-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RfvJObhZFUUsPMpckrAxR1bHF6fcbqm0xY66/hIgCpILqeYQMOfNchR0xi35+vwA Eq8p4wlZoLgC/jznX57X4g== 0001010412-02-000042.txt : 20020415 0001010412-02-000042.hdr.sgml : 20020415 ACCESSION NUMBER: 0001010412-02-000042 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20020311 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20020325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANGUINE CORP CENTRAL INDEX KEY: 0000926287 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 954347608 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24480 FILM NUMBER: 02584274 BUSINESS ADDRESS: STREET 1: 101 EAST GREEN ST STREET 2: #11 CITY: PASADENA STATE: CA ZIP: 91105 BUSINESS PHONE: 8184050079 MAIL ADDRESS: STREET 1: 101 EAST GREEN ST STREET 2: STE 11 CITY: PASADENA STATE: CA ZIP: 91105 8-K 1 k.txt 8-K CURRENT REPORT DATED MARCH 11, 2002 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20509 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act March 11, 2002 -------------- Date of Report (Date of Earliest Event Reported) SANGUINE CORPORATION -------------------- (Exact Name of Registrant as Specified in its Charter) Nevada 0-24480 95-4347608 ------ ------- ---------- (State or other juris- (Commission File No.) (IRS Employer diction of incorporation) I.D. No.) 101 East Green Street, #11 Pasadena, California 91105 -------------------------- (Address of Principal Executive Offices) (626) 405-0079 -------------- Registrant's Telephone Number Item 5. Other. (a) On February 15, 2002, Sanguine Corporation ("Sanguine") entered into an Exclusive License Agreement (the "Exclusive License Agreement") with Ascendiant-Asia, LLC, a Nevada limited liability corporation ("Ascendiant-Asia"), whereby Sanguine granted to Ascendiant-Asia an exclusive license to PHER-02, the licensed products, the licensed process and all proprietary, formula, developmental, technological, intellectual property and patent rights, and all other applications of the above in certain countries in Asia, including the People's Republic of China, Thailand, Laos, Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea, Burma, Mongolia and Taiwan (the "Territory"). The parties, in order to maintain and preserve the rights granted in the Exclusive License Agreement, agreed to certain minimum levels of annual production of the licensed products after completion of all clinical tests, studies and trials: 500,000 units produced the first 12 months, 1,000,000 units produced the second 12 months and 1,000,000 units produced every year thereafter. A unit produced consists of 200 milliliters of the licensed product that is ready for commercial use. If these minimums are not achieved, Ascendiant-Asia will pay a royalty to Sanguine as if the minimum production levels were achieved. A royalty payment is equal to $5.00 for each and every 200 milliliter unit produced and is to be paid quarterly. If not paid, Sanguine may terminate the Exclusive License Agreement. The Exclusive License Agreement has a term of 25 years from February 15, 2002, with a possible extension of 10 years after the expiration of the original term. The Exclusive License Agreement also has miscellaneous provisions, among others, for the parties to keep reports and records, to maintain the requisite patent or patents, action regarding infringement of the patent or patents and to indemnify and hold each other harmless against certain applicable claims. These are the material terms and provisions of the Exclusive License Agreement that is attached hereto and incorporated herein. Further information can be obtained by reviewing the actual instrument that is described below under Item 7. (b) On February 20, 2002, Sanguine also executed and delivered three Warrants under which they granted to Richard H. Walker, Mark Bergendahl and Bradley J. Wilhite warrants to acquire 1,000,000 shares each of common stock of Sanguine at an exercise price of $0.15 per share (the "Warrants"). Each of the Warrants provided, among other things, for: the issuance of 1,000,000 Warrants convertible into shares of our common stock; the Warrants to expire on February 21, 2005; protection against dilution in certain events, including the payment of dividends or splits or in the event of any merger where we are not the survivor, or any reclassification or capital reorganization; the granting of "registration rights" covering the exercise of the Warrants, through registration with the Securities and Exchange Commission; and The Warrants are "callable" at any time the common stock of the Company trades at a price of no less than $1.00 for ten consecutive trading days, based upon the resolutions of the Board of Directors that approved the Warrants. These are the material terms and provisions of the Warrants that are attached hereto and incorporated herein. Further information can be obtained by reviewing the actual instruments that are described below under Item 7. (c) On March 11, 2002, the Board of Directors adopted resolutions pursuant to which the Company entered into the following agreements with First York Partners, Inc. ("First York Partners"), as described below: A 5% Convertible Note for the sum of $25,000 convertible at the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the common stock, the "Principal Market"), or if not then trading on a Principal Market, such other principal market or exchange where the common stock is listed or traded for the five trading days immediately preceding but not including a conversion date; A Common Stock Purchase Warrant for the right to purchase 5,937,500 shares of common stock of the Company exercisable at a purchase price of $.08, provided, however, the purchase price shall be adjusted to be sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices for the Common Stock as reported for the Principal Market (as defined in Section 10(d) of this Warrant) for the five trading days preceding but not including the effective date of the registration statement referred to in Section 10.1(iv) of the Subscription Agreement. Except in connection with other adjustments set forth in this Warrant the Purchase Price will not be adjusted below $.08; A related Subscription Agreement regarding the 5% convertible note and the Common Stock Purchase Warrant, granting, among other rights, registration rights of the exercise and or conversion of any of the notes and/or warrants described, protection against dilution in certain events, including the payment of dividends or splits or in the event of any merger where we are not the survivor, or any reclassification or capital reorganization, and call provisions for the benefit of the Company; A related Fund Escrow Agreement respecting the disbursement of the proceeds of the 5% convertible note and related matters; and A $3,750 5% convertible note to Barbara R. Mittman for legal services rendered regarding all of the foregoing on behalf of First York Partners convertible at the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the common stock, the "Principal Market"), or if not then trading on a Principal Market, such other principal market or exchange where the common stock is listed or traded for the five trading days immediately preceding but not including a conversion date. Copies of the Subscription Agreement regarding a 5% Convertible Note convertible into shares of the Company's $0.001 par value common stock; the related Common Stock Purchase Warrants; the related Convertible Note; and the related Funds Escrow Agreement; and the related Subscription Agreement are attached hereto and incorporated herein by reference. See Item 7. (d) On March 11, 2002, the Board of Directors also adopted resolutions pursuant to which the Company approved an Engagement Letter to engage Leonard W. Burningham, Esq. to perform certain legal services for the Company and that included the granting of certain warrants to Mr. Burningham (the "Burningham Warrant"). Copies of the Engagement Letter and the Burningham Warrant are attached hereto and incorporated herein by reference. See Item 7. The Company authorized the grant to Mr. Burningham of a warrant to acquire 500,000 shares of common stock of the Company at an exercise price of 50% of the bid price for the five trading days prior to the date of exercise at the end of any monthly billing cycle or $0.08 (Eight Cents) per share, whichever is lower, payable in cash or services, to expire on March 11, 2005, and approved the "registration rights" contained in the Burningham Warrant. The terms of the Burningham Warrant are substantially identical to those of the Warrants granted to Messrs. Walker, Bergendahl and Wilhite that are described above under subparagraph (b) of this Item, with the exception of the exercise price and the fact that the Burningham Warrant can be exercised and paid through the performance of services. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Businesses Acquired. None; not applicable. (b) Pro Forma Financial Information. None; not applicable. Exhibits. Exhibit Number Description - ------ ----------- 10.1 Exclusive License Agreement 10.2 Subscription Agreement Exhibit A-Form of Note Exhibit B-Form of Legal Opinion Exhibit C-Form of Warrant Schedule 2(d)-Additional Issuances Schedule 2(t)-Capitalization 10.3 Funds Escrow Agreement 10.4 Engagement Letter 99.1 Warrant of Richard H. Walker 99.2 Warrant of Mark Bergendahl 99.3 Warrant of Bradley J. Wilhite 99.4 Warrant of Leonard W. Burningham, Esq. 99.5 Press Release dated February 21, 2002 99.6 Minutes of Special Meeting of the Board of Directors on March 11, 2002, regarding the foregoing. Item 9. FD Disclosure Please see Exhibit 99.5, which is the Press Release regarding the certain of the matters reported in Item 5. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. SANGUINE CORPORATION Date: 3/25/02 By:/s/Thomas C. Drees ------------- -------------------------------------- Thomas C. Drees, Ph.D. CEO, President and Chairman of the Board of Directors EX-10 3 ex-10.txt EXCLUSIVE LICENSE AGREEMENT EXCLUSIVE LICENSE AGREEMENT for Sanguine Corporation Technologies PHER-02 Oxygen-Carrying Synthetic Substitute for Human Red Blood Cells U.S. Patent Pending, Assigned Serial Number 08/230,672 All Derivatives of PHER-02 TABLE OF CONTENTS RECITALS ARTICLES: I DEFINITIONS II GRANT III OBLIGATIONS OF LICENSEE IV OBLIGATIONS OF LICESOR V PAYMENTS VI REPORTS AND RECORDS VII MAINTENANCE OF PATENT VIII INFRINGEMENT IX LICENSOR REPRESENTATIONS AND WARRANTIES X INDEMNIFICATION, PRODUCT LIABILITY XI USE OF NAMES XII ASSIGNMENT AND SUB-LICENSES XIII TERMINATION XIV PAYMENTS, NOTICES AND OTHER COMMUNICATIONS XV MISCELLANEOUS PROVISIONS This Agreement is effective as of February 15, 2002 (the "Effective Date"), and is made by and between Sanguine Corporation (OTC:BB SGNC), a Nevada corporation, with principal offices at 101 East Green Street, Suite 11, Pasadena, California 91105, along with all affiliates and successors (hereinafter referred to as "LICENSOR"), and Ascendiant-Asia, L.L.C., a Nevada limited liability corporation, with principal offices at 18881 Von Karman, Suite 1630, Irvine, California 92612, or Assignee (hereinafter referred to as "LICENSEE"), collectively hereinafter referred to as the "PARTIES." RECITALS WHEREAS, LICENSOR has developed, acquired, possesses and owns all proprietary, formula, technological and intellectual property rights to a certain oxygen-carrying synthetic substitute for human red blood cells, currently named and known as, PHER-02 (U.S. patent application assigned serial number 08/230,672), along with all derivative formulas, products and processes existing now or in the future (hereinafter referred to in its entirety, inclusive of all future derivatives, as, "PHER-02"). LICENSOR possesses all rights to license PHER-02 for any and all purposes LICENSOR determines or deems desirable. WHEREAS, LICENSEE believes it has the capability and means, either directly or through joint business endeavors and/or sub-licenses, to test, manufacture, market, distribute, and sell PHER-02, Licensed Products and Licensed Processes in and to the geographical territory containing the continents of Asia and Southeast Asia, and all countries, republics and territories therein, inclusive without limitation the People's Republic of China, (hereinafter referred to as "PRC," and defined herein to include any and all parts of China inclusive of Taiwan, Hong Kong, Hainan and Macao), North Korea, Vietnam, Cambodia, Laos, Thailand, Burma, Mongolia, Malaysia, Singapore, and Indonesia (all such geographic territory described herein this paragraph shall be hereinafter collectively referred to as "ASIA") WHEREAS, LICENSOR desires to grant to LICENSEE an exclusive license for all proprietary, formula, developmental, technological, intellectual property and patent rights of PHER-02, Licensed Products and Licensed Processes for any and all uses, inclusive without limitation all medical, commercial, industrial, scientific, and/or agricultural uses and to use, test, manufacture, make, have made, market, distribute, sell and obtain profit from, for and/or within, ASIA. (hereinafter referred to as the "LICENSE," or "LICENSE RIGHTS"). LICENSEE desires to take possession of such LICENSE RIGHTS from LICENSOR pursuant to the terms and duration of this Agreement. Accordingly, the PARTIES, each of them, desire to enter into this Agreement as of the date first written herein for the duration herein provided, and to be bound hereunder to the following terms. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the Parties hereto agree as follows: ARTICLE I - DEFINITIONS For the purpose of this Agreement, the following words and phrases shall have the following meanings: 1.1 "Affiliate" shall mean any person, firm, corporation or other entity controlling, controlled by, or under common control with a PARTY hereto. The term "control" wherever used throughout this Agreement shall mean ownership, directly or indirectly, of more than 50% of the equity capital. Other than LICENSEE, any corporation, company, partnership, joint venture, firm, individual or other entity which does not come within this definition shall be a "Non-Affiliate". 1.2 "Effective Date" is defined above. 1.3 "Grant" is defined in Section 2.1 below. 1.4 "LICENSEE" shall mean Ascendiant-Asia, L.L.C., or its Assignee. 1.5 "Licensed Process" shall mean any process which is covered in whole or in part by this Agreement, Section 1.6 herein, or an issued, unexpired claim or a pending claim contained in the Patent Rights in any country in which such process is practiced. 1.6 "Licensed Product" shall mean PHER-02, as defined in the Recitals Section above (and hereby incorporated into this definition) along with any process or product, or part thereof, developed by or on behalf of LICENSOR, which: (a) is covered in whole or in part by this Agreement or an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any product is made, used or sold; or (b) is manufactured by using a process which is covered in whole or in part by this Agreement or an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any such process is used or in which any such product is used or sold. (c) is developed at any time by, or through, the incremental or accumulated expertise, knowledge, or efforts of LICENSOR, its researchers, chemists, scientists, principals, affiliates, or Thomas Drees, Ph.D. 1.7 "Unit Produced" shall mean any production process or manufacturing method resulting in a complete or finished batch of the Licensed Product, containing a unit portion of 200 milliliters, which is ready for commercial use. "Commercial use" is hereby defined to include any usage of a Unit Produced, which has been designed for, or intended to be used in, any purpose that results in financial gain or economic commerce to any party or entity, whether or not such party or entity is a party to this Agreement. 1.8 "Patent Rights" shall mean all of the following LICENSOR intellectual property: (a) the United States patent application entitled "PFC Emulsions", filed in the United States Patent Office on April 21, 1994, and assigned Serial Number 08/230,672, and all foreign patent applications based on this U.S. application; (b) the European patent application entitled "____________", filed in the on ________________, and assigned Serial Number ________________, and all foreign patent applications based on this European application; (c) United States and foreign patents issued from these applications, and divisionals and continuations of these applications; (d) claims of U.S. and foreign continuation-in-part applications, and of the resulting patents, which are directed to subject matter specifically described in the U.S. patent applications Serial Number ______________, and _______________. (e) any reissues or re-examinations of patents described in (a), (b), (c), and (d) above. 1.9 "Sublicense" shall mean the right to make, use or sell Licensed Products or Licensed Processes, or possess LICENSE RIGHTS pursuant to Article XII below. ARTICLE II - GRANT 2.1 LICENSOR hereby grants to LICENSEE an exclusive license for, including the right to sub-license pursuant to Article XII below, PHER-02, the Licensed Products, Licensed Processes and all proprietary, formula, developmental, technological, intellectual property and patent rights, and all other applications of PHER-02, Licensed Products, or Licensed Processes, for any and all uses, inclusive without limitation all medical, commercial, industrial, scientific, and/or agricultural uses, and to use, test, manufacture, make, have made, market, distribute, sell and derive profit from, for and/or within, ASIA. (hereinafter, the "Grant" of "LICENSE," or "LICENSE RIGHTS"). Pursuant to such Grant of LICENSE, and upon the execution of this Agreement, LICENSOR shall cause a complete transfer of the PHER-02 technologies, formulas, development techniques, processes, methods and procedures of production, trade secrets, and all other information necessary to develop, manufacture and produce PHER-02. Such Grant is in effect until the end of the last to expire patent of the Patent Rights or until this Agreement shall expire or be terminated, as hereinafter provided, whichever is first to occur. 2.2 In order to maintain and preserve the LICENSE and LICENSE RIGHTS granted hereunder, LICENSEE and all sub-licensees agree to certain minimum levels of annual production of the Licensed Products (hereinafter, the "Minimum Production") which, in the aggregate, results in Units Produced equaling or exceeding the following amounts: * 500,000 Units Produced by the end of the first twelve months after commercial production of any Licensed Products begins. Commencement of production shall occur after LICENSEE or sub-licensee shall have completed, to their sole satisfaction, all clinical tests, studies and trials as defined in Section 3.2 herein this Agreement. * 1,000,000 Units Produced by the end of the second twelve months after production of any Licensed Products begins. * 1,000,000 Units Produced by the end of each year thereafter. If LICENSEE fails to achieve the Minimum Production, then, in order to avoid a default under this Agreement, LICENSEE shall consent to pay a royalty to LICENSOR as if such Minimum Production levels were reached (hereinafter, the "Make-up Royalties"). Such make-up Royalties are payable pursuant to the payment terms of Article V herein this Agreement, and shall be due at the end of each twelve month period as delineated above. Should such Minimum Production not be reached and LICENSEE fails to pay Make-up Royalties to LICENSOR when due as provided for herein this paragraph, then, LICENSOR shall have to right to terminate this Agreement pursuant to Section 13.2 of this Agreement. 2.3 This Agreement and the Grant of LICENSE and LICENSE RIGHTS granted herein shall exist for a term of twenty-five (25) years commencing from the date of this Agreement. This Agreement along with the Grant of LICENSE and LICENSE RIGHTS granted shall automatically renew and extend for an additional ten (10) years after the expiration of the original term, subject to, (i) all terms of this Agreement as of the time of the original term's expiration date, are then current and not in default, and, (ii) this Agreement has not been earlier terminated. Except for any provision for a renewal or extension of term, all other provisions of this Agreement shall survive and be in effect for any renewed or extended term. 2.4 Notwithstanding any other provisions of this Agreement, it is agreed that nothing in this Agreement is to be construed to be a granting of a LICENSE or LICENSE RIGHTS outside of ASIA. 2.5 For the purpose of distribution outside of ASIA, should LICENSOR, at any time within the duration of this Agreement, elect to manufacture PHER- 02, the Licensed Product, or Licensed Processes, in whole or in part, at manufacturing facilities located within ASIA, or cause or contract such manufacturing with or through the efforts or joint-efforts of any party or entity, or subsidiary of same, that is domiciled or conducting business directly or indirectly in ASIA, then LICENSEE shall have first rights, under similar terms, to any business contracts, orders or agreements to manufacture such products for hire, and on behalf of, LICENSOR. LICENSEE shall be granted equal time for its due diligence and determination of interest to manufacture products on behalf of LICENSOR for distribution outside of ASIA as that granted to all other prospective parties or entities as described herein this paragraph. LICENSEE's decision of whether or not to accept such manufacturing contract or agreement shall be made in writing and delivered to LICENSOR pursuant to Article XIV herein. 2.6 LICENSEE hereby agrees that every sublicensing agreement to which it shall be a party, and which shall relate to the rights, privileges and LICENSE granted hereunder, shall not be made for any duration beyond the date of this Agreement's expiration, including all periods of extension. 2.7 The LICENSE granted hereunder shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any technology not included in PHER-02, the Licensed Product, Licensed Process, or this Agreement. ARTICLE III - OBLIGATIONS OF LICENSEE In addition to all other obligations of LICENSEE contained herein this Agreement, LICENSOR pledges the following: 3.1 LICENSEE and its sub-licensees shall use their best efforts to bring Licensed Products or Licensed Processes to market through a diligent program for the exploitation of the LICENSE and LICENSE RIGHTS granted herein the Agreement. 3.2 This Agreement expressly contemplates that any clinical studies, tests or trials shall, with all reasonable efforts, be performed diligently and within the standards, protocols, and facilities, acceptable under then existing requirements established for such clinical studies, tests or trials by the United States Food and Drug Administration. LICENSEE agrees that any data derived from such clinical studies, tests or trials shall be delivered to LICENSOR for their unrestricted use. At all times during the term of this agreement, LICENSOR shall have the right to inspect all test, trial and manufacturing facilities involving or attributable to PHER-02. Additionally at all times during the term of this agreement and for up to five years thereafter, LICENSOR shall possess the right to gather, review, and otherwise be privy to, all information and data derived from or involving the clinical studies, testing, trials and manufacturing of PHER-02. ARTICLE IV - OBLIGATIONS OF LICENSOR In addition to all other obligations of LICENSOR contained herein this Agreement, LICENSOR pledges to endeavor to develop new and derivative formulas, products and processes associated with, or derived from, PHER-02, the Licensed Products, and Licensed Processes, and to continue all necessary efforts of research and development for improvements, enhancements and derivatives to PHER-02, the Licensed Products and Licensed Processes, each of which upon its development, LICENSOR hereby agrees shall be added to the LICENSE and LICENSE RIGHTS granted hereunder this Agreement and become subject to all terms and provisions therein. ARTICLE V - PAYMENTS 5.1 For the rights, privileges and licenses granted hereunder, LICENSEE shall pay to the LICENSOR, in the manner hereinafter provided, until the end of the last to expire patent of the Patent Rights or until this Agreement shall expire, or otherwise be terminated, as hereinafter provided, whichever occurs first: a royalty in a minimum amount equal to FIVE U.S. Dollars ($5.00) for each and every 200 milliliter commercial Unit Produced by LICENSEE or any Affiliate or sub-licensee of PHER-02 or the Licensed Products or Licensed Processes. Such royalty shall be paid quarterly, within thirty (30) days from the end of each calendar quarter. 5.2 The obligation to pay royalties under this Article shall be imposed only once with respect to the same Unit Produced regardless of the number of valid patent claims of the Patent Rights that cover the same. 5.3 Royalty payments shall be paid in United States dollars at such place as LICENSOR may reasonably designate consistent with the laws and regulations controlling in any foreign country, but not in any other currency. If any currency conversion shall be required in connection with the payment of royalties hereunder, such conversion shall be made by using the exchange rate prevailing at the Bank of America on the last business day of the calendar quarterly reporting period to which such royalty payments relate. ARTICLE VI - REPORTS AND RECORDS 6.1 LICENSEE shall keep full, true and accurate books of account containing all particulars that may be necessary for the purpose of showing the amounts payable to LICENSOR hereunder. Said books of account shall be kept at LICENSEE's principal place of business . Not more often than once each year during the term of this Agreement, upon receipt of thirty (30) days prior written notice, LICENSEE shall allow LICENSOR or its agents to inspect such books and records for the purpose of verifying LICENSEE's royalty statement or compliance in other respects with this Agreement. 6.2 LICENSEE, within forty-five (45) days after June 30 and December 31 of each year, shall deliver to LICENSOR true and accurate reports, giving such particulars of the business conducted by LICENSEE and its sub-licensees during the preceding six-month period under this Agreement as shall be pertinent to a royalty accounting hereunder. These shall include at least the following, to be itemized per Licensed Product and Licensed Process: (a) number of Licensed Products and Licensed Processes commercially produced by, or for, LICENSEE and sub- licensees; (b) amount due to LICENSOR from Licensed Products and Licensed Processes commercially produced; (c) total royalties due. 6.3 With each such report submitted, LICENSEE shall pay to LICENSOR the royalties due and payable under this Agreement. If no royalties shall be due, LICENSEE shall so report. 6.4 LICENSOR shall keep all reports statements provided by LICENSEE under this Article confidential. ARTICLE VII - MAINTENANCE OF PATENT LICENSOR, at its sole expense, shall diligently prosecute and maintain the Patent Rights using counsel of its choice. LICENSOR shall provide LICENSEE with copies of all relevant documentation so that LICENSEE may be informed and appraised of the continuing maintenance and prosecution of the Patent Rights, and LICENSEE agrees to keep this documentation confidential. ARTICLE VIII - INFRINGEMENT 8.1 LICENSOR, as owner of the Patent Rights, pledges to control and be responsible for all activities related to enforcing the Patent Rights. LICENSEE as the exclusive user of the Patent Rights pursuant to the licensed zone of ASIA, granted by this Agreement, shall assume primary responsibility for enforcing the Patent Rights within ASIA. In exercising these responsibilities, the PARTIES shall promptly contact alleged third party infringers within the scope of their respective obligations and take all reasonable steps to persuade such third parties to desist from infringing the Patent Rights, including initiating and prosecuting an infringement action if necessary, or defending a challenge to the validity of the Patent Rights. Each PARTY also shall notify the other PARTY of each instance of alleged infringement and shall keep each PARTY informed of all stages of Patent Rights enforcement. All costs of any action to enforce the Patent Rights taken by a PARTY shall be borne by same and may keep any recovery of damages derived therefrom. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of LICENSOR, which consent shall not unreasonably be withheld. 8.2 In any infringement suit that either party may institute to enforce the Patent Rights against third PARTIES pursuant to this Agreement, the other PARTY hereto shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like. 8.3 Each PARTY shall promptly notify the other in writing in the event that a third party shall bring a claim of infringement against LICENSOR or LICENSEE, either in the United States or in any foreign country in which there are Patent Rights. If the alleged infringement is so substantial as to threaten the competitive position of LICENSEE and/or LICENSEE is temporarily enjoined from exercise of its license hereunder, and if LICENSOR elects not to defend against such claim, then LICENSEE may in its own name and at its sole expense defend such claim and may compromise, settle or otherwise pursue such defense in such a manner and on such terms as LICENSEE shall see fit. LICENSOR, at its own expense and through counsel of its selection may become a party to such defense and/or settlement and compromise. In any event, LICENSOR shall have the right to defend, at its own expense, any such third party claim or action, and, except for the licensed zone of ASIA, to settle or compromise the same in such manner as its shall see fit. LICENSEE may participate in such litigation or claim on its behalf at its own expense. LICENSEE shall have the right to determine the terms of any settlement, compromise or final determination of claim or suit, which, in any way, involves the licensed zone of ASIA, No terms of such settlement, compromise or final determination of a claim or suit involving the licensed zone of ASIA shall conflict with any material provisions of this Agreement without the express written consent of LICENSOR. ARTICLE IX - LICENSOR REPRESENTATIONS AND WARRANTIES LICENSOR hereby represents and warrants that it is the rightful owner of all technologies, formulas and Patent Rights pertaining to this Agreement and validly holds, such ownership and rights, and possesses the power and authority to Grant such LICENSE and LICENSE RIGHTS to LICENSEE, and to transfer all technologies pertaining therein, and to enter into this Agreement with the power and authority to confer all rights pledged and perform obligations made thereto. ARTICLE X - INDEMNIFICATION, PRODUCT LIABILITY LICENSEE and LICENSOR shall at all times during the term of this Agreement and thereafter, indemnify, defend and hold each other, along with their respective officers, directors, members, employees and affiliates, harmless against all claims and expenses, including legal expenses and reasonable attorneys' fees, arising out of the death of, or injury to, any person or persons, or out of any damage to property, and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from each Party's respective production, manufacture, sale, use, lease, consumption or advertisement of PHER-02, Licensed Products, Licensed Processes, or arising from any other obligation incurred by either PARTY borne from its own actions or otherwise not applicable to this Agreement hereunder. ARTICLE XI - USE OF NAMES LICENSEE shall not use the name of Sanguine Corporation, nor any of its employees, nor any adaptation thereof, nor any symbol or mark of Sanguine Corporation, in any advertising, promotional or sales literature, or for any other commercial purpose, without prior written consent obtained from LICENSOR in each case, except that LICENSEE may state that it is licensed by LICENSOR under one or more of the patents and/or applications pertinent to this Agreement. Notwithstanding the foregoing, LICENSEE shall possess all rights, in all manners, including without limitation for all commercial, promotional, technical or advertising purposes, to use the name, PHER-02, and any other names associated with, or attributed to, any products, technologies, or processes applicable to this Agreement. Such rights of use shall not require LICENSOR's prior consent before LICENSEE'S use. ARTICLE XII - ASSIGNMENT and SUB-LICENSE 12.1 This Agreement may be assigned by LICENSEE, in whole or part, at LICENSEE's sole discretion to any Affiliate, as defined in Article I, without the requirement of prior consent from LICENSOR, so long as assignee agrees to be bound by the applicable terms and conditions of this Agreement and assumes such terms and conditions in writing with a copy of same delivered to LICENSOR. 12.2 LICENSOR hereby grants LICENSEE any and all rights and authority to sub-license LICENSE RIGHTS of PHER-02, Licensed Products, Licensed Processes, in whole or in part, at LICENSEE's sole discretion to the Livzon Pharmaceutical Group, Inc., of Quangdong Province, China, a Shanghai listed public company. Notwithstanding the foregoing, this Agreement may be assigned by LICENSEE, in whole or part, to another party or parties of LICENSEE's determination with the requirement of prior consent from LICENSOR. Such consent from LICENSOR shall not be unreasonably withheld. All rights granted to LICENSEE under the terms of this Agreement shall be conferred to all sub- licensees. 12.3 LICENSEE agrees that any sublicenses granted by it shall provide that the obligations to LICENSOR of Articles VIII, X, and XI of this Agreement shall be binding upon the sub-licensee as if it were a party to this Agreement. LICENSEE further agrees to attach copies of these sections and articles to any sub-license agreements. ARTICLE XIII - TERMINATION 13.1 LICENSOR may terminate this Agreement if LICENSEE becomes insolvent or, a petition in bankruptcy is filed against LICENSEE and is consented to, acquiesced in or remains undismissed for one hundred twenty (120) days; or makes a general assignment for the benefit of creditors, or a receiver is appointed for LICENSEE, and LICENSEE does not return to solvency before the expiration of a one hundred twenty (120) day period. 13.2 Should LICENSEE fail to pay LICENSOR royalties due and payable hereunder resulting in such amounts becoming past due for more than sixty (60) days, LICENSOR shall have the right to terminate this Agreement pursuant to the provisions of Section 13.3 below. Upon the expiration of the ninety (90) day period as provided in Section 13.3 below, if LICENSEE shall not have paid all such royalties then due and payable, the rights, privileges and license granted hereunder shall terminate, unless LICENSEE's failure to pay arises from a bona fide dispute concerning royalties due, in which case either of the parties may elect to pursue the alternative disputes resolution provided by Section 13.6 below. 13.3 Upon any material breach of this Agreement by LICENSEE, other than those occurrences set out in Sections 13.1 and 13.2, LICENSOR shall have the right to terminate this Agreement and the rights, privileges and license granted hereunder by ninety (90) days' notice to LICENSEE. Such termination shall become effective unless LICENSEE shall have cured any such breach prior to the expiration of the ninety (90) day period. 13.4 LICENSEE shall be entitled to terminate this Agreement upon ninety (90) days advance written notice to LICENSOR, in the event of LICENSOR'S material breach of any of the provisions of this Agreement, which breach is not cured (if capable of being cured) within such ninety (90) day notice period. Upon delivering such notice of termination pursuant to this Section 13.4, LICENSEE may withhold any royalties or funds which may be due, but not yet paid, to LICENSOR until final determination, adjudication, award of judgement, or settlement of any damages incurred by LICENSEE as a result of such material breach by LICENSOR. LICENSEE may, at its sole determination, draw from such funds, as an offset against any damage award, settlement, or judgement received by LICENSEE at any time after such award, settlement, or judgement has been determined. LICENSEE shall accrue funds payable to LICENSOR during the funds withholding period for the account of LICENSOR. After any offset by LICENSEE is made against such funds, the balance of all funds accrued shall be thereafter paid to LICENSOR. 13.5 Upon termination of this Agreement for any reason, nothing herein shall be construed to release either PARTY from any obligation that matured prior to the effective date of such termination. Notwithstanding the foregoing, however, LICENSEE shall have the right for eighteen (18) months thereafter to dispose of all Licensed Products then in its, or sub-licensee's inventory, and shall pay royalties thereon, in accordance with the provisions of this Agreement, as though this Agreement had not terminated. 13.6 Other than any claim arising from LICENSEE's failure to pay royalties due under this contract, any controversy or bonafide disputed claim arising between the PARTIES to this Agreement, which dispute cannot be resolved by mutual agreement shall, by the election of either PARTY, be resolved by submitting to binding arbitration for dispute resolution before an independent, accredited arbitrator under the rules and regulations then in effect of the American Arbitration Association, selected by mutual agreement within thirty (30) days of written request by either PARTY. Said dispute resolution shall be held in the county of Los Angeles, California or at such other place as shall be mutually agreed upon in writing by the PARTIES. All determinations of the arbitrator, including which Party shall bear the cost of such arbitration, subject to rules of appeal under the guidelines established by the American Arbitration Association, shall be binding upon the PARTIES. ARTICLE XIV - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS Any payment, notice or other communication pursuant to this Agreement shall be sufficiently made or given on the second business day following the date of mailing if sent to the receiving party by express or certified first class mail, postage prepaid, addressed to the receiving party at their address below or as they shall designate by written notice given to the other party: In the case of LICENSOR : Sanguine Corporation 101 East Green Street, Suite 11 Pasadena, CA 91105 Attn: Thomas C. Drees, Ph.D. In the case of LICENSEE: Ascendiant - Asia, L.L.C. 18881 Von Karman, Suite 1630 Irvine, CA 92612 Attn: Mark Bergendahl With copies to: Lynne Bolduc, Esq. c/o Oswald & Yap 16148 Sand Canyon Irvine, CA 92618 ARTICLE XV - MISCELLANEOUS PROVISIONS 15.1 This Agreement shall be construed, governed, interpreted and applied in accordance with the laws of the State of California, U.S.A., except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent was granted. 15.2 The PARTIES hereto agree that neither PARTY is restricted from conducting any and all other lawful business which is not expressly related to this Agreement, including without limitation to entering into other license agreements with other parties, or in any other manner, and with any other party, or entity that each PARTY deems desirable, whether or not such party or entity may possess similar capabilities or products to the PARTIES herein, and may do so without fear or implication of a conflict to this Agreement. 15.3 The PARTIES hereto acknowledge that this Agreement sets forth the entire agreement and understanding of the PARTIES hereto as to the subject matter hereof, and shall not be subject to any change or modification except by the execution of a written instrument subscribed to by the parties hereto. 15.4 The provisions of this Agreement are severable. In the event that any provisions of this Agreement shall be determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof. 15.5 The failure of either party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other party. 15.6 This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be an original and all such counterparts shall together constitute but one and the same agreement. 15.7 This Agreement along with all its terms shall be construed to include the Parties' respective heirs, representatives, subsidiaries, merged or acquired entities, successors, subsequent LICENSE, LICENSE RIGHTS, Patent Rights holders, owners and/or assigns. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly executed this Agreement the day and year set forth below. SANGUINE CORPORATION (SGNC) By /s/Thomas C. Drees Date February 15, 2002 Thomas C. Drees, Ph.D., Chairman & CEO ** ADDITIONAL SIGNATURES FOLLOW** Attest /s/Anthony G. Gargreaves Date February 15, 2002 Anthony G. Hargreaves, Secretary, Sanguine Corporation ASCENDIANT - ASIA, L.L.C. By /s/ Mark Bergendahl Date February 15, 2002 Mark Bergendahl, President & Managing Director EX-10 4 ex10-2.txt SUBSCRIPTION AGREEMENT SUBSCRIPTION AGREEMENT Dear Subscriber: You (the "Subscriber") hereby agree to purchase, and Sanguine Corporation, a Nevada corporation (the "Company") hereby agrees to issue and to sell to the Subscriber, a 5% Convertible Note convertible in accordance with the terms thereof into shares of the Company's $.001 par value common stock (the "Company Shares") and common stock purchase warrants ("Warrants") for the aggregate consideration as set forth on the signature page hereof ("Purchase Price"). The form of Convertible Note is annexed hereto as Exhibit A. (The Company Shares included in the Securities (as hereinafter defined) are sometimes referred to herein as the "Shares", "Common Shares" or "Common Stock"). (The Notes, the Company Shares, Warrants, and the Common Stock issuable upon exercise of the Warrants are collectively referred to herein as, the "Securities"). Upon acceptance of this Agreement by the Subscriber, the Company shall issue and deliver the Note and Warrants against payment, by federal funds wire transfer of the Purchase Price. The following terms and conditions shall apply to this subscription. 1. Subscriber's Representations and Warranties. The Subscriber hereby represents and warrants to and agrees with the Company that: (a) Information on Company. The Subscriber has been furnished with the Company's Form 10-K for the year ended December 31, 2000 as filed with the Securities and Exchange Commission (the "Commission") together with all subsequently filed forms 10-Q, and other publicly available filings made with the Commission (hereinafter referred to as the "Reports"). In addition, the Subscriber has received from the Company such other information concerning its operations, financial condition and other matters as the Subscriber has requested in writing (such information in writing is collectively, the "Other Written Information"), and considered all factors the Subscriber deems material in deciding on the advisability of investing in the Securities. (b) Information on Subscriber. The Subscriber is an "accredited investor", as such term is defined in Regulation D promulgated by the Commission under the Securities Act of 1933, as amended (the "1933 Act"), is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly- owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Subscriber to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment. The Subscriber has the authority and is duly and legally qualified to purchase and own the Securities. The Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. The information set forth on the signature page hereto regarding the Subscriber is accurate. (c) Purchase of Note. On the Closing Date, the Subscriber will purchase the Note and Warrants for its own account and not with a view to any distribution thereof. (d) Compliance with Securities Act. The Subscriber understands and agrees that the Securities have not been registered under the 1933 Act, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Subscriber contained herein), and that such Securities must be held unless a subsequent disposition is registered under the 1933 Act or is exempt from such registration. (e) Company Shares Legend. The Company Shares, and the shares of Common Stock issuable upon the exercise of the Warrants, shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED." (f) Warrants Legend. The Warrants shall bear the following legend: "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED." (g) Note Legend. The Note shall bear the following legend: "THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED." (h) Communication of Offer. The offer to sell the Securities was directly communicated to the Subscriber. At no time was the Subscriber presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer. (i) Correctness of Representations. The Subscriber represents that the foregoing representations and warranties are true and correct as of the date hereof and, unless the Subscriber otherwise notifies the Company prior to the Closing Date (as hereinafter defined), shall be true and correct as of the Closing Date. The foregoing representations and warranties shall survive the Closing Date. 2. Company Representations and Warranties. The Company represents and warrants to and agrees with the Subscriber that: (a) Due Incorporation. The Company and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdictions of their incorporation and have the requisite corporate power to own their properties and to carry on their business as now being conducted. The Company and each of its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a material adverse effect on the business, operations or financial condition of the Company. (b) Outstanding Stock. All issued and outstanding shares of capital stock of the Company and each of its subsidiaries has been duly authorized and validly issued and are fully paid and non-assessable. (c) Authority; Enforceability. This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity; and the Company has full corporate power and authority necessary to enter into this Agreement and to perform its obligations hereunder and all other agreements entered into by the Company relating hereto. (d) Additional Issuances. Except as set forth on Schedule 2(d), there are no outstanding agreements or preemptive or similar rights affecting the Company's common stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or other equity interest in any of the subsidiaries of the Company except as described in the Reports or Other Written Information. (e) Consents. No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its affiliates, the NASD, NASDAQ or the Company's Shareholders is required for execution of this Agreement, and all other agreements entered into by the Company relating thereto, including, without limitation issuance and sale of the Securities, and the performance of the Company's obligations hereunder. (f) No Violation or Conflict. Assuming the representations and warranties of the Subscriber in Paragraph 1 are true and correct and the Subscriber complies with its obligations under this Agreement, neither the issuance and sale of the Securities nor the performance of its obligations under this Agreement and all other agreements entered into by the Company relating thereto by the Company will: (i) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the certificate of incorporation, charter or bylaws of the Company, (B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of its affiliates or over the properties or assets of the Company or any of its affiliates, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or any of its affiliates is a party, by which the Company or any of its affiliates is bound, or to which any of the properties of the Company or any of its affiliates is subject, or (D) the terms of any "lock-up" or similar provision of any underwriting or similar agreement to which the Company, or any of its affiliates is a party except the violation, conflict, breach, or default of which would not have a material adverse effect on the Company; or (ii) result in the creation or imposition of any lien, charge or encumbrance upon the Securities or any of the assets of the Company, or any of its affiliates. (g) The Securities. The Securities upon issuance: (i) are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the 1933 Act and State laws; (ii) have been, or will be, duly and validly authorized and on the date of issuance and on the Closing Date, as hereinafter defined, and the date the Note is converted, and the Warrants are exercised, the Securities will be duly and validly issued, fully paid and nonassessable (and if registered pursuant to the 1933 Act, and resold pursuant to an effective registration statement will be free trading and unrestricted, provided that the Subscriber complies with the Prospectus delivery requirements); (iii) will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company; and (iv) will not subject the holders thereof to personal liability by reason of being such holders. (h) Litigation. There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its affiliates that would affect the execution by the Company or the performance by the Company of its obligations under this Agreement, and all other agreements entered into by the Company relating hereto. Except as disclosed in the Reports or Other Written Information, there is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its affiliates which litigation if adversely determined could have a material adverse effect on the Company. (i) Reporting Company. The Company is a publicly- held company subject to reporting obligations pursuant to Sections 15(d) and 13 of the Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of common shares registered pursuant to Section 12(g) of the 1934 Act. The Company's common stock is trading on the OTC Bulletin Board ("Bulletin Board"). Pursuant to the provisions of the 1934 Act, the Company has filed all reports and other materials required to be filed thereunder with the Securities and Exchange Commission during the preceding twelve months except as set forth in the Reports. (j) No Market Manipulation. The Company has not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the common stock of the Company to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued. (k) Information Concerning Company. The Reports contain all material information relating to the Company and its operations and financial condition as of their respective dates which information is required to be disclosed therein. Since the date of the financial statements included in the Reports, and except as modified in the Other Written Information or in the Schedule hereto, there has been no material adverse change in the Company's business, financial condition or affairs not disclosed in the Reports. The Reports do not contain any untrue statement of a material fact or omit to state a material fact in light of the circumstances when made required to be stated therein or necessary to make the statements therein not misleading. (l) Dilution. The number of Shares issuable upon conversion of the Notes may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines prior to conversion of the Note. The Company's executive officers and directors have studied and fully understand the nature of the Securities being sold hereby and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Shares upon conversion of the Note and exercise of the Warrants is binding upon the Company and enforceable, except as otherwise described in this Subscription Agreement or the Note, regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company. (m) Stop Transfer. The Securities are restricted securities as of the date of this Agreement. The Company will not issue any stop transfer order or other order impeding the sale and delivery of the Securities, except as may be required by federal securities laws. (n) Defaults. Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or ByLaws. Neither the Company nor any of its subsidiaries is (i) in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a material adverse effect on the Company, (ii) in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to its knowledge in violation of any statute, rule or regulation of any governmental authority which violation would have a material adverse effect on the Company. (o) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of Bulletin Board nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings. The Company has not conducted and will not conduct any offering other than the transactions contemplated hereby that will be integrated with the issuance of the Securities. (p) No General Solicitation. Neither the Company, nor any of its affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Act) in connection with the offer or sale of the Securities. (q) Listing. The Company's common stock is quoted on, and listed for trading on the Bulletin Board. Except as disclosed in the Other Written Information, the Company has not received any oral or written notice that its Common Stock will be delisted from the Bulletin Board or that the Common Stock does not meet all requirements for the continuation of such listing. (r) No Undisclosed Liabilities. The Company has no liabilities or obligations which are material, individually or in the aggregate, which are not disclosed in the Reports and Other Written Information, other than those incurred in the ordinary course of the Company's businesses since December 31, 2000 and which, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the Company's financial condition. (s) No Undisclosed Events or Circumstances. Since December 31, 2000, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports. (t) Capitalization. The authorized and outstanding capital stock of the Company as of the date of this Agreement and the Closing Date are set forth on Schedule 2(t) hereto. Except as set forth in the Reports and Other Written Information and Schedule 2(t), there are no options, warrants, or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company. All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. (u) Correctness of Representations. The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects, will be true and correct as of the Closing Date in all material respects, and, unless the Company otherwise notifies the Subscriber prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date. The foregoing representations and warranties shall survive the Closing Date. 3. Regulation D Offering. This Offering is being made pursuant to the exemption from the registration provisions of the Securities Act of 1933, as amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the Closing Date, the Company will provide an opinion reasonably acceptable to Subscriber from the Company's legal counsel opining on the availability of the Regulation D exemption as it relates to the offer and issuance of the Securities. A form of the legal opinion is annexed hereto as Exhibit B. The Company will provide, at the Company's expense, such other legal opinions in the future as are reasonably necessary for the conversion of the Note and exercise of the Warrants. 4. Reissuance of Securities. The Company agrees to reissue certificates representing the Securities without the legends set forth in Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted to and disposes of such Securities pursuant to Rule 144(d) and/or Rule 144(k) under the 1933 Act in the opinion of counsel reasonably satisfactory to the Company, or (b) upon resale subject to an effective registration statement after the Securities are registered under the 1933 Act. The Company agrees to cooperate with the Subscriber in connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Company and its counsel receive all reasonably requested written representations from the Subscriber and selling broker, if any. Provided the Subscriber provides required certifications and representation letters, if any, if the Company fails to remove any legend as required by this Section 4 (a "Legend Removal Failure"), then beginning on the tenth (10th) day following the date that the Subscriber has requested the removal of the legend and delivered all items reasonably required by the Company to be delivered by the Subscriber, the Company continues to fail to remove such legend, the Company shall pay to each Subscriber or assignee holding shares subject to a Legend Removal Failure an amount equal to one percent (1%) of the Purchase Price of the shares subject to a Legend Removal Failure per day that such failure continues. If during any twelve (12) month period, the Company fails to remove any legend as required by this Section 4 for an aggregate of thirty (30) days, each Subscriber or assignee holding Securities subject to a Legend Removal Failure may, at its option, require the Company to purchase all or any portion of the Securities subject to a Legend Removal Failure held by such Subscriber or assignee at a price per share equal to 120% of the applicable Purchase Price. 5. Warrants. (a) The Company will also issue and deliver on the Closing Date to the Subscriber a Warrant to purchase 5,937,500 Shares of Common Stock (subject to adjustment as described in the Warrant). A form of Warrant is annexed hereto as Exhibit C. The per share "Purchase Price" of Common Stock as defined in the Warrant shall be the greater of $.08 or 66-2/3% of the average of the closing bid prices of the Common Stock on the Bulletin Board, Nasdaq SmallCap Market, Nasdaq National Market System, American Stock, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock, the "Principal Market"), for the trading days immediately preceding the effective date of the registration statement described in Section 10.1(iv). The Warrants shall be exercisable for five years after the Issue Date (as defined in the Warrant). (b) All the representations, covenants, warranties, undertakings, remedies, liquidated damages, indemnification, rights in Section 9 hereof, and other rights including but not limited to registration rights made or granted to or for the benefit of the Subscriber are hereby also made and granted to the Subscribers in respect of the Warrants and Company Shares issuable upon exercise of the Warrants. 6. Fees. The Company shall pay to counsel to the Subscriber its fees of $7,500 for services rendered to Subscribers in connection with this Agreement for aggregate subscription amounts of up to $25,000 of principal amount of Notes (the "Initial Offering") and acting as escrow agent for the Initial Offering. One-half of the legal fee shall be payable in cash and one-half shall be payable by delivery of a Note in the amount of $3,750. The holder of the Note described in this Section 6 shall receive all the rights and benefits, granted to the Subscriber, including but not limited to indemnification and registration rights. All the representations and warranties made for the benefit of the Subscriber are hereby made to and for the benefit of the holder of the Note described in this Section 6. The cash portion of the legal fees will be payable out of funds held pursuant to a Funds Escrow Agreement to be entered into by the Company, Subscriber and Escrow Agent. 7. Covenants of the Company. The Company covenants and agrees with the Subscriber as follows: (a) Stop Orders. The Company will advise the Subscriber, 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. (b) Listing. The Company shall promptly secure the listing of the Company Shares and Common Stock issuable upon exercise of the Warrants upon each national securities exchange, or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain such listing so long as any Notes are outstanding. The Company will maintain the listing of its Common Stock on the Principal Market, and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Principal Market and such other exchanges or markets, as applicable. The Company will provide the Subscriber copies of all notices it receives notifying the Company of the threatened or actual delisting of the Common Stock from any Principal Market provided the provisions of such information to the Subscriber would not violate the provisions of Regulation FD under the 1933 Act. (c) Market Regulations. The Company shall notify the SEC, NASD, the Principal Market and applicable state authorities, in accordance with their requirements, if any, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Subscriber and promptly provide copies thereof to Subscriber. (d) Reporting Requirements. From the Closing Date and until at least three (3) years after the effectiveness of the registration statement on Form SB-2 or such other registration statement described in Section 10.1(iv) hereof, the Company will (i) cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects with its reporting and filing obligations under the Exchange Act, (iii) comply with all reporting requirements that is applicable to an issuer with a class of Shares registered pursuant to Section 12(g) of the Exchange Act, and (iv) comply with all requirements related to any registration statement filed pursuant to this Agreement. The Company will use its best efforts not to take any action or file any document (whether or not permitted by the Act or the Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Acts until the later of three (3) years after the actual effective date of the registration statement on Form SB-2 or such other registration statement described in Section 10.1(iv) hereof. Until the earlier of the resale of the Company Shares by the Subscriber or at least three (3) years after the Warrants have been exercised, the Company will use its best efforts to continue the listing of the Common Stock on the Bulletin Board and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of Bulletin Board. (e) Reservation of Common Stock. The Company undertakes to reserve, pro rata on behalf of each holder of a Note or Warrant, from its authorized but unissued Common Stock, at all times that Notes remain outstanding, a number of Common Shares equal to not less than the amount of Common Shares necessary to allow each such holder to be able to convert all such outstanding Notes, at the then applicable Conversion Price, and one share of Common Stock for each Common Share issuable upon exercise of the Warrants. (f) Taxes. The Company will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefore. (g) Insurance. The Company will keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company's line of business, in amounts sufficient to prevent the Company from becoming a co-insurer and not in any event less than 100% of the insurable value of the property insured; and the Company will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated and to the extent available on commercially reasonable terms. (h) Books and Records. The Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis. (i) Governmental Authorities. The Company shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets. (j) Intellectual Property. The Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use intellectual property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business. (k) Properties. The Company will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a material adverse effect. (l) Confidentiality. The Company agrees that it will not disclose, and will not include in any public announcement, the name of any Subscriber, unless expressly agreed to by such Subscriber or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. 8. Covenants of the Company and Subscriber Regarding Indemnification. (a) The Company agrees to indemnify, hold harmless, reimburse and defend Subscriber, Subscriber's officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon Subscriber or any such person which results, arises out of or is based upon (i) any material misrepresentation by Company or breach of any warranty by Company in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Subscribers relating hereto. (b) Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company's officers, directors, agents, affiliates, control persons against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or is based upon (i) any material misrepresentation by Subscriber in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by Subscriber of any covenant or undertaking to be performed by Subscriber hereunder, or any other agreement entered into by the Company and Subscribers relating hereto. (c) The procedures set forth in Section 10.6 shall apply to the indemnifications set forth in Sections 8(a) and 8(b) above. 9.1. Conversion of Note. (a) Upon the conversion of the Note or part thereof, the Company shall, at its own cost and expense, take all necessary action (including the issuance of an opinion of counsel) to assure that the Company's transfer agent shall issue stock certificates in the name of Subscriber (or its nominee) or such other persons as designated by Subscriber and in such denominations to be specified at conversion representing the number of shares of common stock issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company's Common Stock and that the Shares will be unlegended, free-trading, and freely transferable, and will not contain a legend restricting the resale or transferability of the Company Shares provided the Shares are being sold pursuant to an effective registration statement covering the Shares to be sold or are otherwise exempt from registration when sold and Subscriber complies with prospectus delivery requirements. (b) Subscriber will give notice of its decision to exercise its right to convert the Note or part thereof by telecopying an executed and completed Notice of Conversion (a form of which is annexed to Exhibit A hereto) to the Company via confirmed telecopier transmission. The Subscriber will not be required to surrender the Note until the Note has been fully converted or satisfied. Each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date. The Company will or cause the transfer agent to transmit the Company's Common Stock certificates representing the Shares issuable upon conversion of the Note to the Subscriber via express courier for receipt by such Subscriber within three (3) business days after receipt by the Company of the Notice of Conversion (the "Delivery Date"). In the event the Shares are eligible for and are electronically transferable, then delivery of the Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber. A Note representing the balance of the Note not so converted will be provided to the Subscriber, if requested by Subscriber provided an original Note is delivered to the Company. To the extent that a Subscriber elects not to surrender a Note for reissuance upon partial payment or conversion, the Subscriber hereby indemnifies the Company against any and all loss or damage attributable to a third-party claim in an amount in excess of the actual amount then due under the Note arising from such non-surrender of the Note. (c) The Company understands that a delay in the delivery of the Shares in the form required pursuant to Section 9 hereof, or the Mandatory Redemption Amount described in Section 9.2 hereof, beyond the Delivery Date or Mandatory Redemption Payment Date (as hereinafter defined) could result in economic loss to the Subscriber. As compensation to the Subscriber for such loss, the Company agrees to pay late payments to the Subscriber for late issuance of Shares in the form required pursuant to Section 9 hereof upon Conversion of the Note or late payment of the Mandatory Redemption Amount, in the amount of $100 per business day after the Delivery Date or Mandatory Redemption Payment Date, as the case may be, for each $10,000 of Note principal amount being converted or redeemed. The Company shall pay any payments incurred under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Subscriber, in the event that the Company fails for any reason to effect delivery of the Shares by the Delivery Date or make payment by the Mandatory Redemption Payment Date, the Subscriber will be entitled to revoke all or part of the relevant Notice of Conversion or rescind all or part of the notice of Mandatory Redemption by delivery of a notice to such effect to the Company whereupon the Company and the Subscriber shall each be restored to their respective positions immediately prior to the delivery of such notice, except that late payment charges described above shall be payable through the date notice of revocation or rescission is given to the Company. (d) Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Subscriber and thus refunded to the Company. 9.2. Mandatory Redemption at Subscriber's Election. In the event the Company is prohibited from issuing Shares, or fails to timely deliver Shares on a Delivery Date, or upon the occurrence of any other Event of Default (as defined in the Note) or for any reason other than pursuant to the limitations set forth in Section 9.3 hereof, then at the Subscriber's election, the Company must pay to the Subscriber ten (10) business days after request by the Subscriber or on the Delivery Date (if requested by the Subscriber) at the Subscriber's election, a sum of money determined by (i) multiplying up to the outstanding principal amount of the Note designated by the Subscriber by 130%, or (ii) multiplying the number of Shares otherwise deliverable upon conversion of an amount of Note principal and/or interest designated by the Subscriber (with the date of giving of such designation being a Deemed Conversion Date) at the then Conversion Price that would be in effect on the Deemed Conversion Date by the highest closing price of the Common Stock on the principal market for the period commencing on the Deemed Conversion Date until the day prior to the receipt of the Mandatory Redemption Payment, whichever is greater, together with accrued but unpaid interest thereon ("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be received by the Subscriber on the same date as the Company Shares otherwise deliverable or within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. 9.3. Maximum Conversion. The Subscriber shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Subscriber and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Subscriber and its affiliates of more than 9.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber shall not be limited to aggregate conversions of only 9.99% and aggregate conversion by the Subscriber may exceed 9.99%. The Subscriber may void the conversion limitation described in this Section 9.3 upon 75 days prior written notice to the Company. The Subscriber may allocate which of the equity of the Company deemed beneficially owned by the Subscriber shall be included in the 9.99% amount described above and which shall be allocated to the excess above 9.99%. 9.4. Injunction - Posting of Bond. In the event a Subscriber shall elect to convert a Note or part thereof, the Company may not refuse conversion based on any claim that such Subscriber or any one associated or affiliated with such Subscriber has been engaged in any violation of law, or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of said Note shall have been sought and obtained and the Company posts a surety bond for the benefit of such Subscriber in the amount of 130% of the amount of the Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment. 9.5. Buy-In. In addition to any other rights available to the Subscriber, if the Company fails to deliver to the Subscriber such shares issuable upon conversion of a Note by the Delivery Date and if ten (10) days after the Delivery Date the Subscriber purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Subscriber of the Common Stock which the Subscriber anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of note principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In. The delivery date by which Common Stock must be delivered pursuant to this Section 9.5 shall be tolled for the amount of days that the Subscriber does not deliver information reasonably requested by the Company's transfer agent. 9.6 Adjustments. The Conversion Price and amount of Shares issuable upon conversion of the Notes shall be adjusted to offset the effect of stock splits, stock dividends and pro rata distributions of property or equity interests to the Company's shareholders. 9.7. Redemption. The Company may not redeem or call the Note without the consent of the holder of the Securities except as otherwise described herein. 10.1. Registration Rights. The Company hereby grants the following registration rights to holders of the Securities. (i) On one occasion, for a period commencing 121 days after the Closing Date, but not later than three years after the Closing Date ("Request Date"), the Company, upon a written request therefor from any record holder or holders of more than 50% of the aggregate of the Company's Shares issued and issuable upon Conversion of the Notes (the Common Stock issued or issuable upon conversion of the Notes issued to the Subscriber and described in Section 6 above or issuable by virtue of ownership of such Notes, and one share of Common Stock for each Share issuable upon exercise of the Warrants, collectively the "Registrable Securities"), shall prepare and file with the SEC a registration statement under the Act covering the Registrable Securities which are the subject of such request, unless such Registrable Securities are the subject of an effective registration statement or included for registration in a pending registration statement. In addition, upon the receipt of such request, the Company shall promptly give written notice to all other record holders of the Registrable Securities that such registration statement is to be filed and shall include in such registration statement Registrable Securities for which it has received written requests within 10 days after the Company gives such written notice. Such other requesting record holders shall be deemed to have exercised their demand registration right under this Section 10.1(i). As a condition precedent to the inclusion of Registrable Securities, the holder thereof shall provide the Company with such information as the Company reasonably requests. The obligation of the Company under this Section 10.1(i) shall be limited to one registration statement. (ii) If the Company at any time proposes to register any of its securities under the Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public, provided the Registrable Securities are not otherwise registered for resale by the Subscriber or Holder pursuant to an effective registration statement, each such time it will give at least 25 days' prior written notice to the record holder of the Registrable Securities of its intention so to do. Upon the written request of the holder, received by the Company within 15 days after the giving of any such notice by the Company, to register any of the Registrable Securities, the Company will cause such Registrable Securities as to which registration shall have been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Registrable Securities so registered by the holder of such Registrable Securities (the "Seller"). In the event that any registration pursuant to this Section 10.1(ii) shall be, in whole or in part, an underwritten public offering of common stock of the Company, the number of shares of Registrable Securities to be included in such an underwriting may be reduced by the managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company shall notify the Seller in writing of any such reduction. Notwithstanding the foregoing provisions, or Section 10.4 hereof, the Company may withdraw or delay or suffer a delay of any registration statement referred to in this Section 10.1(ii) without thereby incurring any liability to the Seller. (iii) If, at the time any written request for registration is received by the Company pursuant to Section 10.1(i), the Company has determined to proceed with the actual preparation and filing of a registration statement under the 1933 Act in connection with the proposed offer and sale for cash of any of its securities for the Company's own account, such written request shall be deemed to have been given pursuant to Section 10.1(ii) rather than Section 10.1(i), and the rights of the holders of Registrable Securities covered by such written request shall be governed by Section 10.1(ii). (iv) The Company shall file with the Commission not later than thirty (30) days after the Closing Date (the "Filing Date"), and use its reasonable commercial efforts to cause to be declared effective a Form SB-2 registration statement (or such other form that it is eligible to use) in order to register the Registrable Securities for resale and distribution under the Act. The registration statement described in this paragraph must be declared effective by the Commission one hundred and twenty days (120) of the Closing Date ("Effective Date"). The Company will register not less than a number of shares of Common Stock in the aforedescribed registration statement that is equal to 200% of the Company Shares issuable at the Conversion Price that would be in effect on the Closing Date or the date of filing of such registration statement (employing the Conversion Price which would result in the greater number of Shares), assuming the conversion of 100% of the Notes and one share of Common Stock for each of the shares issuable upon exercise of the Warrants. The Registrable Securities shall be reserved and set aside exclusively for the benefit of the Subscriber, and not issued, employed or reserved for anyone other than the Subscriber. Such registration statement will immediately be amended or additional registration statements will be immediately filed by the Company as necessary to register additional Company Shares to allow the public resale of all Common Stock included in and issuable by virtue of the Registrable Securities. 10.2. Registration Procedures. If and whenever the Company is required by the provisions hereof to effect the registration of any shares of Registrable Securities under the Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), and promptly provide to the holders of Registrable Securities ("Sellers") copies of all filings and Commission letters of comment; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the latest of: (i) twelve months after the latest Maturity Date of a Note; (ii) until one year after all the Company Shares are eligible for resale pursuant to Rule 144(k) of the 1933 Act; or (iii) until such registration statement has been effective for a period of not less than 270 days, and comply with the provisions of the Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the Seller's intended method of disposition set forth in such registration statement for such period; (c) furnish to the Seller, such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration statement; (d) use its best efforts to register or qualify the Seller's Registrable Securities covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the Seller shall reasonably designate, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; (f) immediately notify the Seller when a prospectus relating thereto is required to be delivered under the Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (g) make available for inspection by the Seller, and any attorney, accountant or other agent retained by the Seller or underwriter, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the seller, attorney, accountant or agent in connection with such registration statement. 10.3. Provision of Documents. At the request of the Seller, provided a demand for registration has been made pursuant to Section 10.1(i) or a request for registration has been made pursuant to Section 10.1(ii), the Registrable Securities will be included in a registration statement filed pursuant to this Section 10. In connection with each registration hereunder, the Seller will furnish to the Company in writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws. In connection with each registration pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public offering, the Company and the Seller agree to enter into a written agreement with the managing underwriter in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. 10.4. Non-Registration Events. The Company and the Subscriber agree that the Seller will suffer damages if any registration statement required under Section 10.1(i) or 10.1(ii) above is not filed within 30 days after written request by the Holder and not declared effective by the Commission within 90 days after such request [or the Filing Date and Effective Date, respectively, in reference to the Registration Statement on Form S-3 or such other form described in Section 10.1(iv)], and maintained in the manner and within the time periods contemplated by Section 10 hereof, and it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (i) the Registration Statement described in Sections 10.1(i) or 10.1(ii) is not filed within 30 days of such written request, or is not declared effective by the Commission on or prior to the date that is 90 days after such request, or (ii) the registration statement on Form S-3 or such other form described in Section 10.1(iv) is not filed on or before the Filing Date or not declared effective on or before the sooner of the Effective Date, or within five business days of receipt by the Company of a written or oral communication from the Commission that the registration statement described in Section 10.1(iv) will not be reviewed, or (iii) any registration statement described in Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared effective but shall thereafter cease to be effective (without being succeeded immediately by an additional registration statement filed and declared effective) for a period of time which shall exceed 30 days in the aggregate per year but not more than 20 consecutive calendar days (defined as a period of 365 days commencing on the date the Registration Statement is declared effective) (each such event referred to in clauses (i), (ii) and (iii) of this Section 10.4 is referred to herein as a "Non-Registration Event"), then, for so long as such Non-Registration Event shall continue, the Company shall pay, at the Subscriber's option, in cash or stock at the applicable Conversion Price, as Liquidated Damages to each holder of any Registrable Securities an amount equal to two (2%) percent per month or part thereof for each month or part thereof thereafter during the pendency of such Non-Registration Event, of the principal of the Notes and Additional Notes issued in the Initial Offering and Additional Offering, whether or not converted, then owned of record by such holder or issuable as of or subsequent to the occurrence of such Non- Registration Event. Payments to be made pursuant to this Section 10.4 shall be due and payable within ten (10) business days after demand in immediately available funds. In the event a Mandatory Redemption Payment is demanded from the Company by the Holder pursuant to Section 9.2 of this Subscription Agreement, then the Liquidated Damages described in this Section 10.4 shall no longer accrue on the portion of the Purchase Price underlying the Mandatory Redemption Payment, from and after the date the Holder receives the Mandatory Redemption Payment. It shall also be deemed a Non-Registration Event if at any time a Note is outstanding, there is less than 125% of the amount of Common Shares necessary to allow full conversion of such Note at the then applicable Conversion Price, registered for unrestricted resale in an effective registration statement. 10.5. Expenses. All expenses incurred by the Company in complying with Section 10, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs of insurance are called "Registration Expenses". All underwriting discounts and selling commissions applicable to the sale of Registrable Securities, including any fees and disbursements of any special counsel to the Seller, are called "Selling Expenses". The Seller shall pay the fees of its own additional counsel, if any. The Company will pay all Registration Expenses in connection with the registration statement under Section 10. All Selling Expenses in connection with each registration statement under Section 10 shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree. 10.6. Indemnification and Contribution. (a) In the event of a registration of any Registrable Securities under the Act pursuant to Section 10, the Company will indemnify and hold harmless the Seller, each officer of the Seller, each director of the Seller, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the Seller, or such underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities was registered under the Act pursuant to Section 10, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon 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 in light of the circumstances when made, and will subject to the provisions of Section 10.1(c) reimburse the Seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to the Seller to the extent that any such damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the Company to the Seller with or prior to the delivery of written confirmation of the sale by the Seller to the person asserting the claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (iii) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such Seller, or any such controlling person in writing specifically for use in such registration statement or prospectus. (b) In the event of a registration of any of the Registrable Securities under the Act pursuant to Section 10, the Seller will indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the Act pursuant to Section 10, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon 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, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the gross proceeds received by the Seller from the sale of Registrable Securities covered by such registration statement. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 10.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 10.6(c), except and only if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 10.6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution in the event of joint liability under the Act in any case in which either (i) the Seller, or any controlling person of the Seller, makes a claim for indemnification pursuant to this Section 10.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 10.6 provides for indemnification in such case, or (ii) contribution under the Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is provided under this Section 10.6; then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 11. Miscellaneous. (a) Notices. All notices or other communications given or made hereunder shall be in writing and shall be personally delivered or deemed delivered the first business day after being telecopied (provided that a copy is delivered by first class mail) to the party to receive the same at its address set forth below or to such other address as either party shall hereafter give to the other by notice duly made under this Section: (i) if to the Company, to Sanguine Corporation, 101 East Green Street, #11, Pasadena, CA 91105, telecopier number: (626) 405-0079, with a copy by telecopier only to: Burningham & Burningham, Hermes Building, Suite 205, 455 East Fifth South, Salt Lake City, Utah 84111-3323, Attn: Leonard W. Burningham, Esq., telecopier number: (801) 355-7126, and (ii) if to the Subscriber, to the name, address and telecopy number set forth on the signature page hereto, with a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575. (b) Closing. The consummation of the transactions contemplated herein shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, upon the satisfaction of all conditions to Closing set forth in this Agreement. The closing date shall respectively be the dates that subscriber funds representing the net amount due the Company from the Purchase Price of the Initial Offering (the "Closing Date"). (c) Entire Agreement; Assignment. This Agreement represents the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties. No right or obligation of either party shall be assigned by that party without prior notice to and the written consent of the other party. (d) Execution. This Agreement may be executed by facsimile transmission, and in counterparts, each of which will be deemed an original. (e) Law Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. (f) Specific Enforcement, Consent to Jurisdiction. The Company and Subscriber acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 12(e) hereof, each of the Company and Subscriber hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law. (g) The Company agrees to indemnify the Subscriber against and hold the other Subscriber harmless from any and all liabilities to any persons claiming brokerage commissions or finder's fees on account of services purported to have been rendered on behalf of the Company in connection with this Agreement or the transactions contemplated hereby. The Company represents that there are no parties entitled to receive fees, commissions, or similar payments in connection with the offering described in the Subscription Agreement. (h) Confidentiality. The Company agrees that it will not disclose publicly or privately the identity of the Subscriber unless expressly agreed to in writing by the Subscriber or only to the extent required by law. (i) Automatic Termination. This Agreement shall automatically terminate without any further action of either party hereto if the Closing shall not have occurred by the tenth (10th) business day following the date this Agreement is accepted by the Subscriber. [THIS SPACE INTENTIONALLY LEFT BLANK] Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us. SANGUINE CORPORATION A Nevada Corporation By:/s/Thomas Drees Name: Title: Dated: March 15, 2002 - ------------------------------------------------------------------------------ Purchase Price of Note: $25,000.00 Warrants to Purchase 5,937,500 Common Shares (subject to adjustment) ACCEPTED as of March 19, 2002 FIRST YORK PARTNERS, INC. Subscriber 50 Broadway, Suite 2300 New York, New York 10004 Fax: 212-785-6205 By:/s/ Name: Title: President LIST OF SCHEDULES AND EXHIBITS Exhibit A Form of Note Exhibit B Form of Legal Opinion Exhibit C Form of Warrant Schedule 2(d) Additional Issuances Schedule 2(t) Capitalization THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. CONVERTIBLE NOTE FOR VALUE RECEIVED, SANGUINE CORPORATION, a Nevada corporation (the "Borrower"), hereby promises to pay to FIRST YORK PARTNERS, INC., 50 Broadway, Suite 2300, New York, New York 10004, Fax: 212-785-6205 (the "Holder") or order, without demand, the sum of Twenty-Five Thousand Dollars ($25,000.00), with simple interest accruing at the annual rate of five percent (5%), on February 28, 2004 (the "Maturity Date"). The following terms shall apply to this Note: ARTICLE 1 PAYMENT RELATED PROVISIONS 1.1. Payment Grace Period. The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note, after which grace period a default interest rate of fifteen percent (15%) per annum shall apply to the amounts owed hereunder. 1.2. Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect commencing from the date hereof and until the Note is paid in full. 1.3. Interest Rate. Subject to the Holder?s right to convert, interest payable on this Note shall accrue at the annual rate of five percent (5%) and be payable February 28, 2003 and annually thereafter, and on the Maturity Date, accelerated or otherwise, when the principal and remaining accrued but unpaid interest shall be due and payable, or sooner as described below. ARTICLE 2 CONVERSION RIGHTS The Holder shall have the right to convert the principal amount and interest due under this Note into Shares of the Borrower's Common Stock as set forth below. 2.1. Conversion into the Borrower's Common Stock. (a) The Holder shall have the right from and after the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and/or at the Holder's election, the interest accrued on the Note, (the date of giving of such notice of conversion being a "Conversion Date") into fully paid and nonassessable shares of common stock of Borrower as such stock exists on the date of issuance of this Note, or any shares of capital stock of Borrower into which such stock shall hereafter be changed or reclassified (the "Common Stock") at the conversion price, as defined in Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein. Upon delivery to the Company of a Notice of Conversion, as described in Section 9 of the subscription agreement entered into between the Company and Holder relating to this Note (the "Subscription Agreement"), the terms of which are incorporated herein by this reference, of the Holder's written request for conversion, Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. At the election of the Holder, the Company will deliver accrued but unpaid interest on the Note through the Conversion Date directly to the Holder on or before the Delivery Date (as defined in the Subscription Agreement). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal (and interest, at the election of the Holder) of the Note to be converted, by the Conversion Price. (b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be at the election of the Holder: the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or ?Pink Sheets? (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock, the ?Principal Market?), or if not then trading on a Principal Market, such other principal market or exchange where the Common Stock is listed or traded for the five trading days immediately preceding but not including a Conversion Date. If the Principal Market does not report bid prices, then the closing price shall be substituted for the bid price referred to in this Section 2.1(b)(ii) when determining the Conversion Price. (c) The Conversion Base Price described in Section 2.1(b)(i) above and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: (A) Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other corporation, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance. (B) Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. (C) Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Base Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. (D) Share Issuance. Subject to the provisions of this Section, if the Borrower at any time shall issue any shares of Common Stock prior to the conversion of the entire principal amount of the Note (otherwise than as provided in Sections 2.1(c)A, 2.1(c)B or 2.1(c)C or this subparagraph D, the "Existing Option Obligations") for a consideration less than the Conversion Base Price that would be in effect at the time of such issue, then, and thereafter successively upon each such issue, the Conversion Base Price shall be reduced as follows: (i) the number of shares of Common Stock outstanding immediately prior to such issue shall be multiplied by the Conversion Base Price in effect at the time of such issue and the product shall be added to the aggregate consideration, if any, received by the Borrower upon such issue of additional shares of Common Stock; and (ii) the sum so obtained shall be divided by the number of shares of Common Stock outstanding immediately after such issue. The resulting quotient shall be the adjusted Conversion Base Price. Except for the Existing Option Obligations, for purposes of this adjustment, the issuance of any security of the Borrower carrying the right to convert such security into shares of Common Stock or of any warrant, right or option to purchase Common Stock shall result in an adjustment to the Conversion Base Price upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights. (d) From and after the issuance date of this Note and for the remaining period during which the conversion right exists, Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note. 2.2. Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this Note, if requested by the Holder, a new Note containing the same date and provisions of this Note shall be issued by the Borrower to the Holder for the remaining principal balance of this Note and interest which shall not have been converted or paid. 2.3. Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable in connection with the unconverted portion of the Note, and (iii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of only 9.99% and aggregate conversion by the Holder may exceed 9.99%. The Holder shall have the authority and obligation to determine whether the restriction contained in this Section 2.3 will limit any conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the Notes are convertible shall be the responsibility and obligation of the Holder. The Holder may void the conversion limitation described in this Section 2.3 upon 75 days prior written notice to the Borrower. The Holder may allocate which of the equity of the Company deemed beneficially owned by the Holder shall be included in the 9.99% amount described above and which shall be allocated to the excess above 9.99%. ARTICLE 3 EVENT OF DEFAULT The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand, presentment or notice, or grace period, all of which hereby are expressly waived, except as set forth below: 3.1. Failure to Pay Principal or Interest. The Borrower fails to pay any installment of principal or interest hereon when due and such failure continues for a period of ten (10) days after the due date. The ten (10) day period described in this Section 3.1 is the same ten (10) day period described in Section 1.1 hereof. 3.2. Breach of Covenant. The Borrower breaches any material covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of seven (7) days after written notice to the Borrower from the Holder. 3.3. Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein, in the Subscription Agreement entered into by the Holder and Borrower in connection with this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect. 3.4. Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 3.5. Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $50,000, and shall remain unpaid, unvacated, unbonded or unstayed for a period of forty-five (45) days. 3.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within forty-five (45) days of initiation. 3.7. Default. A default by the Borrower, after applicable notice and cure periods, under any one or more obligations in an aggregate monetary amount in excess of $50,000. 3.8. Stop Trade. A Securities and Exchange Commission stop trade order or Principal Market trading suspension for longer than five (5) trading days. 3.9. Failure to Deliver Common Stock or Replacement Note. Borrower's failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note and Section 9 of the Subscription Agreement, or if required, a replacement Note. 3.10. Non-Registration Event. The occurrence of a Non-Registration Event as described in Section 10.4 of the Subscription Agreement. 3.11. Delisting. Delising of the Common Stock from the OTC Bulletin Board or such other principal exchange on which the Common Stock is listed for trading; failure to comply with the requirements for continued listing on the OTC Bulletin Board for a period of three consecutive trading days; or notification from the OTC Bulletin Board or any Principal Market that the Borrower is not in compliance with the conditions for such continued listing on the OTC Bulletin Board or other Principal Market. ARTICLE 4 MISCELLANEOUS 4.1. Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof 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. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 4.2. Notices. Any notice herein required or permitted to be given shall be in writing and may be personally served or sent by facsimile transmission (with copy sent by regular, certified or registered mail or by overnight courier). For the purposes hereof, the address and facsimile number of the Holder is as set forth on the first page hereof. The address and facsimile number of the Borrower shall be Sanguine Corporation, 101 East Green Street, #11, Pasadena, CA 91105, facsimile number: (626) 405-0079. Both Holder and Borrower may change the address and facsimile number for notice by service of notice to the other as herein provided. Notice of Conversion shall be deemed given when made to the Company pursuant to the Subscription Agreement. 4.3. Amendment Provision. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 4.4. Assignability. This Note shall be binding upon the Borrower and its successors and permitted assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder. 4.5. Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys' fees. 4.6. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in New York County in the State of New York. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. 4.7. Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 4.8. Redemption. This Note is subject to certain mandatory redemption rights described in the Subscription Agreement. IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its Chief Executive Officer on this 19 day of March, 2002. SANGUINE CORPORATION By:/s/Thomas C. Drees WITNESS: /s/Anthony G. Hargreaves NOTICE OF CONVERSION (To be executed by the Registered Holder in order to convert the Note) The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by SANGUINE CORPORATION on March ___, 2002 into Shares of Common Stock of SANGUINE CORPORATION according to the conditions set forth in such Note, as of the date written below. Date of Conversion: Conversion Price: Shares To Be Delivered: Signature: Print Name: Address: THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. CONVERTIBLE NOTE FOR VALUE RECEIVED, SANGUINE CORPORATION, a Nevada corporation (the "Borrower"), hereby promises to pay to BARBARA R. MITTMAN, 551 Fifth Avenue, Suite 1601, New York, New York 10176, Fax: 212-697-3575 (the "Holder") or order, without demand, the sum of Three Thousand Seven Hundred and Fifty Dollars ($3,750.00), with simple interest accruing at the annual rate of five percent (5%), on February 28, 2004 (the "Maturity Date"). The following terms shall apply to this Note: ARTICLE 1 PAYMENT RELATED PROVISIONS 1.1. Payment Grace Period. The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note, after which grace period a default interest rate of fifteen percent (15%) per annum shall apply to the amounts owed hereunder. 1.2. Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect commencing from the date hereof and until the Note is paid in full. 1.3. Interest Rate. Subject to the Holder?s right to convert, interest payable on this Note shall accrue at the annual rate of five percent (5%) and be payable February 28, 2003 and annually thereafter, and on the Maturity Date, accelerated or otherwise, when the principal and remaining accrued but unpaid interest shall be due and payable, or sooner as described below. ARTICLE 2 CONVERSION RIGHTS The Holder shall have the right to convert the principal amount and interest due under this Note into Shares of the Borrower's Common Stock as set forth below. 2.1. Conversion into the Borrower's Common Stock. (a) The Holder shall have the right from and after the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and/or at the Holder's election, the interest accrued on the Note, (the date of giving of such notice of conversion being a "Conversion Date") into fully paid and nonassessable shares of common stock of Borrower as such stock exists on the date of issuance of this Note, or any shares of capital stock of Borrower into which such stock shall hereafter be changed or reclassified (the "Common Stock") at the conversion price, as defined in Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein. Upon delivery to the Company of a Notice of Conversion, as described in Section 9 of the subscription agreement entered into between the Company and Holder relating to this Note (the "Subscription Agreement"), the terms of which are incorporated herein by this reference, of the Holder's written request for conversion, Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. At the election of the Holder, the Company will deliver accrued but unpaid interest on the Note through the Conversion Date directly to the Holder on or before the Delivery Date (as defined in the Subscription Agreement). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal (and interest, at the election of the Holder) of the Note to be converted, by the Conversion Price. (b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be at the election of the Holder: the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or ?Pink Sheets? (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock, the ?Principal Market?), or if not then trading on a Principal Market, such other principal market or exchange where the Common Stock is listed or traded for the five trading days immediately preceding but not including a Conversion Date. If the Principal Market does not report bid prices, then the closing price shall be substituted for the bid price referred to in this Section 2.1(b)(ii) when determining the Conversion Price. (c) The Conversion Base Price described in Section 2.1(b)(i) above and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: (A) Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other corporation, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance. (B) Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. (C) Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Base Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. (D) Share Issuance. Subject to the provisions of this Section, if the Borrower at any time shall issue any shares of Common Stock prior to the conversion of the entire principal amount of the Note (otherwise than as provided in Sections 2.1(c)A, 2.1(c)B or 2.1(c)C or this subparagraph D, the "Existing Option Obligations") for a consideration less than the Conversion Base Price that would be in effect at the time of such issue, then, and thereafter successively upon each such issue, the Conversion Base Price shall be reduced as follows: (i) the number of shares of Common Stock outstanding immediately prior to such issue shall be multiplied by the Conversion Base Price in effect at the time of such issue and the product shall be added to the aggregate consideration, if any, received by the Borrower upon such issue of additional shares of Common Stock; and (ii) the sum so obtained shall be divided by the number of shares of Common Stock outstanding immediately after such issue. The resulting quotient shall be the adjusted Conversion Base Price. Except for the Existing Option Obligations, for purposes of this adjustment, the issuance of any security of the Borrower carrying the right to convert such security into shares of Common Stock or of any warrant, right or option to purchase Common Stock shall result in an adjustment to the Conversion Base Price upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights. (d) From and after the issuance date of this Note and for the remaining period during which the conversion right exists, Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note. 2.2. Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this Note, if requested by the Holder, a new Note containing the same date and provisions of this Note shall be issued by the Borrower to the Holder for the remaining principal balance of this Note and interest which shall not have been converted or paid. 2.3. Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable in connection with the unconverted portion of the Note, and (iii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of only 9.99% and aggregate conversion by the Holder may exceed 9.99%. The Holder shall have the authority and obligation to determine whether the restriction contained in this Section 2.3 will limit any conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the Notes are convertible shall be the responsibility and obligation of the Holder. The Holder may void the conversion limitation described in this Section 2.3 upon 75 days prior written notice to the Borrower. The Holder may allocate which of the equity of the Company deemed beneficially owned by the Holder shall be included in the 9.99% amount described above and which shall be allocated to the excess above 9.99%. ARTICLE 3 EVENT OF DEFAULT The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand, presentment or notice, or grace period, all of which hereby are expressly waived, except as set forth below: 3.1. Failure to Pay Principal or Interest. The Borrower fails to pay any installment of principal or interest hereon when due and such failure continues for a period of ten (10) days after the due date. The ten (10) day period described in this Section 3.1 is the same ten (10) day period described in Section 1.1 hereof. 3.2. Breach of Covenant. The Borrower breaches any material covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of seven (7) days after written notice to the Borrower from the Holder. 3.3. Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein, in the Subscription Agreement entered into by the Holder and Borrower in connection with this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect. 3.4. Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 3.5. Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $50,000, and shall remain unpaid, unvacated, unbonded or unstayed for a period of forty-five (45) days. 3.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within forty-five (45) days of initiation. 3.7. Default. A default by the Borrower, after applicable notice and cure periods, under any one or more obligations in an aggregate monetary amount in excess of $50,000. 3.8. Stop Trade. A Securities and Exchange Commission stop trade order or Principal Market trading suspension for longer than five (5) trading days. 3.9. Failure to Deliver Common Stock or Replacement Note. Borrower's failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note and Section 9 of the Subscription Agreement, or if required, a replacement Note. 3.10. Non-Registration Event. The occurrence of a Non-Registration Event as described in Section 10.4 of the Subscription Agreement. 3.11. Delisting. Delising of the Common Stock from the OTC Bulletin Board or such other principal exchange on which the Common Stock is listed for trading; failure to comply with the requirements for continued listing on the OTC Bulletin Board for a period of three consecutive trading days; or notification from the OTC Bulletin Board or any Principal Market that the Borrower is not in compliance with the conditions for such continued listing on the OTC Bulletin Board or other Principal Market. ARTICLE 4 MISCELLANEOUS 4.1. Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof 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. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 4.2. Notices. Any notice herein required or permitted to be given shall be in writing and may be personally served or sent by facsimile transmission (with copy sent by regular, certified or registered mail or by overnight courier). For the purposes hereof, the address and facsimile number of the Holder is as set forth on the first page hereof. The address and facsimile number of the Borrower shall be Sanguine Corporation, 101 East Green Street, #11, Pasadena, CA 91105, facsimile number: (626) 405-0079. Both Holder and Borrower may change the address and facsimile number for notice by service of notice to the other as herein provided. Notice of Conversion shall be deemed given when made to the Company pursuant to the Subscription Agreement. 4.3. Amendment Provision. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 4.4. Assignability. This Note shall be binding upon the Borrower and its successors and permitted assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder. 4.5. Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys' fees. 4.6. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in New York County in the State of New York. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. 4.7. Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 4.8. Redemption. This Note is subject to certain mandatory redemption rights described in the Subscription Agreement. IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its Chief Executive Officer on this 19 day of March, 2002. SANGUINE CORPORATION By:/s/Thomas C. Drees WITNESS: /s/Anthony G. Hargreaves NOTICE OF CONVERSION (To be executed by the Registered Holder in order to convert the Note) The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by SANGUINE CORPORATION on March ___, 2002 into Shares of Common Stock of SANGUINE CORPORATION according to the conditions set forth in such Note, as of the date written below. Date of Conversion: Conversion Price: Shares To Be Delivered: Signature: Address: [letterhead of Leonard W. Burningham] March 15, 2002 First York Partners, Inc. 50 Broadway, Suite 2300 New York, New York 10004 Facsimile No. 212-785-6205 Gentlemen: I have acted as counsel to Sanguine Corporation, a Nevada corporation (the "Company") in connection with the offer and sale by the Company of $25,000 principal amount of a Convertible Note (the "Note") and issuance of common stock purchase warrants ("Warrants") to the Subscriber identified above, pursuant to the exemption from registration under the Securities Act of 1933, as amended (the "Act) as set forth in Regulation D ("Regulation D") promulgated thereunder. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the subscription agreement (the "Agreement") by and between the Company and (Subscriber) (the "Purchaser") entered into at or about the date hereof. The Agreement, and the agreements described below are sometimes hereinafter referred to collectively as the "Documents". In connection with the opinions expressed herein, I have made such examination of law as I considered appropriate or advisable for purposes hereof. As to matters of fact material to the opinions expressed herein, I have relied, with your permission, upon the representations and warranties as to factual matters contained in and made by the Company and the Purchaser pursuant to the Documents and upon certificates and statements of certain government officials and of officers of the Company as described below. I have also examined originals or copies of certain corporate documents or records of the Company as described below: (a) Form of Subscription Agreement (b) Forms of Convertible Notes to First York Partners and to Barbara R. Mittman (c) Form of Common Stock Purchase Warrant (the "Warrants") (d) Funds Escrow Agreement (e) Certificate of Incorporation of the Company as amended (f) Bylaws of the Company (g) Minutes of the action of the Company=s Board of Directors, including approval of the Board of Directors of the Documents, a copy of which is annexed hereto. In rendering this opinion, I have, with your permission, assumed: (a) the authenticity of all documents submitted to us as originals; (b) the conformity to the originals of all documents submitted to us as copies; (c) the genuineness of all signatures; (d) the legal capacity of natural persons; (e) the truth, accuracy and completeness of the information, factual matters, representations and warranties contained in all of such documents; (f) the due authorization, execution and delivery of all such documents by Subscribers, and the legal, valid and binding effect thereof on Subscribers; and (g) that the Company and the Purchasers will act in accordance with their respective representations and warranties as set forth in the Documents. I am a member of the bar of the State of Utah. I express no opinion as to the laws of any jurisdiction other than Utah, Nevada (the state of the Company's organization) and the federal securities laws of the United States of America. I express no opinion with respect to the effect or application of any other laws. Special rulings of authorities administering any of such laws or opinions of other counsel have not been sought or obtained by us in connection with rendering the opinions expressed herein. 1. The Company (it has no subsidiaries) is duly incorporated, validly existing and in good standing in its state of incorporation; has qualified to do business in each state where required unless the failure to do so would not have a material impact in the Company=s operations; and has the requisite corporate power and authority to conduct its business, and to own, lease and operate its properties. 2. The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Documents. The Documents, and the issuance of the Notes, and Warrants and the reservation and issuance of Common Stock issuable upon conversion of the Notes and exercise of the Warrants have been (a) duly approved by the Board of Directors of the Company, and (b) all such Securities, when issued pursuant to the Agreement and upon delivery, shall be validly issued and outstanding, fully paid and non assessable. 3. The execution, delivery and performance of the Documents by the Company and the consummation of the transactions contemplated thereby, will not, with or without the giving of notice or the passage of time or both: (a) Violate the provisions of the Certificate of Incorporation or bylaws of the Company; or (b) To the best of counsel's knowledge, violate any judgment, decree, order or award of any court binding upon the Company. 4. The Documents constitute the valid and legally binding obligations of the Company and are enforceable against the Company in accordance with their respective terms. 5. Based upon the representations and warranties in the Documents, the Notes, Warrants and the Common Stock issuable upon conversion of the Notes, and exercise of the Warrants, have not been registered under the Securities Act of 1933, as amended (the "Act") or under the laws of any state or other jurisdiction, and are or will be issued pursuant to a valid exemption from registration. 6. The holders of the Common Stock issuable upon conversion of the Notes and exercise of the Warrants will not be subject to the provisions of the anti-takeover statutes of Nevada. My opinions expressed above are specifically subject to the following limitations, exceptions, qualifications and assumptions: A. The effect of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the relief of debtors or the rights and remedies of creditors generally, including without limitation the effect of statutory or other law regarding fraudulent conveyances and preferential transfers. B. Limitations imposed by state law, federal law or general equitable principles upon the specific enforceability of any of the remedies, covenants or other provisions of any applicable agreement and upon the availability of injunctive relief or other equitable remedies, regardless of whether enforcement of any such agreement is considered in a proceeding in equity or at law. C. This opinion letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord, including the General Qualifications and the Equitable Principles Limitation, and this opinion letter should be read in conjunction therewith. This opinion is rendered as of the date first written above, is solely for your benefit in connection with the Agreement and may not be relief upon or used by, circulated, quoted, or referred to nor may any copies hereof by delivered to any other person without my prior written consent. I disclaim any obligation to update this opinion letter or to advise you of facts, circumstances, events or developments which hereafter may be brought to my attention and which may alter, affect or modify the opinions expressed herein. Yours very sincerely, /s/Leonard W. Burningham Leonard W. Burningham LWB cc. Sanguine Corporation THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. Right to Purchase 5,937,500 shares of Common Stock of Sanguine Corporation (subject to adjustment as provided herein) COMMON STOCK PURCHASE WARRANT No. 2002-1 Issue Date: March 19, 2002 SANGUINE CORPORATION, a corporation organized under the laws of the State of Nevada (the "Company"), hereby certifies that, for value received, FIRST YORK PARTNERS, INC. (the "Holder"), or assigns, is entitled, subject to the terms set forth below, to purchase from the Company from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through five (5) years after such date (the "Expiration Date"), up to 5,937,500 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $.001 par value per share, of the Company. The shares of Common Stock purchaseable hereunder shall have a per share purchase price of $.08 or higher pursuant to adjustment that may be made pursuant to Section 1.7 below. The aforedescribed purchase prices per share, as adjusted from time to time as herein provided, are referred to herein as the "Purchase Price". The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "Company" shall include Sanguine Corporation and any corporation which shall succeed or assume the obligations of Sanguine Corporation hereunder. (b) The term "Common Stock" includes (a) the Company's Common Stock, $.001 par value per share, as authorized on the date of the Subscription Agreement referred to in Section 9 hereof, (b) any other capital stock of any class or classes (however designated) of the Company, authorized on or after such date, the holders of which shall have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference, and the holders of which shall ordinarily, in the absence of contingencies, be entitled to vote for the election of a majority of directors of the Company (even if the right so to vote has been suspended by the happening of such a contingency) and (c) any other securities into which or for which any of the securities described in (a) or (b) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. (c) The term "Other Securities" refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise. 1. Exercise of Warrant. 1.1. Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the holder hereof shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of subsection 1.2 or upon exercise of this Warrant in part in accordance with subsection 1.3, shares of Common Stock of the Company, subject to adjustment pursuant to Section 4. 1.2. Full Exercise. This Warrant may be exercised in full by the holder hereof by delivery of an original or facsimile copy of the form of subscription attached as Exhibit A hereto (the "Subscription Form") duly executed by such holder and surrender of the original Warrant within seven (7) days of exercise, to the Company at its principal office or at the office of its Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Common Stock for which this Warrant is then exercisable by the Purchase Price then in effect. 1.3. Partial Exercise. This Warrant may be exercised in part (but not for a fractional share) by surrender of this Warrant in the manner and at the place provided in subsection 1.2 except that the amount payable by the holder on such partial exercise shall be the amount obtained by multiplying (a) the number of shares of Common Stock designated by the holder in the Subscription Form by (b) the Purchase Price then in effect. On any such partial exercise, the Company, at its expense, will forthwith issue and deliver to or upon the order of the holder hereof a new Warrant of like tenor, in the name of the holder hereof or as such holder (upon payment by such holder of any applicable transfer taxes) may request, the number of shares of Common Stock for which such Warrant may still be exercised. 1.4. Fair Market Value. Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall mean the Fair Market Value of a share of the Company's Common Stock. Fair Market Value of a share of Common Stock as of a Determination Date shall mean: (a) If the Company's Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date. (b) If the Company's Common Stock is not traded on an exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is traded in the over-the-counter market, then the mean of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date. (c) Except as provided in clause (d) below, if the Company's Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided. (d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company's charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date. 1.5. Company Acknowledgment. The Company will, at the time of the exercise of the Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights. 1.6. Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of the Warrants pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1. 1.7. Adjustment of Purchase Price. The Purchase Price shall be adjusted to be sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices for the Common Stock as reported for the Principal Market (as defined in Section 10(d) of this Warrant) for the five trading days preceding but not including the effective date of the registration statement referred to in Section 10.1(iv) of the Subscription Agreement. Except in connection with other adjustments set forth in this Warrant the Purchase Price will not be adjusted below $.08. In the event the foregoing adjustment is made then the number of shares of Common Stock purchasable upon exercise of this Warrant after such adjustment shall equal a number the numerator of which is the number of shares of Common Stock purchasable prior to the adjustment multiplied by $.08 and the denominator of which is the adjusted Purchase Price. An adjustment of the Purchase Price shall be effective if and only if written notice of the adjustment with support for the adjustment is given to the Holder within five business days of the effective date of the registration statement described in Section 10.1(iv) of the Subscription Agreement. No adjustment shall be made in connection with any Common Stock for which a Form of Subscription in the form of Exhibit A hereto, has been given to the Company. 2.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within seven (7) days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof, or as such holder (upon payment by such holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such holder is entitled upon such exercise pursuant to Section 1 or otherwise. 2.2. Cashless Exercise. (a) Payment may be made either in (i) cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Purchase Price, (ii) by delivery of Warrants, Common Stock and/or Common Stock receivable upon exercise of the Warrants in accordance with Section (b) below or (iii) by a combination of any of the foregoing methods, for the number of Common Shares specified in such form (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the holder per the terms of this Warrant) and the holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein. (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Purchase Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, upon consent of the Company, the holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being cancelled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Subscription Form in which event the Company shall issue to the holder a number of shares of Common Stock computed using the following formula: X=Y (A-B) A Where X= the number of shares of Common Stock to be issued to the holder Y= the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation) A= the Fair Market Value of one share of the Company's Common Stock (at the date of such calculation) B= Purchase Price (as adjusted to the date of such calculation) (c) The cashless exercise feature of this Warrant may be employed only commencing on the first anniversary of the Issue Date of the Warrant and then only if a Non-Registration Event (as defined in the Subscription Agreement) has occurred and is continuing on such date or occurs after such date. 3. Adjustment for Reorganization, Consolidation, Merger, etc. 3.1. Reorganization, Consolidation, Merger, etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the holder of this Warrant, on the exercise hereof as provided in Section 1, at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4. 3.2. Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the holders of the Warrants after the effective date of such dissolution pursuant to this Section 3 to a bank or trust company having its principal office in New York, NY, as trustee for the holder or holders of the Warrants. 3.3. Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transaction described in this Section 3, then only in such event will the Company's securities and property (including cash, where applicable) receivable by the holders of the Warrants be delivered to the Trustee as contemplated by Section 3.2. 4. Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be increased to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise. 5. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrants, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding and (c) the Purchase Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the holder of the Warrant and any Warrant Agent of the Company (appointed pursuant to Section 12 hereof). 6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements. From and after the Issue Date of this Warrant, the Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock (or Other Securities) from time to time issuable on the exercise of the Warrant. This Warrant entitles the holder hereof to receive copies of all financial and other information distributed or required to be distributed to the holders of the Company's Common Stock. 7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a "Transferor") with respect to any or all of the Shares. On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the "Transferor Endorsement Form") and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, the Company at its expense, but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor. 8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 9. Registration Rights. The Holder of this Warrant has been granted certain registration rights by the Company. These registration rights are set forth in a Subscription Agreement entered into by the Company and Subscriber of the Company's 5% Convertible Notes ("Note") at or prior to the issue date of this Warrant. The terms of the Subscription Agreement are incorporated herein by this reference. Upon the occurrence of a Non-Registration Event, as defined in the Subscription Agreement, in the event the Company is unable to issue Common Stock upon exercise of this Warrant that has been registered in the Registration Statement described in Section 10.1(iv) of the Subscription Agreement, within the time periods described in the Subscription Agreement, which Registration Statement must be effective for the periods set forth in the Subscription Agreement, then upon written demand made by the Holder, the Company will pay to the Holder of this Warrant, in lieu of delivering Common Stock, a sum equal to the closing price of the Company's Common Stock on the Principal Market (as defined in the Subscription Agreement) or such other principal trading market for the Company's Common Stock on the trading date immediately preceding the date notice is given by the Holder, less the Purchase Price, for each share of Common Stock designated in such notice from the Holder. 10. Call Option. The Company shall have the option to "call" the Warrants (the "Warrant Call"), in accordance with and governed by the following: (a) The Company shall exercise the Warrant Call by giving to each Warrant Holder a written notice of call (the "Call Notice") during the period in which the Warrant Call may be exercised. (b) The Company's right to exercise the Warrant Call shall commence with the actual effective date of the registration statement described in Section 10.1(iv) of the Subscription Agreement and thereafter, shall be coterminous with the exercise period of the Warrants for up to one hundred percent (100%) of the Common Stock issuable upon the exercise of this Warrant (the "Warrant Shares"), provided, that the Registration Statement is effective at the date the Call Notice is given and through the period ending fourteen (14) business days thereafter. In no event may the Company exercise the Warrant Call at any time unless the Warrant Shares to be delivered upon exercise of the Warrant, will be upon delivery, immediately resalable, without restrictive legend and upon such resale freely transferable on the transfer books of the Company. (c) Unless otherwise agreed to by the Holder of this Warrant, the Call Notice must be given to all Warrant Holders who hold Warrants similar to this Warrant (in terms of exercise price and other principal terms) in proportion to the amounts of Common Stock which can be purchased by the respective Warrant Holders in accordance with the respective Warrant held by each. (d) The Company may give a Call Notice in connection with up to $50,000 aggregate Purchase Price provided the closing bid price of the Common Stock, as reported on the Principal Market (as defined in the Subscription Agreement) for the five (5) trading days prior to but not including the date of the Call Notice, for each trading day during the five (5) trading days prior to the giving of the Call Notice is not less than one hundred and fifty percent (150%) of the Purchase Price and the average daily trading volume of the Common Stock during such period is not less than forty thousand (40,000) Common Shares. (e) The Company may give a Call Notice in connection with up to an additional $50,000 of aggregate Purchase Price provided the closing bid price of the Common Stock, as reported for the Principal Market for the ten (10) trading days prior to but not including the date of the Call Notice for each trading day during such ten (10) trading days is not less than one hundred and fifty percent (150%) of the Purchase Price and the average daily trading volume of the Common Stock during such ten (10) trading days is not less than eighty thousand (80,000) Common Shares. (f) Provided Call Notices have been given in connection with Sections 10(d) and 10(e), then the Company may give a Call Notice in connection with up to an additional $275,000 of aggregate Purchase Price provided the closing bid price of the Common Stock, as reported for the Principal Market for the ten (10) trading days prior to but not including the date of the Call Notice for each trading day during such ten (10) trading days is not less than two hundred and fifty percent (250%) of the Purchase Price and the average daily trading volume of the Common Stock during such ten (10) trading days is not less than eighty thousand (80,000) Common Shares. (g) Provided Call Notices have been given in connection with Sections 10(d), 10(e) and 10(f), then the Company may give a Call Notice in connection with up to an additional $100,000 of aggregate Purchase Price provided the closing bid price of the Common Stock, as reported for the Principal Market for the ten (10) trading days prior to but not including the date of the Call Notice for each trading day during such ten (10) trading days is not less than three hundred and twelve percent (312%) of the Purchase Price and the average daily trading volume of the Common Stock during such ten (10) trading days is not less than one hundred thousand (100,000) Common Shares. (h) The respective Warrant Holders shall exercise their Warrant rights and purchase the appropriate Warrant Shares and pay for same within fourteen (14) business days of the date of the Call Notice. If the Warrant Holder fails to timely pay the funds required by the Warrant Call, the Company may elect to cancel a corresponding amount of this Warrant. (i) The Company may not exercise the right to Call this Warrant or any part of it after the occurrence of a Non-Registration Event, as defined in the Subscription Agreement, or an Event of Default as defined in the Note referred to in the Subscription Agreement. 11. Maximum Exercise. The Holder shall not be entitled to exercise this Warrant on an exercise date, in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on an exercise date, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an exercise date, which would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock of the Company on such date. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate exercises which would result in the issuance of more than 9.99%. The restriction described in this paragraph may be revoked upon seventy-five (75) days prior notice from the Holder to the Company. The Holder may allocate which of the equity of the Company deemed beneficially owned by the Subscriber shall be included in the 9.99% amount described above and which shall be allocated to the excess above 9.99%. 12. Warrant Agent. The Company may, by written notice to the each holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent. 13. Transfer on the Company's Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 14. Notices. All notices and other communications from the Company to the holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such holder or, until any such holder furnishes to the Company an address, then to, and at the address of, the last holder of this Warrant who has so furnished an address to the Company. 15. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of New York. Any dispute relating to this Warrant shall be adjudicated in New York County in the State of New York. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above. SANGUINE CORPORATION By:/s/Thomas C. Drees Witness: /s/Anthony G. Hargreaves Exhibit A FORM OF SUBSCRIPTION (to be signed only on exercise of Warrant) TO: Sanguine Corporation The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box): ___ ________ shares of the Common Stock covered by such Warrant; or ___ the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2. The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes): ___ $__________ in lawful money of the United States; and/or ___ the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or ___ the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2. The undersigned requests that the certificates for such shares be issued in the name of, and delivered to _____________________________________________________ whose address is ____________________________________________________________________ ______________________________________. The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an exemption from registration under the Securities Act. Dated:___________________ ----------------------------------- (Signature must conform to name of holder as specified on the face of the Warrant) ----------------------------------- ----------------------------------- (Address) Exhibit B FORM OF TRANSFEROR ENDORSEMENT (To be signed only on transfer of Warrant) For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading "Transferees" the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Sanguine Corporation to which the within Warrant relates specified under the headings "Percentage Transferred" and "Number Transferred," respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Sanguine Corporation with full power of substitution in the premises. Transferees Percentage Transferred Number Transferred Dated: ______________,___________ ---------------------------- (Signature must conform to name of holder on face of the warrant) Signed in the presence of: ----------------------------- (Name) ----------------------------- (address) ACCEPTED AND AGREED: [TRANSFEREE] ----------------------------- ----------------------------- (address) (Name) SCHEDULE 2(d) On August 27, 2001, Sanguine entered into a one year Financial Consulting Agreement with Howard Salamon and granted him 1,000,000 warrants to acquire 1,500,000 shares of common stock of Sanguine at an exercise price of $.22 (TWENTY-TWO CENTS) per share, subject to his ability to raise Sanguine the sum of $3,000,000 on terms acceptable to Sanguine. The exercise of these warrants was accorded "registration rights." On February 20, 2002, Sanguine executed and delivered three Warrants under which they granted to Richard H. Walker, Mark Bergendahl and Bradley J. Wilhite warrants to acquire 1,000,000 shares each of common stock of Sanguine at an exercise price of $0.15 per share (the "Warrants"). Each of the Warrants provided, among other things, for: the issuance of 1,000,000 warrants convertible into shares of Sanguine common stock; the warrants to expire on February 21, 2005; protection against dilution in certain events, including the payment of dividends or splits or in the event of any merger where Sanguine is not the survivor, or any reclassification or capital reorganization; and The exercise of these warrants was accorded "registration rights." The foregoing was adopted at a special meeting of the Board of Directors held on March 11, 2002, with the Board of Director's resolutions in this respect providing that the warrants to be issued to Messrs. Walker, Bergedahl and Wilhite were approved subject to an amendment to the warrants to provide for a "call" at any time the common stock of the Company trades on the OTC Bulletin Board or any other national medium on which such shares are regularly traded at a price of no less than $1.00 for 10 consecutive trading days. Also, for services rendered, Leonard W. Burningham, Esq. has been granted 500,000 warrants to purchase common stock at an exercise price of 50% of the bid price for the five trading days prior to the date of exercise at the end of any monthly billing cycle or $0.08 (Eight Cents) per share, whichever is lower, payable in cash or services. These warrants are exercisable only after March 1, 2002, and are void after March 2, 2005. The exercise of these warrants was accorded "registration rights." These warrants were also approved at the March 11, 2002, special meeting of the Board of Directors, along with the related Engagement Letter of Mr. Burningham. SCHEDULE 2(t) The authorized and outstanding capital stock of the Company as of March 14, 2002, is as follows: Common stock - par value $.001 per share. Authorized 100,000,000 shares; issued and outstanding 30,723,607 shares EX-10 5 ex10-3.txt FUNDS ESCROW AGREEMENT FUNDS ESCROW AGREEMENT This Agreement is dated as of the 19 day of March, 2002 among Sanguine Corporation, a Nevada corporation (the "Company"), First York Partners, Inc. ("Subscriber"), and Grushko & Mittman, P.C. (the "Escrow Agent"): W I T N E S S E T H: WHEREAS, the Company and Subscriber have entered into a Subscription Agreement ("Subscription Agreement") calling for the sale by the Company to the Subscriber of Convertible Notes ("Notes") and issuance of Common Stock Purchase Warrants ("Warrants") in the aggregate principal amounts and in the denominations set forth on Schedule A hereto; and WHEREAS, the parties hereto require the Company to deliver the Notes and Warrants against payment therefor, with such Notes and payment to be delivered to the Escrow Agent to be held in escrow and released by the Escrow Agent in accordance with the terms and conditions of this Agreement; and WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to the terms and conditions of this Agreement; NOW THEREFORE, the parties agree as follows: ARTICLE I INTERPRETATION 1.1. Definitions. Whenever used in this Agreement, the following terms shall have the following respective meanings: (a) "Agreement" means this Agreement and all amendments made hereto and thereto by written agreement between the parties; (b) "Escrowed Payment" means the sums set forth on Schedule A hereto which includes the cash Purchase Price (as defined in the Subscription Agreement) of the Notes. (c) "Notes" means Convertible Notes of the Company issued to the Subscriber and Subscribers' counsel in the form of Exhibit A annexed to the Subscription Agreement and in the principal amounts set forth on Schedule A hereto. (d) "Legal Opinion" means the original signed legal opinion referred to in Section 3 of the Subscription Agreement. (e) "Subscription Agreement" means the Subscription Agreement to be entered into by the parties in reference to the Notes and the exhibits thereto. (f) "Warrants" means the common stock purchase warrants of the Company described in Section 5 of the Subscription Agreement and set forth on Schedule A hereto. (g) Collectively, the executed Subscription Agreement, Legal Opinion, Notes, and Warrants are referred to as "Company Documents." (h) Collectively, the Escrowed Payment and Subscription Agreement are referred to as "Subscriber Documents." 1.2. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the Company Documents and Subscriber Documents and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. There are no warranties, representations and other agreements made by the parties in connection with the subject matter hereof except as specifically set forth in this Agreement. 1.3. Extended Meanings. In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders. The word "person" includes an individual, body corporate, partnership, trustee or trust or unincorporated association, executor, administrator or legal representative. 1.4. Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance. Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder. 1.5. Headings. The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. 1.6. Law Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party (which shall be the party which receives an award most closely resembling the remedy or action sought) shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. 1.7. Specific Enforcement, Consent to Jurisdiction. The Company and Subscriber acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 1.6 hereof, each of the Company and Subscriber hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law. 1.8. Fees. The Company shall pay the Subscriber's attorney the fees described in Section 6 of the Subscription Agreement. The cash portion of the fees shall be payable by deduction from the cash portion of the Escrowed Payment, but only if the corresponding balance of the cash portion of the Escrowed Payment is to be released to or on behalf of the Company pursuant to this Agreement, and the balance shall be paid by delivery of a Note to Barbara R. Mittman in the principal amount of $3,750. ARTICLE II DELIVERIES TO THE ESCROW AGENT 2.1. Delivery of Company Documents to Escrow Agent. On or about the date hereof, the Company shall deliver to the Escrow Agent the Company Documents. 2.2 Delivery of Subscriber Documents to Escrow Agent. On or about the date hereof, the Subscriber shall deliver to the Escrow Agent the Subscriber Documents. The Escrowed Payment will be delivered pursuant to the following wire transfer instructions: Citibank, N.A. ABA Number: 0210-00089 For Credit to: Grushko & Mittman, IOLA Trust Account Account Number: 45208884 2.3. Intention to Create Escrow Over Company Documents and Subscriber Documents. The Subscriber and Company intend that the Company Documents and Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit as set forth herein. 2.4. Escrow Agent to Deliver Company Documents and Subscriber Documents. The Escrow Agent shall hold and release the Company Documents and Subscriber Documents only in accordance with the terms and conditions of this Agreement. ARTICLE III RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS 3.1. Release of Escrow. Subject to the provisions of Section 4.2, the Escrow Agent shall release the Company Documents and Subscriber Documents as follows: (a) Upon receipt by the Escrow Agent of the Company Documents and the corresponding Subscriber Documents, the Escrow Agent will simultaneously release the Company Documents to the Subscribers and release the corresponding Subscriber Documents to the Company except that the fee described in Section 1.8 above will be released to the Subscriber's attorneys. At the request of the Escrow Agent, the Company will provide written facsimile or original instructions to the Escrow Agent as to the disposition of all funds releasable to the Company. (b) In the event the Escrow Agent does not receive Company Documents and the corresponding Subscriber Documents prior to March 31, 2002, then the Escrow Agent will promptly return the Company Documents to the Company, and promptly return the Subscriber Documents to the Subscribers. (c) Upon receipt by the Escrow Agent of joint written instructions ("Joint Instructions") signed by the Company and the Subscriber, it shall deliver the Company Documents and Subscriber Documents in accordance with the terms of the Joint Instructions. (d) Upon receipt by the Escrow Agent of a final and non- appealable judgment, order, decree or award of a court of competent jurisdiction (a "Court Order"), the Escrow Agent shall deliver the Company Documents and Subscriber Documents in accordance with the Court Order. Any Court Order shall be accompanied by an opinion of counsel for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable. 3.2. Acknowledgment of Company and Subscriber; Disputes. The Company and the Subscriber acknowledge that the only terms and conditions upon which the Company Documents and Subscriber Documents are to be released are set forth in Sections 3 and 4 of this Agreement. The Company and the Subscriber reaffirm their agreement to abide by the terms and conditions of this Agreement with respect to the release of the Notes and Escrowed Payment. Any dispute with respect to the release of the Notes and Escrowed Payment shall be resolved pursuant to Section 4.2 or by agreement between the Company and Subscriber. ARTICLE IV CONCERNING THE ESCROW AGENT 4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent's duties and responsibilities shall be subject to the following terms and conditions: (a) The Subscriber and Company acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be required to inquire into whether either the Subscriber or Company is entitled to receipt of the Company Documents and Subscriber Documents pursuant to, any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may assume that any person purporting to give notice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so; (v) shall not be under any duty to give the property held by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (vi) may consult counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel. (b) The Subscriber and Company acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be liable for any action taken by Escrow Agent in good faith and believed by Escrow Agent to be authorized or within the rights or powers conferred upon Escrow Agent by this Agreement. The Subscriber and Company, jointly and severally, agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's partners, employees, agents and representatives for any action taken or omitted to be taken by Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful misconduct on Escrow Agent's part committed in its capacity as Escrow Agent under this Agreement. The Escrow Agent shall owe a duty only to the Subscriber and Company under this Agreement and to no other person. (c) The Subscriber and Company jointly and severally agree to reimburse the Escrow Agent for its reasonable out-of-pocket expenses (including outside counsel fees, to the extent authorized hereunder) incurred in connection with the performance of its duties and responsibilities hereunder. (d) The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the Subscriber and the Company. Prior to the effective date of the resignation as specified in such notice, the Subscriber and Company will issue to the Escrow Agent a Joint Instruction authorizing delivery of the Company Documents and Subscriber Documents to a substitute Escrow Agent selected by the Subscriber and Company. If no successor Escrow Agent is named by the Subscriber and Company, the Escrow Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and to deposit the Company Documents and Subscriber Documents with the clerk of any such court. (e) The Escrow Agent does not have and will not have any interest in the Company Documents and Subscriber Documents, but is serving only as escrow agent, having only possession thereof. The Escrow Agent shall not be liable for any loss resulting from the making or retention of any investment in accordance with this Escrow Agreement. (f) This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement. (g) The Escrow Agent shall be permitted to act as counsel for the Subscriber or the Company, as the case may be, in any dispute as to the disposition of the Company Documents and Subscriber Documents, in any other dispute between the Subscriber and Company, whether or not the Escrow Agent is then holding the Company Documents and Subscriber Documents and continues to act as the Escrow Agent hereunder. (h) The provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement. 4.2. Dispute Resolution: Judgments. Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions: (a) If any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Company Documents and Subscriber Documents, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to hold the Company Documents and Subscriber Documents pending receipt of a Joint Instruction from the Subscriber and Company, or (ii) deposit the Company Documents and Subscriber Documents with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice thereof to the Subscriber and the Company and shall thereupon be relieved and discharged from all further obligations pursuant to this Agreement. The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings which relate to the Company Documents and Subscriber Documents. The Escrow Agent shall have the right to retain counsel if it becomes involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to consult counsel. (b) The Escrow Agent is hereby expressly authorized to comply with and obey any Court Order. In case the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be liable to the Subscriber and Company or to any other person, firm, corporation or entity by reason of such compliance. ARTICLE V GENERAL MATTERS 5.1. Termination. This escrow shall terminate upon the release of all of the Company Documents and Subscriber Documents or at any time upon the agreement in writing of the Subscriber and Company. 5.2. Notices. All notices, request, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given one (1) day after being sent by telecopy (with copy delivered by overnight courier, regular or certified mail): (a) If to the Company, to: Sanguine Corporation 101 East Green Street, #11 Pasadena, CA 91105 Telecopier: (626) 405-0079 With a copy to: Burningham & Burningham Hermes Building, Suite 205 455 East Fifth South Salt Lake City, Utah 84111-3323 Attn: Leonard W. Burningham, Esq. Telecopier: (801) 355-7126 (b) If to the Subscriber, to: First York Partners, Inc. 50 Broadway, Suite 2300 New York, New York 10004 Telecopier: 212-785-6205 (c) If to the Escrow Agent, to: Grushko & Mittman, P.C. 551 Fifth Avenue, Suite 1601 New York, New York 10176 Telecopier: (212) 697-3575 or to such other address as any of them shall give to the others by notice made pursuant to this Section 5.2. 5.3. Interest. The Escrowed Payment shall not be held in an interest bearing account nor will interest be payable in connection therewith. 5.4. Assignment; Binding Agreement. Neither this Agreement nor any right or obligation hereunder shall be assignable by any party without the prior written consent of the other parties hereto. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and assigns. 5.5. Invalidity. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 5.6. Counterparts/Execution. This Agreement may be executed in any number of counterparts and by different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile transmission. 5.7. Agreement. Each of the undersigned states that he has read the foregoing Funds Escrow Agreement and understands and agrees to it. SANGUINE CORPORATION the "Company" By:/s/Thomas C. Drees /s/ , Pres. FIRST YORK PARTNERS INC. - "Subscriber" ESCROW AGENT: /s/Grushko & Mittman, P.C. GRUSHKO & MITTMAN, P.C. SCHEDULE A TO FUNDS ESCROW AGREEMENT SUBSCRIBER PRINCIPAL AMOUNT OF WARRANTS CONVERTIBLE NOTE FIRST YORK PARTNERS, INC. $25,000.00 5,937,500 50 Broadway, Suite 2300 New York, New York 10004 Fax: 212-785-6205 BARBARA R. MITTMAN $3,750.00 -0- 551 Fifth Avenue, Suite 1601 New York, New York 10176 Telecopier: (212) 697-3575 EX-10 6 ex10-4.txt ENGAGEMENT LETTER March 5, 2002 Sanguine Corporation 101 East Green Street, Suite 11 Pasadena, California 91105 Attention: Thomas C. Drees, Ph.D., President Re: Engagement Letter to perform legal services for Sanguine Corporation, a Nevada corporation (the "Company") Dear Mr. Drees: This letter will set forth the proposed terms of our firm's engagement for present and future legal services until other cash arrangements are made between the undersigned and Sanguine Corporation, a Nevada corporation. In accordance with my letter to you on February 28, 2002, I am willing to work with you on your fees, receiving from your funding proceeds of $25,000 an amount of $17,500 that shall be used to pay any "capital raising" services first. Then, I am willing to accept a warrant to acquire 500,000 shares of your common stock at the lower of $0.08 per share or the five day average of the bid prices for your common stock on the OTC Bulletin Board of the NASD on the end of each monthly billing period. The warrant can be paid in cash or services related to the Form S-3 Registration Statement, the 8-K Current Report regarding Ascendiant LLC Exclusive License Agreement, the 8-K Current Report regarding the funding, the 10-KSB Annual Report for the year ended December 31, 2001, and the SB-2 Post Effective Amendment and such other matters as we may agree upon. The shares underlying these warrants shall be included in the planned S-3 Registration Statement, at no cost to me, and the warrants shall, other than the price, be in the same form as those granted to Ascendiant principals. You will be required to carefully review and sign the Form S-3 Registration Statement, the 8-K Current Report regarding Ascendiant LLC, the 8-K Current Report regarding the funding, the 10-KSB Annual Report for the year ended December 31, 2001, and the SB-2 Post Effective Amendment, and you will be personally liable for any misstatements of a material fact or omissions to state any material fact required to be stated therein to make the statements made not misleading. In this respect, the Company will be required to indemnify and hold us harmless from and against any liabilities in this respect to which we may become subject as a result of any misstatement or omission, and the execution and delivery of this Engagement Letter confirms that obligation. Therefore, it is very important that you review these filings carefully, especially with respect to business and all related headings, products, risk factors, competition and the like. At such time as the $17,500 has been expended, and all warrants have been exercised for fees or cash or fees shall have been otherwise paid, we will negotiate another Engagement Letter for other services. You are aware that both Branden T. Burningham, Esq. and I are current stockholders of the Company. Although we do not believe that we will be asked to give any advice that would result in a conflict as a result of this engagement, we ask that you waive any conflict in this respect, with the understanding that you may wish to have other counsel independently review our work on your behalf. You must also understand that the shares of common stock that you have previously issued to us or those underlying the aforesaid warrants may end up being worth much more than the fees that we have or will charge for the legal services resulting in the issuance of these shares, especially, if your efforts are successful. If this is acceptable, please sign below, sign and Federal Express the original warrant form and I will provide the necessary billings as services are rendered, monthly, commencing at the end of February, 2002. It is understood that no warrants will be exercised until the S-3 Registration Statement is effective. Thank you very much. Yours very sincerely, /s/Leonard W. Burningham Leonard W. Burningham LWB Accepted this 15 day of March, 2002. SANGUINE CORPORATION By/s/Thomas C. Drees Thomas C. Drees, Ph.D., President Approved By the Unanimous Consent of the Board of Directors in Accordance with Nevada Law: Date: 3/15/02. /s/Thomas C. Drees Thomas C. Drees, Ph.D., MBA Date: 3/15/02. /s/Anthony G. Hargreaves Anthony G. Hargreaves Date: 3/15/02. /s/Edward L. Kunkel Edward L. Kunkel, Esq. Date: 3/15/02. /s/David E. Nelson David E. Nelson EX-99 7 ex99-1.txt WARRANT OF RICHARD H. WALKER THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. Warrant to Purchase Shares # ASCENDIANT CLASS - 01 1,000,000 SANGUINE CORPORATION (OTC:BB SGNC) (Incorporated under the laws of the State of Nevada) WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF THE $.001 PAR VALUE COMMON STOCK OF SANGUINE CORPORATION (OTC:BB SGNC) EXERCISABLE ONLY AFTER February 20, 2002, AND VOID AFTER February 21, 2005. Warrant Price: $.15 (Fifteen Cents) per share. THIS IS TO CERTIFY that, for value received, Richard H. Walker or his registered assigns (either or both of whom are referred to herein as the "Holder"), is entitled to purchase, subject to the terms and conditions hereinafter set forth, at anytime from and after February 20, 2002 and on or before February 21, 2005 (the "Warrant Period"), up to 1,000,000 shares of the $.001 par value common stock ("Common Stock") of Sanguine Corporation (the "Company"), and to receive certificate(s) for the Common Stock so purchased. This warrant may be exercised in whole or in part. Such exercise shall be accomplished by tender to the Company of the purchase price set forth above as the warrant price (the "Warrant Price"), either in cash or by certified check or bank cashier's check, payable to the order of the Company, together with presentation and surrender to the Company of this Warrant with an executed subscription in substantially the form attached hereto as Exhibit A. Fractional shares of the Company's Common Stock will not be issued upon the exercise of this Warrant. 2. The Company agrees at all times to reserve and hold avail- able out of the aggregate of its authorized but unissued Common Stock the number of shares of its Common Stock issuable upon the exercise of this and all other Warrants of like tenor then outstanding. The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder. This Warrant and the Common Stock issuable upon the exercise hereof may not be sold, transferred, pledged or hypothecated unless the Company shall have been supplied with evidence reasonably satisfactory to it that such transfer is not in violation of the Securities Act of 1933, as amended (the "Act") and any applicable state laws. If this Warrant is transferred, in whole or in part, upon surrender of this Warrant to the Company, the Company shall deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer. The Company may place a legend on this Warrant or any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant as to which the Company has not been supplied evidence that the transfer of such security would not be in violation of the Act and any applicable state laws. Only the registered Holder may enforce the provisions of this Warrant against the Company. A transferee of the original registered Holder becomes a registered Holder only upon notice to the Company substantially in the form set forth in Exhibit B hereto. 3. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth, and no dividend shall be payable or accrue by reason of this Warrant or the interest represented hereby, or the shares purchasable hereunder, until or unless, and except to the extent that, this Warrant is exercised. This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender. 4. The Warrant Price and the number of shares purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4. (a) In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into smaller number of shares of Common Stock, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, the number of shares of Common Stock purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder of this Warrant shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Company that he would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Whenever the number of shares of Common Stock pur- chasable upon the exercise of this Warrant is adjusted, as herein provided, the Warrant Price shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Common Stock purchasable upon the exercise of this Warrant immediately prior to such adjustment, and of which the denominator shall be the number of shares of Common Stock so purchasable immediately thereafter. (c) For the purpose of this Section 4, the term shares of Common Stock shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Warrant, or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of change in par value, or from par value to no par value, or from no par value to par value. (d) If during the Warrant Period the Company consolidates with or merges into another corporation or transfers all or substantially all of its assets the Holder shall thereafter be entitled upon exercise hereof to purchase, with respect to each share of Common Stock purchasable hereunder immediately prior to the date upon which such consolidation or merger becomes effective, the securities or property to which a holder of shares of Common Stock is entitled upon such consolidation or merger, without any change in, or payment in addition to the Warrant Price in effect immediately prior to such merger or consolidation, and the Company shall take such steps in connection with such consolidation or merger as may be necessary to ensure that all of the provisions of this Warrant shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or asset transfer unless prior to the consummation thereof the successor corporation (if other than the Company) resulting therefrom shall assume by written agreement executed and mailed to the registered Holder at his address shown on the books and records of the Company, the obligation to deliver to such Holder any such securities or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. (e) Upon the happening of any event requiring an adjust- ment of the Warrant Price, the Company shall forthwith give written notice thereof to the registered Holder of this Warrant, stating the adjusted Warrant Price and the adjusted number of shares of Common Stock or other securities or property purchasable upon the exercise hereof resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Board of Directors of the Company shall determine the adjusted Warrant Price and the securities or property purchasable upon exercise. If any voluntary or involuntary dissolution, liquidation, or winding up of the Company is proposed, the Company shall give at least 20 days prior written notice of such proposal to the registered Holder hereof stating the date on which such event is to take place and the date (which shall be at least 20 days after giving of such notice) as of which the holders of shares of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such dissolution, liquidation or winding up. This Warrant and all rights hereunder shall terminate as of the date on which such dissolution, liquidation, or winding up takes place. The notices pursuant to this paragraph shall be given by first class mail, postage prepaid, addressed to the registered Holder of this Warrant at his address appearing in the records of the Company. (f) Irrespective of any adjustments pursuant to this Section 4 to the Warrant Price or to the number of shares or other securities or other property obtainable upon exercise of this Warrant, this Warrant may continue to state the Warrant Price and the number of shares obtainable upon exercise, as the same price and number of shares stated herein. 5. (a) Whether or not this Warrant has yet been exercised in whole or in part, the Company shall, at its own expense, register and include all shares of Common Stock issued or issuable upon exercise of the Warrants in the registration, which is contemplated to be filed by the Company between February 2002 and April 2002. (b) Notwithstanding the foregoing, should for any reason all shares of Common Stock issued or issuable upon the exercise of the Warrants not be registered pursuant to the provisions of subsection 5(a) above, then in the event that the Company proposes, at any time subsequent to February 20, 2002, but prior to February 21, 2005, whether or not this Warrant has yet been exercised in whole or in part, to file any other registration statement on a general form of registration under the Act relating to securities issued or to be issued by it, then it shall give written notice of such proposal to the record owners of the Warrants and any shares of Common Stock issued upon the exercise thereof. If, within 15 days after the giving of such notice, the record owners of any of the Warrants or shares of Common Stock issued or issuable upon their exercise shall request in writing that all or any of the shares of Common Stock issued or issuable upon exercise of the War- rants be included in such proposed registration, the Company will, at its own expense (except as set forth below), also register such shares of Common Stock as shall have been so requested in writing; provided, however, that (i) the Company shall not be required to include any of such shares of Common Stock if, by reason of such inclusion, the Company shall be required to prepare and file a registration statement on a form promulgated by the Securities and Exchange Commission different from that which the Company otherwise would use; (ii) Holder shall cooperate with the Company in the preparation of such registration statement to the extent required to furnish information concerning such owners therein; and (iii) if any underwriter or managing agent is pur- chasing or arranging for the sale of the securities then being offered by the Company under such registration statement, then Holder shall agree to have the securities being so registered sold to or by such underwriter or managing agent on terms substantially equivalent to the terms upon which the Company is selling the sec- urities so registered. (c) In connection with the filing of a registration state- ment pursuant to subsections 5(a) and 5(b), the Company shall: (i) notify Holder as to the filing thereof and of all amendments thereto filed prior to the effective date of said registration statement; (ii) notify Holder, promptly after it shall have received notice thereof, of the time when the registration statement becomes effective or any supplement to any prospectus forming a part of the registration statement has been filed; (iii) prepare and file without expense to Holder any necessary amendment or supplement to such registration statement or prospectus as may be necessary to comply with Section 10(a)(3) of the Act or advisable in connection with the proposed distribution of the securities by Holder; (iv) take all reasonable steps to qualify the shares of Common Stock being so registered for sale under the securities or blue sky laws in such states, but only in such states, as the Company would qualify the sales of its securities absent any registration of the shares of Common Stock issued or issuable hereunder; and, (v) notify Holder of any stop order suspending the effectiveness of the registration statement and use its reasonable best efforts to remove such stop order. 6. In connection with the obligation of the Company to register shares of Common Stock pursuant to the provisions of Section 5 hereof, the Company and each Holder agree as follows: (a) The Company hereby agrees to indemnify and hold harmless each Holder and each person who controls each Holder within the meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages, liabilities or actions to which each Holder or they or any of them may become subject under the Act, the Exchange Act or otherwise and to reimburse the persons indemnified above for any legal or other expenses (including the cost of any investigation and preparation) reasonably incurred by them in connection with any litigation or proceeding or threatened litigation or proceeding, whether or not resulting in any liabilities, but only insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement with respect to the shares of Common Stock (or incorporated therein by reference) or any amendment or supplement thereto (such registration statement, together with any such amendments or supplements, is referred to herein as the "Registration Statement"), or the omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (ii) the employment of the Company of any device, scheme or artifice to defraud, or the engaging by the Company in any act, practice or course of business which operates or would operate as a fraud or deceit, or any conspiracy with respect thereto, in which the Company shall participate, in connection with the sale pursuant to the Registration Statement of any of the securities registered thereby; provided, however, that the indemnity agreement contained in this paragraph (a) shall not extend to any indemnified person in respect of any such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement or any such omission or alleged omission, if such statement or omission was made in reliance upon information furnished in writing to the Company by such person specifi- cally for use in connection with the preparation of the Registration Statement. The Company agrees to pay any legal and other expenses for which it is liable under this paragraph (a) from time to time (but not more frequently than monthly) within 30 days after its receipt of a bill therefor. (b) Each Holder agrees to indemnify and hold harmless the Company, its directors, its officers who shall have signed the registration statement, each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Holder but in each case to the extent, and only to the extent, that any statement in or omission from or alleged omission from the registration statement, any preliminary prospectus, the prospectus or any amendment or supplement thereto was made in reliance upon information furnished in writing to the Company by such Holder specifically for use in connection with the preparation of the registration statement, any preliminary prospectus or the prospectus or any such amendment or supplement thereto. Each Holder agrees to pay any legal and other expenses for which it is liable under this paragraph (b) within 30 days after its receipt of a bill therefor. (c) If any action is brought against a person entitled to indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified Party") in respect of which indemnity may be sought against a person granting indemnification (an "Indemnifying Party") pursuant to such subsections, such Indemnified Party shall promptly notify such Indemnifying Party in writing of the commencement thereof; but the omission so to notify the Indemnifying Party of any such action shall not release the Indemnifying Party from any liability it may have to such Indemnified Party otherwise than on account of the indemnity agreement contained in paragraphs (a) or (b). In case any such action is brought against an Indemnified Party and it notifies an Indemnifying Party of the commencement thereof, the Indemnifying Party against which a claim is to be made will be entitled to participate therein, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded based upon advice of counsel that there may be legal defenses available to it and/or other Indemnified Parties which conflict with those available to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel to assume such legal defenses and otherwise to participate in the defense of such action on behalf of such Indemnified Party or Parties. Upon receipt of notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense of such action and approval by the Indemnified Party of counsel, the Indemnifying Party will not be liable to such Indemnified Party under this agreement for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof unless (i) the Indemnified Party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel), (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action or (iii) the Indemnifying Party has authorized the employment of such counsel for the Indemnified Party at the expense of the Indemnifying Party. An Indemnifying Party shall not be liable for any settlement of any action or proceeding effected without its written consent. (d) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in paragraph (a) is unavailable to a Holder in accordance with its terms, the Company and each Holder shall contribute to the aggregate losses, claims, damages and liabilities of the nature contemplated by said indemnity agreement incurred by each Holder based on the relative fault of the Company on the one hand, and each Holder on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages and liabilities. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, such statement or omission relates to information supplied by the Company or such Holder and the party's relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by the Indemnified Party as a result of the losses, claims, damages, or liabilities referred to above in this paragraph shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with inves- tigating or defending against or appearing as a third party witness in any such action or claim. Notwithstanding the provisions of this paragraph, if a Holder is found to be guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Act, it shall not be entitled to contribution from the Company unless the Company is also found to be guilty of such fraudulent misrepresentation. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer. DATED: February 18, 2002 SANGUINE CORPORATION (SGNC) By:/s/Thomas C. Drees Thomas C. Drees, Ph.D., Chairman & CEO EXHIBIT "A" SUBSCRIPTION FORM (To be Executed by the Registered Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Warrant) The undersigned hereby irrevocably subscribes for ________ shares (the "Stock") of the Common Stock of SANGUINE CORPORATION (the "Company") pursuant to and in accordance with the terms and conditions of the attached Warrant and hereby makes payment of $___________ therefor, and requests that a certificate for such shares be issued in the name of the undersigned and be delivered to the undersigned at the address stated below. If such number of shares is not all of the shares purchasable pursuant to the attached Warrant, the undersigned requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below. In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the "Act"). I agree that, until such shares have been registered, each share certificate representing the Common Stock delivered to me shall bear substantially the following legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." I further agree that unless the shares are registered, the Company may place stop orders on the certificates evidencing the Stock with the transfer agent, if any, to the same effect as the above legend. The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed or if such shares have been registered. Date:__________________ Signed:____________________________ Address: _____________________ _____________________ _____________________ SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY, AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERNATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER. EXHIBIT "B" ASSIGNMENT (To be Executed by the Registered Holder to Effect Transfer of the Warrant) For Value Received _______________ hereby sells, assigns and transfers to ____________________ this Warrant and the rights represented hereby to purchase Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint _____________________________________ as attorney to transfer this warrant on the books of the Company with full power of substitution. Dated:__________________ Signed:____________________________ Please print or typewrite Please insert Social Security name and address of or other Tax Identification assignee: Number of Assignee: _________________________ ______-________-______________ _________________________ _________________________ _________________________ EX-99 8 ex99-2.txt WARRANT OF MARK BERGENDAHL THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. Warrant to Purchase Shares # ASCENDIANT CLASS - 02 1,000,000 SANGUINE CORPORATION (OTC:BB SGNC) (Incorporated under the laws of the State of Nevada) WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF THE $.001 PAR VALUE COMMON STOCK OF SANGUINE CORPORATION (OTC:BB SGNC) EXERCISABLE ONLY AFTER February 20, 2002, AND VOID AFTER February 21, 2005. Warrant Price: $.15 (Fifteen Cents) per share. THIS IS TO CERTIFY that, for value received, Mark Bergendahl or his registered assigns (either or both of whom are referred to herein as the "Holder"), is entitled to purchase, subject to the terms and conditions hereinafter set forth, at anytime from and after February 20, 2002 and on or before February 21, 2005 (the "Warrant Period"), up to 1,000,000 shares of the $.001 par value common stock ("Common Stock") of Sanguine Corporation (the "Company"), and to receive certificate(s) for the Common Stock so purchased. This warrant may be exercised in whole or in part. Such exercise shall be accomplished by tender to the Company of the purchase price set forth above as the warrant price (the "Warrant Price"), either in cash or by certified check or bank cashier's check, payable to the order of the Company, together with presentation and surrender to the Company of this Warrant with an executed subscription in substantially the form attached hereto as Exhibit A. Fractional shares of the Company's Common Stock will not be issued upon the exercise of this Warrant. 2. The Company agrees at all times to reserve and hold avail- able out of the aggregate of its authorized but unissued Common Stock the number of shares of its Common Stock issuable upon the exercise of this and all other Warrants of like tenor then outstanding. The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder. This Warrant and the Common Stock issuable upon the exercise hereof may not be sold, transferred, pledged or hypothecated unless the Company shall have been supplied with evidence reasonably satisfactory to it that such transfer is not in violation of the Securities Act of 1933, as amended (the "Act") and any applicable state laws. If this Warrant is transferred, in whole or in part, upon surrender of this Warrant to the Company, the Company shall deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer. The Company may place a legend on this Warrant or any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant as to which the Company has not been supplied evidence that the transfer of such security would not be in violation of the Act and any applicable state laws. Only the registered Holder may enforce the provisions of this Warrant against the Company. A transferee of the original registered Holder becomes a registered Holder only upon notice to the Company substantially in the form set forth in Exhibit B hereto. 3. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth, and no dividend shall be payable or accrue by reason of this Warrant or the interest represented hereby, or the shares purchasable hereunder, until or unless, and except to the extent that, this Warrant is exercised. This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender. 4. The Warrant Price and the number of shares purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4. (a) In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into smaller number of shares of Common Stock, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, the number of shares of Common Stock purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder of this Warrant shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Company that he would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Whenever the number of shares of Common Stock pur- chasable upon the exercise of this Warrant is adjusted, as herein provided, the Warrant Price shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Common Stock purchasable upon the exercise of this Warrant immediately prior to such adjustment, and of which the denominator shall be the number of shares of Common Stock so purchasable immediately thereafter. (c) For the purpose of this Section 4, the term shares of Common Stock shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Warrant, or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of change in par value, or from par value to no par value, or from no par value to par value. (d) If during the Warrant Period the Company consolidates with or merges into another corporation or transfers all or substantially all of its assets the Holder shall thereafter be entitled upon exercise hereof to purchase, with respect to each share of Common Stock purchasable hereunder immediately prior to the date upon which such consolidation or merger becomes effective, the securities or property to which a holder of shares of Common Stock is entitled upon such consolidation or merger, without any change in, or payment in addition to the Warrant Price in effect immediately prior to such merger or consolidation, and the Company shall take such steps in connection with such consolidation or merger as may be necessary to ensure that all of the provisions of this Warrant shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or asset transfer unless prior to the consummation thereof the successor corporation (if other than the Company) resulting therefrom shall assume by written agreement executed and mailed to the registered Holder at his address shown on the books and records of the Company, the obligation to deliver to such Holder any such securities or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. (e) Upon the happening of any event requiring an adjust- ment of the Warrant Price, the Company shall forthwith give written notice thereof to the registered Holder of this Warrant, stating the adjusted Warrant Price and the adjusted number of shares of Common Stock or other securities or property purchasable upon the exercise hereof resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Board of Directors of the Company shall determine the adjusted Warrant Price and the securities or property purchasable upon exercise. If any voluntary or involuntary dissolution, liquidation, or winding up of the Company is proposed, the Company shall give at least 20 days prior written notice of such proposal to the registered Holder hereof stating the date on which such event is to take place and the date (which shall be at least 20 days after giving of such notice) as of which the holders of shares of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such dissolution, liquidation or winding up. This Warrant and all rights hereunder shall terminate as of the date on which such dissolution, liquidation, or winding up takes place. The notices pursuant to this paragraph shall be given by first class mail, postage prepaid, addressed to the registered Holder of this Warrant at his address appearing in the records of the Company. (f) Irrespective of any adjustments pursuant to this Section 4 to the Warrant Price or to the number of shares or other securities or other property obtainable upon exercise of this Warrant, this Warrant may continue to state the Warrant Price and the number of shares obtainable upon exercise, as the same price and number of shares stated herein. 5. (a) Whether or not this Warrant has yet been exercised in whole or in part, the Company shall, at its own expense, register and include all shares of Common Stock issued or issuable upon exercise of the Warrants in the registration, which is contemplated to be filed by the Company between February 2002 and April 2002. (b) Notwithstanding the foregoing, should for any reason all shares of Common Stock issued or issuable upon the exercise of the Warrants not be registered pursuant to the provisions of subsection 5(a) above, then in the event that the Company proposes, at any time subsequent to February 20, 2002, but prior to February 21, 2005, whether or not this Warrant has yet been exercised in whole or in part, to file any other registration statement on a general form of registration under the Act relating to securities issued or to be issued by it, then it shall give written notice of such proposal to the record owners of the Warrants and any shares of Common Stock issued upon the exercise thereof. If, within 15 days after the giving of such notice, the record owners of any of the Warrants or shares of Common Stock issued or issuable upon their exercise shall request in writing that all or any of the shares of Common Stock issued or issuable upon exercise of the War- rants be included in such proposed registration, the Company will, at its own expense (except as set forth below), also register such shares of Common Stock as shall have been so requested in writing; provided, however, that (i) the Company shall not be required to include any of such shares of Common Stock if, by reason of such inclusion, the Company shall be required to prepare and file a registration statement on a form promulgated by the Securities and Exchange Commission different from that which the Company otherwise would use; (ii) Holder shall cooperate with the Company in the preparation of such registration statement to the extent required to furnish information concerning such owners therein; and (iii) if any underwriter or managing agent is pur- chasing or arranging for the sale of the securities then being offered by the Company under such registration statement, then Holder shall agree to have the securities being so registered sold to or by such underwriter or managing agent on terms substantially equivalent to the terms upon which the Company is selling the sec- urities so registered. (c) In connection with the filing of a registration state- ment pursuant to subsections 5(a) and 5(b), the Company shall: (i) notify Holder as to the filing thereof and of all amendments thereto filed prior to the effective date of said registration statement; (ii) notify Holder, promptly after it shall have received notice thereof, of the time when the registration statement becomes effective or any supplement to any prospectus forming a part of the registration statement has been filed; (iii) prepare and file without expense to Holder any necessary amendment or supplement to such registration statement or prospectus as may be necessary to comply with Section 10(a)(3) of the Act or advisable in connection with the proposed distribution of the securities by Holder; (iv) take all reasonable steps to qualify the shares of Common Stock being so registered for sale under the securities or blue sky laws in such states, but only in such states, as the Company would qualify the sales of its securities absent any registration of the shares of Common Stock issued or issuable hereunder; and, (v) notify Holder of any stop order suspending the effectiveness of the registration statement and use its reasonable best efforts to remove such stop order. 6. In connection with the obligation of the Company to register shares of Common Stock pursuant to the provisions of Section 5 hereof, the Company and each Holder agree as follows: (a) The Company hereby agrees to indemnify and hold harmless each Holder and each person who controls each Holder within the meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages, liabilities or actions to which each Holder or they or any of them may become subject under the Act, the Exchange Act or otherwise and to reimburse the persons indemnified above for any legal or other expenses (including the cost of any investigation and preparation) reasonably incurred by them in connection with any litigation or proceeding or threatened litigation or proceeding, whether or not resulting in any liabilities, but only insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement with respect to the shares of Common Stock (or incorporated therein by reference) or any amendment or supplement thereto (such registration statement, together with any such amendments or supplements, is referred to herein as the "Registration Statement"), or the omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (ii) the employment of the Company of any device, scheme or artifice to defraud, or the engaging by the Company in any act, practice or course of business which operates or would operate as a fraud or deceit, or any conspiracy with respect thereto, in which the Company shall participate, in connection with the sale pursuant to the Registration Statement of any of the securities registered thereby; provided, however, that the indemnity agreement contained in this paragraph (a) shall not extend to any indemnified person in respect of any such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement or any such omission or alleged omission, if such statement or omission was made in reliance upon information furnished in writing to the Company by such person specifi- cally for use in connection with the preparation of the Registration Statement. The Company agrees to pay any legal and other expenses for which it is liable under this paragraph (a) from time to time (but not more frequently than monthly) within 30 days after its receipt of a bill therefor. (b) Each Holder agrees to indemnify and hold harmless the Company, its directors, its officers who shall have signed the registration statement, each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Holder but in each case to the extent, and only to the extent, that any statement in or omission from or alleged omission from the registration statement, any preliminary prospectus, the prospectus or any amendment or supplement thereto was made in reliance upon information furnished in writing to the Company by such Holder specifically for use in connection with the preparation of the registration statement, any preliminary prospectus or the prospectus or any such amendment or supplement thereto. Each Holder agrees to pay any legal and other expenses for which it is liable under this paragraph (b) within 30 days after its receipt of a bill therefor. (c) If any action is brought against a person entitled to indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified Party") in respect of which indemnity may be sought against a person granting indemnification (an "Indemnifying Party") pursuant to such subsections, such Indemnified Party shall promptly notify such Indemnifying Party in writing of the commencement thereof; but the omission so to notify the Indemnifying Party of any such action shall not release the Indemnifying Party from any liability it may have to such Indemnified Party otherwise than on account of the indemnity agreement contained in paragraphs (a) or (b). In case any such action is brought against an Indemnified Party and it notifies an Indemnifying Party of the commencement thereof, the Indemnifying Party against which a claim is to be made will be entitled to participate therein, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded based upon advice of counsel that there may be legal defenses available to it and/or other Indemnified Parties which conflict with those available to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel to assume such legal defenses and otherwise to participate in the defense of such action on behalf of such Indemnified Party or Parties. Upon receipt of notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense of such action and approval by the Indemnified Party of counsel, the Indemnifying Party will not be liable to such Indemnified Party under this agreement for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof unless (i) the Indemnified Party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel), (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action or (iii) the Indemnifying Party has authorized the employment of such counsel for the Indemnified Party at the expense of the Indemnifying Party. An Indemnifying Party shall not be liable for any settlement of any action or proceeding effected without its written consent. (d) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in paragraph (a) is unavailable to a Holder in accordance with its terms, the Company and each Holder shall contribute to the aggregate losses, claims, damages and liabilities of the nature contemplated by said indemnity agreement incurred by each Holder based on the relative fault of the Company on the one hand, and each Holder on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages and liabilities. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, such statement or omission relates to information supplied by the Company or such Holder and the party's relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by the Indemnified Party as a result of the losses, claims, damages, or liabilities referred to above in this paragraph shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with inves- tigating or defending against or appearing as a third party witness in any such action or claim. Notwithstanding the provisions of this paragraph, if a Holder is found to be guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Act, it shall not be entitled to contribution from the Company unless the Company is also found to be guilty of such fraudulent misrepresentation. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer. DATED: February 18, 2002 SANGUINE CORPORATION (SGNC) By:/s/Thomas C. Drees Thomas C. Drees, Ph.D., Chairman & CEO EXHIBIT "A" SUBSCRIPTION FORM (To be Executed by the Registered Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Warrant) The undersigned hereby irrevocably subscribes for ________ shares (the "Stock") of the Common Stock of SANGUINE CORPORATION (the "Company") pursuant to and in accordance with the terms and conditions of the attached Warrant and hereby makes payment of $___________ therefor, and requests that a certificate for such shares be issued in the name of the undersigned and be delivered to the undersigned at the address stated below. If such number of shares is not all of the shares purchasable pursuant to the attached Warrant, the undersigned requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below. In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the "Act"). I agree that, until such shares have been registered, each share certificate representing the Common Stock delivered to me shall bear substantially the following legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." I further agree that unless the shares are registered, the Company may place stop orders on the certificates evidencing the Stock with the transfer agent, if any, to the same effect as the above legend. The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed or if such shares have been registered. Date:__________________ Signed:____________________________ Address: _____________________ _____________________ _____________________ SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY, AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERNATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER. EXHIBIT "B" ASSIGNMENT (To be Executed by the Registered Holder to Effect Transfer of the Warrant) For Value Received _______________ hereby sells, assigns and transfers to ____________________ this Warrant and the rights represented hereby to purchase Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint _____________________________________ as attorney to transfer this warrant on the books of the Company with full power of substitution. Dated:__________________ Signed:____________________________ Please print or typewrite Please insert Social Security name and address of or other Tax Identification assignee: Number of Assignee: _________________________ ______-________-______________ _________________________ _________________________ _________________________ EX-99 9 ex99-3.txt WARRANT OF BRADLEY J. WILHITE THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. Warrant to Purchase Shares # ASCENDIANT CLASS - 03 1,000,000 SANGUINE CORPORATION (OTC:BB SGNC) (Incorporated under the laws of the State of Nevada) WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF THE $.001 PAR VALUE COMMON STOCK OF SANGUINE CORPORATION (OTC:BB SGNC) EXERCISABLE ONLY AFTER February 20, 2002, AND VOID AFTER February 21, 2005. Warrant Price: $.15 (Fifteen Cents) per share. THIS IS TO CERTIFY that, for value received, Bradley J. Wilhite or his registered assigns (either or both of whom are referred to herein as the "Holder"), is entitled to purchase, subject to the terms and conditions hereinafter set forth, at anytime from and after February 20, 2002 and on or before February 21, 2005 (the "Warrant Period"), up to 1,000,000 shares of the $.001 par value common stock ("Common Stock") of Sanguine Corporation (the "Company"), and to receive certificate(s) for the Common Stock so purchased. This warrant may be exercised in whole or in part. Such exercise shall be accomplished by tender to the Company of the purchase price set forth above as the warrant price (the "Warrant Price"), either in cash or by certified check or bank cashier's check, payable to the order of the Company, together with presentation and surrender to the Company of this Warrant with an executed subscription in substantially the form attached hereto as Exhibit A. Fractional shares of the Company's Common Stock will not be issued upon the exercise of this Warrant. 2. The Company agrees at all times to reserve and hold avail- able out of the aggregate of its authorized but unissued Common Stock the number of shares of its Common Stock issuable upon the exercise of this and all other Warrants of like tenor then outstanding. The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder. This Warrant and the Common Stock issuable upon the exercise hereof may not be sold, transferred, pledged or hypothecated unless the Company shall have been supplied with evidence reasonably satisfactory to it that such transfer is not in violation of the Securities Act of 1933, as amended (the "Act") and any applicable state laws. If this Warrant is transferred, in whole or in part, upon surrender of this Warrant to the Company, the Company shall deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer. The Company may place a legend on this Warrant or any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant as to which the Company has not been supplied evidence that the transfer of such security would not be in violation of the Act and any applicable state laws. Only the registered Holder may enforce the provisions of this Warrant against the Company. A transferee of the original registered Holder becomes a registered Holder only upon notice to the Company substantially in the form set forth in Exhibit B hereto. 3. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth, and no dividend shall be payable or accrue by reason of this Warrant or the interest represented hereby, or the shares purchasable hereunder, until or unless, and except to the extent that, this Warrant is exercised. This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender. 4. The Warrant Price and the number of shares purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4. (a) In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into smaller number of shares of Common Stock, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, the number of shares of Common Stock purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder of this Warrant shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Company that he would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Whenever the number of shares of Common Stock pur- chasable upon the exercise of this Warrant is adjusted, as herein provided, the Warrant Price shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Common Stock purchasable upon the exercise of this Warrant immediately prior to such adjustment, and of which the denominator shall be the number of shares of Common Stock so purchasable immediately thereafter. (c) For the purpose of this Section 4, the term shares of Common Stock shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Warrant, or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of change in par value, or from par value to no par value, or from no par value to par value. (d) If during the Warrant Period the Company consolidates with or merges into another corporation or transfers all or substantially all of its assets the Holder shall thereafter be entitled upon exercise hereof to purchase, with respect to each share of Common Stock purchasable hereunder immediately prior to the date upon which such consolidation or merger becomes effective, the securities or property to which a holder of shares of Common Stock is entitled upon such consolidation or merger, without any change in, or payment in addition to the Warrant Price in effect immediately prior to such merger or consolidation, and the Company shall take such steps in connection with such consolidation or merger as may be necessary to ensure that all of the provisions of this Warrant shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or asset transfer unless prior to the consummation thereof the successor corporation (if other than the Company) resulting therefrom shall assume by written agreement executed and mailed to the registered Holder at his address shown on the books and records of the Company, the obligation to deliver to such Holder any such securities or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. (e) Upon the happening of any event requiring an adjust- ment of the Warrant Price, the Company shall forthwith give written notice thereof to the registered Holder of this Warrant, stating the adjusted Warrant Price and the adjusted number of shares of Common Stock or other securities or property purchasable upon the exercise hereof resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Board of Directors of the Company shall determine the adjusted Warrant Price and the securities or property purchasable upon exercise. If any voluntary or involuntary dissolution, liquidation, or winding up of the Company is proposed, the Company shall give at least 20 days prior written notice of such proposal to the registered Holder hereof stating the date on which such event is to take place and the date (which shall be at least 20 days after giving of such notice) as of which the holders of shares of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such dissolution, liquidation or winding up. This Warrant and all rights hereunder shall terminate as of the date on which such dissolution, liquidation, or winding up takes place. The notices pursuant to this paragraph shall be given by first class mail, postage prepaid, addressed to the registered Holder of this Warrant at his address appearing in the records of the Company. (f) Irrespective of any adjustments pursuant to this Section 4 to the Warrant Price or to the number of shares or other securities or other property obtainable upon exercise of this Warrant, this Warrant may continue to state the Warrant Price and the number of shares obtainable upon exercise, as the same price and number of shares stated herein. 5. (a) Whether or not this Warrant has yet been exercised in whole or in part, the Company shall, at its own expense, register and include all shares of Common Stock issued or issuable upon exercise of the Warrants in the registration, which is contemplated to be filed by the Company between February 2002 and April 2002. (b) Notwithstanding the foregoing, should for any reason all shares of Common Stock issued or issuable upon the exercise of the Warrants not be registered pursuant to the provisions of subsection 5(a) above, then in the event that the Company proposes, at any time subsequent to February 20, 2002, but prior to February 21, 2005, whether or not this Warrant has yet been exercised in whole or in part, to file any other registration statement on a general form of registration under the Act relating to securities issued or to be issued by it, then it shall give written notice of such proposal to the record owners of the Warrants and any shares of Common Stock issued upon the exercise thereof. If, within 15 days after the giving of such notice, the record owners of any of the Warrants or shares of Common Stock issued or issuable upon their exercise shall request in writing that all or any of the shares of Common Stock issued or issuable upon exercise of the War- rants be included in such proposed registration, the Company will, at its own expense (except as set forth below), also register such shares of Common Stock as shall have been so requested in writing; provided, however, that (i) the Company shall not be required to include any of such shares of Common Stock if, by reason of such inclusion, the Company shall be required to prepare and file a registration statement on a form promulgated by the Securities and Exchange Commission different from that which the Company otherwise would use; (ii) Holder shall cooperate with the Company in the preparation of such registration statement to the extent required to furnish information concerning such owners therein; and (iii) if any underwriter or managing agent is pur- chasing or arranging for the sale of the securities then being offered by the Company under such registration statement, then Holder shall agree to have the securities being so registered sold to or by such underwriter or managing agent on terms substantially equivalent to the terms upon which the Company is selling the sec- urities so registered. (c) In connection with the filing of a registration state- ment pursuant to subsections 5(a) and 5(b), the Company shall: (i) notify Holder as to the filing thereof and of all amendments thereto filed prior to the effective date of said registration statement; (ii) notify Holder, promptly after it shall have received notice thereof, of the time when the registration statement becomes effective or any supplement to any prospectus forming a part of the registration statement has been filed; (iii) prepare and file without expense to Holder any necessary amendment or supplement to such registration statement or prospectus as may be necessary to comply with Section 10(a)(3) of the Act or advisable in connection with the proposed distribution of the securities by Holder; (iv) take all reasonable steps to qualify the shares of Common Stock being so registered for sale under the securities or blue sky laws in such states, but only in such states, as the Company would qualify the sales of its securities absent any registration of the shares of Common Stock issued or issuable hereunder; and, (v) notify Holder of any stop order suspending the effectiveness of the registration statement and use its reasonable best efforts to remove such stop order. 6. In connection with the obligation of the Company to register shares of Common Stock pursuant to the provisions of Section 5 hereof, the Company and each Holder agree as follows: (a) The Company hereby agrees to indemnify and hold harmless each Holder and each person who controls each Holder within the meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages, liabilities or actions to which each Holder or they or any of them may become subject under the Act, the Exchange Act or otherwise and to reimburse the persons indemnified above for any legal or other expenses (including the cost of any investigation and preparation) reasonably incurred by them in connection with any litigation or proceeding or threatened litigation or proceeding, whether or not resulting in any liabilities, but only insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement with respect to the shares of Common Stock (or incorporated therein by reference) or any amendment or supplement thereto (such registration statement, together with any such amendments or supplements, is referred to herein as the "Registration Statement"), or the omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (ii) the employment of the Company of any device, scheme or artifice to defraud, or the engaging by the Company in any act, practice or course of business which operates or would operate as a fraud or deceit, or any conspiracy with respect thereto, in which the Company shall participate, in connection with the sale pursuant to the Registration Statement of any of the securities registered thereby; provided, however, that the indemnity agreement contained in this paragraph (a) shall not extend to any indemnified person in respect of any such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement or any such omission or alleged omission, if such statement or omission was made in reliance upon information furnished in writing to the Company by such person specifi- cally for use in connection with the preparation of the Registration Statement. The Company agrees to pay any legal and other expenses for which it is liable under this paragraph (a) from time to time (but not more frequently than monthly) within 30 days after its receipt of a bill therefor. (b) Each Holder agrees to indemnify and hold harmless the Company, its directors, its officers who shall have signed the registration statement, each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Holder but in each case to the extent, and only to the extent, that any statement in or omission from or alleged omission from the registration statement, any preliminary prospectus, the prospectus or any amendment or supplement thereto was made in reliance upon information furnished in writing to the Company by such Holder specifically for use in connection with the preparation of the registration statement, any preliminary prospectus or the prospectus or any such amendment or supplement thereto. Each Holder agrees to pay any legal and other expenses for which it is liable under this paragraph (b) within 30 days after its receipt of a bill therefor. (c) If any action is brought against a person entitled to indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified Party") in respect of which indemnity may be sought against a person granting indemnification (an "Indemnifying Party") pursuant to such subsections, such Indemnified Party shall promptly notify such Indemnifying Party in writing of the commencement thereof; but the omission so to notify the Indemnifying Party of any such action shall not release the Indemnifying Party from any liability it may have to such Indemnified Party otherwise than on account of the indemnity agreement contained in paragraphs (a) or (b). In case any such action is brought against an Indemnified Party and it notifies an Indemnifying Party of the commencement thereof, the Indemnifying Party against which a claim is to be made will be entitled to participate therein, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded based upon advice of counsel that there may be legal defenses available to it and/or other Indemnified Parties which conflict with those available to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel to assume such legal defenses and otherwise to participate in the defense of such action on behalf of such Indemnified Party or Parties. Upon receipt of notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense of such action and approval by the Indemnified Party of counsel, the Indemnifying Party will not be liable to such Indemnified Party under this agreement for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof unless (i) the Indemnified Party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel), (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action or (iii) the Indemnifying Party has authorized the employment of such counsel for the Indemnified Party at the expense of the Indemnifying Party. An Indemnifying Party shall not be liable for any settlement of any action or proceeding effected without its written consent. (d) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in paragraph (a) is unavailable to a Holder in accordance with its terms, the Company and each Holder shall contribute to the aggregate losses, claims, damages and liabilities of the nature contemplated by said indemnity agreement incurred by each Holder based on the relative fault of the Company on the one hand, and each Holder on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages and liabilities. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, such statement or omission relates to information supplied by the Company or such Holder and the party's relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by the Indemnified Party as a result of the losses, claims, damages, or liabilities referred to above in this paragraph shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with inves- tigating or defending against or appearing as a third party witness in any such action or claim. Notwithstanding the provisions of this paragraph, if a Holder is found to be guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Act, it shall not be entitled to contribution from the Company unless the Company is also found to be guilty of such fraudulent misrepresentation. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer. DATED: February 18, 2002 SANGUINE CORPORATION (SGNC) By:/s/Thomas C. Drees Thomas C. Drees, Ph.D., Chairman & CEO EXHIBIT "A" SUBSCRIPTION FORM (To be Executed by the Registered Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Warrant) The undersigned hereby irrevocably subscribes for ________ shares (the "Stock") of the Common Stock of SANGUINE CORPORATION (the "Company") pursuant to and in accordance with the terms and conditions of the attached Warrant and hereby makes payment of $___________ therefor, and requests that a certificate for such shares be issued in the name of the undersigned and be delivered to the undersigned at the address stated below. If such number of shares is not all of the shares purchasable pursuant to the attached Warrant, the undersigned requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below. In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the "Act"). I agree that, until such shares have been registered, each share certificate representing the Common Stock delivered to me shall bear substantially the following legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." I further agree that unless the shares are registered, the Company may place stop orders on the certificates evidencing the Stock with the transfer agent, if any, to the same effect as the above legend. The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed or if such shares have been registered. Date:__________________ Signed:____________________________ Address: _____________________ _____________________ _____________________ SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY, AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERNATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER. EXHIBIT "B" ASSIGNMENT (To be Executed by the Registered Holder to Effect Transfer of the Warrant) For Value Received _______________ hereby sells, assigns and transfers to ____________________ this Warrant and the rights represented hereby to purchase Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint _____________________________________ as attorney to transfer this warrant on the books of the Company with full power of substitution. Dated:__________________ Signed:____________________________ Please print or typewrite Please insert Social Security name and address of or other Tax Identification assignee: Number of Assignee: _________________________ ______-________-______________ _________________________ _________________________ _________________________ EX-99 10 ex99-4.txt WARRANT OF LEONARD W. BURNINGHAM, ESQ. THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID SECURITIES ACT. Warrant to Purchase Shares # _________ 500,000 SANGUINE CORPORATION (OTC:BB SGNC) (Incorporated under the laws of the State of Nevada) WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF THE $.001 PAR VALUE COMMON STOCK OF SANGUINE CORPORATION (OTC:BB SGNC) EXERCISABLE ONLY AFTER March 1, 2002, AND VOID AFTER March 2, 2005. Warrant Price: 50% of the bid price for the five trading days prior to the date of exercise at the end of any monthly billing cycle or $.08 (Eight Cents) per share, whichever is lower, payable in cash or services. 1. THIS IS TO CERTIFY that, for value received, Leonard W. Burningham, Esq. or his registered assigns (either or both of whom are referred to herein as the "Holder"), is entitled to purchase, subject to the terms and conditions hereinafter set forth, at anytime from and after March 1, 2002 and on or before March 2, 2005 (the "Warrant Period"), up to 500,000shares of the $.001 par value common stock ("Common Stock") of Sanguine Corporation (the "Company"), and to receive certificate(s) for the Common Stock so exercised. This warrant may be exercised in whole or in part. Such exercise shall be accomplished by tender to the Company of the purchase price set forth above as the warrant price (the "Warrant Price"), either in services, cash or by certified check or bank cashier's check, payable to the order of the Company, together with presentation and surrender to the Company of this Warrant with an executed subscription in substantially the form attached hereto as Exhibit A. Fractional shares of the Company's Common Stock will not be issued upon the exercise of this Warrant. 2. The Company agrees at all times to reserve and hold available out of the aggregate of its authorized but unissued Common Stock the number of shares of its Common Stock issuable upon the exercise of this and all other Warrants of like tenor then outstanding. The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder. This Warrant and the Common Stock issuable upon the exercise hereof may not be sold, transferred, pledged or hypothecated unless the Company shall have been supplied with evidence reasonably satisfactory to it that such transfer is not in violation of the Securities Act of 1933, as amended (the "Securities Act") and any applicable state laws. If this Warrant is transferred, in whole or in part, upon surrender of this Warrant to the Company, the Company shall deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer. The Company may place a legend on this Warrant or any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant as to which the Company has not been supplied evidence that the transfer of such security would not be in violation of the Securities Act and any applicable state laws. Only the registered Holder may enforce the provisions of this Warrant against the Company. A transferee of the original registered Holder becomes a registered Holder only upon notice to the Company substantially in the form set forth in Exhibit B hereto. 3. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth, and no dividend shall be payable or accrue by reason of this Warrant or the interest represented hereby, or the shares purchasable hereunder, until or unless, and except to the extent that, this Warrant is exercised. This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender. 4. The Warrant Price and the number of shares purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4. (a) In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into smaller number of shares of Common Stock, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, the number of shares of Common Stock purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder of this Warrant shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Company that he would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) Whenever the number of shares of Common Stock purchasable upon the exercise of this Warrant is adjusted, as herein provided, the Warrant Price shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Common Stock purchasable upon the exercise of this Warrant immediately prior to such adjustment, and of which the denominator shall be the number of shares of Common Stock so purchasable immediately thereafter. (c) For the purpose of this Section 4, the term shares of Common Stock shall mean (i) the class of stock designated as the Common Stock of the Company at the date of this Warrant, or (ii) any other class of stock result- ing from successive changes or reclassifications of such shares consisting solely of change in par value, or from par value to no par value, or from no par value to par value. (d) If during the Warrant Period the Company consolidates with or merges into another corporation or transfers all or substantially all of its assets the Holder shall thereafter be entitled upon exercise hereof to purchase, with respect to each share of Common Stock purchasable hereunder immediately prior to the date upon which such consolidation or merger becomes effective, the securities or property to which a holder of shares of Common Stock is entitled upon such consolidation or merger, without any change in, or payment in addition to the Warrant Price in effect immediately prior to such merger or consolidation, and the Company shall take such steps in connection with such consolidation or merger as may be necessary to ensure that all of the provisions of this Warrant shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or asset transfer unless prior to the consummation thereof the successor corporation (if other than the Company) resulting therefrom shall assume by written agreement executed and mailed to the registered Holder at his address shown on the books and records of the Company, the obligation to deliver to such Holder any such securities or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. (e) Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall forthwith give written notice thereof to the registered Holder of this Warrant, stating the adjusted Warrant Price and the adjusted number of shares of Common Stock or other securities or property purchasable upon the exercise hereof resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Board of Directors of the Company shall determine the adjusted Warrant Price and the securities or property purchasable upon exercise. If any voluntary or involuntary dissolution, liquidation, or winding up of the Company is proposed, the Company shall give at least 20 days prior written notice of such proposal to the registered Holder hereof stating the date on which such event is to take place and the date (which shall be at least 20 days after giving of such notice) as of which the holders of shares of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such dissolution, liquidation or winding up. This Warrant and all rights hereunder shall terminate as of the date on which such dissolution, liquidation, or winding up takes place. The notices pursuant to this paragraph shall be given by first class mail, postage prepaid, addressed to the registered Holder of this Warrant at his address appearing in the records of the Company. (f) Irrespective of any adjustments pursuant to this Section 4 to the Warrant Price or to the number of shares or other securities or other property obtainable upon exercise of this Warrant, this Warrant may continue to state the Warrant Price and the number of shares obtainable upon exercise, as the same price and number of shares stated herein. 5. (a) Whether or not this Warrant has yet been exercised in whole or in part, the Company shall, at its own expense, register and include all shares of Common Stock issued or issuable upon exercise of the Warrants in the registration, which is contemplated to be filed by the Company between March 2002 and April 2002. (b) Notwithstanding the foregoing, should for any reason all shares of Common Stock issued or issuable upon the exercise of the Warrants not be registered pursuant to the provisions of subsection 5(a) above, then in the event that the Company proposes, at any time subsequent to March 1, 2002, but prior to March 2, 2005, whether or not this Warrant has yet been exercised in whole or in part, to file any other registration statement on a general form of registration under the Securities Act relating to securities issued or to be issued by it, then it shall give written notice of such proposal to the record owners of the Warrants and any shares of Common Stock issued upon the exercise thereof. If, within 15 days after the giving of such notice, the record owners of any of the Warrants or shares of Common Stock issued or issuable upon their exercise shall request in writing that all or any of the shares of Common Stock issued or issuable upon exercise of the Warrants be included in such proposed registration, the Company will, at its own expense (except as set forth below), also register such shares of Common Stock as shall have been so requested in writing; provided, however, that (i) the Company shall not be required to include any of such shares of Common Stock if, by reason of such inclusion, the Company shall be required to prepare and file a registration statement on a form promulgated by the Securities and Exchange Commission different from that which the Company otherwise would use; (ii) Holder shall cooperate with the Company in the preparation of such registration statement to the extent required to furnish information concerning such owners therein; and (iii) if any underwriter or managing agent is pur- chasing or arranging for the sale of the securities then being offered by the Company under such registration statement, then Holder shall agree to have the securities being so registered sold to or by such underwriter or managing agent on terms substantially equivalent to the terms upon which the Company is selling the securities so registered. (c) In connection with the filing of a registration statement pursuant to subsections 5(a) and 5(b), the Company shall: (i) notify Holder as to the filing thereof and of all amendments thereto filed prior to the effective date of said registration statement; (ii) notify Holder, promptly after it shall have received notice thereof, of the time when the registration statement becomes effective or any supplement to any prospectus forming a part of the registration statement has been filed; (iii) prepare and file without expense to Holder any necessary amendment or supplement to such registration statement or prospectus as may be necessary to comply with Section 10(a)(3) of the Securities Act or advisable in connection with the proposed distribution of the securities by Holder; (iv) take all reasonable steps to qualify the shares of Common Stock being so registered for sale under the securities or blue sky laws in such states, but only in such states, as the Company would qualify the sales of its securities absent any registration of the shares of Common Stock issued or issuable hereunder; and, (v) notify Holder of any stop order suspending the effectiveness of the registration statement and use its reasonable best efforts to remove such stop order. 6. In connection with the obligation of the Company to register shares of Common Stock pursuant to the provisions of Section 5 hereof, the Company and each Holder agree as follows: (a) The Company hereby agrees to indemnify and hold harmless each Holder and each person who controls each Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages, liabilities or actions to which each Holder or they or any of them may become subject under the Securities Act, the Exchange Act or otherwise and to reimburse the persons indemnified above for any legal or other expenses (including the cost of any investigation and preparation) reasonably incurred by them in connection with any litigation or proceeding or threatened litigation or proceeding, whether or not resulting in any liabilities, but only insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement with respect to the shares of Common Stock (or incorporated therein by reference) or any amendment or supplement thereto (such registration statement, together with any such amendments or supplements, is referred to herein as the "Registration Statement"), or the omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (ii) the employment of the Company of any device, scheme or artifice to defraud, or the engaging by the Company in any act, practice or course of business which operates or would operate as a fraud or deceit, or any conspiracy with respect thereto, in which the Company shall participate, in connection with the sale pursuant to the Registration Statement of any of the securities registered thereby; provided, however, that the indemnity agreement contained in this paragraph (a) shall not extend to any indemnified person in respect of any such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement or any such omission or alleged omission, if such statement or omission was made in reliance upon information furnished in writing to the Company by such person specifically for use in connection with the preparation of the Registration Statement. The Company agrees to pay any legal and other expenses for which it is liable under this paragraph (a) from time to time (but not more frequently than monthly) within 30 days after its receipt of a bill therefor. (b) Each Holder agrees to indemnify and hold harmless the Company, its directors, its officers who shall have signed the registration statement, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Holder but in each case to the extent, and only to the extent, that any statement in or omission from or alleged omission from the registration statement, any preliminary prospectus, the prospectus or any amendment or supplement thereto was made in reliance upon information furnished in writing to the Company by such Holder specifically for use in connection with the preparation of the registration statement, any preliminary prospectus or the prospectus or any such amendment or supplement thereto. Each Holder agrees to pay any legal and other expenses for which it is liable under this paragraph (b) within 30 days after its receipt of a bill therefor. (c) If any action is brought against a person entitled to indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified Party") in respect of which indemnity may be sought against a person granting indemnification (an "Indemnifying Party") pursuant to such subsections, such Indemnified Party shall promptly notify such Indemnifying Party in writing of the commencement thereof; but the omission so to notify the Indemnifying Party of any such action shall not release the Indemnifying Party from any liability it may have to such Indemnified Party otherwise than on account of the indemnity agreement contained in paragraphs (a) or (b). In case any such action is brought against an Indemnified Party and it notifies an Indemnifying Party of the commencement thereof, the Indemnifying Party against which a claim is to be made will be entitled to participate therein, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded based upon advice of counsel that there may be legal defenses available to it and/or other Indemnified Parties which conflict with those available to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel to assume such legal defenses and otherwise to participate in the defense of such action on behalf of such Indemnified Party or Parties. Upon receipt of notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense of such action and approval by the Indemnified Party of counsel, the Indemnifying Party will not be liable to such Indemnified Party under this agreement for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof unless (i) the Indemnified Party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel), (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action or (iii) the Indemnifying Party has authorized the employment of such counsel for the Indemnified Party at the expense of the Indemnifying Party. An Indemnifying Party shall not be liable for any settlement of any action or proceeding effected without its written consent. (d) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in paragraph (a) is unavailable to a Holder in accordance with its terms, the Company and each Holder shall contribute to the aggregate losses, claims, damages and liabil- ities of the nature contemplated by said indemnity agreement incurred by each Holder based on the relative fault of the Company on the one hand, and each Holder on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages and liabilities. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, such statement or omis- sion relates to information supplied by the Company or such Holder and the party's relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by the Indemnified Party as a result of the losses, claims, damages, or liabilities referred to above in this paragraph shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending against or appearing as a third party witness in any such action or claim. Notwithstanding the provisions of this paragraph, if a Holder is found to be guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act, it shall not be entitled to contribution from the Company unless the Company is also found to be guilty of such fraudulent misrepresentation. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer. DATED: 3/15/02 SANGUINE CORPORATION (SGNC) By:/s/Thomas C. Drees Thomas C. Drees, Ph.D., Chairman & CEO EXHIBIT "A" SUBSCRIPTION FORM (To be Executed by the Registered Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Warrant) The undersigned hereby irrevocably subscribes for ________ shares (the "Stock") of the Common Stock of SANGUINE CORPORATION (the "Company") pursuant to and in accordance with the terms and conditions of the attached Warrant and hereby makes payment of $___________ (in cash or services per the attached invoice) therefor, and requests that a certificate for such shares be issued in the name of the undersigned and be delivered to the undersigned at the address stated below. If such number of shares is not all of the shares purchasable pursuant to the attached Warrant, the under- signed requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below. In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). I agree that, until such shares have been registered, each share certificate representing the Common Stock delivered to me shall bear substantially the following legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Securities Act." I further agree that unless the shares are registered, the Company may place stop orders on the certificates evidencing the Stock with the transfer agent, if any, to the same effect as the above legend. The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed or if such shares have been registered. Date:__________________ Signed:____________________________ Address:___________________________ ___________________________ ___________________________ SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY, AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER. EXHIBIT "B" ASSIGNMENT (To be Executed by the Registered Holder to Effect Transfer of the Warrant) For Value Received _______________ hereby sells, assigns and transfers to ____________________ this Warrant and the rights represented hereby to purchase Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint _____________________________________ as attorney to transfer this warrant on the books of the Company with full power of substitution. Dated:__________________ Signed:____________________________ Please print or typewrite Please insert Social Security name and address of or other Tax Identification assignee: Number of Assignee: _________________________ ______-________-______________ _________________________ _________________________ _________________________ EX-99 11 ex99-5.txt PRESS RELEASE DATED FEBRUARY 21, 2002 Press Release Sanguine Corporation Signs License Agreement with Ascendiant ? Asia, LLC - - Establishes Framework for Manufacturing and Distribution in China - PASADENA, Calif., February 21, 2002 -- Sanguine Corporation (OTC BB: SGNC), a bio-pharmaceutical company focused on the development of an oxygen-carrying synthetic substitute for human red blood cells, announced today that it has signed a license agreement with Ascendiant - Asia, LLC. Ascendiant - Asia, through the appointment of pharmaceutical company sub- licensees, is arranging for the completion of clinical trials, and the commencement of manufacturing and distribution of Sanguine's products in major countries in Asia, the largest of which is the People's Republic of China, with a population exceeding 1.5 billion. Dr. Thomas C. Drees, Chief Executive Officer of Sanguine, commented, "This is a major step in the commercialization of PHER-02, a product we believe could change the face of medicine." Dr. Drees, with more than 30-years experience in the field of biologics (the study of blood), supervised the development of certain perfluorocarbons (PFCs) into the first synthetic red blood cell substitute to receive FDA approval in 1989. He founded Sanguine Corporation to develop a second-generation synthetic red blood cell substitute named PHER-O2, a PFC-based product that is believed to be a major breakthrough in biologics and considered by the Company's management to be superior to the first- generation product based on improved stability demonstrated in independent laboratory tests. Mark Bergendahl, President and Managing Director of Ascendiant - Asia, added, "We are excited about Sanguine's solution to the worldwide need for a clean, long-lasting blood supply, and plan to move quickly to establish an alliance in China to facilitate the commercialization of PHER-02 in Asia." About Sanguine Corporation Sanguine Corporation is a development-stage company focused on the research and development of PHER-O2, a synthetic red blood cell product with potential applications in a variety of specialties, including: transfusions, CAT scans, cardioplegia and the treatment of heart attacks, strokes, head and neck tumors and hemorrhagic shock. For more information, please visit www.sanguine- corp.com. About Ascendiant - Asia, LLC Ascendiant - Asia, LLC introduces leading edge technologies and products to markets representing over 2 billion people. Ascendiant - Asia assists its U.S. client companies by generating new revenue streams through licensing royalties, and by facilitating lower cost manufacturing arrangements that can help its clients compete more favorably and improve profit margins. Ascendiant - Asia is an affiliate of Ascendiant Capital Group, Inc., an Irvine, California-based, private, full-service financial and business advisory firm that assists emerging growth companies in the micro-cap and small-cap markets. For more information, please contact Ascendiant at 949-756- 1010 or visit www.ascendiant.com. Contact: Investor Relations: OTC Financial Network, Susan Ladue, 800-230- 3519 or 781-444-6100, ext. 637, email: susan@otcfn.com, or visit: www.otcfn.com/sgnc. Forward-looking statements in this release are made pursuant to the ``safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including without limitation, continued acceptance of the Company's products, increased levels of competition for the Company, new products and technological changes, the Company's dependence on third-party suppliers, and other risks detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. ### EX-99 12 ex99-6.txt MINUTES OF SPECIAL MEETING OF THE BOARD OF DIRECTORS ON MARCH 11, 2002 MINUTES OF SPECIAL MEETING OF THE BOARD OF DIRECTORS OF SANGUINE CORPORATION A special meeting of the Board of Directors of Sanguine Corporation was called and held by telephone conference call pursuant to the attached Call and Waiver of Notice originating from the offices of Sanguine Corporation on the 11th day of March, 2002, at the hour of 11:35 o'clock a.m. Present at the offices of Sanguine Corporation were Thomas C. Drees, Ph.D., MBA; Anthony G. Hargreaves; and Edward L. Kunkel, Esq. Present in the office of Leonard W. Burningham, Esq. were Mr. Burningham and David E. Nelson. Dr. Drees was designated Chairman of the meeting and Mr. Hargreaves was designated as the Secretary of the meeting. All of the directors of the Company had executed and delivered to the Company the attached Call and Waiver of Notice with respect to the meeting, all directors were present at the meeting and the meeting was called to order by the Chairman. Mr. Nelson indicated that he intended to abstain on the action to be taken at the meeting, which involved the consideration and approval of the Ascendiant-Asia, LLC ("Ascendiant") Exclusive License Agreement regarding PHER-02 in certain areas of Asia, including the People's Republic of China, Thailand, Laos, Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea, Burma, Mongolia and Taiwan; the warrants that had been granted to Messrs. Walker, Bergendahl and Wilhite; and the funding documents regarding First York Partners, Inc. ("First York Partners"), as described below: (a) 5% Convertible Note for the sum of $25,000 convertible at the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66- 2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the common stock, the "Principal Market"), or if not then trading on a Principal Market, such other principal market or exchange where the common stock is listed or traded for the five trading days immediately preceding but not including a conversion date. (b) The Common Stock Purchase Warrant for the right to purchase 5,937,500 shares of common stock of the Company exercisable at a purchase price of $.08, provided, however, the purchase price shall be adjusted to be sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices for the Common Stock as reported for the Principal Market (as defined in Section 10(d) of this Warrant) for the five trading days preceding but not including the effective date of the registration statement referred to in Section 10.1(iv) of the Subscription Agreement. Except in connection with other adjustments set forth in this Warrant the Purchase Price will not be adjusted below $.08. (c) The related Subscription Agreement regarding the 5% convertible note and the Common Stock Purchase Warrant. (d) The related Fund Escrow Agreement respecting the disbursement of the proceeds of the 5% convertible note and related matters. (e) $3,750 5% convertible note to Barbara R. Mittman for legal services rendered regarding all of the foregoing on behalf of First York Partners convertible at the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent (66-2/3%) of the average of the closing bid prices as reported by the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the time the principal trading exchange or market for the common stock, the "Principal Market"), or if not then trading on a Principal Market, such other principal market or exchange where the common stock is listed or traded for the five trading days immediately preceding but not including a conversion date. and the Engagement Letter and warrants for Leonard W. Burningham, Esq. Mr. Nelson and Mr. Burningham both stated that they were not interested in blocking any of the foregoing but wanted to assist the Company in any manner that they could. Each was concerned that there were no "calls" on the warrants for Messrs. Walker, Bergendahl and Wilhite, while there were "calls" for the warrants that may be granted under the First York Partners funding proposal. They also expressed their concerns that there was no guarantee of any funding under the First York Partners funding proposal because the $25,000 being invested on the convertible note were to be used for expenses, and none of the warrants had to be exercised, even if they were called; First York Partners could just let them lapse. This, taken with the fact that there were no "calls" on the warrants of Messrs. Walker, Bergendahl and Wilhite, meant that this entire process may result in no funding whatsoever. Dr. Drees and Mr. Hargreaves represented that they had faith in the persons affiliated with Ascendiant, including Messrs. Walker, Bergendahl and Wilhite, to complete the funding, and that they were certain they would agree to couple the First York Partners funding, or some other funding, with the granting of the Exclusive License Agreement and their warrants, and that they would agree to some form of a "call." With that in mind, and at the expression of Dr. Drees and Mr. Hargreaves that the Company was in need of funds and had no other avenues from which required funding could be obtained, it was proposed that resolutions to adopt the Exclusive License Agreement, the warrants for Messrs Walker, Bergendahl and Wilhite, the First York Partners funding proposal and the Engagement Letter and warrants to Mr. Burningham should be proposed, and that all directors, with the exception of David E. Nelson, who would abstain, would adopt, ratify and approve those resolutions. There being no further discussion, Mr. Burningham indicated that he would propose the resolutions, as outlined in drafts of Consents he had previously forwarded to the Board of Directors, which were as follows: RESOLVED, that the Company enter into an Exclusive License Agreement (the "Exclusive License Agreement") with Ascendiant-Asia, LLC, a Nevada limited liability corporation ("Ascendiant-Asia"), a copy of which is attached hereto as Exhibit A, and whereby Sanguine will grant to Ascendiant-Asia an exclusive license to PHER-02, the licensed products, the licensed process and all proprietary, formula, developmental, technological, intellectual property and patent rights, and all other applications of the above in Asia, including the People's Republic of China, Thailand, Laos, Cambodia, Vietnam, Singapore, Malaysia, Indonesia, North Korea, Burma, Mongolia and Taiwan; FURTHER, RESOLVED, that the Company hereby adopts, ratifies and approves the Exclusive License Agreement; FURTHER, RESOLVED, that the Company is authorized to issue to Richard H. Walker, Mark Bergendahl and Bradley J. Wilhite three warrants to acquire 1,000,000 shares each of common stock of Sanguine at an exercise price of $0.15 per share, such warrants to expire on February 21, 2005, in the forms attached hereto as Exhibits B, C and D, reserving sufficient shares from the authorized capital of the Company for exercise of the warrants until expiration on February 21, 2005, and approving the "registration rights" contained in the warrants; FURTHER, RESOLVED, that the warrants to be issued to Messrs. Walker, Bergedahl and Wilhite are approved subject to amendment to the warrants to provide for a "call" at any time the common stock of the Company trades on the OTC Bulletin Board or any other national medium on which such shares are regularly traded at a price of no less than $1 for ten consecutive trading days, and the completion of the First York Partners or some other acceptable funding proposal referred by Ascendiant Capital Group, Inc. ("Ascendiant Capital"); FURTHER, RESOLVED, that the shares underlying such warrants be fully paid and non-assessable, on exercise and payment in accordance with the warrants; FURTHER, RESOLVED, that the officers and directors of the Company are hereby authorized to enter into and to sign on behalf of the Company the First York Partners Subscription Agreement regarding a 5% Convertible Note convertible into shares of the Company's $0.001 par value common stock and the related Common Stock Purchase Warrants; the related Convertible Note; the related Common Stock Purchase Warrant, the related Funds Escrow Agreement, and the related Mittman convertible note, copies of which are attached hereto and made a part hereof; FURTHER, RESOLVED, that the Company will reserve pro rata on behalf of each holder of a Note or Warrants, a number of common shares equal to not less than the amount of shares necessary to allow each such holder to be able to convert all such outstanding Notes, at the then applicable price, and one share of common stock for each common share issuable upon exercise of the Warrants; FURTHER, RESOLVED, that the Company authorizes every action to be taken for and on behalf of the Company by any of its officers as outlined in any of the foregoing documents, without qualification, including the filing of any Registration Statement with the Securities and Exchange Commission; FURTHER, RESOLVED, that all securities, when issued pursuant to any of the foregoing documents, shall be validly issued and will be fully paid and non-assessable, on receipt of the consideration stated in such documents; FURTHER, RESOLVED, that the Company hereby adopts, ratifies and approves the Engagement Letter to engage Leonard W. Burningham, Esq., a copy of which is attached hereto and made a part hereof; FURTHER, RESOLVED, that the Company is authorized to issue to Leonard W. Burningham, Esq. a warrant to acquire 500,000 shares of common stock of the Company at an exercise price of 50% of the bid price for the five trading days prior to the date of exercise at the end of any monthly billing cycle or $0.08 (Eight Cents) per share, whichever is lower, payable in cash or services, such warrant to expire on March 11, 2005, in the form attached hereto as Exhibits E, reserving sufficient shares from the authorized capital of the Company for exercise of the warrant until expiration on March 11, 2005, and approving the "registration rights" contained in the warrants; FURTHER, RESOLVED, that the shares underlying such warrants shall be fully paid and non-assessable on receipt of cash or services valued at the exercise price of these warrants; and FURTHER, RESOLVED, that all of the foregoing issuances shall be excepted from the Nevada Control Share Acquisitions Act. There being no further business to come before the meeting, and a motion that the meeting be adjourned having been duly made, seconded and unanimously carried, the meeting was adjourned. /s/Thomas C. Drees ___________________________________ Thomas C. Drees, Ph,.D., MBA, Chairman /s/Anthony G. Hargreaves ___________________________________ Anthony G. Hargreaves, Secretary -----END PRIVACY-ENHANCED MESSAGE-----