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                         BIOSANTE PHARMACEUTICALS, INC.
                              AMENDED AND RESTATED
                             1998 STOCK OPTION PLAN

                      (As amended through March 15, 2001)

1.       PURPOSE OF PLAN.

         The purpose of the BioSante Pharmaceuticals, Inc. 1998 Stock Option
Plan (the "Plan") is to advance the interests of BioSante Pharmaceuticals, Inc.
(the "Company") and its shareholders by enabling the Company and its
Subsidiaries to attract and retain persons of ability to perform services for
the Company and its Subsidiaries by providing an incentive to such individuals
through equity participation in the Company and by rewarding such individuals
who contribute to the achievement by the Company of its objectives, as the Board
of Directors describes them.

2.       DEFINITIONS.

         The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:

         2.1      "CVE" means the Canadian Venture Exchange.

         2.2      "CVE REQUIREMENTS" means the by-laws, rules, circulars and
policies of the CVE.

         2.3      "BOARD" means the Board of Directors of the Company.

         2.4 "BROKER EXERCISE NOTICE" means a written notice pursuant to which a
Participant, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.

         2.5      "CHANGE IN CONTROL" means an event described in Section 9.1 of
the Plan.

         2.6      "CODE" means the Internal Revenue Code of 1986, as amended.

         2.7      "COMMITTEE" means the group of individuals administering the
Plan, as provided in Section 3 of the Plan.

         2.8      "COMMON STOCK" means the common stock of the Company, no par
value, or the number and kind of shares of stock or other securities into which
such Common Stock may be changed in accordance with Section 4.3 of the Plan.

         2.9      "DISABILITY" means the disability of the Participant such as
would entitle the Participant to receive disability income benefits pursuant to
the long-term disability plan of the Company or Subsidiary then covering the
Participant or, if no such plan exists or is applicable to

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the Participant, the permanent and total disability of the Participant within
the meaning of Section 22(e)(3) of the Code.

         2.10     "ELIGIBLE RECIPIENTS" means all employees of the Company or
any Subsidiary and any non-employee directors, officers, consultants and
independent contractors of the Company or any Subsidiary.

         2.11     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         2.12     "FAIR MARKET VALUE" means, with respect to the Common Stock,
as of any date (or, if no shares were traded or quoted on such date, as of the
next preceding date on which there was such a trade or quote) (a) the mean
between the reported high and low sale prices of the Common Stock if the Common
Stock is listed, admitted to unlisted trading privileges or reported on any
foreign or national securities exchange or on the Nasdaq National Market or an
equivalent foreign market on which sale prices are reported; (b) if the Common
Stock is not so listed, admitted to unlisted trading privileges or reported, the
closing bid price as reported by the Nasdaq SmallCap Market, OTC Bulletin Board
or the National Quotation Bureau, Inc. or other comparable service; or (c) if
the Common Stock is not so listed or reported, such price as the Committee
determines in good faith in the exercise of its reasonable discretion.

         2.13     "INCENTIVE STOCK OPTION" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.

         2.14     "NON-STATUTORY STOCK OPTION" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that
does not qualify as an Incentive Stock Option.

         2.15     "OPTION" means an Incentive Stock Option or a Non-Statutory
Stock Option.

         2.16     "PARTICIPANT" means an Eligible Recipient who receives one or
more Options under the Plan.

         2.17     "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock or
any other shares of capital stock of the Company that are already owned by the
Participant or, with respect to any Option, that are to be issued upon the
exercise of such Option.

         2.18     "RETIREMENT" means termination of employment or service
pursuant to and in accordance with the regular (or, if approved by the Board for
purposes of the Plan, early) retirement/pension plan or practice of the Company
or Subsidiary then covering the Participant, provided that if the Participant is
not covered by any such plan or practice, the Participant will be deemed to be
covered by the Company's plan or practice for purposes of this determination.

         2.19     "SECURITIES ACT" means the Securities Act of 1933, as amended.

         2.20     "SUBSIDIARY" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Committee.

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         2.21     "TAX DATE" means the date any withholding tax obligation
arises under the Code or other applicable tax statute for a Participant with
respect to an Option.

3.       PLAN ADMINISTRATION.

         3.1      THE COMMITTEE. The Plan will be administered by the Board or
by a committee of the Board. So long as the Company has a class of its equity
securities registered under Section 12 of the Exchange Act, any committee
administering the Plan will consist solely of two or more members of the Board
who are "non-employee directors" within the meaning of Rule 16b-3 under the
Exchange Act and, if the Board so determines in its sole discretion, who are
"outside directors" within the meaning of Section 162(m) of the Code. Such a
committee, if established, will act by majority approval of the members (but may
also take action with the written consent of all of the members of such
committee), and a majority of the members of such a committee will constitute a
quorum. As used in the Plan, "Committee" will refer to the Board or to such a
committee, if established. To the extent consistent with corporate law, the
Committee may delegate to any officers of the Company the duties, power and
authority of the Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however, that only the
Committee may exercise such duties, power and authority with respect to Eligible
Recipients who are subject to Section 16 of the Exchange Act. The Committee may
exercise its duties, power and authority under the Plan in its sole and absolute
discretion without the consent of any Participant or other party, unless the
Plan specifically provides otherwise. Each determination, interpretation or
other action made or taken by the Committee pursuant to the provisions of the
Plan will be final, conclusive and binding for all purposes and on all persons,
including, without limitation, the Company, the shareholders of the Company, the
participants and their respective successors-in-interest. No member of the
Committee will be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under the Plan.

         3.2      AUTHORITY OF THE COMMITTEE.

                  (a) In accordance with and subject to the provisions of the
         Plan, the Committee will have the authority to determine all provisions
         of Options as the Committee may deem necessary or desirable and as
         consistent with the terms of the Plan, including, without limitation,
         the following: (i) the Eligible Recipients to be selected as
         Participants; (ii) the nature and extent of the Options to be made to
         each Participant (including the number of shares of Common Stock to be
         subject to each Option, the exercise price and the manner in which
         Options will become exercisable) and the form of written agreement, if
         any, evidencing such Option; (iii) the time or times when Options will
         be granted; (iv) the duration of each Option; and (v) the restrictions
         and other conditions to which the Options may be subject. In addition,
         the Committee will have the authority under the Plan in its sole
         discretion to pay the economic value of any Option in the form of cash,
         shares of Common Stock, shares of any capital stock of the Company, or
         any combination of both.

                  (b) The Committee will have the authority under the Plan to
         amend or modify the terms of any outstanding Option in any manner,
         including, without limitation, the authority to modify the number of
         shares or other terms and conditions of an Option,

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          extend the term of an Option, accelerate the exercisability or
          otherwise terminate any restrictions relating to an Option, accept the
          surrender of any outstanding Option or, to the extent not previously
          exercised or vested, authorize the grant of new Options in
          substitution for surrendered Options; provided, however that the
          amended or modified terms are permitted by the Plan as then in effect
          and that any Participant adversely affected by such amended or
          modified terms has consented to such amendment or modification. No
          amendment or modification to an Option, however, whether pursuant to
          this Section 3.2 or any other provisions of the Plan, will be deemed
          to be a re-grant of such Option for purposes of this Plan.

                  (c) In the event of (i) any reorganization, merger,
         consolidation, recapitalization, liquidation, reclassification, stock
         dividend, stock split, combination of shares, rights offering,
         extraordinary dividend or divestiture (including a spin-off) or any
         other similar change in corporate structure or shares, (ii) any
         purchase, acquisition, sale or disposition of a significant amount of
         assets or a significant business, (iii) any change in accounting
         principles or practices, or (iv) any other similar change, in each case
         with respect to the Company or any other entity whose performance is
         relevant to the grant or vesting of an Option, the Committee (or, if
         the Company is not the surviving corporation in any such transaction,
         the board of directors of the surviving corporation) may, without the
         consent of any affected Participant, amend or modify the conditions to
         the exercisability of any outstanding Option that is based in whole or
         in part on the financial performance of the Company (or any Subsidiary
         or division thereof) or such other entity so as equitably to reflect
         such event, with the desired result that the criteria for evaluating
         such financial performance of the Company or such other entity will be
         substantially the same (in the sole discretion of the Committee or the
         board of directors of the surviving corporation) following such event
         as prior to such event; provided, however, that the amended or modified
         terms are permitted by the Plan as then in effect.

4.       SHARES AVAILABLE FOR ISSUANCE.

         4.1      MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to Section 4.4
below and adjustment as provided in Section 4.3 of the Plan, the maximum number
of shares of Common Stock that will be available for issuance under the Plan
will be 7,000,000 shares of Common Stock, plus any shares of Common Stock which,
as of the date the Plan is approved by the shareholders of the Company, are
reserved for issuance under the Company's existing Stock Option Plan and which
are not thereafter issued or which have been issued but are subsequently
forfeited and which would otherwise have been available for further issuance
under such plan.

         4.2      ACCOUNTING FOR OPTIONS. Shares of Common Stock that are issued
under the Plan or that are subject to outstanding Options will be applied to
reduce the maximum number of shares of Common Stock remaining available for
issuance under the Plan. Any shares of Common Stock that are subject to an
Option that lapses, expires, is forfeited or for any reason is terminated
unexercised and any shares of Common Stock that are subject to an Option that is
settled or paid in cash or any form other than shares of Common Stock will
automatically again become available for issuance under the Plan.

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         4.3      ADJUSTMENTS TO SHARES AND OPTIONS. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) will make appropriate
adjustment (which determination will be conclusive) as to the number and kind of
securities or other property (including cash) available for issuance or payment
under the Plan and, in order to prevent dilution or enlargement of the rights of
Participants, the number and kind of securities or other property (including
cash) subject to, and the exercise price of, outstanding Options.

         4.4      CVE REQUIREMENTS. So long as the Common Stock of the Company
is listed on the CVE and the Company has not been exempted from the CVE
Requirements the number of shares of Common Stock that may be reserved for
issuance pursuant to the Plan and any other stock option plan, stock purchase
plan or for remuneration for any service performed for or on behalf of the
Company to any one party shall not exceed five percent of the outstanding shares
of Common Stock, on a non-diluted basis.

5.       PARTICIPATION.

         Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of objectives as determined by the Board of the
Company or its Subsidiaries. Eligible Recipients may be granted from time to
time one or more Options as may be determined by the Committee in its sole
discretion. Options will be deemed to be granted as of the date specified in the
grant resolution of the Committee, which date will be the date of any related
agreement with the Participant.

6.       OPTIONS.

         6.1      GRANT. An Eligible Recipient may be granted one or more
Options under the Plan, and such Options will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may designate
whether an Option is to be considered an Incentive Stock Option or a
Non-Statutory Stock Option. To the extent that any Incentive Stock Option
granted under the Plan ceases for any reason to qualify as an "incentive stock
option" for purposes of Section 422 of the Code, such Incentive Stock Option
will continue to be outstanding for purposes of the Plan but will thereafter be
deemed to be a Non-Statutory Stock Option.

         6.2      EXERCISE PRICE. The per share price to be paid by a
Participant upon exercise of an Option will be determined by the Committee in
its discretion at the time of the Option grant; provided, however, that (a) such
price will not be less than 100% of the Fair Market Value of one share of Common
Stock on the date of grant with respect to an Incentive Stock Option (110% of
the Fair Market Value if, at the time the Incentive Stock Option is granted, the
Participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company), and (b) such price will not be less than 85% of the
Fair Market Value of one share of Common Stock on the date of

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grant with respect to a Non-Statutory Stock Option. NOTWITHSTANDING THE
FOREGOING, SO LONG AS THE COMMON STOCK OF THE COMPANY IS LISTED ON THE CVE AND
THE COMPANY HAS NOT BEEN EXEMPTED FROM THE CVE REQUIREMENTS IN THIS REGARD, THE
EXERCISE PRICE PER SHARE OF AN OPTION SHALL NOT BE LESS THAN THE PRICE PER SHARE
PERMITTED BY THE CVE REQUIREMENTS.

         6.3      EXERCISABILITY AND DURATION. An Option will become exercisable
at such times and in such installments as may be determined by the Committee in
its sole discretion at the time of grant; provided, however, that no Incentive
Stock Option may be exercisable after 10 years from its date of grant (five
years from its date of grant if, (a) at the time the Incentive Stock Option is
granted, the Participant owns, directly or indirectly, more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary corporation of the Company or (B) THE COMMON STOCK OF THE COMPANY
IS THEN LISTED ON THE CVE AND THE COMPANY HAS NOT BEEN EXEMPTED FROM THE CVE
REQUIREMENTS IN THIS REGARD).

         6.4      PAYMENT OF EXERCISE PRICE. The total purchase price of the
shares to be purchased upon exercise of an Option must be paid entirely in cash
(including check, bank draft or money order); provided, however, that the
Committee, in its sole discretion and upon terms and conditions established by
the Committee, may allow such payments to be made, in whole or in part, by
tender of a Broker Exercise Notice, Previously Acquired Shares, a promissory
note (on terms acceptable to the Committee in its sole discretion) or by a
combination of such methods.

         6.5      MANNER OF EXERCISE. An Option may be exercised by a
Participant in whole or in part from time to time, subject to the conditions
contained in the Plan and in the agreement evidencing such Option, by delivery
in person, by facsimile or electronic transmission or through the mail of
written notice of exercise to the Company (Attention: Chief Financial Officer)
at its principal executive office in Lincolnshire, Illinois and by paying in
full the total exercise price for the shares of Common Stock to be purchased in
accordance with Section 6.4 of the Plan.

         6.6      AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK
OPTIONS. To the extent that the aggregate Fair Market Value (determined as of
the date an Incentive Stock Option is granted) of the shares of Common Stock
with respect to which incentive stock options (within the meaning of Section 422
of the Code) are exercisable for the first time by a Participant during any
calendar year (under the Plan and any other incentive stock option plans of the
Company or any subsidiary or parent corporation of the Company (within the
meaning of the Code)) exceeds $100,000 (or such other amount as may be
prescribed by the Code from time to time), such excess Options will be treated
as Non-Statutory Stock Options. The determination will be made by taking
incentive stock options into account in the order in which they were granted. If
such excess only applies to a portion of an Incentive Stock Option, the
Committee, in its discretion, will designate which shares will be treated as
shares to be acquired upon exercise of an Incentive Stock Option.

7.       EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE.

         7.1      TERMINATION  DUE TO  DEATH,  DISABILITY  OR  RETIREMENT.
 Unless  otherwise  provided  by the  Committee  in its sole discretion in the
 agreement evidencing an Option:

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                  (a) In the event a Participant's employment or other service
         with the Company and all Subsidiaries is terminated by reason of death
         or Disability, all outstanding Options then held by the Participant
         will remain exercisable, to the extent exercisable as of the date of
         such termination, for a period of six months after such termination
         (but in no event after the expiration date of any such Option).

                  (b) In the event a Participant's employment or other service
         with the Company and all Subsidiaries is terminated by reason of
         Retirement, all outstanding Options then held by the Participant will
         remain exercisable, to the extent exercisable as of the date of such
         termination, for a period of three months after such termination (but
         in no event after the expiration date of any such Option).

         7.2      TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR
                  RETIREMENT.

                  (a) Unless otherwise provided by the Committee in its sole
         discretion in the agreement evidencing an Option, in the event a
         Participant's employment or other service is terminated with the
         Company and all Subsidiaries for any reason other than death,
         Disability or Retirement, or a Participant is in the employ or service
         of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the
         Company (unless the Participant continues in the employ or service of
         the Company or another Subsidiary), all rights of the Participant under
         the Plan and any agreements evidencing an Option will immediately
         terminate without notice of any kind, and no Options then held by the
         Participant will thereafter be exercisable; provided, however, that if
         such termination is due to any reason other than termination by the
         Company or any Subsidiary for "cause," all outstanding Options then
         held by such Participant will remain exercisable, to the extent
         exercisable as of such termination, for a period of three months after
         such termination (but in no event after the expiration date of any such
         Option).

                  (b) For purposes of this Section 7.2, "cause" (as determined
         by the Committee) will be as defined in any employment or other
         agreement or policy applicable to the Participant or, if no such
         agreement or policy exists, will mean (i) dishonesty, fraud,
         misrepresentation, embezzlement or deliberate injury or attempted
         injury, in each case related to the Company or any Subsidiary, (ii) any
         unlawful or criminal activity of a serious nature, (iii) any
         intentional and deliberate breach of a duty or duties that,
         individually or in the aggregate, are material in relation to the
         Participant's overall duties, or (iv) any material breach of any
         employment, service, confidentiality or non-compete agreement entered
         into with the Company or any Subsidiary.

         7.3      MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the
other provisions of this Section 7, upon a Participant's termination of
employment or other service with the Company and all Subsidiaries, the Committee
may, in its sole discretion (which may be exercised at any time on or after the
date of grant, including following such termination), cause Options (or any part
thereof) then held by such Participant to become or continue to become
exercisable and/or remain exercisable following such termination of employment
or service; provided, however, that no Option may remain exercisable beyond its
expiration date.

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         7.4      EXERCISE OF INCENTIVE STOCK OPTIONS FOLLOWING TERMINATION. Any
Incentive Stock Option that remains unexercised more than one year following
termination of employment by reason of Disability or more than three months
following termination for any reason other than death or Disability will
thereafter be deemed to be a Non-Statutory Stock Option.

         7.5      DATE OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless the
Committee otherwise determines in its sole discretion, a Participant's
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the Company
or the Subsidiary for which the Participant provides employment or other
service, as determined by the Committee in its sole discretion based upon such
records.

8.       PAYMENT OF WITHHOLDING TAXES.

         8.1      GENERAL RULES. The Company is entitled to (a) withhold and
deduct from future wages of the Participant (or from other amounts that may be
due and owing to the Participant from the Company or a Subsidiary), or make
other arrangements for the collection of, all legally required amounts necessary
to satisfy any and all foreign, federal, state and local withholding and
employment-related tax requirements attributable to an Option, including,
without limitation, the grant or exercise of an Option or a disqualifying
disposition of stock received upon exercise of an Incentive Stock Option, or (b)
require the Participant promptly to remit the amount of such withholding to the
Company before taking any action, including issuing any shares of Common Stock,
with respect to an Option.

         8.2      SPECIAL RULES. The Committee may, in its sole discretion and
upon terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or
employment-related tax obligation described in Section 8.1 of the Plan by
electing to tender Previously Acquired Shares, a Broker Exercise Notice or a
promissory note (on terms acceptable to the Committee in its sole discretion),
or by a combination of such methods.

9.       CHANGE IN CONTROL.

         9.1      CHANGE IN CONTROL.  For purposes of this Section 9, a "Change
in Control" of the Company will mean the following:

                  (a) the sale, lease, exchange or other transfer, directly or
         indirectly, of substantially all of the assets of the Company (in one
         transaction or in a series of related transactions) to a person or
         entity that is not controlled by the Company;

                  (b)      the approval by the  shareholders  of the Company of
          any plan or proposal for the liquidation or dissolution of the
          Company;

                  (c) any person becomes after the effective date of the Plan
         the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
         Act), directly or indirectly, of (i) 20% or more, but not 50% or more,
         of the combined voting power of the Company's outstanding securities
         ordinarily having the right to vote at elections of directors, unless
         the transaction resulting in such ownership has been approved in
         advance by the Continuity Directors (as defined in Section 9.2 below),
         or (ii) 50% or more of the

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          combined voting power of the Company's outstanding securities
          ordinarily having the right to vote at elections of directors
          (regardless of any approval by the Continuity Directors);

                  (d) a merger or consolidation to which the Company is a party
         if the shareholders of the Company immediately prior to effective date
         of such merger or consolidation have "beneficial ownership" (as defined
         in Rule 13d-3 under the Exchange Act), immediately following the
         effective date of such merger or consolidation, of securities of the
         surviving corporation representing (i) more than 50%, but less than
         80%, of the combined voting power of the surviving corporation's then
         outstanding securities ordinarily having the right to vote at elections
         of directors, unless such merger or consolidation has been approved in
         advance by the Continuity Directors, or (ii) 50% or less of the
         combined voting power of the surviving corporation's then outstanding
         securities ordinarily having the right to vote at elections of
         directors (regardless of any approval by the Continuity Directors);

                  (e) the Continuity Directors cease for any reason to
         constitute at least a majority of the Board; or

                  (f) any other change in control of the Company of a nature
         that would be required to be reported pursuant to Section 13 or 15(d)
         of the Exchange Act, whether or not the Company is then subject to such
         reporting requirement.

         9.2      CONTINUITY DIRECTORS. For purposes of this Section 9,
"Continuity Directors" of the Company will mean any individuals who are members
of the Board on the effective date of the Plan and any individual who
subsequently becomes a member of the Board whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the Continuity Directors (either by specific vote or by approval of
the Company's proxy statement in which such individual is named as a nominee for
director without objection to such nomination).

         9.3      ACCELERATION OF EXERCISABILITY. Without limiting the authority
of the Committee under Sections 3.2 and 4.3 of the Plan, if a Change in Control
of the Company occurs, then, unless otherwise provided by the Committee in its
sole discretion either in the agreement evidencing an Option at the time of
grant or at any time after the grant of an Option, all outstanding Options will
become immediately exercisable in full and will remain exercisable for the
remainder of their terms, regardless of whether the Participant to whom such
Options have been granted remains in the employ or service of the Company or any
Subsidiary.

10.      RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.

         10.1     EMPLOYMENT OR SERVICE. Nothing in the Plan will interfere with
or limit in any way the right of the Company or any Subsidiary to terminate the
employment or service of any Eligible Recipient or Participant at any time, nor
confer upon any Eligible Recipient or Participant any right to continue in the
employ or service of the Company or any Subsidiary.

         10.2     RIGHTS AS A SHAREHOLDER. As a holder of Options, a Participant
will have no rights as a shareholder unless and until such Options are exercised
for, or paid in the form of, shares of

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Common Stock and the Participant becomes the holder of record of such shares.
Except as otherwise provided in the Plan, no adjustment will be made for
dividends or distributions with respect to such Options as to which there is a
record date preceding the date the Participant becomes the holder of record of
such shares, except as the Committee may determine in its discretion.

         10.3     RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will
or the laws of descent and distribution or as otherwise expressly permitted by
the Plan (unless approved by the Committee in its sole discretion and the CVE,
if necessary), no right or interest of any Participant in an Option prior to the
exercise of such Option will be assignable or transferable, or subjected to any
lien, during the lifetime of the Participant, either voluntarily or
involuntarily, directly or indirectly, by operation of law or otherwise. A
Participant will, however, be entitled to designate a beneficiary to receive an
Option upon such Participant's death, and in the event of a Participant's death,
payment of any amounts due under the Plan will be made to, and exercise of
Options (to the extent permitted pursuant to Section 7 of the Plan) may be made
by, the Participant's legal representatives, heirs and legatees.

         10.4     BREACH OF CONFIDENTIALITY OR NON-COMPETE AGREEMENTS.
Notwithstanding anything in the Plan to the contrary, in the event that a
Participant materially breaches the terms of any confidentiality or non-compete
agreement entered into with the Company or any Subsidiary, whether such breach
occurs before or after termination of such Participant's employment or other
service with the Company or any Subsidiary, the Committee in its sole discretion
may immediately terminate all rights of the Participant under the Plan and any
agreements evidencing an Option then held by the Participant without notice of
any kind.

         10.5     NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation plans or
programs of the Company or create any limitations on the power or authority of
the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.

11.      SECURITIES LAW AND OTHER RESTRICTIONS.

         Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue any
shares of Common Stock under this Plan, and a Participant may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to
Options granted under the Plan, unless (a) there is in effect with respect to
such shares a registration statement under the Securities Act and any applicable
state or foreign securities laws or an exemption from such registration under
the Securities Act and applicable state or foreign securities laws, and (b)
there has been obtained any other consent, approval or permit from any other
regulatory body which the Committee, in its sole discretion, deems necessary or
advisable. The Company may condition such issuance, sale or transfer upon the
receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of Common Stock, as
may be deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.

                                       10
<PAGE>

12.      PLAN AMENDMENT, MODIFICATION AND TERMINATION.

         The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the Board
may deem advisable in order that Options under the Plan will conform to any
change in applicable laws or regulations or in any other respect the Board may
deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the shareholders of
the Company if shareholder approval of the amendment is then required pursuant
to Section 422 of the Code or the rules of any stock exchange or Nasdaq or
similar regulatory body. No termination, suspension or amendment of the Plan may
adversely affect any outstanding Option without the consent of the affected
Participant; provided, however, that this sentence will not impair the right of
the Committee to take whatever action it deems appropriate under Sections 3.2,
4.3 and 9 of the Plan.

13.      EFFECTIVE DATE AND DURATION OF THE PLAN.

         The Plan is effective as of December 8, 1998, the date it was adopted
by the Board. The Plan will terminate at midnight on December 8, 2008 and may be
terminated prior to such time to by Board action, and no Option will be granted
after such termination. Options outstanding upon termination of the Plan may
continue to be exercised in accordance with their terms.

14.      MISCELLANEOUS.

         14.1     GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Wyoming, notwithstanding the conflicts of laws
principles of any jurisdictions.

         14.2     SUCCESSORS  AND  ASSIGNS.  The Plan will be binding  upon and
inure to the benefit of the  successors  and  permitted assigns of the Company
and the Participants.

                                       11<PAGE>

                                  CONFIDENTIAL

August 1, 2000

Mr. John E. Lee
2507 Saffron Glen
Escondido, CA 92029

Dear John:

         I am pleased to confirm our agreement with you concerning your
employment by BioSante Pharmaceuticals, Inc. (the "Company") which is subject to
review, approval, and ratification by the Company's Board of Directors (the
"Board").

I.       EMPLOYMENT. Subject to the terms and  conditions  described  in this
         Employment Agreement (the "Agreement"), the Company agrees to employ
         you as the Vice President, Commercial Development of the Company, and
         you accept this employment on the following terms and conditions.

II.      DUTIES.

         A. You agree to devote, on a full time basis, all of your business
            hours to the Company's business. You will diligently perform the
            duties of your position, within guidelines to be determined by
            Stephen Simes, the Company's Chief Executive Officer (the "CEO"),
            consistent with the policies of the Board. Said responsibilities
            shall include, but not be limited to, the following specific areas:
            commercialization of all products, in-licensing of additional
            products and technologies, out-licensing and partnering of CAP
            technologies and new hormone products, budgeting in the areas of
            product sales and marketing, and forecasting and analysis of current
            and future BioSante markets and competition in those markets. You
            will report to the CEO, who will be responsible for evaluating your
            job performance in accordance with the Company's annual performance
            review process.

         B. While you are employed by the Company, except as otherwise
            expressly permitted by the Company's Conflict of Interest policy or
            this Agreement, you will not engage in any business activity or
            outside employment that conflicts with the Company's interests or
            adversely affects the performance of your duties for the Company.

<PAGE>

         C. You shall be based at, and shall perform your duties at an office
            located in, Lincolnshire, Illinois, or the surrounding suburban
            area, where the corporate headquarters of the Company are located.
            The Company agrees that the other officers and executives of the
            Company except for those who are directly involved in the research
            and development activities of the Company that are currently
            conducted in Atlanta, Georgia shall also be located in the same
            corporate headquarters. However, you shall also travel to other
            locations at such times as may be appropriate for the performance of
            your duties under this Agreement.

III.     TERM. This Agreement is effective August 1, 2000 (the "Effective
         Date"), and will terminate on July 31, 2003, unless earlier terminated
         pursuant to Section V of this Agreement (the "Base Term"). Commencing
         August 1, 2003, and on each August 1st thereafter, the term of your
         employment will be automatically extended for three (3) additional
         years unless on or before June 1st immediately preceding any such
         extension, either party gives written notice to the other of the
         cessation of further extensions, in which case no further automatic
         extensions will occur. In the event that the Company elects not to
         renew this Agreement other than for "cause" as defined herein, you will
         be paid the amount described in Section V.C.2 below.

IV.      COMPENSATION.

         A. BASE SALARY. The Company agrees to pay you an annual base salary
            of One Hundred Seventy Thousand Dollars ($170,000) in accordance
            with the Company's standard payroll practices ("Base Salary"). In
            subsequent years, the CEO or the Board shall have the sole
            discretion to establish your Base Salary, except that, at a minimum,
            it shall be adjusted upward consistent with changes to the Consumer
            Price Index.

         B. ANNUAL BONUS. You will be eligible to receive an annual
            performance bonus not to exceed 30% of your Base Salary in effect
            during the year under review. The amount of said bonus shall be
            determined in the sole discretion of the CEO or the Compensation
            Committee and approved by the Board.

         C. OPTIONS.

            1. Upon the execution of this Agreement, the Company will grant you
               five hundred thousand (500,000) stock options to purchase Common
               Shares of stock of the Company at the lowest permissible price
               when this agreement is executed, 50,000 of which shall vest (but
               cannot be sold for four months pursuant to CDNX requirements) at
               the time of the grant. The remainder shall vest in twelve equal
               quarterly installments over the three year period starting on the
               Effective Date of this Agreement with

                                       2
<PAGE>

               the first installment vesting on November 1, 2000. The remaining
               unvested options shall vest immediately upon a termination
               without cause by the Company, a substantial reduction in job
               responsibilities, a Change in Control as defined in Section IX or
               a change of greater than 50 miles of the geographical location of
               the corporate headquarters.

            2. In the event the Company issues a stock dividend, or effectuates
               a stock split or exchange of any shares of the Company, whether
               by way of reorganization, reclassification, conversion or other
               means, the Company shall make appropriate adjustment to the terms
               of the Option in order to prevent dilution or enlargement of your
               rights.

               In the event that your employment is terminated by the Company
               other than for cause (as hereinafter defined), or if the Company
               elects not to renew this Agreement, all outstanding stock options
               and shares held by you or your estate will immediately become
               exercisable and all restrictions against disposition, if any,
               which have not otherwise lapsed shall immediately lapse, and the
               period within which they may be exercised will be one year
               following such termination of employment.

         D. BENEFITS. In addition to the other compensation to be paid under
            this Section IV, you will be entitled to participate in all benefit
            plans available to all full-time eligible employees hereafter
            established by the Company, in accordance with the terms and
            conditions of such plans, which the Company shall adopt promptly
            following the date hereof. These plans shall include, but are not
            limited to, the following: a 401(k) plan; group hospitalization,
            health, dental, and term life and disability insurance.

         E. EIMBURSEMENT OF BUSINESS EXPENSES. In addition to payment of
            compensation under this Section IV, the Company agrees to reimburse
            you for all reasonable out-of-pocket business expenses incurred by
            you on behalf of the Company, provided that you properly account to
            the Company for all such expenses in accordance with the rules and
            regulations of the Internal Revenue Service promulgated under the
            Internal Revenue Code of 1986, as amended, and in accordance with
            the standard policies of the Company relating to reimbursement of
            business expenses.

         F. AUTOMOBILE ALLOWANCE. The Company shall provide you with a
            monthly stipend of six hundred dollars ($600) for your automobile
            use.

         G. VACATION. You are entitled to three (3) weeks of paid vacation
            per calendar year.

                                       3
<PAGE>

V.       TERMINATION.

         A. EARLY TERMINATION. Subject to the respective continuing
            obligations of the parties pursuant to Sections VI, VII and VIII,
            this Section sets forth the terms for early termination of this
            Agreement.

         B. TERMINATION FOR CAUSE. The Company may terminate this Agreement
            and your employment immediately for cause. For this purpose, "cause"
            means any of the following: (1) fraud, (2) theft or embezzlement of
            the Company's assets or other act of dishonesty, (3) a violation of
            law involving moral turpitude, (4) your repeated and willful failure
            to follow instructions of the Board provided that the conduct has
            not ceased or the offense cured within thirty (30) days following
            written warning from the Company that sets forth in reasonable
            detail the facts claimed to provide the basis for such termination.
            In the event of termination for cause pursuant to this Section V.B.,
            you will be paid, at the usual rate, your annual Base Salary, car
            allowance, and any out-of-pocket expenses, through the date of
            termination specified in any notice of termination and any amounts
            to which you are entitled under any Company benefit plan in
            accordance with the terms of such plan.

         C. TERMINATION WITHOUT CAUSE. Either you or the Company may
            terminate this Agreement and your employment without cause on thirty
            (30) days written notice. In the event of termination of this
            Agreement and of employment pursuant to this Section V.C.,
            compensation shall be paid as follows:

            1. If the termination is by you without cause, you will be paid,
               at the usual rate, your annual Base Salary, car allowance, and
               any out-of-pocket expenses incurred on behalf of the Company and
               accounted for pursuant to Section IV.E through the date of
               termination specified in such notice (but not to exceed thirty
               (30) days from the date of such notice); or

            2. Notwithstanding any provision to the contrary contained
               herein, in the event your employment is terminated by the Company
               at any time for any reason other than for cause, disability or
               death, the Company shall:

               (i.)  pay you a severance benefit, in a lump sum payable no
                     later than the fifth business day following the date of
                     termination, an amount equal to your total compensation
                     over the preceding twelve months;

               (ii.) continue to provide you, at the Company's expense,
                     with term life insurance, as provided herein until the
                     earlier of (A) the expiration of the "Severance Period"
                     (which shall mean the shorter of these two periods: one
                     year from the

                                       4
<PAGE>

                     date of termination or the remaining term of
                     this Agreement), or (B) your attaining full-time
                     employment, elsewhere; but in no event shall the Company
                     provide you with term life insurance for a period of longer
                     than one year;

               (iii.)continue to allow you to participate, at the
                     Company's expense, in the Company's group health, dental
                     and disability insurance programs until the earlier of (A)
                     the expiration of the Severance Period, or (B) your
                     becoming eligible to participate in another employer's
                     corresponding group insurance and disability plans;

               (iv.) provide you with outplacement services at a qualified
                     agency selected by mutual agreement between you and the
                     Company and the use of an office and reasonable secretarial
                     support for one year (unless you become otherwise employed
                     within such a period) all expenses of services described in
                     this paragraph not to exceed $10,000;

                (v.) reimburse out-of-pocket expenses incurred by you on
                     the behalf of the Company prior to termination and
                     accounted pursuant to Section IV.E; and

               (vi.) reimburse you for any and all unused vacation days
                     accrued to the date of such termination.

         D. TERMINATION FOR GOOD REASON. You may terminate this Agreement
            upon thirty (30) days written notice to the Company for good reason.
            For this purpose, "good reason" means: (i) the assignment to you of
            any duties that constitute a significant adverse change in the
            nature, scope or level of your positions, duties, responsibilities
            and status with the Company as of the date hereof, (ii) the failure
            of the Company to continue in effect any fringe benefit or
            compensation plan, retirement plan, life insurance plans, health or
            disability plan in which you were participating (except as such
            change is prompted in good faith by a change in the law), or the
            taking of any action by the Company, which could reasonably be
            expected to adversely affect your participation in or materially
            reduce your benefits under any such plans or deprive you of any
            material fringe benefit enjoyed by you, (iii) the reduction of your
            salary or car allowance or failure to increase such salary as is
            provided in Section IV.A above, or any other breach of this
            Agreement by the Company which has not been cured within thirty (30)
            days following written warning from you, or (iv) the occurrence of a
            Change of Control as defined in Section IX and at which time your
            employment is terminated. In any such

                                       5
<PAGE>

            case the Company will pay you the amounts, and provide you the
            benefits, all as set forth in Section V.C.2 above.

         E. TERMINATION IN THE EVENT OF DEATH OR PERMANENT DISABILITY. This
            Agreement and your employment will terminate in the event of your
            death or permanent disability.

            1. In the event of your death, Base Salary and car allowance will
               be terminated as of the end of the month in which death occurs.

            2. For the purposes of this Agreement, the term "disability"
               shall mean your inability, due to an illness, accident or any
               other physical or mental incapacity, to substantially perform
               your duties for a period of four (4) consecutive months or for a
               total of six (6) months (whether or not consecutive) during any
               twelve (12) month period during the term of this Agreement.

         F. ENTIRE TERMINATION PAYMENT.

            1. The compensation provided for in Sections V.B, V.C, V.D, and
               V.E for early termination of this Agreement will constitute your
               sole remedy for such termination. You will not be entitled to any
               other termination or severance payment which might otherwise be
               payable to you under any other agreement between you and the
               Company or under any policy of the Company. This Section F.1.
               will not have any effect on distributions to which you may be
               entitled at termination from any qualified tax plan or any other
               plan (other than a severance payment or similar plan).

            2. Notwithstanding any other provisions of this Agreement or any
               other agreement, contract or understanding heretofore or
               hereafter entered into between you and the Company, if any
               "payments" (including, without limitation, any benefits or
               transfers of property or the acceleration of the vesting of any
               benefits) in the nature of compensation under any arrangement
               this is considered contingent on a Change in Control for purposes
               of Section 280g of the Internal Revenue Code of 1986, as amended
               (the "Code"), together with any other payments that you have the
               right to receive from the Company or any corporation that is a
               member of an "affiliated group" (as defined in Section 1504(a) of
               the Code without regard to Section 1504(b) of the Code) of which
               the Company is a member, would constitute a "parachute payment"
               (as defined in Section 280G of the Code), such payments will be
               reduced to the largest amount as will result in no portion of
               such payments being subject to the excise tax imposed by Section
               4999 of the Code; provided, however, that you

                                       6
<PAGE>

               will be entitled to designate those payments that will be reduced
               or eliminated in order to comply with the forgoing provision.

         G. REQUIRED RESIGNATIONS UPON EARLY TERMINATION OR EXPIRATION. You
            agree that upon any termination of your employment with the Company
            or expiration under this Agreement will automatically and without
            further action be deemed to constitute your simultaneous resignation
            from all director officer, trustee, agent and any other positions
            within the Company, all of its affiliates (including but not limited
            to any entity that is a shareholder of the Company and any
            subsidiaries and any parent of the Company), the Company's employee
            benefit plans, trusts, and foundations (charitable or otherwise) or
            any other similar positions associated with the Company.
            Simultaneously upon such termination of employment or expiration of
            this employment agreement, you agree to execute and deliver to the
            Company any and all documents, agreements, certificates, letters or
            other written instruments confirming all such resignations.

         H. If for any reason, other than for Termination Without Cause, you
            are not employed by the Company 15 months from the effective date of
            this Agreement, you will reimburse the Company for all costs paid by
            the Company to relocate you to the Chicago area.

VI.      INVENTIONS.

         A. You agree that all Inventions (as defined below) you make,
            conceive, reduce to practice or author (either alone or with others)
            during or within one year after the term of this Agreement will be
            the Company's sole and exclusive property. You will, with respect to
            any such Invention: (i) keep current, accurate, and complete
            records, which will belong to the Company and be kept and stored on
            the Company's premises while you are employed by the Company; (ii)
            promptly and fully disclose the existence and describe the nature of
            the Invention to the Company in writing (and without request); (iii)
            assign (and you hereby assign) to the Company all of your rights to
            the Invention, any applications you make for patents or copyrights
            in any country; and (iv) acknowledge and deliver promptly to the
            Company any written instruments, and perform any other acts
            necessary in the Company's opinion to preserve property rights in
            the Invention against forfeiture, abandonment, or loss and to obtain
            and maintain patents and/or copyrights on the Invention to vest the
            entire right and title to the Invention to the Company.

         B. "Inventions," as used in this Section, means any discoveries,
            improvements, creations, ideas and inventions, including without
            limitation software and artistic and literary works (whether or not
            they can be patented or copyrighted) that: (i) relate directly to
            the Company's business or the

                                       7
<PAGE>

            Company's research or development during the term of this Agreement,
            (ii) result from any work you perform for the Company; (iii) use the
            Company's equipment, supplies, facilities or trade secret
            information, or (iv) you develop during any time that Section II
            above obligates you to perform your employment duties.

     The requirements of this Section do not apply to an Invention for which no
equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on your own time, and which neither (1)
relates directly to the Company's business or to the Company's actual and
demonstrably anticipated research or development, nor (2) results from any work
you performed for the Company. Except as previously disclosed to the Company in
writing, you do not have, and will not assert, any claims to or rights under any
Inventions as having been made, conceived, authored or acquired by you prior to
your employment by the Company.

VII.     PROPRIETARY INFORMATION.

         A. Except as required in your duties to the Company, you will never,
            either during or after your employment by the Company, use or
            disclose Proprietary Information to any person not authorized by the
            Company to receive it. When your employment with the Company ends,
            you will promptly turn over to the Company all records and any
            compositions, articles, devices, apparatus and other items that
            disclose, describe or embody Proprietary Information, including all
            copies, reproductions and specimens of the Proprietary Information
            in your possession, regardless of who prepared them.

         B. "Proprietary Information," as used in this Section VII, means any
            nonpublic information concerning the Company, including information
            relating to the Company's research, product development,
            engineering, purchasing, product costs, accounting, leasing,
            servicing, manufacturing, sales, marketing, administration and
            finances. This information includes, without limitation: (i) trade
            secret information about the Company and its products; (ii)
            "Inventions," as defined in Section VI.B; (iii) information
            concerning any of the Company's past, current or possible future
            products. Proprietary Information also includes any information
            which is not generally disclosed and which is useful or helpful to
            the Company and/or which would be useful or helpful to competitors.
            More specific examples include financial data, sales figures for
            individual projects or groups of projects, planned new projects or
            planned advertising programs, areas where the Company intends to
            expand, lists of suppliers, lists of customers, wage and salary
            data, capital investment plans, projected earnings, changes in
            management or policies of the Company, testing data, manufacturing
            methods, suppliers' prices to us, or any plans we may have for
            improving any of our products. Information is Proprietary
            Information regardless of its form, e.g. oral, written, electronic
            or

                                       8
<PAGE>

            other, and whether or not it is labeled as "proprietary" or
            "confidential." The Company's Proprietary Information includes our
            information and that of our affiliates and third parties concerning
            or relating to us.

VIII.    COMPETITIVE ACTIVITIES.

         A. You agree that during your employment with the Company, you will
            not alone, or in any capacity with another person or entity, (i)
            directly or indirectly engage in any employment or activity that
            competes with the Company's business at the time of your employment
            with the Company ends, within any state in the United States or
            within Canada, or (ii) in any way interfere or attempt to interfere
            with the Company's relationships with any of its current or
            potential customers.

         B. You agree that during your employment with the Company, you will
            not, directly or indirectly, whether for your account or for any
            other person or entity: (i) solicit for employment or hire, or
            attempt to solicit for employment or hire, any person who is
            employed by (or, but for the violation of this Agreement, would have
            been employed by) the Company and any clients of the Company or (ii)
            otherwise interfere with the relationship between any such person,
            the Company and any clients of the Company.

         C. You also agree that for a period of one year after the
            termination of this Agreement for any one of the following reasons:
            (i) for "cause" as defined above, (ii) voluntarily by you without
            "good reason" as defined above; or (iii) in the event of a
            non-renewal of the Agreement by you other than for "good reason",
            you will abide by Sections VIII.A and B above.

IX.      CHANGE IN CONTROL.

         A. For purposes of this Agreement, a "Change in Control" of the
            Company will mean the following:

            1. the sale, lease, exchange or other transfer, directly or
               indirectly, of all or substantially all of the assets of the
               Company (in one transaction or in a series of related
               transactions) to a person or entity that is not controlled by the
               Company;

            2. the approval by the shareholders of the Company of any plan or
               proposal for the liquidation or dissolution of the Company; or

            3. a change in control of the Company of a nature that would be
               required to be reported in response to Item 5(f) of Schedule 14A
               of Regulation 14A or to Item 1 of Form 8-K promulgated under the
               Securities

                                       9
<PAGE>

               Exchange Act of 1934, as amended (the "Act"); provided that,
               without limitation, a Change in Control shall be deemed to have
               occurred if (i) any "person" (as such term is used in Sections
               13(d) and 14(d)(2) of the Act) is or shall become the beneficial
               owner, directly or indirectly, of securities of the Company
               representing 30% or more of the Company" then outstanding
               securities; or (ii) during any period of twenty-four (24)
               consecutive months, individuals who at the beginning of such
               period constitute the entire Board of Directors shall cease for
               any reason to constitute a majority thereof unless the election,
               or the nomination for election by the Company's stockholders, of
               each new director was approved by a vote of at least two-thirds
               of the directors then still in office who were directors at the
               beginning of the period.

         B. If a Change in Control occurs, all stock options held by you will
            become immediately exercisable in full and will remain exercisable
            for the remainder of their terms, regardless of whether you remain
            in the employ or service of the Company.

         C. For purposes of this Section IX, you shall be entitled to the
            severance benefits provided in Section V.D if the date of
            termination occurs either (i) while there is to the Company's
            knowledge actively pending a proposed transaction, which, if
            consummated, could reasonably be expected to result within one (1)
            year in a Change of Control; unless, in the case of either (i) or
            (ii), your employment is terminated or this Agreement is not renewed
            because of death or disability or by the Company for "cause" or
            voluntarily by you other than for "good reason".

X.       MISCELLANEOUS.

         A. NO ADEQUATE REMEDY. You understand that if you fail to fulfill
            your obligations under this Agreement, the monetary damages to the
            Company as a result of your failure would be very difficult to
            determine. Therefore, if the Company shall institute any action or
            proceeding to enforce such provisions, you waive the defense that
            there is an adequate remedy at law and agree not to interpose the
            claim or defense that such remedy exists at law. Therefore, without
            limiting any other rights or remedies available to the Company at
            law, in equity, or by statute, you hereby consent to the specific
            enforcement of this Agreement by the Company through an injunction,
            restraining order or other equitable relief in any such action.

         B. GOVERNING LAW AND JURISDICTION. The internal laws of Illinois (as
            opposed to the conflict of law provisions) will govern the validity,
            construction, and

                                       10
<PAGE>

            performance of this Agreement and the parties submit to the
            jurisdiction of the state or federal courts located in Illinois.

         C. ARBITRATION. Any and all disputes which arise concerning the
            rights, duties or obligations of either party under any provision of
            this Agreement shall be resolved exclusively by binding arbitration
            in accordance with the following terms and conditions. The party
            seeking arbitration shall commence a proceeding in arbitration in
            Chicago, Illinois under the Rules of the American Arbitration
            Association. The arbitrator shall render his or her decision and
            award in writing with ninety (90) days from the initiation of the
            arbitration.

            There shall be no appeal from arbitrator's decision and award which
            shall be final and binding on the parties and may be entered in any
            court having jurisdiction thereof.

         D. RIGHTS IN THE EVENT OF DISPUTE. If, with respect to any alleged
            failure by the Company to comply with any of the terms of this
            Agreement, you hire legal counsel with respect to this Agreement or
            institute any negotiations or institute or respond to legal action
            to assert or defend the validity of, enforce your rights under, or
            recover damages for breach of this Agreement, the Company shall pay,
            as they are incurred, your actual expenses for attorneys' fees and
            disbursements, together with such additional payments, if any, as
            may be necessary so that the net-after-tax payments to you equal
            such fees and disbursements up to a maximum aggregate of $10,000,
            provided that, in regard to such matters, you have not acted in bad
            faith or with no colorable claim of success. Further, if the Company
            is the prevailing party in any action brought by you to enforce the
            terms of this Agreement, such payments shall be reimbursed by you to
            the Company.

         E. MITIGATION. You are not required to mitigate the amount of any
            payments to be made pursuant to this Agreement by seeking other
            employment or otherwise, nor shall the amount of any payments
            provided for in the Agreement be reduced by any compensation earned
            by you as the result of your self-employment or your employment by
            another employer after the date of termination of your employment
            with the Company.

         F. CONSTRUCTION. Wherever possible, each provision of this agreement
            will be interpreted so that it is valid under the applicable law. If
            any provision of this agreement is to any extent invalid under the
            applicable law, that provision will still be effect to the extent it
            remains valid under the applicable law. The remainder of this
            Agreement also will continue to be valid, and the entire Agreement
            will continue to be valid in other jurisdictions.

                                       11
<PAGE>

         G. WAIVERS. No failure or delay by either the Company or you in
            exercising any right or remedy under this Agreement will waive any
            provision of the Agreement. Nor will any single or partial exercise
            by either the Company or you for any right or remedy under this
            agreement preclude either the Company or you from otherwise or
            further exercising these rights or remedies, or any other rights or
            remedies granted by any law or any related document.

         H. ENTIRE AGREEMENT. This Agreement is the entire agreement between
            the parties and replaces all other oral negotiations, commitments,
            writings and understandings between the parties concerning the
            matters in this agreement. The Agreement can only be modified by
            mutual written consent of the parties. You acknowledge that you have
            been advised to seek legal counsel to review this Agreement with you
            before you sign it.

         I. SUCCESSORS AND ASSIGNS. Except as otherwise provided in Section
            IX, this Agreement will be binding upon and inure the benefit of the
            successors and assigns of the Company whether by way of merger,
            consolidation, operation of law, purchase or other acquisition of
            substantially all of the assets or business of the Company, and any
            such successor or assign will absolutely and unconditionally assume
            all of the Company's obligations under this Agreement. You are not
            permitted to assign your rights or obligations under this Agreement.

         J. NOTICES. All notices, requests and demands given to or made
            pursuant hereto will, except as otherwise specified herein, be in
            writing and be delivered or mailed to any such party at its address
            which:

            A. In the case of the Company will be:

                           BioSante Pharmaceuticals, Inc.
                           175 Olde Half Day Road
                           Lincolnshire, IL 60069
                           Attn:    Chief Executive Officer

            B. In the case of the employee will be:

                           John E. Lee
                           2507 Saffron Glen
                           Escondido, CA 92029

            Any party may, by notice to the other party, designate a changed
            address. Any notice, if mailed properly addressed, postage prepaid,
            registered or certified mail, will be deemed dispatched on the
            registered date or that date stamped on the certified mail receipt,
            and will be deemed received within the

                                       12
<PAGE>

            second business day thereafter or when it is actually received,
            whichever is sooner.

         K. CAPTIONS. The various headings or captions in this Agreement are
            for convenience only and will not affect the meaning or
            interpretation of this agreement.

         L. REASONABLE LIMITATIONS. The parties hereto stipulate and agree
            that each of the terms of this Agreement including, but not limited
            to, the scope of the activities prohibited and the time limitations
            are reasonable. The parties further stipulate and agree that in the
            event a court determines contrary to the agreement of the parties
            herein that any of the terms of this Agreement are unreasonable or
            contrary to public policy, or invalid or unenforceable for any
            reason in fact, law, or equity, then the court shall limit the
            application of any such provision or term or modify any provision or
            term to that which it finds reasonable, valid, or enforceable and
            shall enforce this Agreement as so limited or modified.

         Would you please confirm that this Agreement is in accordance with your
understanding and that you have received a copy of this letter by signing and
dating where indicated below, and returning an executed copy for our records.

     Very truly yours,

     BioSante Pharmaceuticals, Inc.

     By:   /s/ Stephen Simes
         --------------------------------------------
         Stephen Simes
         Its: Chief Executive Officer

     By signing below, you warrant and represent that: (1) you have been
     represented by legal counsel of your choice in connection with the review,
     approval and execution of this Agreement or have elected not to engage
     legal counsel after having been informed of your right to do so; (2) you
     understand that this Agreement is a legally binding contract; (3) you have
     read and understand the terms of this Agreement; (4) that you understand
     its terms which are fair, reasonable and enforceable; (5) you have had
     ample opportunity to negotiate with the Company with regard to all of the
     Agreement's terms; (6) you have entered into this Agreement freely and
     voluntarily without fraud, duress, or coercion; (7) you have the full
     right, power, authority and capacity to enter into and execute this
     Agreement; and (8) you intend to be bound by each provision of this
     Agreement.

                                       13
<PAGE>

     Agreed to and confirmed as of August 1, 2000:

     /s/ John E. Lee
     ---------------------------------------------
     John E. Lee

                                       14

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