Document:

Warrant
      No.  [__________]

            	
              Exhibit
      4.5

            

    

    

    VENTRUS
BIOSCIENCES, INC.

    COMMON
STOCK WARRANT

     

    THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR
UNDER THE SECURITIES LAWS OF ANY STATE.  THIS WARRANT IS SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  THE ISSUER OF THIS
WARRANT MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

     

    This
certifies that PARAMOUNT CREDIT
PARTNERS, LLC (the “Holder”), its
designees or permitted assigns, subject to the terms and conditions set forth
herein, at any time after the Commencement Date and prior to the Expiration Date
(as such terms are defined below), is entitled to purchase from VENTRUS BIOSCIENCES, INC., a
Delaware corporation (the “Company”), that
number of fully-paid and non-assessable shares (subject to adjustment as
provided herein) (the “Warrant Shares”) of
the Company’s Common Stock, $0.001 par value per share (the “Common Stock”), equal
to (i) forty percent (40%) of the principal amount of that certain Senior 10%
Promissory Note dated the date hereof in the principal amount of $1,100,000,
issued by the Company to the Holder (the “Note”) pursuant to
that certain Note and Warrant Purchase Agreement dated the date hereof between
the Company and the Holder (the “Purchase Agreement”),
divided by (ii) the lowest price at which equity securities of the Company are
sold in the first Qualified Financing (as defined in the Note) following the
date hereof (the “Lowest Price Paid”),
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly completed and signed
and upon payment of the aggregate Exercise Price (as defined below) for the
number of Warrant Shares for which this Warrant is being exercised determined in
accordance with the provisions hereof.  The exercise price (the “Exercise Price”) per
Warrant Share issuable pursuant to this Common Stock Warrant shall be equal to
110% of the Lowest Price Paid, payable in accordance with Section 1(b)
hereof.

     

    Notwithstanding
the foregoing, in the event that the Company consummates a merger, share
exchange, or other transaction (or series of related transactions), other than
in connection with a Qualified Financing, in which (i) the Company merges into
or otherwise becomes a wholly-owned subsidiary of a company subject to the
public company reporting requirements of the Securities Exchange Act of 1934, as
amended, and (ii) the aggregate consideration accorded to the Company in such
transaction(s) (the “Reverse Merger
Consideration”) is greater than or equal to $10,000,000 (a “Reverse Merger”),
then this Warrant shall be exercisable immediately prior to the Reverse Merger
(and subject to Section 3 hereof following the Reverse Merger) for that number
of Warrant Shares, with an Exercise Price, in each case determined in accordance
with, and on the same terms and conditions, as provided for in the event of a
Qualified Financing above, provided that for purposes thereof, the Lowest Price
Paid shall be deemed equal to the quotient obtained by dividing the (i) Reverse
Merger Consideration less the amount of unpaid principal and accrued interest
under the Note by (ii) the number of shares of Common Stock outstanding
immediately prior to such Reverse Merger, on a fully diluted basis, but without
giving effect to the conversion of the Notes or any other senior promissory
notes of the Company or any placement warrants that have been issued by the
Company issued to the Placement Agent (as defined in the Purchase
Agreement).  If any Reverse Merger Consideration is other than cash, its
value will be deemed to be its fair market value as determined, in good faith,
by the Board of Directors of the Company.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Notwithstanding
the foregoing, if neither a Qualified Financing nor a Reverse Merger occur on or
before January 23, 2011, then this Warrant will be exercisable for that number
of Warrant Shares equal to forty percent (40%) of the principal amount of the
Note purchased by the original holder divided by $1.00, at a per share exercise
price of $1.00.

     

    This
Warrant is issued subject to the following terms and conditions:

     

    1. 
         Exercise, Issuance of
Certificates.  Subject to Sections 3(d) and 4 hereof, the Holder may
exercise this Warrant, at any time or from time to time, during the period (a)
commencing on the consummation of a Qualified Financing or a Reverse Merger (the
“Commencement
Date”), and (b)
expiring at 5:00 p.m. (Eastern Time) on January 23, 2014 (the “Expiration Date”).  The Holder may
exercise this Warrant on or prior to the Expiration Date for all or any part of
the Warrant Shares (but not for a fraction of a share) that may be purchased
hereunder, as that number may be adjusted pursuant to Section 3 of this
Warrant.  The Company agrees that the Warrant Shares purchased under this
Warrant shall be and are deemed to be issued to the Holder hereof as the record
owner of such Warrant Shares as of the close of business on the date on which
this Warrant shall have been surrendered, properly endorsed, the completed and
executed Form of Subscription delivered, and payment made for such Warrant
Shares (such date, a “Date of Exercise”).  Certificates for the
Warrant Shares so purchased, together with any other securities or property to
which the Holder hereof is entitled upon such exercise, shall be delivered to
the Holder hereof by the Company at the Company’s expense as soon as practicable
after the rights represented by this Warrant have been so exercised, but in any
event not later than ten (10) business days following the Date of
Exercise.  In case of a purchase of less than all the Warrant Shares which
may be purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver to the Holder hereof within a reasonable time a new Warrant
or Warrants of like tenor for the balance of the Warrant Shares purchasable
under the Warrant surrendered upon such purchase.  Each stock certificate
so delivered shall be registered in the name of such Holder and issued with a
legend in substantially the form of the legend placed on the front of this
Warrant.

     

    (a)           The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same.  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.

     

    (b)           Payment of Exercise
Price.  The
Holder shall pay the Exercise Price by delivering immediately available funds to
the Company.

    
      
         

      

      
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    2. 
         Shares to be Fully Paid;
Reservation of Shares.  The Company covenants and agrees that all
Warrant Shares, will, upon issuance and payment of the applicable Exercise
Price, be duly authorized, validly issued, fully paid and nonassessable, and
free of all preemptive rights, liens and encumbrances, except for restrictions
on transfer provided for herein.  The Company shall at all times reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of the rights to purchase all Warrant
Shares granted pursuant to this Warrant, such number of shares of Common Stock
as shall, from time to time, be sufficient therefor.

     

    3. 
         Adjustment of Exercise Price
and Number of Shares.  The Exercise Price and
the total number of Warrant Shares shall be subject to adjustment from time to
time upon the occurrence of certain events described in this Section
3.

     

    (a)          Subdivision or Combination
of Stock.  In the event the outstanding shares of the Company’s
Common Stock shall be increased by a stock dividend payable in Common Stock,
stock split, subdivision, or other similar transaction occurring after the date
hereof into a greater number of shares of Common Stock, the Exercise Price in
effect immediately prior to such subdivision shall be proportionately reduced
and the number of Warrant Shares issuable hereunder proportionately
increased.  Conversely, in the event the outstanding shares of the
Company’s Common Stock shall be decreased by reverse stock split, combination,
consolidation, or other similar transaction occurring after the date hereof into
a lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased and the
number of Warrant Shares issuable hereunder proportionately
decreased.

     

    (b)         Reclassification. 
If any reclassification of the capital stock of the Company or any
reorganization, consolidation, merger (other than a Reverse Merger), or any
sale, lease, license, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all, of the business and/or
assets of the Company (the “Reclassification
Events”) shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, or other assets or property,
then, as a condition of such Reclassification Event, lawful and adequate
provisions shall be made whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities, or other assets
or property as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby.  In any Reclassification Event,
appropriate provision shall be made with respect to the rights and interests of
the Holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares), shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities, or other assets or property
thereafter deliverable upon the exercise hereof.

    
      
         

      

      
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    (c)         Notice of
Adjustment.  Upon any adjustment of the Exercise Price, any increase
or decrease in the number of Warrant Shares or any change in the type of stock,
securities or other assets or property issuable upon exercise hereof, the
Company shall give written notice thereof, by first class mail postage prepaid,
addressed to the registered Holder of this Warrant at the address of such Holder
as shown on the books of the Company.  The notice shall be prepared and
signed by the Company’s Chief Financial Officer and shall state the Exercise
Price resulting from such adjustment, the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant
and, if applicable, the type of stock, securities or other assets or property
then issuable upon exercise hereof, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based.

     

    (d)         Termination Upon a Sale of
the Company.  Notwithstanding any other provision of this Section 3,
upon the consummation of a Sale of the Company (as defined in the Note) prior
to, but not in connection with, a Qualified Financing or Reverse Merger, this
Warrant shall terminate immediately upon such consummation without the
opportunity for exercise.  “Sale of the Company” shall mean a transaction
(or series of related transactions) with one or more non-affiliates, pursuant to
which such party or parties acquire (x) capital stock of the Company or the
surviving entity possessing the voting power to elect a majority of the Board of
Directors of the Company or the surviving entity (whether by merger,
consolidation, sale or transfer of the Company’s capital stock or otherwise); or
(y) all or substantially all of the Company’s assets determined on a
consolidated basis.

     

    4. 
         Redemption of
Warrants.

     

    (a)           Redemption. 
This Warrant maybe redeemed at the option of the Company, at any time after the
date that the Common Stock is traded on the Over-the-Counter Bulletin Board (the
“OTCBB”) or on
a national securities exchange, following a period of thirty (30) consecutive
calendar days in which the per share average closing sale price of the Common
Stock equals or exceeds an amount that is twice the Exercise Price, on notice as
set forth in Section 4(b) hereof, and at a redemption price equal to $0.001 (the
“Redemption
Price”) for each Warrant Share purchasable under this Warrant; provided, however, that this
Warrant may not be redeemed by the Company unless the resale of the Warrant
Shares purchasable hereunder has been registered under the Securities Act of
1933, as amended (the “Act”) or are
otherwise freely tradable.  For purposes of this Section 4(a), the closing
sale price of the Common Stock shall be determined by the closing price as
reported by the OTCBB so long as the Common Stock is quoted on the OTCBB, and if
the Common Stock is hereafter listed or quoted on the Nasdaq Capital Market or a
national securities exchange, shall be determined by the last reported sale
price on the primary exchange or market on which the Common Stock is
traded.

     

    (b)          Notice of
Redemption.  In the case of any redemption of this Warrant, the
Company shall give notice of such redemption to the Holder hereof as provided in
this Section 4(b).  Notice of redemption to the Holder of this Warrant
shall be given in person, by recognized overnight courier, mailed by certified
or registered mail, return receipt requested, or by confirmed facsimile
transmission, to the Holder’s last address and/or facsimile of record with the
Company not less than twenty (20) days prior to the date fixed for
redemption.  Any notice which is given in the manner herein provided shall
be conclusively presumed to have been duly given, whether or not the Holder
receives the notice.  Each such notice shall specify the date fixed
for redemption, the place of redemption and the aggregate Redemption Price, and
shall state that payment of the Redemption Price will be made upon surrender of
this Warrant at such place of redemption, and that if not exercised by the close
of business on the date fixed for redemption, the exercise rights of the Warrant
shall expire unless extended by the Company.  Such notice shall also
state the current Exercise Price and the date on which the right to exercise the
Warrant will expire unless extended by the Company.

    
      
         

      

      
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    (c)          Payment of Redemption
Price.  If notice of redemption shall have been given as
provided in Section 4(b), the Redemption Price shall, unless the Warrant is
theretofore exercised pursuant to the terms hereof, become due and payable on
the date and at the place stated in such notice.  On and after such
date of redemption, the exercise rights of this Warrant shall expire and this
Warrant shall be null and void on presentation and surrender of this Warrant at
such place of payment in such notice specified, this Warrant shall be paid and
redeemed at the Redemption Price per Warrant Share within ten (10) days
thereafter.

     

    5.           No Voting or Dividend
Rights.  Nothing contained in this Warrant shall be construed
as conferring upon the holder hereof the right to vote or to consent to receive
notice as a stockholder of the Company on any other matters or any rights
whatsoever as a shareholder of the Company.  No dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised.

     

    6.           Compliance with the
Act.  The Holder of this Warrant, by acceptance hereof, agrees
that this Warrant is being acquired for its own account and not for any other
person or persons, for investment purposes and that it will not offer, sell, or
otherwise dispose of this Warrant except under circumstances which will not
result in a violation of the Act or any applicable state securities
laws.

     

    7.           Limited
Transferability.  The Holder represents that by accepting this
Warrant it understands that this Warrant and any securities obtainable upon
exercise of this Warrant have not been registered for sale under Federal or
state securities laws and are being offered and sold to the Holder pursuant to
one or more exemptions from the registration requirements of such securities
laws.  In the absence of an effective registration of such securities
or an exemption therefrom, any certificates for such securities shall bear the
legend set forth on the first page hereof.  The Holder understands
that it must bear the economic risk of its investment in this Warrant and any
securities obtainable upon exercise of this Warrant for an indefinite period of
time, as this Warrant and such securities have not been registered under Federal
or state securities laws and therefore cannot be sold unless subsequently
registered under such laws, unless an exemption from such registration is
available.

     

    8.           Amendment, Waiver,
etc.  Except as expressly provided herein, neither this Warrant
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.

     

    9.           Notices.  Any
notice, request, or other document required or permitted to be given or
delivered to the Holder hereof or the Company shall be delivered as set forth in
the Purchase Agreement.

    
      
         

      

      
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    10.         Governing
Law.  This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York without regard to the conflicts of laws provisions
thereof.

     

    11.         Lost or Stolen
Warrant.  Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant and,
in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

     

    12.         Fractional
Shares.  No fractional shares shall be issued upon exercise of
this Warrant.  The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction (calculated to the nearest 1/100th of a share) multiplied by the then
effective Exercise Price on the date the Form of Subscription is received by the
Company.

     

    13.         Successors and
Assigns.  This Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the successors and assigns of the Holder.

     

    14.         Severability of
Provisions.  In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

     

    Remainder
of Page Intentionally Left Blank; Signature Page Follows

    
      
         

      

      
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    IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed by its officer, thereunto
duly authorized as of this day of January, 2009.

     

    
      
        
          	
                  VENTRUS
      BIOSCIENCES, INC.

                
	 
      	 
      
	
                  By:

                	 
      
	
                  Name:

                	
                  Thom
      Rowland

                
	
                  Title:

                	
                  President
      and CEO

                

        

      

    

    

    Signature
Page _____ Common Stock Warrant

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    FORM
OF SUBSCRIPTION

     

    (To be
signed only upon exercise of Warrant)

     

    To:         [COMPANY
NAME]

     

    The
undersigned, the holder of the attached Common Stock Warrant, hereby elects to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder, shares of Common Stock of [COMPANY NAME] and such holder herewith
makes payment of $ therefor.

     

    
      
        The
undersigned requests that certificates for such shares be issued in the name of,
and delivered to: __________
__________________________________________________________________________________________________________________________
whose address is:
__________________________________________________________.

      

    

     

    DATED:                                                      

     

    
      
        
          
            
              
                	 	 
      
	 	
                        (Signature
      must conform in all respects to name of

                        Holder
      as specified on the face of the Warrant)

                      
	 	 
      	 
      
	 	
                        Name: 
      

                      	 
      
	 	 
      	 
      
	 	
                        Title:Exhibit
4.6

    

    THIS NOTE
AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION.  THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.

    

    VENTRUS
BIOSCIENCES, INC.

    CONVERTIBLE
PROMISSORY NOTE

    

    
      	 
      	
              New
      York, NY

            
	
              $___________

            	
              February
      __, 2010

            

    

    

    1.           Principal and
Interest

    

    VENTRUS BIOSCIENCES, INC. (the “Company”), a Delaware
corporation, for value received, hereby promises to pay to the order of
______________________, or assigns (“Holder”), in lawful
money of the United States of America at the address for notices to Holder set
forth in the applicable Purchase Agreement (as defined below) (or such other
address as Holder shall provide to the Company pursuant hereto), the principal
amount of ____________ dollars ($___________), together with interest as set
forth below.

    

    The Company promises to pay interest,
compounded annually, on the unpaid principal amount from the date hereof until
such principal amount is paid in full at the rate of eight percent (8%), or such
lesser rate as shall be the maximum rate allowable under applicable
law.  Interest from the date hereof shall be computed on the basis of
a 360-day year of twelve 30-day months, and shall be accrued and added to
principal on an annual basis.  Unless converted or prepaid earlier as
set forth below, all unpaid principal and unpaid accrued interest on this Note
shall be due and payable on September 10, 2010 (the “Due Date”); provided, however, that during
the continuance of an Event of Default (as defined herein), the interest rate on
this Note shall be increased to twelve percent (12%) per annum.

    

    This Note is one of a series of
convertible promissory notes of like tenor and ranking (collectively, the
“Notes”) made by the Company in favor of certain investors and issued, from time
to time, on and after the date hereof, all upon terms set forth in that certain
Confidential Private Placement Memorandum, dated January 5, 2010, as same may be
amended and supplemented from time (collectively referred to herein as the
“Memorandum”), which has been issued by the Company.

    

    The Notes are unsecured obligations of
the Company and rank pari passu with the Company’s other existing indebtedness,
and no new indebtedness which is secured or senior to the Notes may be issued by
the Company without the consent of the Holders of Notes representing at least
sixty six and two thirds percent (662⁄3%) of the principal amount of all
outstanding Notes.  No consent of the Holders of the Notes is required
for issuances by the Company of unsecured indebtedness that ranks pari passu
with, or junior to, the Notes.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    2.           Conversion.

    

    2.1          (a)
All unpaid principal and accrued unpaid interest on this Note shall be
automatically converted into the Company’s common stock, par value $0.001
(“Common Stock”) upon a Qualified IPO (as defined below) at a conversion price
equal to 70% of the price at which such securities of the Company are sold in a
Qualified IPO (the “IPO Price”), and on
such other terms and conditions on which such securities are sold in the
Qualified IPO.  For purposes hereof, “Qualified IPO” means
the consummation of an underwritten initial public offering of equity securities
by the Company resulting in aggregate gross cash proceeds (before commissions or
other expenses) to the Company of at least $10,000,000.

    

    (b)       In
the event that the Company consummates a merger, share exchange, or other
similar transaction (or series of related transactions), other than in
connection with a Qualified IPO, in which (i) the Company merges into or
otherwise becomes a wholly-owned subsidiary of a company that (A) is subject to
the public company reporting requirements of the Securities Exchange Act of
1934, as amended, and (B) does not engage in any active operations, and (ii) the
aggregate consideration payable to the Company or its stockholders in such
transaction(s) (the “Reverse Merger
Consideration”) is greater than or equal to $10,000,000 (a “Reverse Merger”),
then immediately prior to such Reverse Merger, all unpaid principal and accrued
but unpaid interest on this Note shall be automatically converted into Common
Stock at a conversion price per share equal to 70% of the quotient obtained by
dividing (i) the Reverse Merger Consideration less the amount of unpaid
principal and accrued but unpaid interest on all Notes, Bridge Notes (as defined
below) and the Existing Notes (as defined below) immediately prior to the
Reverse Merger by (ii) the number of shares of Common Stock of the Company then
outstanding, on a fully diluted basis (the “Outstanding
Shares”).  For this purpose, Outstanding Shares shall (i)
exclude any shares of Common Stock issuable upon conversion of the Notes, Bridge
Notes or the Existing Notes or upon exercise of the warrants issued to the
Placement Agent in connection with the sale of the Notes  but (ii)
include all shares of Common Stock issuable upon the exercise of (A) options and
other warrants outstanding (to the extent that such options or warrants are
exercised or assumed in connection with the Reverse Merger) and (B) options that
the Company is required by agreement to issue to one or more employees,
consultants, or licensors of the Company in connection with such Reverse Merger
to maintain a specified percentage interest in the Company (but which have not
yet been issued).  For purposes hereof, “Existing Notes” shall mean
collectively, (1) that certain Future Advance Promissory Note dated April 24,
2009, in favor of Capretti Grandi, LLC and (2) that certain Future Advance
Promissory Notes dated June 23, 2008, as amended on July 23, 2009, in favor of
Paramount Biosciences, LLC.

    

    The
shares of Common Stock issuable pursuant to clause 2.1(b) above shall be issued
effective prior to the consummation of the Reverse Merger and conditioned upon
the consummation of such Reverse Merger.  As a holder of such shares of
Common Stock, the Holder will receive the consideration payable in connection
with such Reverse Merger on a share-for-share basis with all other stockholders
of the Company and in like kind, at the same time and upon the same conditions
as all other stockholders of the Company. 

    

    If any
Reverse Merger Consideration is other than cash, its value will be deemed to be
its fair market value as determined, in good faith, by the Board of Directors of
the Company.  The value of any securities shall be determined by the Board
of Directors of the Company as set forth for a Sale of the Company in Section
2.1(c) below.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (c)      
The Notes plus any unpaid accrued interest thereon shall automatically convert
into shares of Common Stock of the Company effective immediately prior to the
consummation of a Sale of the Company.  For purposes hereof, “Sale of the Company”
shall mean a transaction (or series of related transactions) with one or more
non-affiliates of the Company, pursuant to which such party or parties acquire
(i) capital stock of the Company or the surviving entity possessing the voting
power to elect a majority of the board of directors of the Company or the
surviving entity (whether by merger, consolidation, sale or transfer of the
Company’s capital stock or otherwise) (a “Stock Acquisition”);
or (ii) all or substantially all of the Company’s assets determined on a
consolidated basis (an “Asset Sale”);
provided, however, that notwithstanding anything to the contrary contained
herein, to the extent any transaction (or series of related transactions)
qualifies as a Qualified Financing or a Reverse Merger, such transaction(s)
shall not be deemed to constitute a Sale of the Company.  For purposes
hereof, “Sale
Proceeds” shall mean (i) in the event of a Stock Acquisition, the cash or
securities paid by the acquirer to the Company or the selling stockholders to
acquire such shares; and (ii) in the event of an Asset Sale, the cash or
securities legally available for distribution to the Company’s stockholders,
after creation of adequate reserves for liabilities of the
Company.  

    

    The price
per share at which the Notes will convert into Common Stock of the Company upon
a Sale of the Company will be equal to the lesser of (i) 70% of the quotient
obtained by dividing (x) the value of the Sale Proceeds received in such
transaction less the unpaid principal and accrued but unpaid interest on the
Notes, Bridge Notes and the Existing Notes immediately prior to the Sale of the
Company by (y) the number of Outstanding Shares, and (ii) the quotient obtained
by dividing (x) $50,000,000 less the unpaid principal and accrued but unpaid
interest on the Notes, the Bridge Notes and the Existing Notes by (y) the number
of Outstanding Shares.  For purposes of this Section 2.1(c),
Outstanding Shares shall be determined as set forth in Section 2.1(b) of this
Note, except that it shall not include any shares of Common Stock issuable upon
the exercise of any options and warrants outstanding immediately prior to such
Sale of the Company if such options or warrants have an exercise price in excess
of the Note conversion price determined under this Section 2.1(c)).

    

    (d)
      In the event the Company completes (in one
or a series of related transactions) a merger, consolidation, sale or transfer
of more than fifty percent (50%) of the Company’s capital stock, in each case,
which does not constitute a Sale of the Company, a Reverse Merger or a Qualified
Financing (an “Other Transaction”), then the term “Securities” as used herein
shall thereafter refer to the equity securities or securities convertible into
or exchangeable for equity securities of the surviving, resulting, combined or
acquiring entity in such merger, consolidation, sale or transfer.

    

    2.2         Upon
conversion of this Note in accordance with the terms of this Section 2, the
applicable amount of outstanding principal and accrued unpaid interest of the
Note shall be converted without any further action by the Holder and whether or
not the Note is surrendered to the Company or its transfer agent.  The
Company shall not be obligated to issue certificates evidencing the shares of
the securities issuable upon such conversion unless the Note is either delivered
to the Company or its transfer agent, or the Holder notifies the Company or its
transfer agent that such Note has been lost, stolen or destroyed and executes an
agreement satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with such Note.  The Company shall, as
soon as practicable after such delivery, or such agreement and indemnification,
issue and deliver to such Holder of such Note, a certificate or certificates for
the securities to which the Holder shall be entitled.  Such conversion
shall be deemed to have been made concurrently with the close of the Qualified
IPO, Sale of the Company or Reverse Merger.  The person or persons
entitled to receive securities issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such securities on such
date. The Company shall not issue fractional shares but shall round up the
number of shares issued to the next whole number.  Any conversion
effected in accordance with this Section 2 shall be binding upon the Holder
hereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    3.           Prepayment.  The
Notes may not be prepaid at any time, in whole or in part, prior to their
maturity.

    

    4.           Events of
Default.  The entire unpaid principal amount under this Note
and the interest due thereon shall become and be due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, if any one or more of the following events (herein
called “Events of Default”) shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and be continuing at the time of such
notice, that is to say:

    

    (a)           the
Company shall default in the performance of, or violate any of the covenants and
agreements contained in this Note or the Subscription Agreement executed in
connection with the Memorandum, including without limitation, the failure to pay
the Note on the Due Date;

     

    (c)           there
shall be a dissolution, termination of existence, suspension or discontinuance
of the Company’s business for a continuous period of 60 days or it ceases to
operate as going concern;

     

    (d)           if
the Company shall:

     

    (i)           admit
in writing its inability to pay its debts generally as they become
due;

    (ii)          file
a petition in bankruptcy or a petition to take advantage of any insolvency
act;

    (iii)         convey
any material portion of the assets of the Company to a trustee, mortgage or
liquidating agent or make an assignment for the benefit of
creditors;

    

    (iv)         consent
to the appointment of a receiver, trustee, custodian or similar official, for
the Company or any material portion of the property or assets of the Company;
or

    

    (v)          on
a petition in bankruptcy filed against it, be adjudicated a bankrupt;
or

    

    (vi)         file
a petition or answer seeking reorganization or arrangement under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America or any State, district or territory thereof;

    

    (e)           if
a court of competent jurisdiction shall enter an order, judgment, or decree
appointing, without the consent of the Company, a receiver of the whole or any
substantial part of the Company’s assets, and such order, judgment or decree
shall not be vacated or set aside or stayed within 60 days from the date of
entry thereof;

     

    (f)           if,
under the provisions of any other law for the relief or aid of debtors, any
court of competent jurisdiction shall assume custody or control of the whole or
any substantial part of the Company’s assets and such custody or control shall
not be terminated or stayed within 60 days from the date of assumption of such
custody or control;

     

    (g)           the
Company shall default in any of its obligations under any Bridge Note or
Existing Note or any other promissory note, indenture or any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be evidenced
any indebtedness for borrowed money or money due in an amount exceeding $50,000,
whether such indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;
or

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (h)           any
representation or warranty made by the Company in the Subscription Agreement
was, when made, untrue or misleading, the result of which is reasonably likely
to have a Material Adverse Effect.

     

    If any
Event of Default shall have occurred and be continuing, the Holder may proceed
to protect and enforce the Holder’s rights either by suit in equity and/or by
action at law, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may proceed to enforce the payment of all sums due upon this Note or to
enforce any other legal or equitable right of the Holder.

     

    5.           Attorney’s
Fees.  If the indebtedness represented by this Note or any part
thereof is collected in bankruptcy, receivership or other judicial proceedings
or if this Note is placed in the hands of attorneys for collection after
default, the Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys’ fees and costs incurred by
Holder.

    

    6.           Notices. Any notice,
other communication or payment required or permitted hereunder shall be in
writing and shall be deemed to have been given upon delivery to the address
provided pursuant to the Purchase Agreement. In the case of notice to either
party, copies should be sent to W. David Mannheim, Esq., Wyrick Robbins Yates
& Ponton LLP, 4101 Lake Boone Trail Suite
300, Raleigh, NC 27607-7506. The Company shall notify the Holder in writing at
least five (5) days prior to the closing of a Qualified IPO, Sale of the Company
or Reverse Merger.

    

    7.           Notice of Proposed
Transfers.  Prior to any proposed transfer of this Note or the
Common Stock, unless there is in effect a registration statement under the
Securities Act, covering the proposed transfer, the holder hereof shall give
written notice to the Company of such holder’s intention to effect such
transfer.  Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall, if the
Company so requests, be accompanied by an unqualified written opinion of legal
counsel, who shall be reasonably satisfactory to the Company, addressed to the
Company and reasonably satisfactory in form and substance to the Company’s
counsel, to the effect that the proposed transfer of the Note or Common Stock
may be effected without registration under the Securities Act; provided,
however, no such opinion of counsel shall be necessary for a transfer without
consideration by a Holder to any affiliate of such Holder, or a transfer by a
Holder which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his spouse or lineal descendants or
ancestors, if the transferee agrees in writing to be subject to the terms hereof
to the same extent as if such transferee were the original Holder
hereunder.  Each certificate evidencing Common Stock or the Note
transferred as above provided shall bear an appropriate restrictive legend,
except that the Note or certificate shall not bear such restrictive legend if in
the opinion of counsel for the Company such legend is not required in order to
establish compliance with any provisions of the Securities Act.

    

    8.           Acceleration.  This
Note shall become immediately due and payable if (i) the Company commences any
proceeding in bankruptcy or for dissolution, liquidation, winding-up,
composition or other relief under state or federal bankruptcy laws; or (ii)
there is any material breach of any material covenant, warranty, representation
or other term or condition of this Note or the Purchase Agreement at any time
which is not cured within the time periods permitted therein, or if no cure
period is provided therein, within sixty (60) days after the date on which the
Company receives notice of such breach.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    9.           No Dilution or
Impairment.  The Company will not, by amendment of its
Certificate of Incorporation or Bylaws 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 Note, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder of this
Note against dilution or other impairment.

    

    10.         Waivers.  The
Company hereby waives presentment, demand for performance, notice of
non-performance, protest, notice of protest and notice of
dishonor.  No delay on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right. This Note
is being delivered in and shall be construed in accordance with the laws of the
State of Delaware, without regard to the conflicts of laws provisions
thereof.

    

    11.         No Stockholder
Rights.  Nothing contained in this Note shall be construed as
conferring upon the Holder or any other person the right to vote or to consent
or to receive notice as a stockholder of the Company.

    

    12.         Amendment.  Any
term of this Note may be amended with the written consent of the Company and the
holders of not less than sixty-six and two-thirds percent (662⁄3%) of the then
outstanding principal amount of the Notes, even without the consent of the
Holder hereof.  Any amendment effected in accordance with this Section
12 shall be binding upon each holder of any Note, each future holder of all such
Notes, and the Company; provided, however, that no
special consideration or inducement may be given to any such holder in
connection with such consent that is not given ratably to all such holders, and
that such amendment must apply to all such holders ratably in accordance with
the principal amount of their then outstanding Notes.  The Company
shall promptly give notice to all holders of outstanding Notes of any amendment
effected in accordance with this Section 12.

    

    [SIGNATURE
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                ISSUED
      as of the date first above
written.

              

      

    

    

    
      
        
          	 
      	
                  VENTRUS
      BIOSCIENCES, INC.

                
	 
      	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	
                  Name: 

                	
                  Thom
      Rowland

                
	 
      	
                  Title:

                	
                  Acting
      President

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