SECURITIES PURCHASE AGREEMENT

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

The Company wishes to sell to each Investor, and each Investor wishes to purchase, on the terms and subject to the conditions set forth in this Agreement, (1) shares (the Shares) of the Companys common stock, $0.001 par value per share (the Common Stock), and a Warrant in the form attached hereto as Exhibit A (each, a Warrant and, collectively with the other Warrants issued hereunder, the Warrants).  The shares of Common Stock into which the Warrants are exercisable are referred to herein as the Warrant Shares, and the Shares, the Warrants and the Warrant Shares are collectively referred to herein as the Securities.

Each Warrant purchased by an Investor shall (1) entitle such Investor to purchase a number of Warrant Shares equal to the product of (i) the number of Shares being purchased by such Investor at the Closing and (ii) 0.30, (2) have an exercise price equal to $1.51 (which is equal to 120% of VWACP and subject to adjustment as provided therein), and (3) be exercisable for the period commencing on the first Business Day following the six (6) month anniversary of the Closing Date and expiring sixty (60) months thereafter.

The Company has agreed to effect the registration of the Shares and the Warrant Shares for resale by the holders thereof under the Securities Act of 1933, as amended (the Securities Act), pursuant to a Registration Rights Agreement in the form attached hereto as Exhibit B (the Registration Rights Agreement).

The sale of the Shares and the Warrants by the Company to the Investors will be effected in reliance upon the exemption from the securities registration requirements of the Securities Act afforded by the provisions of Regulation D (Regulation D), as promulgated by the Commission (as defined below) under the Securities Act.

The obligations of each Investor hereunder are several and not joint with the obligations of the other Investors hereunder, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor hereunder.

The Company and each Investor hereby agree as follows:

1.                                       PURCHASE AND SALE OF SHARES AND WARRANTS.

1.1           Closing.  Upon the terms and subject to the satisfaction or waiver of the conditions set forth herein, the Company agrees to sell and each Investor agrees to purchase (i) Shares in the amount set forth below such Investors name on the signature pages hereof, and (ii) a Warrant.  The date on which the closing of such purchase and sale occurs (the Closing) is hereinafter referred to as the Closing Date. The Closing will be deemed to occur at the offices of the Company, 7068 Koll Center Parkway, Suite 401, Pleasanton, CA 94566 at 12:30 p.m., Pacific Daylight Time, on August 8, 2006, or at such other time and place upon which the Company and the Investors shall agree.

1.2           Certain Definitions.  When used herein, the following terms shall have the respective meanings indicated:

Affiliate means, as to any Person (the subject Person), any other Person (a) that directly or indirectly through one or more intermediaries controls or is controlled by, or is under direct or indirect common control with, the subject Person, (b) that directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting equity of the subject Person, or (c) ten percent (10%) or more of the voting equity of which is directly or indirectly beneficially owned or held by the subject Person. For the purposes of this definition, control when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, through representation on such Persons board of directors or other management committee or group, by contract or otherwise.

Board of Directors means the Companys board of directors.

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

Closing has the meaning specified in Section 1.1 of this Agreement.

Closing Date has the meaning specified in Section 1.1 of this Agreement.

Commission means the Securities and Exchange Commission.

Common Stock has the meaning specified in the preamble to this Agreement.

Disclosure Documents means all SEC Documents filed with the Commission at least five (5) Business Days prior to the Execution Date.

Effective Date has the meaning set forth in the Registration Rights Agreement.

Environmental Law means any federal, state, provincial, local or foreign law, statute, code or ordinance, principle of common law, rule or regulation, as well as any Permit, order, decree, judgment or injunction issued, promulgated, approved or entered thereunder, relating to pollution or the protection, cleanup or restoration of the environment or natural resources, or to the public health or safety, or otherwise governing the generation, use, handling, collection, treatment, storage, transportation, recovery, recycling, discharge or disposal of hazardous materials.

Equity Securities means (i) any shares of Common Stock, (ii) any other equity security of the Company, including without limitation shares of preferred stock, (iii) any other security of the Company which by its terms is convertible into or exchangeable or exercisable for any equity security of the Company, or (iv) any option, warrant or other right to subscribe for, purchase or otherwise acquire any such security described in the foregoing clauses (i) through (iii).

ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder.

Exchange Act means the Securities Exchange Act of 1934, as amended (or any successor act), and the rules and regulations thereunder (or respective successors thereto).

Execution Date means the date of this Agreement.

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GAAP means generally accepted accounting principles, applied on a consistent basis, as set forth in (i) opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements of the Financial Accounting Standards Board and (iii) interpretations of the Commission and the staff of the Commission.  Accounting principles are applied on a consistent basis when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period.

Governmental Authority means any nation or government, any state, provincial or political subdivision thereof having jurisdiction over the Company and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including without limitation any stock exchange, securities market or self-regulatory organization.

Governmental Requirement means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, license or other directive or requirement of any federal, state, county, municipal, parish, provincial or other Governmental Authority or any department, commission, board, court, agency or any other instrumentality of any of them to which the Company is bound.

Intellectual Property means any U.S. or foreign patents, patent rights, patent applications, trademarks, trade names, service marks, brand names, logos and other trade designations (including unregistered names and marks), trademark and service mark registrations and applications, copyrights and copyright registrations and applications, inventions, invention disclosures, protected formulae, formulations, processes, methods, trade secrets, computer software, computer programs and source codes, manufacturing research and similar technical information, engineering know-how, customer and supplier information, assembly and test data drawings or royalty rights.

Knowledge of the Company means any other phrases of similar import, with respect to any matter in question relating to the Company, if S. Lewis Meyer, Sandra Gardiner or H. Bryan Brewer, Jr., M.D. has actual knowledge of such matter, without duty of investigation or inquiry.

Lien means, with respect to any Property, any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, tax lien, financing statement, pledge, charge, or other lien, charge, easement, encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

Material Adverse Effect means an effect that is material and adverse to (i) the consolidated business, properties, assets, operations, results of operations, financial condition or prospects, of the Company taken as a whole, or (ii) the ability of the Company to perform its obligations under this Agreement or the other Transaction Documents (as defined below).

Material Contracts means, as to the Company, any agreement required pursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K, as applicable, promulgated under the Securities Act to be filed as an exhibit to any report, schedule, registration statement or definitive proxy statement filed or required to be filed by the Company with the Commission under the Exchange Act or any rule or regulation promulgated thereunder, and any and all amendments, modifications, supplements, renewals or restatements thereof.

NASD means the National Association of Securities Dealers, Inc.

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Pension Plan means an employee benefit plan (as defined in ERISA) maintained by the Company for employees of the Company or any of its Affiliates.

Permitted Liens means the following:

(a)           encumbrances consisting of easements, rights-of-way, zoning restrictions or other restrictions on the use of real property or imperfections to title that do not (individually or in the aggregate) materially impair the ability of the Company to use such Property in its businesses, and none of which is violated in any material respect by existing or proposed structures or land use;

(b)           Liens for taxes, assessments or other governmental charges (including without limitation in connection with workers compensation and unemployment insurance) that are not delinquent or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject to such Liens, and for which adequate reserves (as determined in accordance with GAAP) have been established;

(c)           Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar statutory Liens securing obligations that are not yet due and are incurred in the ordinary course of business or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject to such Liens, for which adequate reserves (as determined in accordance with GAAP) have been established; and

(d)           Liens in an amount not to exceed $10,000.

Person means any individual, corporation, trust, association, company, partnership, joint venture, limited liability company, joint stock company, Governmental Authority or other entity.

Principal Market means the principal exchange or market on which the Common Stock is listed or traded.

Property means property and/or assets of all kinds, whether real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto).

Pro Rata Share means, with respect to an Investor, the ratio determined by dividing (i) the number of Shares purchased hereunder by such Investor by (ii) the aggregate number of Shares purchased hereunder by all of the Investors.

Purchase Price means, with respect to an Investor, the number of Shares purchased by such Investor at the Closing multiplied by $1.26 (the VWACP).

Registrable Securities has the meaning set forth in the Registration Rights Agreement.

Rule 144 means Rule 144 under the Securities Act or any successor provision.

SEC Documents has the meaning specified in Section 3.4 of this Agreement.

Securities has the meaning specified in the preamble to this Agreement.

Subsequent Placement means the issuance, sale, exchange, or agreement or obligation to issue, sell or exchange or reserve, or agreement to or set aside for issuance, sale or exchange, any

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Equity Securities, other than in connection with bona fide licensing or other strategic transactions not for the primary purpose of raising equity capital approved by the Board of Directors.

Subsidiary means, with respect to any Person, any corporation or other entity of which at least a majority of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors (or Persons performing similar functions) of such corporation or entity (regardless of whether or not at the time, in the case of a corporation, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries.

Trading Day means any day on which the Common Stock is purchased and sold on the Principal Market.

Transaction Documents means, collectively, this Agreement, the Registration Rights Agreement, the Warrants, and all other agreements, documents and other instruments executed and delivered by or on behalf of the Company or any of its officers at the Closing.

VWACP means the volume weighted average closing price of the Companys Common Stock for the 10 Trading Days immediately preceding the Closing; provided, that such price shall not be less than the closing bid price for the Companys Common Stock immediately prior to the Closing.

1.3           Other Definitional Provisions.  All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined.  The words hereof, herein and hereunder and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.

2.                                       REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.

Each Investor (with respect to itself only) hereby represents and warrants to the Company and agrees with the Company that, as of the Execution Date:

2.1           Authorization; Enforceability.  Such Investor is duly and validly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization as set forth below such Investors name on the signature page hereof.  Such Investor has the requisite organizational power and authority to purchase the Shares and Warrant to be purchased by it hereunder and to execute, deliver and perform its obligations pursuant to this Agreement and the other Transaction Documents to which it is a party.  This Agreement constitutes, and upon execution and delivery thereof, each other Transaction Document to which such Investor is a party will constitute, such Investors valid and legally binding obligation, enforceable in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors rights generally, and (ii) general principles of equity.

2.2           Accredited Investor.  Such Investor (i) is an accredited investor as that term is defined in Rule 501 of Regulation D, (ii) was not formed or organized for the specific purpose of making an investment in the Company, and (iii) is acquiring the Securities solely for its own account and not with a present view to the public resale or distribution of all or any part thereof, except pursuant to sales that are registered under, or exempt from the registration requirements of, the Securities Act; provided, however, that in making such representation, such Investor reserves the right to sell, transfer or otherwise dispose of

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the Securities in accordance with the provisions of this Agreement (including pursuant to the Registration Rights Agreement) and with Federal and state securities laws applicable to such sale, transfer or disposition. Such Investor can bear the economic risk of a total loss of its investment in the Securities and has such knowledge and experience in business and financial matters so as to enable it to understand the risks of and form an investment decision with respect to its investment in the Securities.

2.3           Information.  Investor acknowledges that it has been provided with information regarding the business, operations and financial condition of the Company and has, prior to the Execution Date, been granted the opportunity to ask questions of and receive answers from representatives of the Company, its officers, directors, employees and agents concerning the Company in order for such Investor to make an informed decision with respect to its investment in the Shares and Warrants.  Neither such information nor any other investigation conducted by such Investor or any of its representatives shall modify, amend or otherwise affect such Investors right to rely on the Companys representations and warranties contained in this Agreement.

2.4           Limitations on Disposition.  Such Investor acknowledges that, except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act and may not be transferred or resold without registration under the Securities Act or unless pursuant to an exemption therefrom.

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