SECURITIES PURCHASE AGREEMENT

          This Securities Purchase Agreement (this “Agreement”) is dated as of
April 11, 2006, among NovaDel Pharma Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and permitted assigns, a “Purchaser” and collectively
the “Purchasers”).

          WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 promulgated thereunder, the Company hereby
offers to issue and sell to each Purchaser (the “Offering”), and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.

          NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser hereby
agree as follows:

ARTICLE I.
DEFINITIONS

          1.1 Definitions.

                    In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated in this Section 1.1:

          “Action” shall have the meaning set forth in Section 3.1(j).

          “Affiliate” means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are defined in and construed under Rule 144
promulgated under the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.

          “Agreement” shall have the meaning set forth in the preamble.

          “AMEX” means the American Stock Exchange.

          “Closing” means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.

          “Closing Date” means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all conditions precedent to (i) the Purchasers’ obligations to pay the
Subscription Amounts and (ii) the Company’s obligations to deliver the
Securities have been satisfied or waived.

          “Closing Price” means the closing price of the Common Stock on the
AMEX on the Trading Day immediately preceding the date hereof.

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          “Commission” means the United States Securities and Exchange
Commission.

          “Common Stock” means the common stock, par value $0.001 per share, of
the Company and stock of any other class of securities into which such
securities may hereafter have been reclassified.

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

          “Company” shall have the meaning set forth in the preamble.

          “Company Counsel” means Morgan Lewis & Bockius LLP.

          “Confidential Information” shall have the meaning set forth in Section
3.2(m).

          “Discussion Time” shall have the meaning set forth in Section 3.2(f).

          “Effective Date” means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights Agreement is
first declared effective by the Commission.

          “Escrow Agent” means US Bank Trust National Association, 100 Wall
Street, Suite 1600, New York, New York 10005.

          “Evaluation Date” shall have the meaning set forth in Section 3.1(r).

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

          “Exercise Price” means the greater of: (i) 110% of the Purchase Price
and (ii) Closing Price.

          “GAAP” shall have the meaning set forth in Section 3.1(h).

          “Intellectual Property Rights” shall have the meaning set forth in
Section 3.1(o).

          “Intermediary” shall have the meaning set forth in Section 3.1(s).

          “Legend Removal Date” shall have the meaning set forth in Section
4.1(c).

          “Lien” means a lien, charge, security interest, encumbrance, right of
first refusal or preemptive right (but shall not include (a) liens for taxes and
assessments or governmental charges or levies not at the time due or (b) liens
in respect of pledges or deposits under workmen’s compensation laws or similar
legislation, carriers’, warehousemen’s, mechanics’, laborers’ and materialmen’s
and similar liens).

          “Material Adverse Effect” shall have the meaning set forth in Section
3.1(b).

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          “Offering” shall have the meaning set forth in the preamble.

          “Person” means an individual, corporation, partnership, trust,
business trust, incorporated or unincorporated association, joint venture,
limited liability company, sole proprietorship, joint stock company, government
(or an agency or subdivision thereof) or other entity of any kind not
specifically listed herein.

          “Placement Agents” means Griffin Securities, Inc. and Paramount
BioCapital, Inc.

          “Placement Agents’ Counsel” means Thompson Hine LLP.

          “Placement Warrants” means the Common Stock purchase warrants,
substantially in the form of Exhibit A, to purchase six percent (6%) of the
number of Shares being purchased by the Purchasers hereunder (excluding from
this calculation, any shares of Common Stock sold to officers or directors of
the Company for their personal investment accounts, including for accounts
beneficially owned by or for the benefit of their family members, or to SIAR
Capital or any Affiliates thereof) deliverable to the Placement Agents in
connection with the transactions contemplated herein.

          “Placement Warrant Shares” means the shares of Common Stock issuable
upon exercise of the Placement Warrants.

          “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

          “Purchase Price” means the lower of (a) volume weighted average
closing price of the Common Stock on the AMEX on the twenty (20) Trading Days
immediately preceding, and ending on the Trading Day prior to, the Closing Date,
and (b) closing price of the Common Stock on the AMEX on the Trading Day
immediately preceding the date hereof, but in no event to exceed $1.45 per share
of Common Stock.

          “Purchaser(s)” shall have the meaning set forth in the preamble.

          “Registration Rights Agreement” means the Registration Rights
Agreement, made and entered into as of the date hereof, among the Company and
the Purchasers, substantially in the form of Exhibit B attached hereto.

          “Registration Statement” means a registration statement meeting the
requirements set forth in, and filed pursuant to, the Registration Rights
Agreement covering the resale of the Shares and Warrant Shares by each Purchaser
and the Placement Warrant Shares by the Placement Agents, and any shares of
Common Stock issued as a dividend or distribution with respect to or in
replacement of the Common Stock issued in the Offering.

          “Required Minimum” means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including the Warrant Shares and the
Placement Warrant Shares.

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

          “SEC Reports” shall have the meaning set forth in Section 3.1(h).

          “Securities” means the Shares, the Warrants and the Warrant Shares.

          “Securities Act” shall have the meaning set forth in the preamble.

          “Shares” means the shares of Common Stock to be issued by the Company
to the Purchasers hereunder.

          “Short Sales” includes, without limitation, all “short sales” as
defined in Rule 200 promulgated under Regulation SHO under the Exchange Act.

          “Subscription Amount” means, as to each Purchaser, the aggregate
amount to be paid for the Shares and Warrants purchased hereunder as specified
below such Purchaser’s name on the signature page of this Agreement and next to
the heading “Subscription Amount,” in United States Dollars and in immediately
available funds.

          “Trading Day” means a day on which the Common Stock is traded on the
AMEX.

          “Transaction Documents” means this Agreement, the Warrants, the
Placement Warrants, the Registration Rights Agreement and any other documents or
agreements executed or delivered in connection with the transactions
contemplated hereunder.

          “Warrants” means, collectively, the Common Stock purchase warrants, in
substantially the form of Exhibit A, delivered to the Purchasers at the Closing
in accordance with Section 2.3(a)(iii) hereof.

          “Warrant Shares” means the shares of Common Stock issuable upon
exercise of the Warrants.

ARTICLE II.
PURCHASE AND SALE

          2.1 Closing.

                    On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, the number of
Shares set forth opposite its or his name, at a price per Share equal to the
Purchase Price. In addition to the Shares, each Purchaser shall be entitled to
receive a Warrant to purchase a number of additional shares of Common Stock
equal to 3/10 of the number of Shares purchased by such Purchaser hereunder, at
the Exercise Price. The parties agree that Closing shall take place via
facsimile exchange of the Transaction Documents or at the offices of Thompson
Hine, or such other location as the parties shall mutually agree.

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          Notwithstanding the foregoing, in the event an officer or director of
the Company wishes to participate in this Offering, on the Closing Date, upon
the terms and subject to the conditions set forth herein, concurrent with the
execution and delivery of this Agreement by the parties hereto, the Company
agrees to sell, and each such officer and director of the Company agrees to
purchase in the aggregate, severally and not jointly, the number of Shares set
forth opposite his or her name, at a price per Share equal to the higher of (i)
book value of the Common Stock on the Closing Date and (ii) the Closing Price.

          2.2 Payment and Delivery.

          Prior to the Closing, each Purchaser shall deliver such Purchaser’s
Subscription Amount in immediately available funds to the Escrow Agent via wire
transfer in accordance with the written wire instructions set forth on the
signature pages hereto. There is no minimum subscription amount required for
Closing. At the Closing, the (i) Escrow Agent shall wire such funds to the
Company’s account in accordance with written instructions provided by the
Company and Placement Agents and (ii) the Company shall deliver to each
Purchaser certificates (each bearing a legend as set forth in Section 4.1(b))
for their respective Shares and Warrants as determined pursuant to Section
2.3(a)(ii) and 2.3(a)(iii).

          2.3 Closing Deliveries.

                    (a) On the Closing Date, the Company shall deliver or cause
to be delivered to each Purchaser the following:

 

 

 

                    (i) this Agreement, duly executed by the Company;

 

 

 

                    (ii) the number of Shares being purchased by such Purchaser,
registered in the name of such Purchaser;

 

 

 

                    (iii) a Warrant registered in the name of such Purchaser to
purchase a number of shares of Common Stock equal to 3/10 share of Common Stock
of the number of Shares being purchased by such Purchaser hereunder;

 

 

 

                    (iv) the Registration Rights Agreement, duly executed by the
Company;

 

 

 

                    (v) an officer’s certificate of the Company’s Chief
Executive Officer or Chief Financial Officer, in form reasonably acceptable to
the Purchasers, certifying the continuing material accuracy of the Company’s
representations and warranties made in this Agreement and the Company’s
performance in all material respects of the covenants to be performed by it
pursuant to this Agreement at or prior to Closing;

 

 

 

                    (vi) a legal opinion of Company Counsel and/or General
Counsel of the Company, substantially in the form of Exhibit E.

                    (b) On the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:

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                    (i) this Agreement, duly executed by such Purchaser;

 

 

 

                    (ii) such Purchaser’s Subscription Amount in United States
dollars by wire transfer of immediately available funds to the account specified
in writing by the Company;

 

 

 

                    (iii) the Registration Rights Agreement, duly executed by
such Purchaser;

 

 

 

                    (iv) a fully completed and duly executed Selling
Securityholder Notice and Questionnaire substantially in the Form set forth in
Exhibit C;

 

 

 

                    (v) a duly executed Confidential Investor Qualification
Questionnaire and Certificate substantially in the form attached hereto as
Exhibit D (the “Investor Questionnaire”); and

 

 

 

                    (vi) a duly executed Form W-8BEN or W-9, as applicable.

          2.4 Closing Conditions.

                    (a) The obligations of the Company hereunder in connection
with the Closing are subject to the following conditions being met, on or prior
to the Closing Date, any of which may be waived by the Company:

 

 

 

                    (i) the accuracy in all material respects when made and on
the Closing Date of the representations and warranties of the Purchasers
contained herein;

 

 

 

                    (ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date shall have
been performed;

 

 

 

                    (iii) the delivery by the Purchasers of the items set forth
in Section 2.3(b) of this Agreement;

 

 

 

                    (iv) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents; and

 

 

 

                    (v) this Agreement shall not have been terminated as to the
relevant Purchaser in accordance with Section 5.1 hereof.

                    (b) The obligations of the respective Purchasers hereunder
in connection with the Closing are subject to the following conditions being
met, on or prior to the Closing Date, any of which may be waived by each
Purchaser (as to itself only):

 

 

 

                    (i) the accuracy in all material respects on the Closing
Date of the representations and warranties of the Company contained herein;

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                    (ii) all obligations, covenants and agreements of the
Company required to be performed at or prior to the Closing Date shall have been
performed;

 

 

 

                    (iii) the delivery by the Company of the items set forth in
Section 2.3(a) of this Agreement;

 

 

 

                    (iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof;

 

 

 

                    (v) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents; and

 

 

 

                    (vi) from the date hereof to the Closing Date, trading in
the Common Stock shall not have been suspended by the Commission (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Shares at the Closing.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

          3.1 Representations and Warranties of the Company.

          Except as set forth under the corresponding section of the disclosure
schedules delivered to the Purchasers concurrently herewith (the “Disclosure
Schedules”) which Disclosure Schedules shall be deemed a part hereof, the
Company hereby makes the representations and warranties set forth below to each
Purchaser.

                    (a) Subsidiaries. The Company does not have any
subsidiaries.

                    (b) Organization and Qualification. The Company is an entity
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own or
lease and use its properties and assets and to carry on its business as
currently conducted. The Company is not in violation or default of any of the
provisions of its certificate of incorporation, bylaws or other organizational
or charter documents. The Company is duly qualified to conduct business and is
in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure

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to be so qualified or in good standing, as the case may be, would not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
financial condition of the Company or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and to the Company’s knowledge, no Proceeding has
been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.

                    (c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company, its directors and stockholders, and no
further action is required by the Company in connection therewith other than in
connection with the Required Approvals. Each Transaction Document has been (or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof (assuming due authorization, execution and
delivery thereof by the other parties thereto), will constitute the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other laws of general
application affecting the enforcement of creditors’ rights and remedies
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

                    (d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of the Company’s certificate of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
debt or otherwise) to which the Company is a party or by which any property or
asset of the Company is bound or affected or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including federal and
state securities or “blue sky” laws and regulations, assuming the accuracy and
completeness of the representations and warranties made by the Purchasers
herein), or by which any property or asset of the Company is bound or affected;
except in the case of each of clauses (ii) and (iii), such as would not have a
Material Adverse Effect.

                    (e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other

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Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than:

 

 

 

                    (i) filings required pursuant to Section 4.6;

 

 

 

                    (ii) the filing with the Commission of the Registration
Statement;

 

 

 

                    (iii) the notice and/or application(s) to each applicable
Trading Market for the issuance and sale of the Shares and Warrants and the
listing of the Shares and the Warrants Shares for trading thereon in the time
and manner required thereby;

 

 

 

                    (iv) the filing of a Form D with the Commission; and

 

 

 

                    (v) such filings as are required to be made under applicable
state securities or “blue sky” laws and regulations.

                    (f) Issuance of the Securities. The Shares and Warrants are
duly authorized and, when issued and paid for in accordance with the terms of
the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens other than restrictions on transfer
provided for in the Transaction Documents. The Warrant Shares, when issued in
accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens other than
restrictions on transfer provided for in the Transaction Documents. The Company
has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Warrant Shares at least equal to the Required Minimum
on the date hereof.

                    (g) Capitalization. The capitalization of the Company is as
set forth on Schedule 3.1(g). Except as described in Schedule 3.1(g), the
Company has not issued any options, warrants or Common Stock Equivalents. The
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise of employee
stock options pursuant to the Company’s stock option plan or outside the plan as
otherwise disclosed in Schedule 3.1(g), and pursuant to the conversion or
exercise of outstanding Common Stock Equivalents. Except as described in
Schedule 3.1(g), no securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as described in Schedule
3.1(g) or as a result of the purchase and sale of the Securities, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments or arrangements by which the Company is bound to issue additional
shares of Common Stock or Common Stock Equivalents. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers and the Placement
Agents or their designees) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all applicable federal and

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state securities or “blue sky” laws, and none of such outstanding shares were
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase any securities of the Company. Except as otherwise provided in this
Agreement, no further approval or authorization of any stockholder or the Board
of Directors of the Company is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to which the
Company is a party or, to the knowledge of the Company, between or among any of
the Company’s stockholders.

                    (h) SEC Reports; Financial Statements. The Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the Commission pursuant to the Exchange Act, including pursuant
to Section 13(a) or 15(d) of the Exchange Act, for the two (2) years preceding
the date hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. Except to the extent updated or superseded by
a subsequently filed report, including without limitation, any amendments
thereto, as of their respective dates, in each filed prior to the date hereof,
the SEC Reports complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports, as subsequently amended
and restated prior to the date hereof, complied in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements were prepared in accordance with United States generally
accepted accounting principles (“GAAP”) in effect at the time of preparation and
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments.

                    (i) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had a Material Adverse Effect, (ii) the Company has not
incurred any 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 or required to be disclosed in filings
made with the Commission and (C) expenses incurred in connection with the
transactions contemplated hereunder, (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 officer,
director or Affiliate, except pursuant to existing

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Company stock option plans. Except with respect to license or similar agreements
entered into with each of Manhattan Pharmaceuticals, Inc., Velcera
Pharmaceuticals, Inc., Par Pharmaceutical, Inc. and Hana Biosciences, Inc.,
which have been filed as exhibits to certain SEC Reports or earlier filings made
with the Commission pursuant to the 1934 Act, the Company does not have pending
before the Commission any request for confidential treatment of information.

                    (j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or its properties before or
by any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
would, if there were an unfavorable decision, have a Material Adverse Effect.
Neither the Company nor, to its knowledge, any of its current directors or
officers (in his or her capacity as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been and
there is not pending or, to the knowledge of the Company, threatened, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the
Exchange Act or the Securities Act.

                    (k) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company which would have a Material Adverse Effect.

                    (l) Compliance. The Company, except in each case as would
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect (i) is not in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company under), nor has the
Company received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is not in
violation of any order of any court, arbitrator or governmental body having
jurisdiction over the Company or its properties or assets, or (iii) is not and
has not been in violation of any statute, rule or regulation of any governmental
authority applicable to the Company.

                    (m) Regulatory Permits. The Company possesses all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct its
businesses as described in the SEC Reports, except where the failure to possess
such permits would not have a Material Adverse Effect, and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such permits.

                    (n) Title to Assets. The Company has (i) good and marketable
title in fee simple to all real property owned by it that is material to the
business of the Company and good

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and marketable title in all personal property owned by it that is material to
the business of the Company, in each case free and clear of all Liens, except
for Liens that do not have a Material Adverse Effect, and (ii) valid and
enforceable leasehold interests in all leased real property, and each such lease
is valid and enforceable in accordance with its terms and is in full force and
effect and free and clear of all Liens, except for Liens that do not have a
Material Adverse Effect.

                    (o) Patents and Trademarks. The Company owns, possesses or
has other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with its business as
described in the SEC Reports and which the failure to so have would have a
Material Adverse Effect (collectively, the “Intellectual Property Rights”). The
Company has not received a written notice that the Intellectual Property Rights
used by the Company violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.

                    (p) Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company is engaged. To the best of Company’s knowledge, such insurance contracts
and policies are accurate and complete. The Company does not have any knowledge
or reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

                    (q) Transactions With Officers, Directors and Employees.
Except as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of sixty thousand dollars ($60,000), other than
(i) for payment of salary or consulting fees for services rendered, (ii)
reimbursement of expenses incurred on behalf of the Company and (iii) for other
employee benefits, including stock option agreements under any equity
compensation plan of the Company.

                    (r) Sarbanes-Oxley; Internal Controls. Except as set forth
in the SEC Reports, the Company is in material compliance with all provisions of
the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
Date. The Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and l5d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in its periodic reports under the Exchange Act is
accumulated and communicated to the Company’s management, including the
Company’s certifying officers, as appropriate to allow timely decisions
regarding required disclosure. The Company’s management has evaluated, under the
supervision and with the participation of the Company’s Chief Executive Officer
and Chief Financial Officer, the effectiveness of the

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Company’s disclosure controls and procedures as of the end of the Company’s last
fiscal quarter with respect to which the Company has filed, or was required to
have filed, as of the date hereof, its periodic report under the Exchange Act
(such date, the “Evaluation Date”). The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the Company’s
Chief Executive Officer and Chief Financial Officer about the effectiveness of
the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge,
in other factors that could significantly affect the Company’s internal
controls. The Company maintains and will continue to maintain a system of
accounting established and administered in accordance with GAAP and the
applicable requirements of the Exchange Act.

                    (s) Certain Fees. Except for the fees and commissions
payable to the Placement Agents, neither the Company nor any of its officers has
retained any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person (collectively, “Intermediary”) with
respect to the transactions contemplated by this Agreement, and the Company
shall indemnify and hold harmless the Purchasers from any liability for any
compensation to any Intermediary engaged by the Company and the fees and
expenses of defending against said liability or alleged liability.

                    (t) Private Placement. Assuming the accuracy and
completeness of the Purchasers’ representations and warranties set forth in
Section 3.2 and the completed Investor Questionnaires, and compliance by the
Placement Agents with their obligations, (i) no registration under the
Securities Act is required for the offer and sale of the Shares or the Warrants
to be delivered at Closing by the Company to the Purchasers as contemplated
hereby and (ii) the issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the AMEX.

                    (u) Investment Company. The Company is not, and is not an
Affiliate of, and immediately following the Closing will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

                    (v) Registration Rights. Other than each of the Purchasers
and the Placement Agents, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company,
except as described in Schedule 3.1(v).

                    (w) Listing and Maintenance Requirements. The Company’s
Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and
the Company has taken no action designed to, or which to the Company’s knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. The Company has
not, in the twelve (12) months preceding the date hereof, received notice from
the AMEX to the effect that the Company is not in compliance with the listing or
maintenance requirements of the AMEX. The Company is in compliance in all
material respects with the listing and maintenance requirements for continued
listing of the Common Stock on the AMEX.

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                    (x) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might constitute
material, nonpublic information. The Company understands and confirms that the
Purchasers will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished by the
Company with respect to the representations and warranties made herein are true
and correct in all material respects with respect to such representations and
warranties and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, and when taken as a
whole, not misleading.

                    (y) No Integrated Offering. Neither the Company nor, to the
Company’s knowledge, any Person acting on its behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the
Securities as contemplated hereby or (ii) cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable shareholder approval provisions under the rules
and regulations of the AMEX.

                    (z) Solvency. Based on the financial condition of the
Company as of the Closing Date after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, (i) the Company’s
fair saleable value of its assets exceeds the amount that will be required to be
paid on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company’s
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted,
including its capital needs, taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash necessary to make the payments payable on or in
respect of its debt). The Company has no knowledge of any facts or circumstances
which lead it to reasonably believe (based in part on the Company’s belief that
it will be able successfully to raise equity financing) that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date.

                    (aa) Form S-3 Eligibility. As of the Closing Date, the
Company is eligible to register the Shares and the Warrant Shares for resale by
the Purchasers on Form S-3 promulgated under the Securities Act.

                    (bb) Tax Status. Except for matters that would not,
individually or in the aggregate, have a Material Adverse Effect, the Company
has filed all necessary federal, state and

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foreign income and franchise tax returns and has paid or accrued all taxes shown
as due thereon, and the Company has no knowledge of a material tax deficiency
that has been asserted or threatened against the Company.

                    (cc) No General Solicitation. The Company has not offered or
sold, and has not authorized any other Person to offer or sell, any of the
Securities by any form of general solicitation or general advertising (as those
terms are defined in Regulation D). The Company has offered the Securities for
sale, and has directed the Placement Agents to offer the Securities for sale,
only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.

                    (dd) Foreign Corrupt Practices. Neither the Company nor, to
the knowledge of the Company, any agent or other Person acting on behalf of the
Company has, directly or indirectly, (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
applicable law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.

                    (ee) Accountants. J.H. Cohn LLP is currently the Company’s
independent registered public accounting firm. To the Company’s knowledge, such
firm is a registered public accounting firm as required by the Securities Act.

                    (ff) No Disagreements with Accountants. There are no
disagreements of any kind presently existing, or currently reasonably
anticipated by the Company to arise, between the Company and the accountants
formerly or presently employed by the Company that would cause the Company to be
required to file a Current Report on Form 8-K under Items 4.01 or 4.02.

                    (gg) Acknowledgment Regarding the Trading Market for Common
Stock. Since the Discussion Time, neither the Company nor any of its officers
and directors nor, to the best of the Company’s knowledge, any of their
respective Affiliates have taken any action which would constitute a violation
of Regulation M under the Exchange Act or any other rule, regulation or law
applicable to the trading of the Company’s Common Stock on the AMEX.

          3.2 Representations and Warranties of the Purchasers.

                    Each Purchaser, for itself and for no other Purchaser,
hereby represents and warrants as of the date hereof and as of the Closing Date
to the Company as follows:

                    (a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right and corporate, partnership or
limited liability company power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the Transaction Documents and the consummation
of the transactions contemplated by this Agreement and the other Transaction
Documents have been

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duly authorized by all necessary corporate or, if such Purchaser is not a
corporation, such partnership, limited liability company or other applicable
similar action on the part of such Purchaser. Each Transaction Document to which
such Purchaser is a party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will constitute
the legal, valid and binding obligation of such Purchaser enforceable against
such Purchaser in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other laws
of general application affecting the enforcement of creditors’ rights and
remedies generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.

                    (b) Own Account. Such Purchaser understands and acknowledges
that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities or “blue sky” law
and represents, warrants and covenants that such Purchaser is acquiring the
Securities and, upon exercise of the Warrants will acquire the Warrant Shares
issuable upon exercise thereof, as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof, has no present intention of distributing any of
such Securities and has no arrangement or understanding with any other Persons
regarding the distribution of such Securities (this representation and warranty
not limiting such Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not have any agreement
or understanding, directly or indirectly, with any Person with respect to the
holding, distribution or voting of any of the Securities. The Purchaser is aware
that (i) the Securities are not currently eligible for sale in reliance upon
Rule 144 promulgated under the Securities Act, and (ii) the Company has no
obligation to register the Securities subscribed for hereunder, except as
provided in the Registration Rights Agreement.

                    (c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and on each date on which
it exercises any Warrant it will be, an “accredited investor” as defined in Rule
501(a) under the Securities Act. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act.

                    (d) Experience of Such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Securities,
and has so evaluated the merits and risks of such investment. Such Purchaser is
able to bear the economic risk of an investment in the Securities and is able to
afford a complete loss of such investment.

                    (e) General Solicitation. Such Purchaser is not purchasing
the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement (as those terms are
defined in Regulation D).

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                    (f) Short Sales. Such Purchaser has not, directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, sold “short” or “short against the box” or
otherwise engaged in any disposition of any securities of the Company
(including, without limitation, any Short Sales involving the Company’s
securities) since the time that such Purchaser was first contacted by the
Company, the Placement Agents or any other Person regarding an investment in the
Company until the date hereof (“Discussion Time”). Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with the transactions contemplated
under this Agreement (including the existence and terms of this transaction).

                    (g) Access to Information. Such Purchaser acknowledges that
it has reviewed the SEC Reports and the Transaction Documents and is familiar
with and understands the terms contained in the Transaction Documents and has
been afforded: (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
merits and risks of investing in the Securities; (ii) access to information
(other than material non-public information) about the Company and its financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to
obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense (other than material non-public
information) that is necessary to make an informed investment decision with
respect to the Securities. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser’s right to rely on the truth,
accuracy and completeness of the SEC Reports and the Company’s representations
and warranties contained in the Transaction Documents.

                    (h) Fees and Commissions. Such Purchaser has not retained
any Intermediary with respect to the transactions contemplated by this Agreement
and shall indemnify and hold harmless the Company from any liability for any
compensation to any Intermediary engaged by such Purchaser and the fees and
expenses of defending against said liability or alleged liability.

                    (i) No Government Review. Such Purchaser understands,
acknowledges and agrees that the offering of the Securities hereby, and the
fairness or suitability of the investment in the Securities, has not been
reviewed, recommended or endorsed by the Commission or any state securities
regulatory authority or other governmental body or agency, and that the offering
of the Securities hereby is intended to be exempt from the registration
requirements of Section 5 of the Securities Act pursuant to Regulation D
promulgated thereunder. Such Purchaser shall not sell or otherwise transfer the
Securities unless such transfer is registered under the Securities Act or unless
an exemption from such registration is available.

                    (j) Residence. The address of such Purchaser furnished by
such Purchaser on the signature page hereof is such Purchaser’s principal
residence if Purchaser is an individual or its principal business address if it
is a corporation or other entity. If such Purchaser is a corporation,
partnership, limited liability company, trust, employee benefit plan, individual
retirement account, Keogh Plan, or other entity (i) it is authorized and
qualified to become an investor in the Company and the Person signing this
Agreement on behalf of such entity has been duly authorized by such entity to do
so and (ii) it is duly organized, validly existing and in good

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standing under the laws of the jurisdiction of its organization and is qualified
to do business in all jurisdiction in which the failure to be so qualified
would, or would reasonably be expected to, adversely affect its ability to
perform its obligations under the Transactions Document to which it is a party
and to consummate the transactions contemplated thereby.

                    (k) NASD Members. Such Purchaser acknowledges that if he or
she is a Registered Representative of an NASD member firm, he or she must give
such firm the notice required by the NASD Rules of Fair Practice, receipt of
which must be acknowledged by such firm in accordance with such rules.

                    (l) Limited Availability of Sales. Such Purchaser
understands, acknowledges and agrees that there can be no assurance that such
Purchaser will ever be able to sell or dispose of the Securities.

                    (m) Confidentiality. Such Purchaser understands,
acknowledges and agrees that the information contained in this Agreement or
otherwise made available to such Purchaser by the Company (collectively, the
“Confidential Information”) is to be used solely for the purpose of evaluating a
possible investment in the Securities and is confidential and non-public and
agrees that, except as required by law, all such Confidential Information shall
be kept in confidence by such Purchaser and neither used by such Purchaser for
such Purchaser’s personal benefit (other than in connection with evaluating a
possible investment in the Securities) nor disclosed to any third party for any
reason and in any manner, notwithstanding that such Purchaser’s subscription may
not be accepted by the Company; provided, however, that this obligation shall
not apply to any such Confidential Information that (i) is now or becomes
generally known or available by publication, commercial use or otherwise or part
of the public knowledge or literature and readily accessible at the date hereof
(except as a result of a breach of this provision by any party), (ii) is
rightfully received by such Purchaser from a third party without knowledge of
violation of any obligation of confidentiality, or (iii) is known by the
Purchaser prior to the time of receiving such Confidential Information, but not
as a result of any violation of any obligation of confidentiality.

                    (n) Independent Investment Decision. Such Purchaser has
independently evaluated the merits of its decision to purchase Securities
pursuant to the Transaction Documents, and such Purchaser confirms that it has
not relied on the advice of any other Purchaser’s business and/or legal counsel
in making such decision. Such Purchaser understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to the
Purchaser in connection with the purchase of the Securities 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 Securities. Such Purchaser
understands that the Placement Agents have acted solely as the agents of the
Company in this placement of the Securities and such Purchaser has not relied on
any information provided by, or the business or legal advice of, the Placement
Agents or any of their agents, counsel or Affiliates in making its investment
decision hereunder, and confirms that none of such Persons has made any
representations or warranties to such Purchaser in connection with the
transactions contemplated by the Transaction Documents.

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                    (o) Section 13 Reporting. Such Purchaser is responsible for
the preparation, submission and filing of any materials required by Section
13(d) or 13(g) of the Securities Act.

                    (p) Relationship to the Company. Such Purchaser (a) has had
no position, office or other material relationship within the past three years
with the Company or persons known to it to be affiliates of the Company and (b)
is not a NASD member or an Associated Person (as such term is defined under the
NASD Membership and Registration Rules Section 1011) as of the Closing. Neither
such Purchaser nor any group of Purchasers (as identified in a public filing
made with the Commission) of which the Purchaser is a part in connection with
the offering of the Shares, acquired, or obtained the right to acquire, 20% or
more of the Common Stock (or securities convertible into or exercisable for
Common Stock) or the voting power of the Company on a post-transaction basis.

          The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2 and in its Investor Questionnaires and its Selling Securityholder
Notice and Questionnaire.

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

          4.1 Transfer Restrictions.

                    (a) Notwithstanding any other provision of this Article IV,
each Purchaser acknowledges, agrees and covenants, severally and not jointly,
that the Securities may only be disposed of pursuant to an effective
registration statement under, and in compliance with the requirements of, the
Securities Act, or pursuant to an available exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act, and in
compliance with any applicable federal and state or “blue sky” securities laws.
In connection with any transfer of Securities other than pursuant to an
effective registration statement, pursuant to Rule 144(k), to the Company, to an
Affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company will 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 and its legal counsel, 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 and shall have the rights
of a Purchaser under this Agreement and the Registration Rights Agreement.

                    (b) The Purchasers agree to the imprinting, so long as is
required by Section 4.1(c), of a legend on certificates evidencing any of the
Securities in the following form:

 

 

 

 

          [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT

 

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OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY AND ITS LEGAL COUNSEL. THESE SECURITIES [AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

          The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the legended
Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At
the appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.

                    (c) Certificates evidencing the Shares and the Warrant
Shares shall not be required to contain such legend or any other legend (i)
following any sale of such Shares or Warrant Shares pursuant to Rule 144, or
(ii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k) or
have been sold pursuant to the Registration Statement (as hereafter defined), or
(iii) such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Securities and Exchange Commission), in each such case of (iii)
to the extent reasonably determined by the Company’s legal counsel.
Notwithstanding the foregoing, following the effective date of the Registration
Statement, the legend set forth above shall be removed from the certificates
evidencing such Shares upon a sale or bona fide intent to sell such Shares
and/or Warrant Shares prior to the resale thereof upon exercise of the Warrants
and subsequent sale or bona fide intent to sell such Warrant Shares and the
Company will rescind any stop transfer orders with respect to such shares given
to the Company’s transfer agent; provided that, such Registration Statement
remains effective and the Company is current with regard to its SEC filings, and
such Purchaser represents and covenants to the Company in writing (in a form
reasonably acceptable to the

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Company and its counsel) that (1) the Purchaser will sell such shares only
pursuant to and in the manner contemplated by the Registration Statement,
including the Plan of Distribution section contained therein (in substantially
the form attached to the Registration Rights Agreement), and otherwise in
compliance with the Securities Act, including the prospectus delivery
requirements of such act, (2) the Purchaser will indemnify the Company for any
damages or losses resulting to the Company for the Purchaser’s breach of its
representation and covenant described in the foregoing clause (1), and (3) such
other agreements or covenants as the Company, its transfer agent or its counsel
may reasonably request. Subject to the foregoing, at such time and to the extent
the resale of the Shares and Warrant Shares is registered with the Commission or
a legend is otherwise no longer required for the Shares or Warrant Shares, the
Company will use its best efforts to no later than three (3) trading days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a legended certificate representing such Shares or Warrant Shares
(together with such accompanying documentation or representations as reasonably
required by counsel to the Company), to cause the transfer agent of the Company
to credit the account of the holder’s prime broker with the Depository Trust
Company System with, or, at the request of such holder, to deliver or cause to
be delivered, a certificate representing such Shares or Warrant Shares that is
free from the foregoing legend.

                    (d) In addition to such Purchaser’s other available
remedies, the Company shall pay to a Purchaser, in cash, as liquidated damages
and not as a penalty, for each one thousand dollars ($1,000) worth of Shares or
Warrant Shares (based on the Closing Price of the Common Stock on the date such
Securities are submitted to the Company’s transfer agent) delivered for removal
of the restrictive legend and subject to this Section 4.1, five dollars ($5) per
Trading Day (increasing to ten dollars ($10) per Trading Day, ten (10) Trading
Days after such damages have begun to accrue) for each Trading Day after the
second (2nd) Trading Day following the Legend Removal Date until such
certificate is delivered without a legend. Nothing herein shall limit such
Purchaser’s right to pursue actual damages for the Company’s failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief

                    (e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance that the Purchaser will sell all Securities pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom.

          4.2 Acknowledgment of Dilution.

                    The Company and each of the Purchasers acknowledge that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.

          4.3 Furnishing of Information.

                    As long as any Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports

21

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required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, but only until such
Securities may be sold under Rule 144(k), if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.

          4.4 No Integration.

                    On or after the Closing Date, but in no event later than six
(6) months from Closing, the Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of the AMEX or that would violate the rules and regulations of
the AMEX.

          4.5 Exercise Procedures.

                    The form of Notice of Exercise included in the Warrants sets
forth the totality of the procedures required of the Purchasers in order to
exercise the Warrants. No additional legal opinion or other information or
instructions shall be required of the Purchasers to exercise their Warrants
(provided that the applicable Purchaser requests that the Warrant Shares be
issued only in the name of such Purchaser). The Company shall honor exercises of
the Warrants and shall deliver Warrant Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.

          4.6 Securities Laws Disclosure; Publicity.

                    The Company shall, by 5:30 p.m. Eastern time, on the fourth
(4th) Trading Day following the date hereof, file a Current Report on Form 8-K
in connection with the Closing disclosing the material terms of the transactions
contemplated hereby, and shall attach this agreement, the form of Registration
Rights Agreement, the form of Warrant and such other documents as the Company my
deem necessary or appropriate. The Purchasers acknowledge and agree that after
the date hereof the Company may issue one or more press releases disclosing the
transactions contemplated by the Transaction Documents and the terms thereof, in
such form as may be determined by the Company. No Purchaser shall issue any
press release or otherwise make any public statement disclosing any information
with respect to the transactions contemplated by the Transaction Documents
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed, except if such disclosure is required by law,
in which case the disclosing party shall promptly provide the other party with
prior written notice of such public statement or communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any press release or filing
with the Commission or any regulatory agency or

22

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Trading Market, without the prior written consent of such Purchaser, except (i)
as required by federal securities laws and regulations in connection with the
registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or regulation, or AMEX
rules, as determined by the Company and its legal counsel, in which case, to the
extent practical, the Company shall provide the Purchasers with prior notice of
such disclosure permitted under subclause (i) or (ii).

          4.7 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information, other than with respect to this Offering (notwithstanding the
foregoing, the reference to this Offering shall not be deemed an admission that
the Offering constitutes material non-public information). The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

          4.8 Use of Proceeds.

                    The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital and general corporate purposes. The
Company shall not use any proceeds from the sale of Securities hereunder to
repay any indebtedness of the Company, including, but not limited to, any
indebtedness to current executive officers or principal stockholders of the
Company, but excluding trade payable and accrued expenses incurred in the
ordinary course of business and consistent with prior practices or in connection
with the transactions contemplated by the Transaction Documents.

          4.9 Reimbursement.

                    If any Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales and similar transactions by such
Purchaser), solely as a result of such Purchaser’s acquisition of the Securities
under this Agreement, the Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability of the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.

23

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          4.10 Reservation of Common Stock and Listing of Securities.

                    (a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations in full
under the Transaction Documents.

                    (b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors of the Company shall use
commercially reasonable efforts to amend the Company’s Certificate of
Incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time at the next scheduled annual
meeting of the stockholders of the Company.

                    (c) The Company has, if applicable: (i) in the time and
manner required by the AMEX, prepared and filed with the AMEX an additional
shares listing application covering a number of shares of Common Stock at least
equal to the Required Minimum on the date of such application; (ii) taken all
steps necessary to cause such shares of Common Stock to be approved for listing
on the AMEX as soon as possible thereafter; (iii) provided to the Purchasers
evidence of such listing; and (iv) maintained the listing of such Common Stock
on any date at least equal to the Required Minimum on such date on the AMEX.

          4.11 Subsequent Equity Sales.

                    (a) From the date hereof until the earlier of (i) thirty
(30) days after the Effective Date or (ii) one hundred fifty (150) days after
the Closing Date, the Company shall not file a registration statement with the
Commission other than the Registration Statement(s) required to be filed
pursuant to the Registration Rights Agreement or Registration Statements filed
using Form S-8 or S-4; provided, however, the no file period set forth in this
Section 4.10 shall be extended for the number of Trading Days during such period
in which (i) trading in the Common Stock is suspended by the AMEX, or (ii)
following the Effective Date, the Registration Statement is not effective or the
prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of the Shares and Warrant Shares.

                    (b) The Company shall not make any issuance whatsoever of
Common Stock or Common Stock Equivalents or any distribution of indebtedness or
assets (including cash or cash dividends) or rights or warrants to purchase any
security, which would cause any holders of the Warrants to not be permitted to
exercise their respective Warrants in full. Any Purchaser shall be entitled to
obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.

          4.12 Equal Treatment of Purchasers.

                    Except as set forth herein, no consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Warrant holders as a class and shall
not in any way be construed as the

24

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Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

          4.13 Short Sales and Confidentiality.

                    Each Purchaser, severally and not jointly with the other
Purchasers, covenants that neither it nor any of its Affiliates or any Person
acting on its or its Affiliates’ behalf or pursuant to any understanding with it
or any of its Affiliates will engage in any Short Sales prior to the one hundred
eightieth (180th) day after the Closing Date. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.6, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock “against the box” prior to the
Effective Date of the Registration Statement with the Shares and the Warrant
Shares is a violation of Section 5 of the Securities Act, as set forth in Item
65, Section 5 under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in
Short Sales in the securities of the Company after the one hundred eightieth
(180th) day after the Closing Date.

ARTICLE V.
MISCELLANEOUS

          5.1 Termination.

                    This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before 5:00 p.m. Eastern time on April 12, 2006; provided, however, that the
right to terminate this Agreement under this Section 5.1 shall not be available
to any Person whose failure to comply with his or her obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time; provided further, that no such termination will
affect the right of any party to sue for any breach by the other party (or
parties).

          5.2 Fees and Expenses.

                    At Closing, the Company has agreed to reimburse ProQuest
Investments III, L.P. (“ProQuest”), up to $10,000 for its actual, reasonable,
out-of-pocket legal fees and expenses and the Placement Agents up to an
aggregate of fifty-five Thousand Dollars ($55,000), for their actual,
reasonable, out-of-pocket expenses, each in connection with the transactions
contemplated by this Agreement. The Company shall deliver, prior to the Closing,
a completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its respective advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party in connection with the negotiation, preparation, execution,

25

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delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities.

          5.3 Entire Agreement.

                    The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.

          5.4 Notices.

                    Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number set forth below or on the signature pages attached hereto prior
to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth below or on the signature pages
attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) the second (2nd) Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service or (d) upon actual receipt by the party to whom such notice is required
to be given. Notwithstanding anything herein to the contrary, in the event
notice is sent by facsimile transmission, the sending party shall also send such
notification by e-mail if the receiving party has included an e-mail address
below or on their respective signature page. The address for such notices and
communications shall be as follows:

 

 

 

 

 

If to Company, to:

 

NOVADEL PHARMA INC.
25 Minneakoning Road
Flemington, New Jersey 08822
Attention: Michael E.B. Spicer
Facsimile: 908-782-2445
E-mail address: mspicer@NovaDel.com

 

 

 

 

 

With a copy to:

 

MORGAN LEWIS & BOCKIUS LLP
502 Carnegie Center
Princeton, New Jersey 08540
Attention: Emilio Ragosa, Esq.
Facsimile: (609) 919-6701
E-mail address: eragosa@morganlewis.com

 

 

 

 

 

If to a Purchaser:

 

To the address set forth under such Purchaser’s name on the signature pages
hereof;

26

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

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

          5.5 Amendments; Waivers.

                    No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

          5.6 Headings.

                    The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

          5.7 Successors and Assigns.

                    This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of each Purchaser. Any Purchaser may assign any or all of
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities in compliance with this Agreement and applicable law,
provided such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the terms and conditions of this Agreement that apply
to the “Purchasers”.

          5.8 No Third-Party Beneficiaries.

                    Except as set forth in Section 4.1(c), this Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.

          5.9 Governing Law.

                    All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereto hereby

27

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irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such state or
federal court sitting in the City of New York or that such suit, action or
proceeding is in an improper or inconvenient venue for such proceeding. Each
party hereto hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby waives all rights to a trial by jury. If either party
shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

          5.10 Survival.

                    The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable, for the applicable statute of limitations.

          5.11 Execution.

                    This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

          5.12 Severability.

                    If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

          5.13 Replacement of Securities.

                    If any certificate or instrument evidencing any Securities
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument,

28

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but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction and the execution thereof by the holder thereof of a
customary lost certificate affidavit of that fact and customary and reasonable
indemnity of the Company, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.

          5.14 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock subject to any such
rescinded conversion or exercise notice.

          5.15 Remedies.

                    In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation (other than in
connection with any action for a temporary restraining order) the defense that a
remedy at law would be adequate. If any action at law or in equity is necessary
to enforce or interpret the terms of any of the Transaction Documents, the
prevailing party shall be entitled to reasonable attorneys’ fees, costs and
disbursements in addition to any other relief to which such party may be
entitled.

          5.16 Payment Set Aside.

                    To the extent that the Company makes a payment or payments
to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

          5.17 Independent Nature of Purchasers Obligations and Rights.

                    The obligations of each Purchaser under any Transaction
Document are several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction

29

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

Document. Nothing contained herein or in any Transaction Document, 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 other 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 the Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser has been
represented by its own separate legal counsel in its review and negotiation of
the Transaction Documents.

          5.18 Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

          5.19 Construction.

                    The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, no rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of the Transaction Documents or any amendments hereto.

[(“Remainder of Page Intentionally Left Blank; Signature Pages Follow”)]

30

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          IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above, which, together with all
counterparts of this Securities Purchase Agreement and the signature pages of
the other Purchasers and the Company to the Securities Purchase Agreement, shall
constitute one and the same document in accordance with the terms of the
Securities Purchase Agreement.

 

 

 

 

NOVADEL PHARMA INC.

 

 

 

By:

 

 

 

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

 

Name: Dr. Jan Egberts

 

Title: President and Chief Executive Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES FOR PURCHASERS FOLLOWS]

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          IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above, which, together with all
counterparts of this Securities Purchase Agreement and the signature pages of
the other Purchasers and the Company to the Securities Purchase Agreement, shall
constitute one and the same document in accordance with the terms of the
Securities Purchase Agreement.

 

 

 

Name of Purchaser

 

 

 

 

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

 

 

 

Signature of Authorized Signatory of Purchaser

 

 

 

 

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

 

 

 

Name of Authorized Signatory

 

 

 

 

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

 

 

 

Title of Authorized Signatory

 

 

 

 

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

 

 

 

Facsimile Number of Purchaser

 

 

 

 

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

 

 

 

E-mail Address of Purchaser

 

 

 

 

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

 

 

 

 

 

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

Address for Notice of Purchaser

 

 

 

 

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

 

 

 

Address for Delivery of Securities for Purchaser

 

 

(if not same as above)

 

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

 

 

 

 

 

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

 

 

 

Subscription Amount

 

 

 

 

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

 

 

 

EIN Number

 

 

 

 

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

 

 

 

Wire Instructions to Escrow Agent

 

 

 

 

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

Purchaser Signature Page to the Securities Purchase Agreement

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

ANNEXES, EXHIBITS AND SCHEDULES

 

 

Annexes:

 

 

A.

Closing Statement

 

 

Exhibits:

 

 

A.

Form of Class E Warrant

B.

Form of Registration Rights Agreement

C.

Selling Securityholder Notice and Questionnaire

D.

Confidential Investor Qualification Questionnaire

E.

Form of Opinion of Company Counsel

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

ANNEX A

Closing Statement

          Pursuant to the Securities Purchase Agreement, dated as of the date
hereto, among NovaDel Pharma Inc. (the “Company”) and each Purchaser identified
on the signature page thereto (the “Securities Purchase Agreement”), the
Purchasers shall purchase up to $__,000,000 of Shares and Warrants from the
Company. All funds will be wired into an escrow account maintained by the Escrow
Agent. All funds will be disbursed in accordance with this Closing Statement.
Capitalized terms not defined herein shall have the meaning set forth in the
Securities Purchase Agreement.

 

 

 

 

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

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

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

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

 

 

 

 

I.

PURCHASE PRICE

 

 

 

$1.45 (non-affiliates) $1.58 (affiliates)

 

 

 

Gross Proceeds to be Received in Trust

$

_________________________________________________

 

 

 

 

II.

DISBURSEMENTS

 

 

 

 

$

_________________________________________________

 

 

$

_________________________________________________

 

 

$

_________________________________________________

 

 

$

_________________________________________________

 

 

$

_________________________________________________

 

 

$

_________________________________________________

 

 

 

 

Total Amount Disbursed:

$

_________________________________________________

 

 

 

WIRE INSTRUCTIONS:

 

 

 

 

 

 

To:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

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

 

 

To:

 

 

 

 

 

 

 

 

 

 

 

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

EXHIBIT A

Form of Class E Warrant

A-1

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

EXHIBIT B

Form of Registration Rights Agreement

B-1

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

EXHIBIT C

NOVADEL PHARMA INC.

Selling Securityholder Notice and Questionnaire

          The undersigned beneficial owner (the “Selling Securityholder”) of
common stock, par value $0.001 per share (the “Common Stock”), of NovaDel Pharma
Inc., a Delaware corporation (the “Company”), (the “Registrable Securities”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a registration statement on Form S-3,
or if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance with the Registration Rights Agreement (the
“Registration Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Registrable
Securities, in accordance with the terms of the Registration Rights Agreement,
dated as of April 11, 2006 (the “Registration Rights Agreement”), among the
Company and the purchasers named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the address set forth
below. All capitalized terms not otherwise defined herein shall have the
meanings set forth on Annex A hereto or the meanings ascribed thereto in the
Registration Rights Agreement.

          Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

          Upon any sale of Registrable Securities pursuant to the Registration
Statement under the Securities Act, the Selling Securityholder will be
encouraged to deliver to the Company the Broker’s Notice of Transfer Statement
set forth in Annex B (completed and signed) and hereby undertakes to do so.

          The Selling Securityholder hereby provides the following information
to the Company and represents and warrants that such information is accurate and
complete:

 

 

 

 

(1)

(a) Full Legal Name of the Selling Securityholder:

 

 

 

 

 

(b) The exact name that the Registrable Securities are to be registered in (if
not the same as in (a) above) (this is the name that will appear on your stock
certificate (s)). The Selling Securityholder may use a nominee name if
appropriate:

 

 

 

 

 

(c) Full Legal Name of Registered Holder (if not the same as in (a) above) of
the Registrable Securities listed in (3) below:

C-1

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

 

 

 

 

(2) Address, Telephone and Facsimile Numbers for the Selling Securityholder:

 

 

 

 

Address:

 

 

 

 

 

Telephone:

 

 

Facsimile:

 

 

Contact Person:

 

 

 

 

(3) Beneficial Ownership:

 

 

 

          (a) Fill in the number of shares of Common Stock owned of record and
beneficially (see definition) by the Selling Securityholder:

 

 

Of Record

 

Beneficially

 

 

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

 

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

 

 

 

 

 

 

Common Stock:*

 

 

 

 

 

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

 

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

 

Other:

 

 

 

 

 

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

 

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

*Other than the Registrable Shares to be included in the Registration Statement.

 

 

 

 

 

 

(b) Number of Registrable Securities to be included in the

 

Registration Statement:

______________________________

 

 

 

 

 

(c) Fill in the number of shares to which the Selling Securityholder disclaims

 

beneficial ownership (see definition):

______________________________

 

 

 

 

 

(d) Reason for disclaiming beneficial ownership (see definition) in (a) above,
if applicable:

 

 

 

 

(4) Please identify the natural person or persons who have voting, dispositive
or investment control over the Registrable Securities if the Selling
Securityholder is an entity.

C-2

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

 

 

 

 

(5) Other securities of the Company owned by the Selling Securityholder:

 

 

 

Except as set forth below and under Item (3) above, the undersigned Selling
Securityholder is not the beneficial or registered owner of any shares of Common
Stock or any other securities of the Company.

 

 

State any exceptions here:

 

 

 

(6) Relationships with the Company:

 

 

 

Except as set forth below, neither the Selling Securityholder nor any of its
affiliates, officers (see definition), directors or principal stockholders (5%
or more) has held any position or office or has had any other material (see
definition) relationship with the Company (or its predecessors or affiliate)
during the past three years.

 

 

State any exceptions here:

 

 

(7) Plan of Distribution:

 

 

 

The undersigned Selling Securityholder intends to distribute the Registrable
Securities in accordance with the form of Plan of Distribution set forth in the
Registration Rights Agreement, subject to any modifications that are responsive
to comments, rules or regulations of the Securities and Exchange Commission.

 

 

State any exceptions here:

 

 

(8) NASD Matters:

 

 

          A. Do you know of any information pertaining to underwriting
compensation and arrangements (see definition) or any dealings between any
Underwriter or Related Person (see definition), NASD Member (see definition) or
Person Associated with a Member of the NASD (see definition) on the one hand,
and the Company or any parent, subsidiary or Controlling (see definition)
shareholder thereof on the other hand?

 

 

Answer: [   ] Yes     [   ] No     If “yes,” please describe

 

 

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

 

C-3

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

          B. (a) Are you (i) an NASD Member (see definition), (ii) a Controlling
(see definition) shareholder of an NASD Member, (iii) a Person Associated with a
Member of the NASD (see definition) or (iv) an Underwriter or a Related Person
(see definition) with respect to the proposed offering; or (b) do you own any
shares or other securities of any NASD Member not purchased in the open market;
or (c) have you made any outstanding subordinated loans to any NASD Member?

 

 

          Answer: [   ] Yes     [   ] No     If “yes,” please describe

 

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

          C. Have you been an Underwriter, or a Controlling (see definition)
person or member of any investment banking or brokerage firm which has been or
might be an underwriter, for securities of the Company?

 

 

          Answer: [   ] Yes     [   ] No     If “yes,” please describe

 

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

          D. If the answer to either Question B or C above is “yes,” set forth
below information as to all purchases and acquisitions (including contracts for
purchase or acquisition) of securities of the Company by you during the last 18
months, as well as to all proposed purchases and acquisitions which are to be
consummated in whole or in part within the next 12 months.

 

 

 

 

Seller or
Prospective
Seller

Amount and
Nature of
Securities

Price or Other
Consideration Date

Description
of
Relationship

          E. Set forth below information as to all sales and dispositions
(including contracts to sell or to dispose) of securities of the Company during
the last 18 months by you to any NASD Member (see definition) or any Person
Associated with a Member of the NASD (see definition) or any Underwriter or
Related Person (see definition) as well as to all proposed such sales and such
dispositions of securities of the Company by you to such persons which are to be
consummated by you in whole or in part within the next 12 months. Also set forth
below a description of the relationship, affiliation or association of you and,
if known, the other party or parties to the above transactions with an
underwriter or other person or entity “in the stream of distribution” with
respect to the offering.

 

 

 

 

Buyer or
Prospective
Buyer

Amount and
Nature of
Securities

Price or Other
Consideration Date

Description
of
Relationship

C-4

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

          F. If you have had during the last 18 months, or are to have within
the next 12 months, any transactions of the character referred to in Question D
or E of this Section, describe briefly below the relationship, affiliation or
association of both you and, if known, the other party or parties to any such
transaction with an underwriter or other person or entity “in the stream of
distribution” with respect to the proposed transaction. In any case, where the
purchaser (whether you or any such party) is known by you to be a member of a
“private investment group,” such as a hedge fund or other group of purchasers,
furnish, if known, the names of all persons comprising the Group (see
definition) and their association with or relationship to any broker-dealer.

Description:

          In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of the
transferee(s) rights and obligations under the Securities Purchase Agreement.

By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (7) above and
the inclusion of such information in the Registration Statement and related
Prospectus and for any required disclosures to any self-regulatory body,
including the NASD. The Selling Securityholder understands that such information
will be relied upon by the Company in connection with the preparation of the
Registration Statement and related Prospectus and any amendments or supplements
thereto.

          The undersigned Selling Securityholder agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein which
may occur subsequent to the date hereof and prior to the filing of the
Registration Statement, and at any time while the Registration Statement is in
effect. All notices hereunder shall be made in writing and shall be deemed given
(i) when made, if made by hand delivery, (ii) upon confirmation, if made by
facsimile or (iii) one business day after being deposited with a reputable
next-day courier, postage prepaid, as follows:

 

 

 

 

(i)

To the Company:

 

 

 

 

 

NovaDel Pharma Inc.

 

 

25 Minneakoning Road

 

 

Flemington, New Jersey 08822

 

 

Attn: Jean W. Frydman, Esq.

C-5

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

 

 

Telephone: (908) 782-3431

 

 

Facsimile: (908) 806-7624

 

 

 

 

(ii)

With a copy to:

 

 

 

MORGAN LEWIS & BOCKIUS LLP

 

 

502 Carnegie Center

 

 

Princeton, New Jersey 08540

 

 

Attention:      Emilio Ragosa, Esq.

 

 

Facsimile:     (609) 919-6701

 

 

E-mail address: eragosa@morganlewis.com

C-6

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

          IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Selling Securityholder Notice and Questionnaire to be executed and
delivered either in person or by its duly authorized agent.

 

 

 

 

 

 

 

Selling Securityholder

 

 

 

[_________________________]

 

 

 

By:

 

 

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

 

 

 

Name:

Dated:

 

Title:

 

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

 

 

 

 

 

 

 

 

 

[_________________________]

 

 

Dated:

By:

 

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

 

 

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

 

 

 

 

 

Name:

 

 

 

 

Title:

C-7

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

ANNEX A

DEFINITIONS

          For purposes of the representations made in this Selling
Securityholder Notice and Questionnaire, the following definitions shall be
applicable:

          Arrangement. The term “arrangement” means any plan, contract,
agreement, authorization or arrangement, whether or not set forth in writing.

          Beneficial Ownership. The term “beneficially owned” as applied to an
interest in securities means (i) any direct or indirect interest in the
securities which entitles you to any of the rights or benefits of ownership,
even though you are not the holder or owner of record or (ii) securities owned
by you or to which you have a right to acquire, directly or indirectly,
including those held for your own benefit (regardless of how registered) or
securities held by others for your own benefit (regardless of how registered),
such as custodians, brokers, nominees, pledgees, etc., and including securities
held by an estate or trust in which you have an interest as legatee or
beneficiary, securities owned by a partnership of which you are a partner,
securities held by a personal holding company of which you are a shareholder,
etc., and securities held in the name of your spouse, minor children and any
relative (sharing the same home). “Beneficial ownership” includes having or
sharing, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise:

          (1) voting power which includes the power to vote, or to direct the
voting of, such security; and/or

          (2) investment power which includes the power to dispose, or to direct
the disposition of, such security. Any person who, directly or indirectly,
creates or uses a trust, proxy, power of attorney, pooling arrangement or any
other contract, arrangement or device with the purpose or effect of divesting
such person of beneficial ownership of a security or preventing the vesting of
such beneficial ownership as part of a plan or scheme to evade the reporting
requirements of Section 13(d) of the Exchange Act, is deemed for purposes of
such section to be the beneficial owner of such security.

          The Securities and Exchange Commission (the “Commission”) has
expressed the view that a person may be regarded as the beneficial owner of
securities which are held in the name of such person’s spouse, minor children or
other relatives (including relatives of the person’s spouse) who share the
person’s home if the relationship which exists results in such person obtaining
benefits substantially equivalent of ownership of the securities.

          The Commission has expressed the view that a person may be deemed to
be the beneficial owner of a security if that person has the right to acquire
beneficial ownership of such security within 60 days, including, but not limited
to, any right to acquire: (i) through the exercise of any option, warrant or
right; (ii) through the conversion of a security; (iii) pursuant to the right to
revoke a trust, discretionary account or similar arrangement; or (iv) pursuant
to the automatic termination of a trust, discretionary account or similar
arrangement.

          If you have any reason to believe that any interest in securities of
the Company, however remote, which you or the above-described relatives may have
is a beneficial interest, please describe such interest.

C-8

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

          Control. The term “control” (including the terms “controlling,”
“controlled by” and “under common control with”) means the possession, direct or
indirect, of the power, either individually or with others, to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise. (Rule 405 promulgated
under the Securities Act).

          Group. The term “group” includes a partnership, syndicate or other
group, whether formally organized or not, which has as a purpose acquiring,
holding or disposing of securities of the Company.

          Material. The term “material,” when used in this Shareholders
Questionnaire to qualify a requirement for the furnishing of information as to
any subject, limits the information required to those matters as to which there
is a substantial likelihood that a reasonable investor would attach importance
in determining whether to purchase securities of the Company. The materiality of
any relationship is to be determined on the basis of the significance of the
information to investors in light of all of the circumstances of the particular
case. The importance of the relationship, the relationship of the parties to the
transaction with each other and the amount involved in the transaction are among
the factors to be considered in determining the significance of the information
to investors. If you have any question as to whether or not a matter is
“material,” please describe the matter, and, if such is the case, state your
belief that the matter is not “material.”

          NASD Member. The term “NASD member” means either any broker or dealer
admitted to membership in the National Association of Securities Dealers, Inc.
(the “NASD”). (NASD Manual, By-laws Article I, Definitions).

          Officers. The term “officers” means the president, chief executive
officer, chief financial officer, chief operational officer, secretary,
treasurer, any vice president in charge of a principal business function (such
as sales, administration or finance) and any other person who performs similar
policy-making functions for the Company.

          Person Associated with a member of the NASD. The term “person
associated with a member of the NASD” means every sole proprietor, partner,
officer, director, branch manager or executive representative of any NASD
Member, or any natural person occupying a similar status or performing similar
functions, or any natural person engaged in the investment banking or securities
business who is, directly or indirectly, controlling or controlled by an NASD
Member, whether or not such person is registered or exempt from registration
with the NASD pursuant to its bylaws (NASD Manual, By-laws Article I,
Definitions).

          Underwriter or a Related Person. The term “underwriter or a related
person” means, with respect to a proposed offering, underwriters, underwriters’
counsel, financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any of such persons. (NASD Interpretation).

C-9

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

ANNEX B

BROKER’S NOTICE OF TRANSFER OF SECURITIES PURSUANT TO
REGISTRATION STATEMENT

NovaDel Pharma Inc.
25 Minneakoning Road
Flemington, New Jersey 08822
Attn: Jean W. Frydman, Esq.
Telephone: (908) 782-3431
Facsimile: (908) 806-7624

MORGAN Lewis & BOCKIUS LLP
502 Carnegie Center
Princeton, New Jersey 08540
Attention: Emilio Ragosa, Esq.
Facsimile: (609) 919-6701
E-mail address: eragosa@morganlewis.com

 

 

Re: NovaDel Pharma Inc.

Date:

Ladies and Gentlemen:

Please be advised that ___________________________________ has transferred
_______________ shares (the “Shares”) of common stock, par value $.001 per
share, of NovaDel Pharma Inc. (the “Company”), on ___________________ (date),
pursuant to the Registration Statement on Form ___ (File No. 333-____________)
filed by the Company.

I certify that the prospectus delivery requirements of the Securities Act of
1933 have been satisfied with respect to the transfer described above and that
the above-named beneficial owner of the Shares is named as a selling stockholder
in the Prospectus dated ____________________ or in amendments or supplements
thereto, and that the aggregate number of shares of Common Stock transferred are
[a portion of] the Common Stock listed in such owner’s name.

This certificate is made for the sole benefit of the Company, its transfer agent
and the Company’s counsel who may rely upon the representations and
certifications given herein in connection with the opinion it may be requested
to furnish in connection with the above-referenced transfer.

 

 

 

 

Very truly yours,

 

[Name of entity or individual]

 

 

 

By:

 

 

 

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

 

Name:

 

 

 

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

 

Title:

 

 

 

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

C-10

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

EXHIBIT D

CONFIDENTIAL INVESTOR QUALIFICATION QUESTIONNAIRE

NovaDel Pharma Inc.
25 Minneakoning Road
Flemington, NJ 08822

Paramount BioCapital, Inc.
787 Seventh Avenue
48th Floor
New York, NY 10019

Griffin Securities, Inc.
17 State Street
New York, NY 10004

NovaDel Pharma Inc.--
Private Offering of Common Stock and Warrants

Ladies and Gentlemen:

                    Reference is made to the private offer and sale (the
“Offering”) by NovaDel Pharma Inc. (the “Company”), of shares of its common
stock and warrants to purchase common stock. Paramount BioCapital, Inc. (the
“Placement Agent”), is acting as placement agent in connection with the
Offering. The information contained herein is provided in order for the Company
and the Placement Agent to determine whether the undersigned will be a qualified
investor in connection with the Offering. The undersigned understands that (i)
the Company, the Placement Agent and their respective counsels will rely upon
the information contained herein for purposes of such determination, (ii) the
Securities which the Company proposes to offer will not be registered under the
Securities Act of 1933 (the “Act”) in reliance upon the exemptions from
registration provided by Rule 506 of Regulation D promulgated under the Act, and
other applicable exemptions, and will not be registered under any state
securities or “blue sky” laws and (iii) this Questionnaire is not an offer to
sell the shares of common stock and warrants to the undersigned.

                    The undersigned represents to the Company and the Placement
Agent that (i) the information provided herein is complete and accurate and may
be relied upon by the Company, the Placement Agent and their respective counsels
and (ii) the undersigned will notify the Company immediately of any material
change in any of such information occurring prior to the purchase of the shares
of common stock and warrants, if any purchase is made, by the undersigned.

D-1

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

                    The undersigned will complete, sign, date and return one
copy of this Questionnaire to the Placement Agent at the above address as soon
as possible and one copy via facsimile at the number set forth above.

                    All information furnished is for the sole use of the
Company, the Placement Agent and their respective counsels, and will be held in
confidence by the Company, the Placement Agent and their respective counsels,
except that this Questionnaire may be furnished to such parties as the Company
may deem desirable to establish compliance with federal, state or international
securities laws, rules and regulations.

NOTE: If this Questionnaire is being completed on behalf of individuals
subscribing as joint tenants-in-common, or by a corporation, partnership or
trust, it must be completed in the name of such corporation, partnership by the
person making the investment decision on behalf of such entity; a separate
Questionnaire must be completed in the name of and by the person making the
investment decision; and a separate Questionnaire must be completed by and for
each joint tenant or tenant-in-common.

 

 

 

Category A ___

 

The undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.

 

 

 

 

 

Explanation: In calculating net worth you may include equity in personal
property and real estate, including your principal residence, cash, short-term
investments, stock and securities. Equity in personal property and real estate
should be based on the fair market value of such property less debt secured by
such property.

 

 

 

Category B ___

 

The undersigned is an individual (not a partnership, corporation, etc.) who had
an income in excess of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each of those years (in
each case including foreign income, tax exempt income and full amount of capital
gains and losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of reaching
the same income level in the current year.

 

 

 

Category C ___

 

The undersigned is a director or executive officer of the Company which is
issuing and selling the Securities.

 

 

 

Category D ___

 

The undersigned is a bank; a savings and loan association; insurance company;
registered investment company; registered business development company; licensed
small business investment company (“SBIC”); or employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total assets in
excess of $5,000,000 or (c) is a self directed plan with investment decisions
made solely by persons that are accredited investors. (describe entity)

D-2

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

 

 

 

 

 

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

Category E ___

 

The undersigned is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940. (describe entity)

 

 

 

 

 

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

 

 

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

 

 

 

Category F ___

 

The undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Securities and with total assets in excess of
$5,000,000. (describe entity)

 

 

 

 

 

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

 

 

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

 

 

 

Category G ___

 

The undersigned is a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Securities, where the purchase is
directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii)
under the Securities Act.

 

 

 

Category H ___

 

The undersigned is an entity (other than a trust) in which all of the equity
owners are “accredited investors” within one or more of the above categories. If
relying upon this Category alone, each equity owner must complete a separate
copy of this Agreement. (describe entity)

 

 

 

 

 

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

 

 

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

 

 

 

Category I ___

 

The undersigned is not within any of the categories above and is therefore not
an accredited investor.

The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.

SUITABILITY. (please answer each question)

(a) For an individual Purchaser, please describe your current employment,
including the company by which you are employed and its principal business:

 

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

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

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

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

 

(b) For an individual Purchaser, please describe any college or graduate degrees
held by you:

 

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

D-3

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

 

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

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

(c) For all Purchasers, please state whether you have you participated in other
private placements before:

YES_______                   NO_______

(d) If your answer to question (d) above was “YES”, please indicate frequency of
such prior participation in private placements of:

 

 

 

 

 

 

 

Public
Companies

 

Private
Companies

 

Public or Private
Biopharmaceutical Companies

 

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

 

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

 

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

Frequently

 

 

 

 

 

 

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

 

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

 

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

Occasionally

 

 

 

 

 

 

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

 

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

 

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

Never

 

 

 

 

 

 

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

 

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

 

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

(e) For individual Purchasers, do you expect your current level of income to
significantly decrease in the foreseeable future:

YES_______                    NO_______

(f) For trust, corporate, partnership and other institutional Purchasers, do you
expect your total assets to significantly decrease in the foreseeable future:

YES_______                     NO_______

(g) For all Purchasers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:

YES_______                    NO_______

(h) For all Purchasers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?

YES_______                    NO_______

(i) For all Purchasers, do you understand that there is no guarantee of
financial return on this investment, that an investment in the securities is
highly speculative and risky and that you run the risk of losing your entire
investment

(j) For all Purchasers, will you have sufficient readily available cash to fund
your obligation to purchase securities at the Closing pursuant to your
subscription if and when the Closing occurs?

D-4

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

YES_______                    NO_______

MANNER IN WHICH TITLE IS TO BE HELD. (circle one)

 

 

 

 

(a)

Individual Ownership

 

(b)

Community Property

 

(c)

Joint Tenant with Right of Survivorship (both parties must sign)

 

(d)

Partnership*

 

(e)

Tenants in Common

 

(f)

Company*

 

(g)

Trust*

 

(h)

Other

          *If Securities are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.

NASD AFFILIATION.

Are you affiliated or associated with an NASD member firm (please check one)?

Yes _________                    No __________

If Yes, please describe:

 

 

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

 

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

 

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

 

*If Purchaser is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:

The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

 

 

 

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

 

Name of NASD Member Firm

 

 

 

By:

 

 

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

 

               Authorized Officer

 

 

 

D-5

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

 

 

 

 

Date:

 

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

 

 

The undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in this Confidential Investor
Questionnaire and such answers have been provided under the assumption that the
Company will rely on them.

SIGNATURE

The undersigned is informed of the significance to the Company and the Placement
Agent of the foregoing representations and answers contained in the Confidential
Investor Questionnaire and such answers have been provided under the assumption
that the Company, its counsel and the Placement Agent will rely on them.

 

 

 

 

 

 

 

[_____________________________________]

 

 

 

By:

 

 

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

 

 

Name:

Dated:

 

Title:

 

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

 

 

D-6

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CERTIFICATE OF SIGNATORY

(To be completed if Securities are
being subscribed for by an entity)

                    I,____________________________, am
the____________________________ of __________________________________________
(the “Entity”).

                    I certify that I am empowered and duly authorized by the
Entity to execute and carry out the terms of the Securities Purchase Agreement
and to purchase and hold the Securities, and certify further that the Securities
Purchase has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.

                    IN WITNESS WHEREOF,  I  have  set  my  hand  this
________day of __________________, 2006.

 

 

 

 

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

 

 

(Signature)

D-7

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EXHIBIT E

Form of Opinion of Company Counsel

 

 

1.

The Company is a corporation validly existing and in good standing under the
laws of the State of Delaware, with the corporate power and authority to carry
on its business as described in the Company’s annual report on Form 10-KSB for
the fiscal year ended July 31, 2005, and any amendments thereto (the “Form
10-KSB”), the Company’s quarterly reports on Form 10-Q for each of the periods
ending subsequent to July 31, 2005, and any amendments thereto, and the
Company’s Definitive Proxy Statement dated December 27, 2005.

 

 

2.

The Company has the requisite corporate power and authority to execute, deliver
and perform its obligations under the Transaction Documents, including issuing,
selling and delivering the Shares, the Warrants and the Warrant Shares, upon the
due exercise of the Warrants.

 

 

3.

As of the date of the Company’s quarterly report on Form 10-Q for the quarterly
period ended January 31, 2006, the authorized capital stock of the Company
consists of [101,000,000] shares of capital stock of all classes; [100,000,000]
shares of Common Stock, par value $0.001 per share, [40,597,318] shares of which
are [issued and outstanding] prior to the Closing, and [1,000,000] shares of
undesignated preferred stock, par value [$0.001] per share, none of which are
issued and outstanding prior to the Closing.

 

 

4.

Each of the Transaction Documents has been duly authorized, executed and
delivered by the Company.

 

 

5.

Each of the Transaction Documents constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.

 

 

6.

The Shares and the Warrants have been duly authorized by the Company and, when
issued and sold by the Company, and delivered by the Company and paid for by you
in accordance with the terms of the Securities Purchase Agreement, will be
validly issued, fully paid and non-assessable and free of statutory preemptive
rights under the Delaware General Corporation Law, the Restated Certificate, the
Restated Bylaws or pursuant to any agreement listed as an exhibit to the
Company’s Form 10-KSB. The Common Stock issuable upon exercise of the Warrants
have been duly and validly reserved for issuance and, when and if issued upon
exercise in accordance with the Warrants, will be validly issued, fully paid and
non-assessable and free of statutory preemptive rights under the Delaware
General Corporation Law, the Restated Certificate, the Restated Bylaws or
pursuant to any agreement listed as an exhibit to the Company’s Form 10-KSB.

 

 

7.

To our knowledge, the Company meets the eligibility requirements for the use of
Form S-3 for the registration of the Shares and Warrant Shares.

E-1

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

 

 

8.

Based in part upon the representations made by you in the Securities Purchase
Agreement, the offer, sale and issuance of the Shares and Warrants to be issued
in conformity with the terms of the Securities Purchase Agreement and the
issuance of the Common Stock, if any, to be issued upon exercise of the
Warrants, constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the “Securities Act”).

 

 

9.

The execution and delivery by the Company of the Transaction Documents do not,
and the performance by the Company of its obligations thereunder will not, (i)
result in a violation of the Restated Certificate, Restated Bylaws or breach
under any agreement filed as an exhibit to the Company’s Form 10-KSB (the
“Material Agreements”), (ii) result in a violation of any court order or decree
known to us, or (iii) violate any federal law of the United States applicable to
the Company or the General Corporation Law of the Sate of Delaware.

 

 

10.

To our knowledge, the Company’s Form 10-KSB and subsequent filings pursuant to
Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as of their respective effective or issue dates, or as of the
dates they were filed with the Securities Exchange Commission, as the case may
be (except as to the financial statements, schedules, notes, other financial and
accounting data and statistical data derived therefrom, and information about
internal controls over financial reporting and disclosure controls, as to which
we express no opinion) appear on their face to comply as to form and are
appropriately responsive in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Securities and Exchange
Commission.

 

 

11.

To our knowledge, there are no pending lawsuits or other proceedings against the
Company before any court, arbitrator or governmental agency or authority that
challenge the legality, validity or enforceability of the Transaction Documents
or as may otherwise be required to be described in the Company’s Form 10-KSB,
the Company’s quarterly reports on Form 10-Q for each of the periods ending
subsequent to July 31, 2005, and any amendments thereto, which is not otherwise
disclosed therein.

 

 

12.

No consent, approval or authorization of or designation, declaration or filing
with, any federal or state governmental authority, stock exchange or under the
Delaware General Corporation Law, on the part of the Company is required in
connection with the valid execution and delivery of the Transaction Documents,
or the offer, sale or issuance of the Shares, the Warrants and Warrant Shares,
except for: (i) such filings as may be necessary under applicable state blue sky
laws; (ii) the filing of Form D pursuant to Rule 503 under the Securities Act;
and (iii) the Company’s Additional Listing Application with the American Stock
Exchange.

 

 

13.

To our knowledge, the Company is not and, after giving effect to the offering
and sale of the Shares and the Warrants, will not be, an “investment company,”
as such term is defined in the Investment Company Act of 1940, as amended.

E-2

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

 

 

14.

To my knowledge, the Company has all material governmental licenses,
authorizations, consents and approvals which are required under Applicable Laws
(as defined below).

 

 

15.

Except as described in the Purchase Agreement, there are no other options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire from the Company any capital stock or other
securities of the Company, or any other agreements to issue any such securities
or rights. The rights, privileges and preferences of the Common Stock and
preferred stock of the Company are as stated in the “Description of Securities –
Common Stock” set forth in the Company’s Registration Statement on Form SB-2/A,
No. 333-112852, filed with the Securities and Exchange Commission (“SEC”) on
March 25, 2004.

 

 

16.

Commencing upon the Company’s 2005 fiscal year, the Company has filed all
reports (the “SEC Reports”) required to be filed by it under Sections 13(a) and
15(d) of the Exchange Act of 1934, as amended (the “Exchange Act”). As of their
respective filing dates, the SEC Reports complied in all material respects as to
form with the requirements of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder.

 

 

17.

Except as otherwise disclosed in the Form 10-Q for the quarterly period ended
January 31, 2006 there is no threatened litigation and there is no claim,
action, suit, proceeding, arbitration, investigation or inquiry, pending before
any court or governmental or administrative body or agency, or any private
arbitration tribunal, against the Company or any of its officers, directors or
employees (in connection with the discharge of their duties as officers,
directors and employees), or affecting any of its properties or assets which
would have a material adverse effect on the business and prospects of the
Company.

 

 

18.

No shareholder approval is necessary in connection with the execution of the
transaction documents.

E-3

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SCHEDULES

TO

SECURITIES PURCHASE AGREEMENT

AMONG

NOVADEL PHARMA INC.

AND

EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES THERETO

April 11, 2006

These Schedules are qualified in their entirety by reference to specific
provisions of the Securities Purchase Agreement, dated as of April 11, 2006 (the
“Securities Purchase Agreement”), among NovaDel Pharma Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the signature
pages thereto. Capitalized terms used and not defined herein shall have the
meanings ascribed to them in the Securities Purchase Agreement.

The inclusion of any information in any Schedule shall not be construed as an
admission or acknowledgement that such information is material to the business,
operations or financial condition of the Company. Any disclosure set forth in
any Schedule herein shall also be deemed to apply to and qualify as a disclosure
set forth in any other Schedule herein provided the relevance of the disclosed
information with respect to such other Schedules is reasonably apparent from the
information disclosed.

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

Schedule 3.1(g)

Capitalization.

(i)          Capitalization Table

As of April 11, 2006

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

Authorized

 

 

100,000,000

 

Issued and Outstanding Common Stock

 

 

40,667,318

 

 

 

 

 

 

Preferred Stock

 

 

 

 

Authorized and Unissued

 

 

1,000,000

 

 

 

 

 

 

Derivatives:

 

 

 

 

Outstanding Stock Options

 

 

8,148,034

 

Outstanding Warrants to Purchase Common Stock

 

 

19,568,454

 

Reserved Option Pool

 

 

6,423,000

 

 

 

 

 

 

Total Issued and Reserved

 

 

74,806,806

 

(ii)     (a) Certain warrants issued to Lindsay A. Rosenwald, M.D. and
BioMedical Investment Group LLC and their respective transferees, which are
currently exercisable, in the aggregate, for approximately 9,673,025 shares of
Common Stock, are entitled to adjustments to the exercise price of such
warrants, and in certain cases the amount of shares issuable pursuant to such
warrants, in the event that the Company issues shares of Common Stock or
securities convertible into Common Stock in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
which is less than the then current market price of the Common Stock (as defined
in such warrants) but not below the current per share exercise price of such
warrants. Dr. Rosenwald, and certain other warrant holders or their respective
transferees, waived the right to receive adjustments to the amount of shares
issuable pursuant to such warrants in May 2005, such that only 607,601 warrants
in the aggregate still retain the right to such adjustment. All warrants remain
entitled to adjustments in the exercise price of such warrants. Such warrants
are currently exercisable at per share exercise prices of approximately $0.46 to
$0.60. The amount of such adjustments depends on the market price of the Common
Stock on the closing of the issuance that causes such adjustment and therefore,
the effect of such provision can not be ascertained until the execution of the
Subscription Agreements.

          (b) Certain warrants issued to Paramount Capital, Inc., and its
designees, which are currently exercisable, in the aggregate, for approximately
200,212 shares of Common Stock, are entitled to adjustments to the exercise
price of such warrants in the event that the Company issues shares of Common
Stock or securities convertible into Common Stock, any rights, options

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

 

or warrants to purchase or otherwise receive issuances of Common Stock or any
securities convertible into, or exercisable or exchangeable for, Common Stock,
in each case for a price per share or entitling the holders thereof to purchase
Common Stock at a price per share which is less than the then the greater of (i)
the per share warrant price and (ii) the current market price (as defined in
such warrants) in effect on the date of such issuance or sale. Of such warrants,
160,017 are currently exercisable at a per share exercise price equal to
approximately $1.35 and 40,005 are currently exercisable at a per share exercise
price equal to approximately $1.64. The amount of such adjustments depends on
the market price of the Common Stock on the closing of the issuance that causes
such adjustment and therefore, the effect of such provision can not be
ascertained until the execution of the Subscription Agreements.

          (c) Certain unit purchase options issued to Paramount Capital, Inc.,
and its designees, which are currently exercisable, in the aggregate, for units
which include approximately 1,729,378 shares of Common Stock, are entitled to
adjustments to the exercise price of such unit purchase options in the event
that the Company issues shares of Common Stock, any securities convertible into
Common Stock, any rights, options or warrants to purchase Common Stock or any
securities convertible into Common Stock, in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
which is less than either (i) the then current market price per share of Common
Stock (as defined in the unit purchase options) in effect on the date of such
issuance or sale or (ii) the per unit price divided by the number of shares of
Common Stock that each unit is then exercisable for. Such unit purchase options
are currently exercisable at a per share exercise price equal to approximately
$1.37. The amount of such adjustments depends on the market price of the Common
Stock on the closing of the issuance that causes such adjustment and therefore,
the effect of such provision can not be ascertained until the execution of the
Subscription Agreements.

The adjustment of such warrants and unit purchase options as described above
will cause an immediate decrease in the book value per share of the Common Stock
and otherwise have a dilutive impact on our stockholders. The adjustment may
have a negative effect on the market price of the Common Stock.

(iii) Certain warrants have been exercised in the last 12 months, as follows:

 

 

 

 

-

On March 8, 2006, the Company received a request from Daniel J. Walsh to
exercise 30,881 warrants. Mr. Walsh made payment in the amount of $23,160.75 in
full exercise of the warrants, and was therefore issued 30,881 shares of Common
Stock.

 

 

 

 

-

On March 14, 2006, the Company received a request for cashless exercise from
Jennifer Ludlow, a holder of 20,458 warrants. After cashless exercise, Ms.
Ludlow was issued 13,628 shares of Common Stock.

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

Schedule 3.1(v)

Registration Rights

1) Certain holders of Common Stock and warrants to purchase Common Stock, listed
as selling stockholders (the “Selling Stockholders”) in the Company’s currently
effective registration statements on Form SB-2 (SEC File Nos. 333-86262,
333-107122 and 333-112852), are entitled to cause the Company to register for
resale certain shares owned by or issuable to the Selling Stockholders (the
“Registrable Shares”) in the event that such registration statements are
unavailable to the Selling Stockholders to sell all of the Registrable Shares.

On January 12, 2006, the Company issued notices to certain holders of warrants
to purchase Common Stock, which holders were entitled to adjustments to the
exercise price of such warrants and in the amount of shares issuable pursuant to
such warrants, in the event that the Company issues shares of Common Stock or
securities convertible into Common Stock in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
which is less than the then current market price of the Common Stock (as defined
in such warrants) but not below the current per share exercise price of such
warrants. Such notices resulted in an additional 3,006,358 warrants being issued
to those certain holders and entitled to registration.

2) During the quarter ended January 31, 2005, the Company issued 15,000 warrants
to outside consultants, which expire in three years and which have an exercise
price equal to $1.57 per share. The Company intends to register these
securities.

3) On September 26, 2005, the Company issued 1,622,700 non-plan employee stock
options to purchase Common Stock to Jan H. Egberts, M.D., the Company’s Chief
Executive Officer, President and Chairman of the Board of Directors. Those
options have an exercise price of $1.70 per share, and vest equally over three
years, with an expiration date of September 26, 2010. The Company intends to
register these securities.

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

NOVADEL – Schedule of Purchasers

 

 

 

 

 

 

 

 

Name

 

Shares

 

Warrants

 

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

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

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

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

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

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

Adam S. Leeds, Trustee of Trust A U/D/T Dated 1/23/81

 

 

17,241

 

 

5,172

 

Alfred Abraham

 

 

32,337

 

 

9,701

 

AMP Enhanced Index International Share Fund

 

 

232,414

 

 

69,724

 

Atlas Master Fund, Ltd.

 

 

54,115

 

 

16,235

 

Ben Heller

 

 

144,828

 

 

43,448

 

Caisse de Depot et Placement du Quebec

 

 

2,413,793

 

 

724,138

 

Capital Ventures International

 

 

344,828

 

 

103,448

 

Clearwater Fund I, LP

 

 

200,000

 

 

60,000

 

Clearwater Offshore Fund, Ltd.

 

 

200,000

 

 

60,000

 

Cranshire Capital, LP

 

 

137,931

 

 

41,379

 

Daniel Gallagher

 

 

8,621

 

 

2,586

 

David Jaroslawicz

 

 

144,828

 

 

43,448

 

David Weisberg

 

 

34,483

 

 

10,345

 

Dean Glaser

 

 

13,793

 

 

4,138

 

H. Martyn Group, Ltd. Profit Sharing Plan & Trust

 

 

15,517

 

 

4,655

 

Hans F. Heye

 

 

600,000

 

 

180,000

 

Hauck & Aufhauser

 

 

41,379

 

 

12,414

 

Henderson North American Multi-Strategy Fund

 

 

194,483

 

 

58,345

 

Isaac R. Dweck

 

 

160,761

 

 

48,228

 

J. Jay Lobell

 

 

31,646

 

 

9,494

 

Joe Vale

 

 

100,000

 

 

30,000

 

Lewis Opportunity Fund

 

 

86,207

 

 

25,862

 

Michael Chill

 

 

15,823

 

 

4,747

 

Mrs. MA Egberts Gunning

 

 

126,582

 

 

37,975

 

Neil Herskowitz

 

 

48,276

 

 

14,483

 

Nicole Berg

 

 

213,793

 

 

64,138

 

Oppenheim Pramerica Asset Management S.a.r.l. on behalf of FCP OP Medical
BioHe@lth-Trends

 

 

165,517

 

 

49,655

 

ProQuest Investments II Advisors

 

 

3,351

 

 

1,005

 

ProQuest Investments II, LP

 

 

138,947

 

 

41,684

 

ProQuest Investments III, LP

 

 

547,365

 

 

164,210

 

Riverside Contracting, LLC

 

 

48,276

 

 

14,483

 

Shea Diversified Investments, Inc.

 

 

131,034

 

 

39,310

 

South Ferry Building Company

 

 

655,172

 

 

196,552

 

Stephan P. Vermut & Barbara T. Vermut Trust dtd March 2002

 

 

103,448

 

 

31,034

 

Steven B. Ratoff

 

 

129,090

 

 

38,727

 

Visium Balanced Fund, LP

 

 

130,837

 

 

39,251

 

Visium Balanced Offshore Fund, Ltd.

 

 

195,539

 

 

58,662

 

Visium Long Bias Fund

 

 

39,343

 

 

11,803

 

Visium Long Bias Offhore Fund, Ltd.

 

 

131,888

 

 

39,566

 

Witan Investment Trust

 

 

59,310

 

 

17,793

 

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