Document:

Exhibit
4.1

 

Common Stock Purchase Warrant

 

BIOSANTE PHARMACEUTICALS, INC.

 

	
  Warrant Shares:

  	
  Initial Exercise Date:
  September     , 2010

  
	
   

  	
  ISSUE
  DATE: March     ,
  2010

  

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received,                           
(the “Holder”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after September     , 2010 (the “Initial
Exercise Date”) and on or prior to the close of business on September     ,
2015 (the “Termination Date”) but not thereafter, to subscribe for and
purchase from BioSante Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
up to             
shares (the “Warrant Shares”) of Common Stock.

 

Section 1.                                            Definitions.  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the “Purchase Agreement”), dated March 4,
2010, among the Company and the
purchasers signatory thereto.

 

Section 2.                                            Exercise.

 

a)                                      Exercise of Warrant. 
Exercise of the purchase rights represented by this Warrant may be made,
in whole or in part, at any time or times on or after the Initial Exercise Date
and on or before the close of business on the Termination Date by delivery to
the Company (or such other office or agency of the Company as it may designate
by notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto; and, within three (3) Trading
Days of the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank or, if available, pursuant to the cashless exercise procedure
specified in Section 2(c) below. 
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within three (3) Trading Days of the date
the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting
in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable number of
Warrant Shares purchased.  The Holder and
the Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. 
The Company shall deliver any objection to any Notice of Exercise Form within
1 Business Day of receipt of such notice. 
The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available 

 

 

for purchase hereunder at any
given time may be less than the amount stated on the face hereof.

 

b)                                     Exercise Price. 
The exercise price per share of the Common Stock under this Warrant
shall be $2.08, subject to adjustment hereunder
(the “Exercise Price”).

 

c)                                      Cashless Exercise. 
This Warrant may also be exercised, in whole or in part, at any time
after the Initial Exercise Date and prior to the close of business on the
Termination Date by means of a “cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the Trading Day immediately
preceding the date on which Holder elects to exercise this Warrant by means of
a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

(B) = the Exercise Price of this Warrant, as
adjusted hereunder; and

 

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

 

“VWAP” means, for any
date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:35 a.m.
(New York City time) to 3:55 p.m. (New York City time), (b)  if the
Common Stock is not then listed or quoted for trading on a Trading Market and
if prices for the Common Stock are then reported in the “Pink Sheets” published
by Pink OTC Markets, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of
the Common Stock so reported, or (c) in all other cases, the fair market
value of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Company and reasonably acceptable to the Holder,
the fees and expenses of which shall be paid by the Company.

 

d)                                     Mechanics of Exercise.

 

i.                  Delivery of Certificates Upon Exercise. 
Certificates for shares purchased hereunder shall be transmitted by the
Transfer Agent to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”) system if the Company is then a participant in such
system and either (A) there is an effective Registration Statement
permitting the issuance of the Warrant Shares to or resale of the Warrant
Shares by Holder or (B) this Warrant is being exercised via cashless
exercise, and otherwise by physical delivery to the address specified by 

 

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the Holder in the Notice of
Exercise by the date that is three (3) Trading Days after the latest of (A) the
delivery to the Company of the Notice of Exercise Form, (B) surrender of
this Warrant (if required) and (C) payment of the aggregate Exercise Price
as set forth above (including by cashless exercise, if permitted) (such date,
the “Warrant Share Delivery Date”). 
This Warrant shall be deemed to have been exercised on the first date on
which all of the foregoing have been delivered to the Company.  The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been properly exercised, with payment
to the Company of the Exercise Price (or by cashless exercise, if permitted)
and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior
to the issuance of such shares, having been paid.

 

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

 

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

 

iv.           Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise.  In addition
to any other rights available to the Holder, if the Company fails to cause the
Transfer Agent to transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to an exercise on or before the
Warrant Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall (A) pay in cash to the Holder the amount, if any, by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (1) the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the 

 

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Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored (in which case such exercise shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder.  For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In and, upon request of the Company, evidence of
the amount of such loss.  Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

 

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

 

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

 

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

 

e)                                      Holder’s Exercise Limitations. 
The Company shall not effect any exercise of this Warrant, and a Holder
shall not have the right to exercise any portion of this 

 

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Warrant, pursuant to Section 2
or otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to which
such determination is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (i) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (ii) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without
limitation, any other Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its Affiliates.  Except as set
forth in the preceding sentence, for purposes of this Section 2(e),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by the Holder that the Company is not representing to the
Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith.  
To the extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination and shall have no liability for
exercises of the Warrant that are in noncompliance with the Beneficial
Ownership Limitation.   In addition, a
determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder.  For
purposes of this Section 2(e), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares
of Common Stock as reflected in (A) the Company’s most recent periodic or
annual report filed with the Commission, as the case may be, (B) a more
recent public announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Stock outstanding.  Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation”
shall be 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock 

 

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issuable upon exercise of
this Warrant.  The Holder, upon not less
than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(e).  Any such increase or decrease will not be
effective until the 61st day after such notice is delivered to the
Company.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(e) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

 

Section 3.                                            Certain Adjustments.

 

a)                                      Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this Warrant
shall be proportionately adjusted such that the total purchase price for the
all of shares underlying the Warrant immediately prior to any such adjustment
shall equal to the total purchase price for all of the shares underlying the
Warrant immediately after any such adjustment. 
Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

b)                                     [RESERVED]

 

c)                                      Subsequent Rights Offerings. 
If the Company, at any time while the Warrant is outstanding, shall
issue rights, options or warrants to all holders of Common Stock (and not to
the Holders) entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the VWAP on the record date mentioned below,
then, the Exercise Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock outstanding on
the date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and of
which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights, options or warrants plus
the number of shares which the aggregate offering price 

 

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of the total number of
shares so offered (assuming receipt by the Company in full of all consideration
payable upon exercise of such rights, options or warrants) would purchase at
such VWAP.  Such adjustment shall be made
whenever such rights, options or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.

 

d)                                     Pro Rata Distributions. 
If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to the Holders) evidences of
its indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security other than the Common Stock,
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the
Board of Directors in good faith.  In
either case the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any
such distribution is made and shall become effective immediately after the
record date mentioned above.

 

e)                                      Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets
in one or a series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other securities, cash
or property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions  consummates
a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another
Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock
(not including any shares of Common Stock held by the other Person or other
Persons making or party to, or associated or affiliated with the other Persons
making or party to, such stock or share purchase agreement or other
business combination), (vi) the
liquidation, bankruptcy, insolvency, dissolution or winding-up (or the
occurrence of any analogous proceeding) affecting the Company (each a “Fundamental Transaction”),
then, upon any subsequent exercise of
this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been 

 

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issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction,
at the option of the Holder (without regard to any limitation in Section 2(e) on
the exercise of this Warrant), the number and
type of securities of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional consideration (the
“Alternate Consideration”) receivable as
a result of such Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
Fundamental Transaction (without regard to any limitation in Section 2(e) on
the exercise of this Warrant).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  The Company
shall cause any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the
Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of this Warrant,
deliver to the Holder in exchange for this Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding number of
shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and with an exercise price
which applies the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of capital stock,
such number of shares of capital stock and such exercise price being for the
purpose of protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any
such Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction
Documents with the same effect as if such Successor Entity had been named as
the Company herein.

 

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

 

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as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares,
if any) issued and outstanding.

 

g)                                     Notice to Holder.

 

i.                  Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.

 

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

 

9

 

of such notice to the
effective date of the event triggering such notice except as may otherwise be
expressly set forth herein.

 

Section 4.                                            Transfer of
Warrant.

 

a)                                      Transferability. 
Subject to compliance with applicable securities laws, this Warrant and
all rights hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.

 

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

 

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

 

Section 5.                                            Miscellaneous.

 

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

 

b)                                     Loss, Theft, Destruction or Mutilation of
Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant or any stock certificate relating to 

 

10

 

the Warrant Shares, and
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or
stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.

 

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

 

d)                                     Authorized Shares.

 

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

 

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

 

11

 

efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations under this
Warrant.

 

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

 

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

 

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

 

g)                                     Nonwaiver and Expenses. 
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder’s rights, powers or remedies.  Without limiting any other provision of this
Warrant or the Purchase Agreement, if the Company willfully and knowingly fails
to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.

 

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

 

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

 

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

 

12

 

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

 

l)                                         Amendment.  This Warrant
may be modified or amended or the provisions hereof waived with the written
consent of the Company and Holder.

 

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

 

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

 

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

 

(Signature
Pages Follow)

 

13

 

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

 

 

	
   

  	
  BIOSANTE PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Phillip B.
  Donenberg

  
	
   

  	
   

  	
  Title: Chief
  Financial Officer, Treasurer and Secretary

  

 

14

 

NOTICE OF EXERCISE

 

TO:  BIOSANTE PHARMACEUTICALS,
INC.

 

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

 

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

 

o in lawful money of the United States; or

 

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

 

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

 

 

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

 

 

 

 

[SIGNATURE OF
HOLDER]

 

	
  Name of
  Investing Entity:

  	
   

  
	
  Signature
  of Authorized Signatory of Investing Entity:

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
			

 

 

ASSIGNMENT
FORM

 

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

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

 

whose address is

 

.

 

	
   

  	
   

  

 

Dated: 
                            ,

 

	
   

  	
  Holder’s
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

	
  Signature
  Guaranteed:

  	
   

  	
   

  

 

 

NOTE:  The signature to this
Assignment Form must correspond with the name as it appears on the face of
the Warrant, without alteration or enlargement or any change whatsoever, and
must be guaranteed by a bank or trust company. 
Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.Exhibit 10.1

 

SECURITIES
PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as of
March 4, 2010, between BioSante Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively the “Purchasers”).

 

WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
an effective registration statement under the Securities Act of 1933, as
amended (the “Securities Act”), the Company desires to issue and sell to
each Purchaser, 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 agree
as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1           Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings set forth in this Section 1.1:

 

“Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.

 

“Action” shall have the meaning ascribed to
such term 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 used in and construed
under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of
directors of the Company.

 

“Business Day” means any day except any
Saturday, any Sunday, any day which is a federal legal holiday in the United
States or any day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.

 

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

 

“Closing Date” means the Trading Day on which
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 Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived.

 

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

 

1

 

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

 

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

 

“Company Counsel”
means Oppenheimer Wolff & Donnelly LLP, with offices located at Plaza
VII, Suite 3300, 45 South Seventh Street, Minneapolis, Minnesota 55402.

 

“Disclosure Schedules” means the Disclosure
Schedules of the Company delivered concurrently herewith.

 

“Evaluation Date” shall have the meaning
ascribed to such term in Section 3.1(r).

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options
to current or former employees, officers, directors or independent contractors
of the Company pursuant to any stock-based compensation plan duly adopted for
such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange
of or conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities, (c) securities issued pursuant to
stock splits, stock dividends or distributions, recapitalizations and similar
events affecting the Common Stock; (d) shares of Common Stock or warrants
to vendors of the Company approved by a majority of the non-employee members of
the Board of Directors; (e) securities issued pursuant to mergers,
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company; and (f) securities issued after
the completion of any merger, acquisition or strategic transaction approved by
a majority of the disinterested directors of the Company upon the exercise or
exchange of or conversion of any securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
effectiveness of such merger, acquisition or strategic transaction.

 

“FDA” shall
have the meaning ascribed to such term in Section 3.1(gg).

 

“FDCA” shall have the meaning ascribed to such
term in Section 3.1(gg).

 

2

 

“GAAP” shall have the meaning ascribed to such
term in Section 3.1(h).

 

“Indebtedness” shall have the meaning ascribed
to such term in Section 3.1(z).

 

“Intellectual Property Rights” shall have the
meaning ascribed to such term in Section 3.1(o).

 

“Liens” means a lien, charge, security
interest, encumbrance, right of first refusal, preemptive right or other restriction,
other than restrictions imposed by securities laws.

 

“Material Adverse Effect” shall have the
meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning
ascribed to such term in Section 3.1(m).

 

“Per Share Purchase Price” equals $1.73,
subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock that
occur after the date of this Agreement.

 

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

 

Pharmaceutical Product” shall have the meaning ascribed to such term in
Section 3.1(gg).

 

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

 

“Prospectus” means the base prospectus filed
with the Registration Statement.

 

“Prospectus Supplement” means the supplement to
the Prospectus complying with Rule 424(b) of the Securities Act that
is filed with the Commission and delivered by the Company to each Purchaser
prior to or at the Closing.

 

“Purchaser Party” shall have the meaning
ascribed to such term in Section 4.8.

 

“Registration Statement” means the effective
registration statement with Commission file No. 333-159606 which registers
the sale of the Shares, the Warrants and the Warrant Shares to the Purchasers.

 

“Required Approvals” shall have the meaning
ascribed to such term in Section 3.1(e).

 

“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 

 

3

 

regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be
amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed
to such term in Section 3.1(h).

 

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

 

“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.

 

“Shares” means the shares of Common Stock
issued or issuable to each Purchaser pursuant to this Agreement.

 

“Short Sales” means all “short sales” as
defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares
of Common Stock).

 

“Subscription Amount” means, as to each
Purchaser, the aggregate amount to be paid for 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.

 

“Subsidiary” means any subsidiary of the
Company as set forth on Schedule 3.1(a), and shall, where applicable,
also include any direct or indirect subsidiary of the Company formed or
acquired after the date hereof.

 

“Trading Day” means a day on which the
principal Trading Market is open for trading.

 

“Trading Market” means any of the following
markets or exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or
the OTC Bulletin Board (or any successors to any of the foregoing).

 

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

 

“Transfer Agent” means Computershare Investor
Services, the current transfer agent of the Company, with a mailing address of
350 Indiana Street, Suite 750, Golden CO 80401 and a facsimile number of
312.601.2312, and any successor transfer agent of the Company.

 

4

 

“Warrants” means, collectively, the Common
Stock purchase warrants delivered to the Purchasers at the Closing in
accordance with Section 2.2(a) hereof, which Warrants shall have a
term of exercise equal that commences six months and one day from the Closing
Date (the “Initial Exercise Date”) and ends on the five (5) year
anniversary of the Initial Exercise Date, in the form of Exhibit A
attached hereto.

 

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

 

“WS” means Weinstein Smith LLP with offices
located at 420 Lexington Avenue, Suite 2620, New York, New York
10170-0002.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1           Closing.  On the Closing Date, upon the terms and
subject to the conditions set forth herein, substantially concurrent with the
execution and delivery of this Agreement by the parties hereto, the Company
agrees to sell, and each of the Purchasers, severally and not jointly,  agrees to purchase the number of Shares and
Warrants specified below such Purchaser’s name on the signature page to
this Agreement.  Each Purchaser shall
deliver to the Company, via wire transfer or a certified check of immediately
available funds equal to such Purchaser’s Subscription Amount as set forth on
the signature page hereto executed by such Purchaser and the Company shall
deliver to each Purchaser its respective Shares and a Warrant as determined
pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the
Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at such location as the parties shall mutually agree.

 

2.2           Deliveries.

 

(a)           On
or prior to 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)           a legal opinion of
Company Counsel, in the form to be mutually agreed upon by the parties;

 

(iii)          a copy of the
irrevocable instructions to the Company’s transfer agent instructing the transfer
agent to deliver via the Depository Trust Company Deposit Withdrawal Agent
Commission System (“DWAC”) Shares equal to such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price, registered in the name of such
Purchaser;

 

(iv)          a Warrant registered
in the name of such Purchaser to purchase up to a number of shares of Common
Stock equal to 50% of such Purchaser’s Shares, with an exercise price equal to
$2.08, subject to adjustment therein (such Warrant certificate may be delivered
within three Trading Days of the Closing Date); and

 

5

 

(v)           the Prospectus and
Prospectus Supplement (which may be delivered in accordance with Rule 172
under the Securities Act).

 

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

 

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

 

(ii)           such Purchaser’s
Subscription Amount by wire transfer to the account as specified in writing by
the Company.

 

2.3           Closing Conditions.

 

(a)           The obligations of the Company
hereunder in connection with the Closing are subject to the following
conditions being met:

 

(i)            the accuracy in all
material respects when made and on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a specific date
therein);

 

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

 

(iii)          the delivery by
each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

 

(b)           The respective
obligations of the Purchasers hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i)            the accuracy in all
material respects when made and on the Closing Date of the representations and
warranties of the Company contained herein (unless as of a specific date
therein);

 

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

 

(iii)          the delivery by the
Company of the items set forth in Section 2.2(a) of this Agreement;

 

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

 

(v)           from the date hereof
to the Closing Date, trading in the Common Stock shall not have been suspended
by the Commission or the Company’s principal Trading Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the 

 

6

 

Closing), and, at
any time prior to the Closing Date, trading in securities generally as reported
by Bloomberg L.P. 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 Securities at the Closing; and

 

(vi)          at least $18.0
million of Shares shall have been subscribed for at the Per Share Purchase
Price and all such subscriptions shall have been funded and the corresponding
Shares issued.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and Warranties of
the Company.  Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or warranty made herein to the
extent of such disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations
and warranties to each Purchaser:

 

(a)           Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and clear
of any Liens, and all of the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction Documents
shall be disregarded.

 

(b)           Organization
and Qualification.  The Company and
each of the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any
Subsidiary is in violation nor default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. 
Each of the Company and the Subsidiaries 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 to be
so qualified or in good standing, as the case may be, would not result in:
(i) a material adverse effect on the legality, validity or enforceability
of any Transaction Document with respect to the Company, (ii) a material
adverse effect on the results of operations, assets, business or condition
(financial or otherwise) of the 

 

7

 

Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect its obligations
under any Transaction Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”) and 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 hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required
by the Company, the Board of Directors or the Company’s stockholders in
connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(d)           No
Conflicts.  The execution, delivery
and performance by the Company of the Transaction Documents, the issuance and
sale of the Securities and the consummation by it of the transactions
contemplated hereby and thereby to which it is a party do not and will not
(i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (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 any Subsidiary, 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 or Subsidiary debt or otherwise) or other understanding
to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary 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 or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary 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 

 

8

 

or
other Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings required
pursuant to Section 4.4 of this Agreement, (ii) the filing with the
Commission of the Prospectus Supplement, (iii) application(s) to each
applicable Trading Market for the listing of the Securities for trading thereon
in the time and manner required thereby and (iv) such filings as are
required to be made under applicable state securities laws and FINRA
(collectively, the “Required Approvals”).

 

(f)            Issuance
of the Securities; Registration.  The
Securities are duly authorized and, when issued and paid for in accordance with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Warrant Shares, when issued
in accordance with the terms of the Warrants, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants. The Company has prepared
and filed the Registration Statement in conformity in all material respects
with the requirements of the Securities Act, which Registration Statement
became effective on June 9, 2009 (the “Effective Date”), including
the Prospectus, and such amendments and supplements thereto as may have been
required to the date of this Agreement. 
The Registration Statement is effective under the Securities Act and to
the actual knowledge of the Company, no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus has been issued by the Commission and no proceedings for that
purpose have been instituted or, to the knowledge of the Company, are
threatened by the Commission.  The
Company, if required by the rules and regulations of the Commission,
proposes to file the Prospectus Supplement, with the Commission pursuant to
Rule 424(b).  At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at the Closing Date, the Registration Statement and any
amendments thereto conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the Prospectus and any amendments or supplements thereto, at time the
Prospectus or any amendment or supplement thereto was issued and at the Closing
Date, conformed and will conform in all material respects to the requirements
of the Securities Act and did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

(g)           Capitalization.  The authorized capitalization of the Company
is as set forth on Schedule 3.1(f). 
The Company has not issued any capital stock since its most recently
filed report under the Exchange Act, other than pursuant to the exercise of
stock options under the Company’s stock-based compensation plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents outstanding as of
the date of the most recently filed report under the Exchange Act.  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 disclosed in the 

 

9

 

SEC
Reports or Schedule 3.1(f) or as a result of the purchase and sale
of the Securities, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary 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 will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under any of such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in all material respects in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or purchase
securities.  No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities, including without limitation,
pursuant to Rule 5635(b) or (d) of the Listing Rules of the
NASDAQ Stock Market.  Except as disclosed
in any SEC Report, including any exhibit thereto, 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 complied in all material respects with requirements to file all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law or
regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports”) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company is not an issuer currently subject to
Rule 144(i) under the Securities Act. The financial statements of the
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as
may be otherwise specified in such financial statements or the notes thereto
and except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results 

 

10

 

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; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed prior to the date hereof,
(i) there has been no event, occurrence or development that has had or
that would result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to
be reflected in the Company’s financial statements pursuant to GAAP or required
to be disclosed in filings made with the Commission, (iii) the Company has
not materially 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 Company stock-based compensation plans.  The Company does not have pending before the
Commission any request for confidential treatment of information.  Except for the issuance of the Securities
contemplated by this Agreement or as set forth in the SEC Reports or on Schedule
3.1(i), no event, liability or development has occurred with respect to the
Company or its Subsidiaries or their respective business, properties,
operations or financial condition that would be required to be disclosed by the
Company under applicable securities laws at the time this representation is
made or deemed made that has not been publicly disclosed prior to the date that
this representation is made.

 

(j)            Litigation.  Except as disclosed in the SEC Reports or on Schedule
3.1(j), 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, any Subsidiary or any of their respective
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.  Except as
disclosed in the SEC Reports or on Schedule 3.1(j), neither the Company
nor any Subsidiary, nor to the Company’s actual knowledge, director or officer
thereof, is or during the past 12 months 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 to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or to the Company’s knowledge, any current
director or officer of the Company during the past 12 months.   The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k)           Labor
Relations.  No material labor dispute
exists or, to the actual knowledge of the Company, is imminent with respect to
any of the employees of the 

 

11

 

Company,
which would have a Material Adverse Effect. 
None of the Company’s or its Subsidiaries’ employees is a member of a
union that relates to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good.  No executive officer, to the knowledge of the
Company, is, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any
restrictive covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local and foreign
laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance would not, individually or in the aggregate, result in a Material
Adverse Effect.

 

(l)            Compliance.  Neither the Company nor any Subsidiary:
(i) is 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 or any Subsidiary under), nor has the Company or any
Subsidiary 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
in violation of any judgment, decree or order of any court, arbitrator or
governmental body or (iii) is or has been in violation of any statute,
rule, ordinance or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business and all such laws that affect the environment, except as would not,
individually or in the aggregate, result in a Material Adverse Effect.

 

(m)          Regulatory
Permits.  The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits would not result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or modification
of any Material Permit.

 

(n)           Title
to Assets.  The Company and the
Subsidiaries do not own any real property. The Company and the Subsidiaries
have good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all Liens, except for Liens created under license or collaboration
agreements relating to the Company’s products or Intellectual Property Rights
and Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries and Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to
penalties.  Any real property and
facilities held under lease by the Company and the Subsidiaries are held by 

 

12

 

them
under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance with the provisions thereof, except where such
non-compliance would not result in a Material Adverse Effect.

 

(o)           Patents
and Trademarks.  The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have would not result in a Material Adverse Effect (collectively, the
“Intellectual Property Rights”).  Neither
the Company nor any Subsidiary has received a notice (written or otherwise)
that any of the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person.  To the actual 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 which would result
in a Material Adverse Effect.  The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so would not, individually or in the aggregate,
result in a Material Adverse Effect.

 

(p)           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary for companies of similar
size as the Company in the businesses in which the Company and the Subsidiaries
are engaged, including, but not limited to, directors and officers insurance
coverage.  Neither the Company nor any
Subsidiary has any 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 Affiliates 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 or any Subsidiary (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 $120,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) other employee benefits, including stock option
agreements under any stock-based compensation plan of the Company.

 

(r)            Sarbanes-Oxley;
Internal Accounting Controls.  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 and the Subsidiaries maintain a 

 

13

 

system
of internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences. The Company has established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and
forms.  The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently
filed 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 certifying officers 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
changes in the Company’s internal control over financial reporting (as such
term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.

 

(s)           Certain
Fees.  Except as set forth in the
Prospectus Supplement, no brokerage or finder’s fees or commissions are or will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due
from the Company in connection with the transactions contemplated by the
Transaction Documents.

 

(t)            Investment
Company. The Company is not, and immediately after receipt of payment for
the Securities, will not be an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

(u)           Registration
Rights.  Except as described in the
SEC Reports or as provided in agreements filed as exhibits to the SEC Reports,
no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company, which rights are currently
not satisfied.

 

(v)           Listing
and Maintenance Requirements.  The
Common Stock is registered pursuant to Section 12(b) of the Exchange
Act and listed on the NASDAQ Global Market (the “NASDAQ Stock Market”), and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the NASDAQ Stock Market nor has
the Company received any notification that the 

 

14

 

Commission
is contemplating terminating such registration. 
The Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in compliance with
the material listing or maintenance requirements of such Trading Market.

 

(w)          Application
of Takeover Protections.  The Company
and the Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers solely as a result of the Company’s
issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(x)            Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, 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 it believes constitutes or might constitute material, non-public
information which is not otherwise disclosed in the Prospectus Supplement.   The Company understands and confirms that
the Purchasers will rely on the foregoing representation in effecting
transactions in securities of the Company. 
All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does 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, not
misleading. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.

 

(y)           No
Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of any applicable stockholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or
designated.

 

(z)            Solvency.  Except as described in the SEC Reports, based
on the consolidated 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 fair saleable value of the Company’s
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 as now 

 

15

 

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 liabilities 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 to be payable on or in respect of its
debt).  The Company has no knowledge of
any facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of
any jurisdiction within one year from the Closing Date.  Schedule 3.1(z) sets forth as of
the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this
Agreement, “Indebtedness” means (x) any liabilities for borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable incurred
in the ordinary course of business), (y) all guaranties, endorsements and
other contingent obligations in respect of indebtedness of others, whether or
not the same are or should be reflected in the Company’s balance sheet (or the
notes thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of business;
and (z) the present value of any lease payments in excess of $50,000 due
under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness except where such default would not
result in a Material Adverse Effect.

 

(aa)         Tax
Status.  Except for matters that
would not, individually or in the aggregate, result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no actual knowledge of a tax
deficiency which has been asserted or threatened against the Company or any
Subsidiary.

 

(bb)         Foreign
Corrupt Practices.  Neither the
Company, nor to the actual knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, 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 law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(cc)         Accountants.  The Company’s accounting firm is set forth on
Schedule 3.1(cc) of the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm is a registered public accounting firm as required by the
Exchange Act who the Company expects will express its opinion with respect to
the financial statements 

 

16

 

to be
included in the Company’s next Annual Report on Form 10-K for the year
ending December 31, 2009.

 

(dd)         Acknowledgment
Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each
of the Purchasers is acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated
thereby.  The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of
the transactions contemplated hereby by the Company and its representatives.

 

(ee)         Acknowledgement
Regarding Purchaser’s Trading Activity. 
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Sections 3.2(e) and 4.14 hereof), it is
understood and acknowledged by the Company that: (i) none of the Purchasers
have been asked by the Company to agree, nor has any Purchaser agreed, to
desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company
or to hold the Securities for any specified term; (ii) past or future open
market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in
any “derivative” transaction.  The
Company further understands and acknowledges that (y) one or more
Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the
periods that the value of the Warrant Shares deliverable with respect to
Securities are being determined, and (z) such hedging activities (if any)
could reduce the value of the existing stockholders’ equity interests in the
Company at and after the time that the hedging activities are being
conducted.  The Company acknowledges that such aforementioned hedging
activities do not constitute a breach of any of the Transaction Documents.

 

(ff)           Regulation
M Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and 

 

17

 

(iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

 

(gg)         FDA.  As to each product subject to the
jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations thereunder
(“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold,
and/or marketed by the Company or any of its Subsidiaries (each such product, a
“Pharmaceutical Product”), such Pharmaceutical Product is being manufactured,
packaged, labeled, tested, distributed, sold and/or marketed by the Company in
compliance with all applicable requirements under FDCA and similar laws,
rules and regulations relating to registration, investigational use,
premarket clearance, licensure, or application approval, good manufacturing
practices, good laboratory practices, good clinical practices, product listing,
quotas, labeling, advertising, record keeping and filing of reports, except
where the failure to be in compliance would not have a Material Adverse Effect.  There is no pending, completed or, to the
Company’s knowledge, threatened, action (including any lawsuit, arbitration, or
legal or administrative or regulatory proceeding, charge, complaint, or
investigation) against the Company or any of its Subsidiaries, and none of the
Company or any of its Subsidiaries has received any notice, warning letter or
other communication from the FDA or any other governmental entity, which
(i) contests the premarket clearance, licensure, registration, or approval
of, the uses of, the distribution of, the manufacturing or packaging of, the
testing of, the sale of, or the labeling and promotion of any Pharmaceutical
Product, (ii) withdraws its approval of, requests the recall, suspension,
or seizure of, or withdraws or orders the withdrawal of advertising or sales
promotional materials relating to, any Pharmaceutical Product,
(iii) imposes a clinical hold on any clinical investigation by the Company
or any of its Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter into a
consent decree of permanent injunction with the Company or any of its
Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse
Effect.  The properties, business and
operations of the Company have been and are being conducted in all material
respects in accordance with all applicable laws, rules and regulations of
the FDA.  The Company has not been informed by the FDA that the FDA will
prohibit the marketing, sale, license or use in the United States of any
product proposed to be developed, produced or marketed by the Company nor has
the FDA expressed any concern as to approving or clearing for marketing any
product being developed or proposed to be developed by the Company.

 

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 (unless as of a specific date therein):

 

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

 

18

 

and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of such
Purchaser.  Each Transaction Document to
which it 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 valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

(b)           Understandings or Arrangements.  Such Purchaser is acquiring the Securities as
principal for its own account and has no direct or indirect arrangement or
understandings with any other persons to distribute or 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.

 

(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it exercises any Warrants, it will be either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(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, at the present time, is able to afford a complete loss of such
investment.

 

(e)           Certain Transactions and
Confidentiality.  Other than
consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing as of the time that such Purchaser first received a term sheet
(written or oral) as of the Company or any other Person representing the
Company setting forth the material terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment 

 

19

 

decision
to purchase the Securities covered by this Agreement.  Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). The Purchasers acknowledge that they have read the
Prospectus, the Prospectus Supplement, the Registration Statement and the SEC
Reports. The Purchasers have not received any written documents that would
constitute an offer to sell, or the solicitation of an offer to buy the
Securities or that would constitute a prospectus under the Securities Act,
other than the Prospectus and the Prospectus Supplement. Notwithstanding the
foregoing, for avoidance of doubt, nothing contained herein shall constitute a
representation or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available shares to
borrow in order to effect Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that the representations contained
in Section 3.2 shall not modify, amend or affect such Purchaser’s right to
rely on the Company’s representations and warranties contained in this
Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of the
transaction contemplated hereby.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Warrant Shares.  If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement to cover
the issuance or resale of the Warrant Shares or if the Warrant is exercised via
cashless exercise, the Warrant Shares issued pursuant to any such exercise
shall be issued free of all legends.  If
at any time following the date hereof the Registration Statement (or any subsequent
registration statement registering the sale or resale of the Warrant Shares) is
not effective or is not otherwise available for the sale or resale of the
Warrant Shares, the Company shall immediately notify the holders of the
Warrants in writing that such registration statement is not then effective and
thereafter shall promptly notify such holders when the registration statement
is effective again and available for the sale or resale of the Warrant Shares
(it being understood and agreed that the foregoing shall not limit the ability of
the Company to issue, or any Purchaser to sell, any of the Warrant Shares in
compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants.

 

4.2       Furnishing of Information.  Until the earliest of the time that
(i) no Purchaser owns Securities or (ii) the Warrants have expired,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by the Company after the date hereof pursuant to the Exchange Act even if the
Company is not then subject to the reporting requirements of the Exchange
Act.  As long as any Purchaser owns
Securities, 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, including without limitation, under
Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent required
from time to time to 

 

20

 

enable such Person to
sell such Securities without registration under the Securities Act, including
without limitation, within the requirements of the exemption provided by Rule 144.

 

4.3       Integration.  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 for purposes of the rules and
regulations of any Trading Market such that it would require stockholder
approval prior to the closing of such other transaction unless stockholder
approval is obtained before the closing of such subsequent transaction.

 

4.4       Securities Laws Disclosure; Publicity.  The Company shall, by 9:00 a.m. (New
York City time) on the Trading Day immediately following the date hereof, issue
a press release disclosing the material terms of the transactions contemplated
hereby.  From and after the issuance of
such press release, the Company shall have publicly disclosed all material,
non-public information delivered to any of the Purchasers by the Company or any
of its subsidiaries, or any of their respective officers, directors, employees
or agents in connection with the transactions contemplated by the Transaction
Documents.  The Company and each
Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company
nor any Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company, with respect to
any press release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be 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 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 filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except
(a) as required by federal securities law in connection with the filing of
final Transaction Documents (including signature pages thereto) with the
Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this clause
(b).

 

4.5       Stockholder Rights Plan.  No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company
and the Purchasers.

 

4.6       Non-Public Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, 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 with the Company regarding the confidentiality and use of such
information.  The Company 

 

21

 

understands and confirms
that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

 

4.7       Use of Proceeds.  Except as set forth in the Prospectus
Supplement, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes.

 

4.8       Indemnification of Purchasers.   Subject to the provisions of this
Section 4.8, the Company will indemnify and hold each Purchaser and its
directors, officers, stockholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person
who controls such Purchaser (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, stockholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur due to a claim by a third party as a result of or
relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of such Purchaser, with respect to any
of the transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser’s representations, warranties
or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense thereof
with counsel of its own choosing reasonably acceptable to the Purchaser
Party.  Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party,
in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel.  The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The Company will have the exclusive right to settle any
claim or proceeding, provided that the Company will not settle any such claim,
action or proceeding without the prior written consent of the Purchaser Party,
which will not be unreasonably withheld or delayed; 

 

22

 

provided, however, that
such consent shall not be required if the settlement includes a full and
unconditional release satisfactory to the Purchaser Party from all liability
arising or that may arise out of such claim or proceeding and does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any Purchaser Party.

 

4.9       Reservation of Common Stock. As of
the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue Shares pursuant to this Agreement and Warrant Shares pursuant
to any exercise of the Warrants.

 

4.10         Listing
of Common Stock. The Company hereby agrees to use reasonable best efforts
to maintain the listing or quotation of the Common Stock on the Trading Market
on which it is currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Shares and Warrant Shares on such
Trading Market and promptly secure the listing of all of the Shares and Warrant
Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
then include in such application all of the Shares and Warrant Shares, and will
take such other action as is necessary to cause all of the Shares and Warrant
Shares to be listed or quoted on such other Trading Market as promptly as
possible.  The Company will use its
reasonable best efforts to continue the listing and trading of its Common Stock
on a Trading Market and will comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Trading Market.

 

4.11         [RESERVED]

 

4.12         Subsequent
Equity Sales.  From the date hereof
until 30 days after the Closing Date, the Company shall not issue, enter into
any agreement to issue or announce the issuance or proposed issuance of any
shares of Common Stock or Common Stock Equivalents. Notwithstanding the
foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance.

 

4.13         Equal
Treatment of Purchasers.  No
consideration (including any modification of any Transaction Document) 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 for the
Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

 

4.14         Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly
with the other Purchasers, covenants that neither it nor any Affiliate acting
on its behalf or pursuant to any understanding with it will execute any
purchases or sales, including Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement and ending at
such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in
Section 4.4.  Each 

 

23

 

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 pursuant to the initial
press release as described in Section 4.4, such Purchaser will maintain
the confidentiality of the existence and terms of this transaction and the
information included in the Disclosure Schedules.  Notwithstanding the
foregoing and notwithstanding anything contained in this Agreement to the
contrary, the Company expressly acknowledges and agrees that (i) no
Purchaser makes any representation, warranty or covenant hereby that it will
not engage in effecting transactions in any securities of the Company after the
time that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.4, (ii) no Purchaser shall be restricted or prohibited from
effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.4 and (iii) no
Purchaser shall have any duty of confidentiality to the Company or its
Subsidiaries after the issuance of the initial press release as described in
Section 4.4.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.

 

ARTICLE V.

MISCELLANEOUS

 

5.1       Termination.  This Agreement
may be terminated by any Purchaser, as to such Purchaser’s obligations
hereunder only and without any effect whatsoever on the obligations between the
Company and the other Purchasers, by written notice to the other parties, if
the Closing has not been consummated on or before March 11, 2010; provided,
however, 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.  Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, 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 to the Purchasers.

 

5.3       Entire Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, 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 

 

24

 

on the earliest of:
(a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth 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 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.  The
address for such notices and communications shall be as set forth on the
signature pages attached hereto.

 

5.5       Amendments; Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waived provision 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 any 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.

 

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 (other than by merger).  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, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions of the
Transaction Documents that apply to the “Purchasers.”

 

5.8       No Third-Party Beneficiaries.  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, except as otherwise set forth in Section 4.8.

 

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, stockholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York.
Each party hereby 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 

 

25

 

agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party 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 other manner
permitted by law.  If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company under
Section 4.8, 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 and warranties contained
herein shall survive the Closing and the delivery of the Securities.

 

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
or by e-mail delivery of a “.pdf” format data file, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or
“.pdf” signature page were an original thereof.

 

5.12         Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

 

5.13         Rescission
and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other 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,
that in the case of a rescission of an exercise of a Warrant, the applicable
Purchaser shall be required to return any shares of Common Stock subject to any
such rescinded exercise notice concurrently with the return to such Purchaser
of the aggregate exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares pursuant to such 

 

26

 

Purchaser’s Warrant (including, issuance of a
replacement warrant certificate evidencing such restored right).

 

5.14         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 (in the case of mutilation), or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity or security, if
requested.  The applicant for a new
certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with
the issuance of such replacement Securities.

 

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 contained in the
Transaction Documents and hereby agree to waive and not to assert in any action
for specific performance of any such obligation the defense that a remedy at
law would be adequate.

 

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 or non-performance of the obligations of any other Purchaser under
any Transaction Document.  Nothing
contained herein or in any other 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 their review and negotiation
of the Transaction Documents.  The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers.  For reasons of administrative 

 

27

 

convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through WS.  WS does not represent any of the Purchasers
and only represents Rodman & Renshaw, the placement agent.

 

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

 

5.20         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, the normal 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. In
addition, each and every reference to share prices and shares of Common Stock
in any Transaction Document shall be subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.

 

5.21         WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

 

(Signature Pages Follow)

 

28

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

	
  BIOSANTE
  PHARMACEUTICALS, INC.

  	
   

  	
  Address for
  Notice:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Fax: (847)
  478-9260

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

With a copy to (which shall not constitute notice):

 

Oppenheimer Wolff & Donnelly LLP

Plaza VII, Suite 3300

45 South Seventh Street

Minneapolis, Minnesota 55402

Facsimile: (612) 607-7100

Attention:
Amy E. Culbert, Esq.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

29

 

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

 

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.

 

	
  Name of
  Purchaser:

  	
   

  
	
   

  	
   

  
	
  Signature
  of Authorized Signatory of Purchaser:

  	
   

  
	
   

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
   

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  
	
   

  	
   

  
	
  Email Address of
  Authorized Signatory:

  	
   

  
	
   

  	
   

  
	
  Facsimile Number
  of Authorized Signatory:

  	
   

  

 

Address for Notice of
Purchaser:

 

 

Address for Delivery of
Securities for Purchaser (if not same as address for notice):

 

Subscription Amount: $

 

Shares:

 

Warrant Shares:

 

[SIGNATURE PAGES CONTINUE]

 

30

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