SECURITIES PURCHASE AGREEMENT

dated as of July 22, 2009

by and among

PROLOR BIOTECH, INC.

and

THE PURCHASERS SET FORTH ON
THE SIGNATURE PAGES HERETO

 
 

--------------------------------------------------------------------------------

 

SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of July 22,
2009, by and between PROLOR Biotech, Inc. (the “Company”), a corporation
organized under the laws of the State of Nevada, with its principal offices at 3
Sapir Street, Weizmann Science Park, Nes-Ziona, Israel, and the purchasers whose
names and addresses are set forth on the signature pages hereto (the
“Purchasers”).  Certain capitalized terms used but not defined herein shall have
the respective meanings set forth on Schedule 1 attached hereto.
 
IN CONSIDERATION of the mutual covenants contained in this Agreement, and
intending to be legally bound hereby, the Company and the Purchasers agree as
follows:
 
SECTION 1.               Authorization of Sale of the Shares.  Subject to the
terms and conditions of this Agreement, and the filing with the Secretary of
State of the State of Nevada of the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of
the 10.0% Series B Cumulative Convertible Preferred Stock, and Qualifications,
Limitations and Restrictions Thereof, substantially in the form attached hereto
as Exhibit A (the “Certificate of Designation”), the Company has authorized the
issuance and sale to the Purchasers in a private placement of up to an aggregate
of $10,000,000 of 10.0% Series B Cumulative Convertible Preferred Stock, par
value $0.00001 per share, of the Company (each, a “Share”).
 
SECTION 2.              Agreement to Sell and Purchase the Shares.  Subject to
the terms and conditions of this Agreement, at the Initial Closing and at each
Subsequent Closing (as such terms are defined in Section 3), as applicable, the
Company shall issue and sell to each Purchaser, and such Purchaser shall buy
from the Company, the number of Shares set forth on such Purchaser’s signature
page hereto for an aggregate purchase price equal to the number of such Shares
purchased by such Purchaser multiplied by the per-Share purchase price of $2.00
(the “Purchase Price”), which is the average closing price per share of the
Company’s common stock, par value $0.00001 per share (“Common Stock”), as
reported on the OTCBB for the thirty (30) trading days immediately preceding the
date hereof (rounded up to $1.00) multiplied by two.  The aggregate Purchase
Price paid by all Purchasers at the Initial Closing shall be Two Million Dollars
($2,000,000).  The aggregate Purchase Price paid by the Purchasers at each
Subsequent Closing shall be determined by the Company’s Board of Directors (the
“Board”), acting in its sole discretion; provided that the aggregate Purchase
Price paid by the Purchasers at each Subsequent Closing shall not be less than
Two Million Dollars ($2,000,000), and the aggregate Purchase Price paid by the
Purchasers at all Subsequent Closings, taken together, shall not exceed Eight
Million Dollars ($8,000,000).  Each Subsequent Closing shall be subject to prior
approval by the Board.
 
SECTION 3.                Closings
 
3.1          Delivery of the Shares at the Initial Closing.  The completion of
the purchase and sale of One Million (1,000,000) Shares (the “Initial Closing”)
shall occur at the offices of Greenberg Traurig, P.A., 1221 Brickell Avenue,
Miami, Florida 33131 (the “Closing Office”) as soon as practicable and as agreed
to by the parties hereto, on the date of and concurrently with the execution of
this Agreement, or on such later date or at such different location as the
parties hereto shall mutually agree, but not prior to the date on which the
Closing Conditions (as defined below) have been satisfied or waived (the
“Initial Closing Date”).
 
1

--------------------------------------------------------------------------------

 
3.2          Delivery of the Shares at each Subsequent Closing.  The completion
of the purchase and sale of Shares at any closings subsequent to the Initial
Closing (each, a “Subsequent Closing” and all such Subsequent Closings, together
with the Initial Closing, the “Closings”) shall occur, at the Company’s sole
election and in its sole discretion, at the Closing Office on any date on or
prior to March 25, 2013, provided that, in respect of each Subsequent
Closing:  (i) the Company shall have provided to each Purchaser written notice
(each, a “Notice”) of such Subsequent Closing, together with a copy of the
resolutions of the Board approving the consummation of such Subsequent Closing
(certified by a duly authorized officer of the Company) on or prior to the
thirtieth (30th) calendar day preceding the date of such Subsequent Closing (the
“Subsequent Closing Date” and, together with the Initial Closing Date, the
“Closing Dates”); (ii) the Notice shall specify the number of Shares subject of
such closing (on a per-Purchaser basis in accordance with Section 3.3), provided
that aggregate number of such Shares shall be no fewer than One Million
(1,000,000); and (iii) the Closing Conditions (as defined below) shall have been
satisfied or waived on or prior to such Subsequent Closing Date.
 
3.3          Pro Rata Allocation of Shares at each Subsequent Closing.  For each
Subsequent Closing, the Company shall allocate among the Purchasers, and the
Purchaser shall purchase, the number of Shares subject of such Subsequent
Closing pro rata based upon the number of Shares acquired by the Purchasers at
the Initial Closing, unless otherwise determined by the Purchasers.
 
3.4          Closing Deliverables.  At each Closing:
 
(a)           the Company shall deliver to each Purchaser one or more stock
certificates registered in the name of such Purchaser, or, if so indicated on
such Purchaser’s Stock Certificate Questionnaire, the form of which is attached
hereto as Appendix I (the “Stock Certificate Questionnaire”), in such other
name(s) as designated by such Purchaser, evidencing the number of Shares set
forth on such Purchaser’s signature page attached hereto, each bearing a
restrictive legend, substantially in the form set forth in Section 6.2; and
 
(b)           each Purchaser shall deliver to the Company (i) immediately
available funds in the full amount of the aggregate Purchase Price for all
Shares acquired by such Purchaser at such Closing and (ii) a lockup agreement in
respect of such Shares, substantially in the form of Exhibit B hereto (the
“Lockup Agreement”).
 
3.5          Conditions to the Company’s Obligations.  The Company’s obligation
to complete the sale of the Shares at a Closing is subject to the fulfillment,
at or prior to such Closing, of each of the following conditions, unless
otherwise waived (“Company Closing Conditions”):
 
(a)           receipt by the Company of immediately available funds in the full
amount of the aggregate Purchase Price for all Shares being purchased at such
Closing;
 
(b)           receipt by the Company of each Purchaser’s duly executed and
delivered Lockup Agreement;

 
2

--------------------------------------------------------------------------------

 
 
(c)           each of the representations and warranties of each Purchaser set
forth in Section 5 shall be true and correct on the date of such Closing;
 
(d)           each Purchaser shall have performed and complied with all
covenants, agreements and obligations contained in this Agreement that are
required to be performed or complied with by such Purchaser on or prior to such
Closing; and
 
(e)           solely in respect of each Subsequent Closing, the Board shall have
approved the consummation of such Subsequent Closing.
 
3.6          Conditions to Purchasers’ Obligations.  Each Purchaser’s obligation
to purchase the Shares at a Closing is subject to the fulfillment, at or prior
to such Closing, of each of the following conditions, unless otherwise waived
(“Purchaser Closing Conditions” and, together with the Company Closing
Conditions, the “Closing Conditions”):
 
(a)           each of the representations and warranties of the Company set
forth in Section 4 that is qualified by materiality or material adverse effect
or words of similar effect shall be accurate in all respects on such Closing
Date (except to the extent any such representations and warranties expressly
relate to a specific date, in which case such representations and warranties
shall be accurate as of such date), and each of the representations and
warranties of the Company set forth in Section 4 that is not so qualified shall
be accurate in all material respects as of such Closing Date (except to the
extent such representations and warranties expressly relate to a specific date,
in which case such representations and warranties shall be accurate in all
material respects as of such date);
 
(b)           the Company shall have performed and complied with all covenants,
agreements and obligations contained in this Agreement that are required to be
performed or complied with by the Company on or before such Closing;
 
(c)           the Certificate of Designation shall have been filed with, and
accepted for filing by, the Secretary of State of the State of Nevada; and
 
(d)           solely in respect of each Subsequent Closing, the Board shall have
approved the consummation of such Subsequent Closing.
 
SECTION 4.                Representations, Warranties and Covenants of the
Company.  The Company hereby represents and warrants to the Purchasers as
follows:
 
4.1          Issuance of Shares.  The Company has taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the Company’s issuance and sale of the Shares.  The Shares, when issued and
delivered and paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable and will be issued free and clear of any
Encumbrances (other than as arising under applicable securities laws or this
Agreement).  Assuming the accuracy of the representations and warranties of the
Purchasers set forth in Section 5 of this Agreement, the Shares will be issued
in compliance with all applicable federal and state securities laws.

 
3

--------------------------------------------------------------------------------

 
 
4.2          Organization and Qualification.  The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and is duly qualified to do business in any other jurisdiction by virtue of the
nature of the businesses conducted by it or the ownership or leasing of its
properties, except where the failure to be so qualified will not, when taken
together with all other such failures, have a Material Adverse Effect on the
Company.
 
4.3          Charter and Bylaws.  The Company’s Charter and Bylaws, as amended
or restated to date, as filed with the SEC, are a complete and correct copy of
such documents as in effect on the date hereof.
 
4.4          Capitalization.  As of the date hereof, the Company is authorized
to issue 310,000,000 shares of capital stock, consisting of 300,000,000 shares
of Common Stock and 10,000,000 shares of preferred stock, par value $0.00001 per
share, of which 800,000 shares have been designated as Series A Convertible
Preferred Stock (“Series A Preferred Stock”).  As of July 21, 2009, there were
(i) 35,549,017 shares of Common Stock issued and outstanding, and (ii) 800,000
shares of Series A Preferred Stock issued and outstanding.  All such outstanding
shares of Common Stock and Series A Preferred Stock have been duly authorized
and are validly issued, fully paid and nonassessable.  Except as disclosed in
the SEC Documents, as of the date hereof, there are no outstanding options,
warrants, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any class of capital stock of the Company, or agreements,
understandings or arrangements to which the Company is a party, or by which the
Company is or may be bound, to issue additional shares of its capital stock or
options, warrants or rights to subscribe for, calls or commitment of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of any class of its capital stock.
 
4.5          Authorization, Enforceability and Related Matters.  (i) The Company
has full right, power, authority and capacity to enter into this Agreement and
to consummate the transactions contemplated hereby and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement; (ii) the making and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated herein will not
violate any provision of the Company’s Charter or Bylaws or, except to the
extent that it would not have a Material Adverse Effect on the Company or
adversely affect the Company’s ability to consummate the transactions
contemplated hereby, conflict with, result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both, a
default under any material agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which the Company is a party,
or any statute or any authorization, judgment, decree, order, rule or regulation
of any court or any regulatory body, administrative agency or other governmental
agency or body applicable to the Company; (iii) no consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental agency or body is required in respect of the
Company’s execution and delivery of this Agreement or the consummation by the
Company of the transactions contemplated by this Agreement; (iv) upon the
execution and mutual delivery of this Agreement by the parties hereto, this
Agreement shall constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to the
enforcement of creditor’s rights and the application of equitable principles
relating to the availability of remedies, and except as rights to indemnity or
contribution may be limited by federal or state securities laws or the public
policy underlying such laws; and (v) there is not in effect any order enjoining
or restraining the Company from entering into or engaging in any of the
transactions contemplated by this Agreement.
 
4

--------------------------------------------------------------------------------

 
4.6          Brokers or Finders.  No broker, investment banker, financial
advisor or other individual, corporation, general or limited partnership,
limited liability company, firm, joint venture, association, enterprise, joint
securities company, trust, unincorporated organization or other person or entity
is entitled to any broker’s, finder’s, financial advisor’s or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Affiliate.
 
4.7          SEC Documents.  The Company has made available to the Purchasers
true and complete copies of all SEC Documents.  As of their respective dates (or
if amended, as of the date of the last amendment filed prior to the date
hereof), the SEC Documents complied in all material respects with the
requirements of the 1934 Act, and rules and regulations of the SEC promulgated
thereunder, and the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
 
4.8          Company Financial Statements.  The financial statements, together
with any notes thereto, included in the Company’s Annual Report on Form 10-K as
filed with the SEC on March 16, 2009 and the Company’s Quarterly Report on Form
10-Q as filed with the SEC on May 14, 2009 fairly present in all material
respects, on the basis stated therein and on the date thereof, the financial
position of the Company at the respective dates therein specified and its
results of operations and cash flows for the periods then ended.  Such
statements and related notes have been prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”) applied on a
consistent basis except as expressly noted therein and subject in the case of
the unaudited financial statements to year-end adjustments.
 
4.9          Material Changes; Undisclosed Events, Liabilities or Developments.
Since March 31, 2009, except as specifically disclosed in any SEC Document filed
subsequent to March 31, 2009 and prior to the date hereof:  (i) there has been
no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect; (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP; (iii) the Company has
not altered its method of accounting; (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock; and (v) the Company has not issued any equity securities to
any of its officers, directors or Affiliates.  As of the date hereof, except for
the issuance of the Shares contemplated by this Agreement, no event, liability
or development has occurred or exists with respect to the Company or its
subsidiaries or their respective business, properties, operations or financial
condition that is required to be disclosed by the Company under applicable
securities laws.
 
5

--------------------------------------------------------------------------------

 
4.10        Full Disclosure.  No representation or warranty made by the Company
in this Agreement contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements contained herein not
misleading.
 
SECTION 5.                Representations, Warranties and Covenants of the
Purchasers.  Each Purchaser severally, and not jointly with any other Purchaser,
represents and warrants to the Company that:
 
5.1          Experience.  (i) Such Purchaser is knowledgeable, sophisticated and
experienced in financial and business matters, and is making, and is qualified
to make, decisions with respect to investments in shares representing an
investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the Company and/or comparable entities, has
the ability to bear the economic risks of an investment in the Shares and has
had the opportunity to request, receive, review and consider all information it
deems relevant in making an informed decision to purchase the Shares; (ii) such
Purchaser is acquiring the number of Shares set forth on such Purchaser’s
signature page attached hereto for its own account, solely for investment and
with no present intention to distribute any of such Shares and is subject to no
arrangement or understanding with any other persons regarding the distribution
of such Shares; (iii) such Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares, except in
compliance with the Securities Act of 1933, as amended (the “Securities Act”),
and the rules and regulations promulgated thereunder (the “Rules and
Regulations”) and any applicable state securities laws; (iv) such Purchaser has,
in connection with its decision to purchase the number of Shares set forth on
such Purchaser’s signature page attached hereto, relied solely upon the
representations and warranties of the Company contained in this Agreement; (v)
such Purchaser has had an opportunity to discuss this investment with
representatives of the Company and ask questions of them; and (vi) such
Purchaser is either a “qualified institutional buyer” as defined by Rule 144A
promulgated under the Securities Act or an “accredited investor” as defined by
Rule 501(a) of Regulation D promulgated under the Securities Act.
 
5.2          Reliance on Exemptions.  Such Purchaser understands that the Shares
and the Common Stock issuable upon conversion of the Shares (the “Conversion
Shares” and, together with the Shares, the “Securities”) are being offered and
sold to in reliance upon specific exemptions from the registration requirements
of the Securities Act and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Purchaser’s compliance with, the
representations, warranties, covenants, agreements, acknowledgments and
understandings of such Purchaser contained in this Agreement in order to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Securities.

 
6

--------------------------------------------------------------------------------

 

5.3          Confidentiality.  Such Purchaser understands that this Agreement,
the information contained in all materials provided to the Purchaser by the
Company and its representatives, including any information conveyed orally, in
connection with the transactions contemplated hereunder (“Confidential
Information”), is strictly confidential and proprietary to the Company and is
being provided to such Purchaser solely for such Purchaser’s confidential use in
connection with the transactions contemplated hereunder.  Such Purchaser agrees
to use the Confidential Information solely for the purpose of evaluating a
possible investment in the Shares, and such Purchaser acknowledges that it is
prohibited from distributing, divulging or discussing any Confidential
Information, in whole or in part, with any Person, except to such Purchaser’s
financial, investment or legal advisors (such Persons, “Authorized Advisors”),
solely to the extent necessary for such Authorized Advisors to assist such
Purchaser with its proposed investment in the Shares. To the extent that such
Purchaser provides, directly or indirectly, any Confidential Information to any
Authorized Advisor, such Purchaser shall ensure that such Authorized Advisor
maintain the confidentiality of the Confidential Information to the same extent
applicable to such Purchaser as set forth in this Section 5.3.  Confidential
Information does not include any information that is or becomes publicly
available through no fault of such Purchaser, or that such Purchaser is required
to disclose pursuant to applicable law, regulation or legal process; provided,
however, that if such Purchaser is requested or ordered to disclose any
Confidential Information pursuant to any court or other government order or any
other applicable legal procedure, it shall provide the Company with prompt
notice of any such request or order so that the Company may seek an appropriate
protective order.
 
5.4          Investment Decision.  Such Purchaser understands that nothing in
this Agreement or any other materials presented to the Purchaser in connection
with the purchase and sale of the Shares constitutes legal, tax or investment
advice.  Such Purchaser has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares.
 
5.5          Risk of Loss.  Such Purchaser understands that its investment in
the Shares involves a significant degree of risk, including a risk of total loss
of such Purchaser’s investment, and such Purchaser has full cognizance of and
understands all of the risk factors related to its purchase of the Shares,
including, but not limited to, those set forth in the SEC Documents.  The
Purchaser understands that no representation is being made as to the future
value of the Securities.
 
5.6          Residency.  Such Purchaser’s principal executive offices, or
primary residence, as applicable, are in the jurisdiction set forth on such
Purchaser’s signature page attached hereto.
 
7

--------------------------------------------------------------------------------

 
5.7          Authorization, Enforceability and Related Matters.  (i) Such
Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement; (ii) the making and performance of this Agreement by such
Purchaser and the consummation by such Purchaser of the transactions
contemplated herein will not violate any provision of the organizational
documents of such Purchaser (if not a natural person) or, except to the extent
that it would not have a Material Adverse Effect on such Purchaser’s ability to
consummate the transactions contemplated hereby, conflict with, result in the
breach or violation of, or constitute, either by itself or upon notice or the
passage of time or both, a default under any material agreement, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other instrument to
which such Purchaser is a party, or any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body;
administrative agency or other governmental agency or body applicable to such
Purchaser, (iii) no consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental agency or
body is required in respect of such Purchaser’s execution and delivery of this
Agreement or the consummation by such Purchaser of the transactions contemplated
by this Agreement; (iv) upon the execution and mutual delivery of this Agreement
by the parties hereto, this Agreement shall constitute a legal, valid and
binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to the enforcement of creditor’s rights and the application
of equitable principles relating to the availability of remedies, and except as
rights to indemnity or contribution may be limited by federal or state
securities laws or the public policy underlying such laws; and (v) there is not
in effect any order enjoining or restraining the Purchaser from entering into or
engaging in any of the transactions contemplated by this Agreement.
 
5.8          Brokers or Finders.  No broker, investment banker, financial
advisor or other individual, corporation, general or limited partnership,
limited liability company, firm, joint venture, association, enterprise, joint
securities company, trust, unincorporated organization or other person or entity
is entitled to any broker’s, finder’s, financial advisor’s or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of such Purchaser or of its
Affiliates.
 
SECTION 6.               Restrictions on Transfer.
 
6.1          Restrictions on Transfer.  The Securities may be disposed of only
in compliance with state and federal securities laws.  In connection with any
transfer of any Securities other than pursuant to an effective registration
statement or Rule 144 under the Securities Act, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.  As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement.
 
6.2          General Legend.  Each Purchaser agrees that a restrictive legend,
in substantially the following form, shall be imprinted on the Securities:
 
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PROLOR BIOTECH, INC., A NEVADA
CORPORATION, AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 
8

--------------------------------------------------------------------------------

 

SECTION 7.               Survival of Representations, Warranties and
Agreements.  All covenants, representations and warranties made by the Company
and the Purchasers herein and in any documents delivered pursuant hereto shall
survive for a period of one (1) year following the later of the execution of
this Agreement, the Initial Closing or the most recent Subsequent Closing.
 
SECTION 8.               Independent Nature of Purchasers’ Obligations and
Rights.  The obligations of each Purchaser under this Agreement are several and
not joint (or joint and several) with the obligations of any other Purchaser
hereunder, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement.  The decision of
a Purchaser to purchase Shares pursuant to this Agreement has been made by such
Purchaser independently of any other Purchaser.  Nothing contained in this
Agreement, and no action taken by any Purchaser pursuant thereto, shall be
deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any kind of entity, or create a presumption that the Purchasers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by this Agreement.  Each Purchaser acknowledges
that no other Purchaser has acted as agent for such Purchaser in connection with
making its investment hereunder and that no other Purchaser will be acting as
agent of such Purchaser in connection with monitoring its investment in the
Securities or enforcing its rights under this Agreement.
 
SECTION 9.                Notices.  All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given:  (i) upon delivery to
the party to be notified; (ii) when received by confirmed facsimile or (iii) one
(1) business day after deposit with a nationally recognized overnight carrier,
specifying next business day delivery, with written verification of
receipt.  All communications shall be sent to the Company and the Purchasers as
follows or at such other addresses as the Company or any Purchaser may designate
upon ten (10) days’ advance written notice to the other party:
 
(a)          if to the Company, to:
 
 
PROLOR Biotech, Inc.

 
3 Sapir Street

 
Weizmann Science Park

 
Nes-Ziona, Israel 74140

 
Attn.: Shai Novik

 
(b)          if to a Purchaser, at its address as set forth on such Purchaser’s
signature page attached hereto.
 
SECTION 10.             Amendments.  This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Company and
each of the Purchasers.  No waiver of any provision this Agreement shall be
binding unless executed in writing by the party to be bound thereby.  No waiver
of any provision of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (regardless of whether similar), nor shall any
such waiver constitute a continuing waiver unless otherwise expressly provided.
 
9

--------------------------------------------------------------------------------

 
SECTION 11.             Headings.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
 
SECTION 12.             Severability.  In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
 
SECTION 13.             Governing Law.  This Agreement and any disputes or
claims arising out of or in connection with its subject matter shall be governed
by and construed in accordance with the laws of the State of Florida without
regard to the rules of conflict of laws of such state that would cause the laws
of another jurisdiction to apply. The parties hereto acknowledge and agree that
venue and jurisdiction for any claim, suit or controversy related to or arising
out of this Agreement shall lie in the state or federal courts located in
Miami-Dade County, Florida.  THE PARTIES HEREBY WAIVE THE RIGHT TO JURY TRIAL OF
ANY MATTERS ARISING OUT OF THIS AGREEMENT OR THE CONDUCT OF THE RELATIONSHIP
BETWEEN THEM.
 
SECTION 14.             Counterparts; Facsimile Signatures.  This Agreement may
be executed in one or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties. Facsimile or
other electronically scanned and transmitted signatures shall be deemed
originals for all purposes of this Agreement.
 
SECTION 15.             Entire Agreement.  This Agreement (including the
Exhibits, Schedules and Appendices attached hereto) and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
 
SECTION 16.             Fees and Expenses.  Except as expressly set forth
herein, the Company, on the one hand, and each Purchaser, on the other hand,
shall pay their respective fees and expenses related to the transactions
contemplated by this Agreement.
 
SECTION 17.              Parties.  This Agreement is made solely for the benefit
of and is binding upon the Purchasers and the Company, and no other person shall
acquire or have any right under or by virtue of this Agreement.
 
SECTION 18.             Assignment.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and assigns.  This
Agreement and the rights of each Purchaser hereunder may be assigned by said
Purchaser only with the prior written consent of the Company.  The Company may
not assign this Agreement without the written consent of each of the Purchasers.
 
10

--------------------------------------------------------------------------------

 
SECTION 19.        Further Assurances.  Each party agrees to cooperate fully
with the other parties hereto and to execute such further instruments, documents
and agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
 
SECTION 20.        Liability Not Affected by Knowledge or Waiver.  The right to
recovery of losses or other remedy based upon breach of representations,
warranties or covenants will not be affected by any investigation conducted, or
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement, with respect to the accuracy
or inaccuracy of or compliance or noncompliance with any such representation,
warranty, or covenant.
 
[Signature pages follow]

 
11

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
 

 
COMPANY:
     
PROLOR BIOTECH, INC.
      By:
  /s/ Shai Novik

 
Name:
Shai Novik
 
Title:
President

 
Company Signature Page to Securities Purchase Agreement

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.

 
PURCHASER(S):
   
If a corporation or other entity:
Frost Gamma Investments Trust
 
(name of corporation or entity)
     
By:
    /s/ Dr. Phillip Frost, M.D.
 
Name:      Dr. Phillip Frost, M.D.
 
Title:        Trustee
   
If an individual:
   
Name:
         
Name (co-purchaser, if any):
   
Number of Shares Purchased at Initial Closing:
825,000
   
Number of Shares subscribed to and subject to one or more Subsequent Closings:
3,300,000
   
Contact Information:
Address:
     
Telephone:
 
Facsimile:
 
E-mail:

 
Purchaser Signature Page to Securities Purchase Agreement
 
 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.

 
PURCHASER(S):
   
If a corporation or other entity:
Hsu Gamma Investment, L.P.
 
(name of corporation or entity)
     
By:
    /s/ Dr. Jane H. Hsiao, Ph.D, MBA
 
Name:      Dr. Jane H. Hsiao, Ph.D., MBA
 
Title:        General Partner
   
If an individual:
   
Name:
         
Name (co-purchaser, if any):
   
Number of Shares Purchased at Initial Closing:
170,000
   
Number of Shares subscribed to and subject to one or more Subsequent Closings:
680,000
   
Contact Information:
Address:
     
Telephone:
 
Facsimile:
 
E-mail:

 
Purchaser Signature Page to Securities Purchase Agreement

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.

 
PURCHASER(S):
   
If a corporation or other entity:
   
(name of corporation or entity)
     
By:
   
Name:                                                            
 
Title:
   
If an individual:
/s/ Subbarao Uppaluri
 
Name: Subbarao Uppaluri
         
Name (co-purchaser, if any):
   
Number of Shares Purchased at Initial Closing:
2,500
   
Number of Shares subscribed to and subject to one or more Subsequent Closings:
10,000
   
Contact Information:
Address:
     
Telephone:
 
Facsimile:
 
E-mail:

 
Purchaser Signature Page to Securities Purchase Agreement

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.

 
PURCHASER(S):
   
If a corporation or other entity:
   
(name of corporation or entity)
     
By:
   
Name:                                                            
 
Title:
   
If an individual:
/s/ Steven D. Rubin
 
Name: Steven D. Rubin
         
Name (co-purchaser, if any):
   
Number of Shares Purchased at Initial Closing:
2,500
   
Number of Shares subscribed to and subject to one or more Subsequent Closings:
10,000
   
Contact Information:
Address:
     
Telephone:
 
Facsimile:
 
E-mail:

 
Purchaser Signature Page to Securities Purchase Agreement

 
 

--------------------------------------------------------------------------------

 

Appendix I
 
STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
 
1.
The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)).  You may use a nominee name if
appropriate:
 
 
     
2.
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
     
3.
The mailing address of the Registered Holder listed in response to item 1 above:
 
                       
4.
The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:
 
 

 
PURCHASER
   
By:
     
Its:
 

 
 
 

--------------------------------------------------------------------------------

 

Schedule 1
 
CERTAIN DEFINED TERMS
 
Definitions.  The following terms, whenever used herein, shall have the
following respective meanings for all purposes of this Agreement.
 
“1934 Act” means the Securities Exchange Act of 1934, as amended.
 
“Affiliate” means as to any Person (a) any Person which directly or indirectly
controls, is controlled by, or is under common control with such Person, and
(b) any Person who is a director, officer, partner or principal of such Person
or of any Person which directly or indirectly controls, is controlled by, or is
under common control with such Person.  For purposes of this definition,
“control” of a Person shall mean the power, direct or indirect, to direct or
cause the direction of the management and policies of such Person whether by
ownership of voting stock, by contract or otherwise.
 
“Bylaws” means the Amended and Restated Bylaws of the Company, as may be amended
from time to time.
 
“Charter” means the Amended and Restated Articles of Incorporation of the
Company, as may be amended from time to time.
 
“Encumbrances” means any and all liens, encumbrances, charges, mortgages, deeds
of trust, options, pledges, restrictions on transfer, preemptive rights, rights
of first refusal or offer, security interests, hypothecations, easements,
rights-of-way or encroachments of any nature whatsoever, whether voluntarily
incurred or arising by operation of law.
 
“Governmental Authority” means any nation or country (including but not limited
to the United States) and any state, commonwealth, territory or possession
thereof and any political subdivision of any of the foregoing, including but not
limited to courts, departments, commissions, boards, bureaus, agencies,
ministries or other instrumentalities.
 
“Material Adverse Effect” means a material adverse effect on the business,
results of operations, properties or assets of a Person; provided, however, that
“Material Adverse Effect” shall not include the impact on such business, results
of operations, properties or assets of a Person arising out of or attributable
to (i) economic conditions affecting the United States generally,
(ii) conditions or effects affecting the capital markets in the United States
generally or (iii) effects relating to the announcement of the execution of this
Agreement or otherwise to the pendency of the transactions contemplated hereby,
except to the extent that the impact of any of the conditions or events
described in the foregoing clauses (i), (ii) or (iii) disproportionally affects
such Person.
 
“Person” means any individual, corporation (including any not-for-profit
corporation), general or limited partnership, limited liability partnership,
joint venture, estate, trust, firm, company (including any limited liability
company or joint stock company), association, organization, entity or
Governmental Authority.

 
S-1-1

--------------------------------------------------------------------------------

 

“SEC” means the United States Securities and Exchange Commission.
 
“SEC Documents” means each form, report, schedule, statement and other document
filed or required to be filed by the Company with the SEC pursuant to the 1934
Act through the date hereof, including any filed amendment to such document,
whether or not such amendment is required to be so filed.  “SEC Documents” does
not include any information furnished to the SEC, including, but not limited to,
information under Items 2.02, 7.01 or 9.01 of Form 8-K.

 
S-1-2

--------------------------------------------------------------------------------

 

Exhibit A
 
[Certificate of Designation - Attached]

 
 

--------------------------------------------------------------------------------

 

Exhibit B
 
[Form of Lockup Agreement]

 
 

--------------------------------------------------------------------------------