actual, out-of-pocket expenses related to the Offering, including but not limited to fees and expenses of Empire’s legal counsel, travel expenses, and due diligence related expenditures (the “Agent Expense Reimbursement”); provided, however, that any travel expenses over five hundred dollars ($500) shall be pre-approved by Cardium prior to being incurred. The provisions of this paragraph shall survive the Final Closing and any termination of the Offering.

(e) EI Investors Tail. Cardium shall also pay and issue to the Placement Agent the Agent’s Compensation calculated according to the percentages set forth in Sections 3(b) and (c) of this Agreement, if any Empire Subscriber or any other person or entity to whom the Placement Agent has introduced (directly or indirectly) to Cardium during the term of this Agreement (“EI Investors”) makes a private investment in Cardium at any time prior to the date that is twelve (12) months after the termination or expiration of this Agreement regardless of whether such EI Investor purchased Securities in the Offering.

4. Covenants.

(a) Borrower’s Expenses. Cardium shall pay all reasonable expenses incurred in connection with the preparation and printing of all necessary offering documents and instruments related to the Offering, the issuance of the Securities and will also pay Cardium’s own expenses for accounting fees, legal fees, escrow account fees and other costs involved with the Offering, including the printing costs, if any, of the Offering documentation. Cardium will provide at its own expense such quantities of the

Empire Asset Management Company

June 5, 2009

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Transaction Documents/Offering Materials and other documents and instruments relating to the Offering as the Placement Agent may reasonably request. Further, as promptly as practicable after the Final Closing Date, Cardium shall prepare, at its own expense, no more than four “velobound volumes” relating to the Offering and will distribute such volumes to the individuals designated by counsel to the Placement Agent.

(b) Blue Sky. Cardium will qualify the Securities for sale under the securities laws of such jurisdictions as may be mutually agreed to by Cardium and the Placement Agent, and Cardium will make such applications and furnish information as may be required for such purposes, provided, that Cardium will not be required or obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities.

Cardium or its counsel will provide counsel for the Placement Agent with copies of all correspondence or other documentation filed with or received from any jurisdiction where the Securities are to be registered or qualified or offered (including, without limitation, Form D filing with the SEC). In addition, upon receipt of notification by Cardium of the qualification, registration or exemption of the Securities by an applicable jurisdiction, Cardium will promptly notify counsel for the Placement Agent in writing of such action.

In each jurisdiction where the Securities have been registered or qualified or are offered in an exempt transaction as provided above, Cardium will make and file such statements, documents, materials, and reports as are or may be required to be made or filed by Cardium by the laws of such jurisdiction.

Cardium will promptly provide to the Placement Agent for delivery to all offerees and investors and their representatives any additional information, documents and instruments which the Placement Agent or Cardium reasonably deem necessary to comply with the rules, regulations and judicial and administrative interpretations respecting compliance with such exemptions or qualifications and registrations in those states where the Securities are to be offered or sold.

Cardium shall place a legend on the certificates representing the Securities issued to Investors and the Agent’s Warrants stating that the securities evidenced thereby have not been registered under the Act or applicable state securities laws, setting forth or referring to the applicable restrictions on transferability and sale of such securities under the Act and applicable state laws.

(c) Amendments and Supplements. If, at any time prior to the Final Closing, any event shall occur which does or may materially affect the Borrower (as a whole) or as a result of which it might become necessary to amend or supplement the Transaction Documents/Offering Materials so that the representations and warranties herein remain true, or in case it shall, in the opinion of the Placement Agent and its counsel

Empire Asset Management Company

June 5, 2009

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or counsel to Cardium, be necessary to amend or supplement the Transaction Documents/Offering Materials to comply with Regulation D or any other applicable securities laws or regulations, Cardium will promptly notify the Placement Agent and shall prepare and furnish to the Placement Agent a reasonable number of copies of appropriate amendments and/or supplements in form and substance satisfactory to the Placement Agent and its counsel.

(d) Use of Proceeds. The net proceeds of the Offering will be used by Borrower for working capital purposes only.

(e) Legal Opinion and Closing Certificates. There shall have been delivered to the Placement Agent and the Investors a signed opinion of K&L Gates LLP, counsel to Borrower (“Company Counsel”), dated as of each Closing Date, in form and substance reasonably satisfactory to counsel to the Placement Agent. In addition, the Placement Agent shall be entitled to receive copies of the closing certificates required to be delivered pursuant to Section 2.3 of the Note and Warrant Purchase Agreement.

5. Indemnification.

(a) The Borrower agrees to i) indemnify and hold harmless the Placement Agent, its sub-agents and their respective officers, directors, employees and each person, if any, who controls the Placement Agent within the meaning of the Act and such selected dealers (each an “Indemnitee”) against, and pay or reimburse each Indemnitee for, any and all losses, claims, damages, liabilities or expenses whatsoever (or actions or proceedings or investigations in respect thereof), joint or several (which will, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys’ fees and disbursements, including appeals), to which any Indemnitee may become subject (x) under the Act or otherwise, in connection with the offer and sale of the Securities and (y) as a result of the breach of any representation, warranty or covenant made by the Borrower herein, regardless of whether such losses, claims, damages, liabilities or expenses shall result from any claim of any Indemnitee or any third party; and (ii) reimburse each Indemnitee for any legal or other expenses reasonably incurred in connection with investigating or defending against any such loss, claim, action, damage or liability; provided, however, that the Borrower will not be liable in any such case to the extent that any such claim, damage or liability results from (A) an untrue statement or alleged untrue statement of a material fact made in the Transaction Documents/Offering Materials or an omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, made solely in reliance upon and in conformity with written information furnished to Cardium by the Placement Agent specifically for use in the preparation thereof, or (B) any violations by the Placement Agent of any federal or state securities laws or rules and regulations thereunder or any self-regulatory organization that does is unrelated to any violation thereof by the Borrower or any of their respective affiliates. In addition to the foregoing agreement to indemnify and reimburse, the Borrower will indemnify and hold harmless each Indemnitee from and against any and all losses,

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claims, damages, liabilities or expenses whatsoever (or actions or proceedings or investigations in respect thereof), joint or several (which shall for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all reasonable attorneys’ fees, including appeals) to which any Indemnitee may become subject insofar as such costs, expenses, losses, claims, damages or liabilities arise out of or are based upon the claim of any person or entity that he or it is entitled to broker’s or finder’s fees from any Indemnitee in connection with the Offering. The foregoing indemnity agreements will be in addition to any liability which the Borrower may otherwise have.

(b) The Placement Agent will indemnify and hold harmless the Borrower, its officers, directors, employees and each person, if any, who controls the Borrower within the meaning of the Act against, and pay or reimburse any such person for, any and all losses, claims, damages or liabilities or expenses whatsoever (or actions, proceedings or investigations in respect thereof) to which the Borrower or any such person may become subject under the Act or otherwise, whether such losses, claims, damages, liabilities or expenses shall result from any claim of the Borrower, any of its officers, directors, employees, agents, or any person who controls the Borrower within the meaning of the Act or any third party, but only to the extent that such losses, claims, damages or liabilities are based upon any untrue statement or alleged untrue statement of any material fact contained in the Transaction Documents/Offering Materials made in reliance upon and in conformity with information contained in the Transaction Documents/Offering Materials relating to the Placement Agent, or an omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in either case, if made or omitted in reliance upon and in conformity with written information furnished to Cardium by the Placement Agent, specifically for use in the preparation thereof. The Placement Agent will reimburse the Borrower or any such person for any legal or other expenses reasonably incurred in connection with investigating or defending against any such loss, claim, damage, liability or action, proceeding or investigation to which such indemnity obligation applies. The foregoing indemnity agreements will be in addition to any liability which the Placement Agent may otherwise have.

(c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, claim, proceeding or investigation (the “Action”), such indemnified party, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, will notify the indemnifying party of the commencement thereof, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 5 except to the extent that the indemnifying party has been actually prejudiced by such omission. The indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof subject to the provisions herein stated, with counsel reasonably satisfactory to such indemnified party. The indemnified party will have the right to employ separate counsel in any such Action and to participate in the defense thereof, but the fees and expenses of such counsel will not be at the expense of the indemnifying party if the indemnifying party has assumed

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the defense of the Action with counsel reasonably satisfactory to the indemnified party, provided, however, that if the indemnified party shall be requested by the indemnifying party to participate in the defense thereof or shall have concluded in good faith and specifically notified the indemnifying party either that there may be specific defenses available to it which are different from or additional to those available to the indemnifying party or that such Action involves or could have a material adverse effect upon it with respect to matters beyond the scope of the indemnity agreements contained in this Agreement, then the counsel representing it, to the extent made necessary by such defenses, shall have the right to direct such defenses of such Action on its behalf and in such case the reasonable fees and expenses of such counsel in connection with any such participation or defenses shall be paid by the indemnifying party. No settlement of any Action against an indemnified party will be made without the consent of the indemnifying party and the indemnified party, which consent shall not be unreasonably withheld or delayed in light of all factors of importance to such party and no indemnifying party shall be liable to indemnify any person for any settlement of any such claim effected without such indemnifying party’s consent.

6. Contribution. To provide for just and equitable contribution, if (i) an indemnified party makes a claim for indemnification pursuant to Section 5 hereof and it is finally determined, by a judgment, order or decree not subject to further appeal that such claims for indemnification may not be enforced, even though this Agreement expressly provides for indemnification in such case; or (ii) any indemnified or indemnifying party seeks contribution under the Act, the Securities Exchange Act of 1934, as amended (the “1934 Act”) or otherwise, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Borrower on the one hand and the Placement Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Borrower on the one hand and the Placement Agent on the other shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Borrower bears to the total commissions and fees actually received by the Placement Agent. The relative fault, in the case of an untrue statement, alleged untrue statement, omission or alleged omission will be determined by, among other things, whether such statement, alleged statement, omission or alleged omission relates to information supplied by the Borrower or by the Placement Agent, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement, alleged statement, omission or alleged omission. The Borrower and the Placement Agent agree that it would be unjust and inequitable if the respective obligations of the Borrower and the Placement Agent for contribution were determined by pro rata allocation of the aggregate losses, liabilities, claims, damages and expenses or by any other method or allocation that does not reflect the equitable considerations referred to in this Section 6. No person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person who is not guilty

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of such fraudulent misrepresentation. For purposes of this Section 6, each person, if any, who controls the Placement Agent within the meaning of the Act will have the same rights to contribution as the Placement Agent, and each person, if any, who controls the Borrower within the meaning of the Act will have the same rights to contribution as the Borrower, subject in each case to the provisions of this Section 6. Anything in this Section 6 to the contrary notwithstanding, no party will be liable for contribution with respect to the settlement of any claim or action effected without its written consent. This Section 6 is intended to supersede, to the extent permitted by law, any right to contribution under the Act, the 1934 Act or otherwise available.

7. Due Diligence and Company Cooperation. The Borrower shall make members of management and other employees, advisors and agents available to Empire as Empire shall reasonably request. The Borrower shall cooperate with the Placement Agent in connection with, and shall make available to the Placement Agent, historic, current and prospective information concerning the business, assets, prospects, operations and financial condition of the Borrower and such documents and other information as the Placement Agent shall reasonably request in connection with the services to be performed by it under this Agreement. The Borrower recognizes and confirms that the Placement Agent will use and rely, without investigation as to accuracy and completeness, on the documents and information (written and oral) provided by the Borrower and on information available from generally recognized public sources in performing the services contemplated by this Agreement and that the Placement Agent does not assume nor have responsibility for the accuracy or completeness of such documents or information. Further, the Placement Agent does not assume any obligation to make any solvency determination or to conduct any appraisal of assets or liabilities of the Borrower.

8. Securities Law Compliance. The Borrower and the Placement Agent agree to conduct the Offering in a manner intended (a) to qualify as a private placement of the Securities in any jurisdiction in which the Securities are offered and (b) to comply with the requirements of Rule 506 of Regulation D under the Act. Assuming the accuracy of the representations and warranties given to the Borrower by each investor to the extent relevant for such determination, the Offering will be exempt from the registration requirements of the Act. In connection with offers made in the U.S. pursuant to Regulation D, the Borrower and the Placement Agent agree (i) to limit offers to sell, and solicitations of offers to buy, the Securities to persons reasonably believed by it to be “accredited investors” within the meaning of Rule 501(a) under the Act, and (ii) not to engage in any form of general solicitation or general advertising in connection with the Offering within the meaning of Rule 502 under the Act.

9. Termination. The Offering may be terminated by the Placement Agent at any time prior to the expiration of the Offering Period as contemplated in Section 1 hereof (the “Expiration Date”) in the event that (a) any of the representations or warranties of the Borrower contained herein shall prove to have been false or misleading in any material respect when made or deemed made or (b) the Borrower shall have failed to perform any of its material obligations hereunder. This Offering may be terminated by Cardium at any

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time prior to the Expiration Date in the event that the Placement Agent shall have failed to perform any of its material obligations hereunder. In the event of any such termination under this Section 9, the Placement Agent shall be entitled to receive, in addition to other rights and remedies it may have hereunder, at law or otherwise, an amount equal to the sum of: (X) all Agent’s Fees earned through the Expiration Date, (Y) any accountable Agent’s Expense Reimbursement through the Expiration Date; and (Z) all amounts which may become payable in respect of EI Investors pursuant to Section 3(e) hereof.

10. Miscellaneous.

(a) Survival. Any termination of the Offering without consummation thereof, or any termination of this Agreement by Cardium or the Placement Agent, shall be without obligation on the part of any party except that the provisions of Sections 3(d), 3(e), 4(a), 5, 6 and 10 shall survive such termination.

(b) Representations, Warranties, Indemnities and Covenants to Survive Delivery. The representations, warranties, indemnities, agreements, covenants and other statements of the Borrower contained herein shall survive the Final Closing, if any.

(c) No Other Beneficiaries. This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective successors, controlling persons and permitted assigns, and no other person, firm or corporation shall have any third party beneficiary or other rights hereunder.

(d) ARBITRATION, CHOICE OF LAW; COSTS. THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO ARBITRATION IN ACCORDANCE WITH THE PROVISIONS SET FORTH BELOW AND UNDERSTAND AND AGREE THAT (A) ARBITRATION IS FINAL AND BINDING ON THE PARTIES, (B) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE ARBITRATOR’S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY ARBITRATORS IS STRICTLY LIMITED, (E) THE PANEL OF FINANCIAL INDUSTRY REGULATORY AUTHORITY (“FINRA”) ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY ARISE BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED BY ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO FINRA IN THE CITY OF NEW YORK, STATE OF NEW YORK. JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN THE SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT HAVING JURISDICTION OVER THE PERSON OR

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PERSONS AGAINST WHOM SUCH AWARD IS RENDERED. THE PARTIES AGREE THAT THE DETERMINATION OF THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. ANY NOTICE OF SUCH ARBITRATION OR FOR THE CONFIRMATION OF ANY AWARD IN ANY ARBITRATION SHALL BE SUFFICIENT IF GIVEN IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT. THE PREVAILING PARTY, AS DETERMINED BY SUCH ARBITRATORS IN AN ARBITRATION PROCEEDING SHALL BE ENTITLED TO COLLECT ANY COSTS, DISBURSEMENTS AND REASONABLE ATTORNEY’S FEES FROM THE OTHER PARTY.

(e) Notices. All notices, requests, demands and other communications which are required or may be given hereunder shall be in writing and shall be deemed to have been duly given (i) when delivered personally, receipt acknowledged, (ii) five (5) days after being sent by registered or certified mail, return receipt requested, postage prepaid or (iii) one (1) business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery. All notices shall be made to the parties at the addresses designated above or at such other or different addresses which a party may subsequently provide with notice thereof, and to their respective legal counsel, as follows:

If to Empire, to:

Empire Asset Management Company

2 Rector Street, 15th Floor,

New York, NY 10006

Attn: Gregg Zeoli

Fax: (212) 417-8229

With a copy to:

Littman Krooks LLP

655 Third Avenue, 20^th Floor

New York, NY 10017

Attn: Steven D. Uslaner, Esq.

Fax: (212) 490-2990

or to such other person or address as Empire shall furnish to the Borrower in writing.

If to the Borrower, to:

Cardium Therapeutics, Inc.

12255 El Camino Real, Suite 250

San Diego, California 92130

Attn: Tyler Dylan, Chief Business Officer

Fax: (858) 436-1011

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with a copy to:

K&L Gates LLP

3580 Carmel Mountain Rd., Ste. 200

San Diego, CA 92130-6766

Attn: Gregory F. Brucia, Esq.

Fax: (858) 509-7464

or to such other person or address as Cardium shall furnish to Empire in writing.

(f) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement (and all signatures need not appear on anyone counterpart). In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof. This Agreement shall become effective when one or more counterparts has been signed and delivered by each of the parties hereto.

(g) Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersede all prior and contemporaneous agreements, understandings, documents, negotiations and discussions, whether oral or written, of the parties hereto pertaining to the subject matter hereof.

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If you find the foregoing is in accordance with our understanding, kindly sign and return to us a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between us.

Dated: As of June 5, 2009

Very truly yours, CARDIUM THERAPEUTICS, INC.
By:	/s/ Tyler Dylan
	Tyler Dylan Chief Business Officer, General Counsel, Executive Vice President and Secretary

ACCEPTED AND AGREED TO: EMPIRE ASSET MANAGEMENT COMPANY
By:	/s/ Gregg Zeoli
	Gregg Zeoli President & CEO