AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

FINAL EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

between

BIOSANTE PHARMACEUTICALS, INC.

and

CELL GENESYS, INC.

Dated as of June 29, 2009

 

Table of Contents

 

 

 

-i-

 

-ii-

 

-iii-

 

-iv-

SCHEDULES

Company Disclosure Schedules

BioSante Disclosure Schedules

EXHIBITS

 

 

-v-

AGREEMENT AND PLAN OF MERGER, dated as of June 29, 2009 (this “ Agreement ”), between BIOSANTE PHARMACEUTICALS, INC., a Delaware corporation (“ BioSante ”) and CELL GENESYS, INC., a Delaware corporation (the “ Company ”).

WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), the Company will merge with and into BioSante (the “ Merger ”);

WHEREAS, the Board of Directors of the Company (the “ Company Board ”) has (i) determined that the Merger is in the best interests of the Company and its stockholders, (ii) approved, and declared it advisable to enter into, this Agreement, and (iii) resolved to recommend that this Agreement be adopted by the stockholders of the Company;

WHEREAS, (i) the Board of Directors of BioSante (the “ BioSante Board ”) has (i) determined that the Merger is in the best interests of BioSante and its stockholders, (ii) approved, and declared it advisable to enter into, this Agreement, and (iii) resolved to recommend that this Agreement be adopted by the stockholders of BioSante and that the stockholders of BioSante approve the issuance of shares of common stock, par value $0.0001 per share, of BioSante (“ BioSante Common Shares ”), to the stockholders of the Company pursuant to this Agreement (the “ BioSante Share Issuance ”);

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to BioSante’s willingness to enter into this Agreement, Stephen A. Sherwin, M.D, (the “ Company Principal Stockholder ”), is entering into a voting agreement with BioSante substantially in the form attached hereto as Exhibit A-1 (the “ Company Voting Agreement ”), pursuant to which, among other things, the Company Principal Stockholder has agreed to vote or cause to be voted the Shares (as defined herein) beneficially owned by him in favor of approval and adoption of this Agreement and the transactions contemplated hereby (including the Merger), upon the terms and subject to the conditions set forth in the Company Voting Agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to the Company’s willingness to enter into this Agreement, Stephen M. Simes, Ross Mangano, Phillip B. Donenberg, JO & Co. and Louis W. Sullivan, M.D. (the “ BioSante Principal Stockholders ”) are entering into a voting agreement with the Company substantially in the form attached hereto as Exhibit A-2 (the “ BioSante Voting Agreement ”), pursuant to which, among other things, the BioSante Principal Stockholders have agreed to vote or cause to be voted the BioSante Common Shares beneficially owned by them in favor of approval and adoption of this Agreement and the transactions contemplated hereby (including the Merger) and the approval of the BioSante Share Issuance, upon the terms and subject to the conditions set forth in the BioSante Voting Agreement; and

WHEREAS, immediately prior to the execution and delivery of this Agreement and as a condition to BioSante’s willingness to enter into this Agreement, certain current executive officers of the Company listed in Section 4.11(e) of the Company Disclosure Schedule (the “ Executives ”) have delivered to Parent a letter agreement agreeing to execute and deliver to Parent releases in the form attached to such letter agreement (the “ Executive Release ”) as a condition to the receipt of any payments due to them under their retention letters and change of control and severance agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, BioSante and the Company hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Definitions .

(a) For purposes of this Agreement:

“ affiliate ” of a specified person means a person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person.

“ BioSante Disclosure Schedule ” means BioSante’s disclosure schedule delivered by BioSante to the Company concurrently with the delivery of this Agreement.

“ BioSante Material Adverse Effect ” means any event, occurrence, development, change or effect that (i) is, individually or in the aggregate with all other events, occurrences, developments, changes and effects, materially adverse to the business, properties, assets (tangible or intangible), liabilities, condition (financial or otherwise) or results of operations of BioSante and its subsidiaries, taken as a whole, other than any event, occurrence, development, change or effect described in clause (i) resulting primarily from any of the following: (A) changes in the United States economy or financial markets as a whole, so long as such conditions do not adversely affect BioSante or its subsidiaries in a materially disproportionate manner relative to other similarly situated participants in the industries, geographies or markets in which they operate, (B) general changes in the industries in which BioSante and its subsidiaries operate, so long as such conditions do not adversely affect BioSante or its subsidiaries in a materially disproportionate manner relative to other participants in the industries in which BioSante and its subsidiaries operate, (C) any change in any applicable Law, rule or regulation or GAAP or interpretation thereof after the date of this Agreement, (D) the commencement, occurrence, continuation or escalation of any war, armed hostilities or acts of terrorism involving or affecting the United States of America or any part thereof, and (E) any claim or litigation arising from allegations of breach of fiduciary duty relating to this Agreement or the Merger, or of disclosure violations in securities filings made in connection with this Agreement or the Merger; or (ii) would reasonably be expected to prevent or materially delay the consummation of the Merger or prevent or materially delay BioSante from performing its obligations under this Agreement.

“ BioSante Share Value ” means the closing price of a BioSante Common Share on the Nasdaq Global Market on the date the Effective Time occurs.

 

-2-

“ BioSante Stockholder Approval ” means: (i) the adoption of this Agreement at the BioSante Stockholder Meeting by holders of a majority of the outstanding BioSante Common Shares and Special Shares, voting together as a single class, in accordance with the DGCL and BioSante’s certificate of incorporation and bylaws and (ii) the approval of the BioSante Share Issuance at the BioSante Stockholder Meeting by a majority of votes cast by holders of BioSante Common Shares and Special Shares, voting together as a single class, in accordance with the DGCL, the requirements of NASDAQ and BioSante’s certificate of incorporation and bylaws.

“ BioSante Significant Subsidiary ” means a subsidiary of BioSante that would constitute a “significant subsidiary” of BioSante within the meaning of Rule 1.02(w) of Regulation S-X as promulgated by the SEC.

“ business day ” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in The City of New York.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Company Disclosure Schedule ” means the Company’s disclosure schedule delivered by the Company to BioSante concurrently with the delivery of this Agreement.

“ Company Material Adverse Effect ” means any event, occurrence, development, change or effect that (i) is, individually or in the aggregate with all other events, occurrences, developments, changes and effects, materially adverse to the business, properties, assets (tangible or intangible), liabilities, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, other than any event, occurrence, development, change or effect described in clause (i) resulting primarily from any of the following: (A) the announcement of the execution of this Agreement, or the pendency of consummation of the Merger, (B) changes in the United States economy or financial markets as a whole, so long as such conditions do not adversely affect the Company or its Subsidiaries in a materially disproportionate manner relative to other similarly situated participants in the industries, geographies or markets in which they operate, (C) any change in any applicable Law, rule or regulation or GAAP or interpretation thereof after the date of this Agreement, (D) the commencement, occurrence, continuation or escalation of any war, armed hostilities or acts of terrorism involving or affecting the United States of America or any part thereof, (E) any claim or litigation arising from allegations of breach of fiduciary duty relating to this Agreement or the Merger, or of disclosure violations in securities filings made in connection with this Agreement or the Merger, and (F) any action taken by the Company or any of its Subsidiaries as contemplated or permitted by this Agreement or with BioSante’s consent; or (ii) would reasonably be expected to prevent or materially delay the consummation of the Merger or prevent or materially delay the Company from performing its obligations under this Agreement. For the avoidance of doubt, a Company Material Adverse Effect shall be deemed to have occurred if a Fundamental Change (as defined in the New Notes Indenture (as defined in Section 7.17)) under the New Convertible Notes shall have occurred or an event of default shall have occurred that has triggered acceleration of repayment of the New Convertible Notes under the New Notes Indenture, except in each case to the extent any such Fundamental Change or event

 

-3-

of default has resulted from the failure of BioSante to comply with the terms of Section 7.17, and if the occurrence of such Fundamental Change or event of default is evidenced by either: (i) an Order issued by a court of competent jurisdiction, or (ii) a written acknowledgement or agreement by the Company. The intent of the foregoing sentence is to simply provide an example of a Company Material Adverse Effect and is not meant to define the only parameters under which the occurrence of a Fundamental Change or event of default under the Old Notes Indenture and/or the New Notes Indenture may or may not constitute a Company Material Adverse Effect.

“ Company Stockholder Approval ” means the adoption of this Agreement at the Company Stockholder Meeting by holders of a majority of the outstanding Shares in accordance with the DGCL and the Company’s certificate of incorporation and bylaws.

“ control ” (including the terms “ controlled by ”, “ controlling ” and “ under common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.

“ D&O Insurance ” means directors’ and officers’ liability insurance and fiduciary liability insurance.

“ Environment ” means ambient air, indoor air, surface water, groundwater, soil, surface or subsurface strata and natural resources such as wetlands, flora and fauna.

“ Environmental Law ” means the common law and all laws, statutes, rules, regulations, codes, ordinances, orders, judgments and decrees relating to pollution or the protection of the Environment or of human health or safety, including those relating to the use, handling, distribution, generation, transportation, storage, treatment, Release or exposure to Hazardous Materials.

“ Environmental Permits ” means all licenses, approvals, authorizations, notifications and identification numbers required under Environmental Laws.

“ Exchange Ratio ” shall be 0.1615; provided, however , that if the Net Cash at the Determination Date is more than $500,000 greater than or less than the Target Net Cash at the Determination Date, then the Exchange Ratio shall be equal to:

 

 

-4-

 

-5-

“ Hazardous Materials ” means any chemical, substance, waste, pollutant, compound, mixture or constituent in any form, including asbestos and asbestos-containing materials, radon, mold, petroleum and petroleum products, including crude oil and any fractions thereof, which are regulated or can give rise to liability under any Environmental Law.

“ Intellectual Property ” means intellectual property or similar proprietary rights of any kind, including any and all: (i) United States, non-United States and international patents, patent applications including any continuations, continuations-in-part, re-issues, reexamination certificates, statutory invention registrations and any restorations or extensions of the foregoing, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names and other source identifiers, and registrations and applications for registration thereof, and the goodwill associated with any of the foregoing, (iii) copyrightable works, copyrights, mask works, and registrations and applications for registration thereof, (iv) confidential and proprietary information, including trade secrets and know-how, (v) Internet domain names and (vi) with respect to clauses (i) – (iii) above the rights to sue or otherwise enforce and collect all damages or any other consideration obtained or awarded for any past, present or future infringement thereof.

“ Liens ” means all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind, including any easement, right of way or other encumbrance to title, or any option, right of first refusal, or right of first offer.

“ NASDAQ ” means The NASDAQ Global Market.

“ Net Cash ” means (x) the sum of:

(i) the Company’s cash and cash equivalents, short-term investments and restricted cash, in each case as of the Determination Date and determined in a manner consistent with the manner in which such items were historically determined by the Company and in accordance with the Company Balance Sheet, plus

 

-6-

(ii) accrued interest receivable as of the Determination Date on the Company’s cash and cash equivalents, short term investments and restricted cash, determined in a manner consistent with the manner in which such item was historically determined by the Company, plus

(iii) the Company’s accounts receivable, refundable deposits and recoverable prepaid balances, in each case as of the Determination Date and determined in a manner consistent with the manner in which such items were historically determined by the Company and in accordance with the Company Balance Sheet,

minus (y) the sum of (without duplication):

(i) the Company’s accounts payable and accrued expenses, in each case as of the Determination Date and determined in a manner consistent with the manner in which such items were historically determined by the Company and in accordance with the Company Balance Sheet, plus

(ii) the amount of bona fide contractual commitments of the Company as of the Determination Date, including commitments set forth on the Company Disclosure Schedule or which have arisen prior to Closing, in each case to the extent not cancelled or satisfied as of the Determination Date or cancellable within 90 days after the Determination Date without material cost or penalty, plus

(iii) the remaining cash cost of restructuring accruals as of the Determination Date in a manner substantially consistent with the manner in which such items were determined for the Company’s unaudited consolidated balance sheet as of March 31, 2009 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009, as filed with the SEC prior to the date of the Agreement, plus

(iv) the cash cost of any change of control payments or severance payments that are or become due to any employee of the Company in connection with the Closing or any employee’s termination in connection with, or immediately following, the Closing and the cash cost of any current and future COBRA premium payments, excluding any cash premium payments and related tax gross-up payments to the Executives and current non-executive officers described in Section 7.06 hereof, plus

(v) the cash cost of any accrued and unpaid retention payments due to any employee of the Company as of the Determination Date or any retention payments that will become due to any employee of the Company in connection with the Closing, plus

(vi) the cash cost of any and all billed and unpaid Taxes for which the Company is liable in respect of any period ending on or before the Determination Date, plus

 

-7-

(vii) in the event a Fundamental Change (as defined in the Old Notes Indenture (as defined in Section 7.17)) under the Old Convertible Notes shall have occurred or an event of default shall have occurred that has triggered acceleration of repayment of the Old Convertible Notes under the Old Notes Indenture, except in each case to the extent any such Fundamental Change or event of default has resulted from the failure of BioSante to comply with the terms of Section 7.17, the amount of principal and accrued interest then due and payable in respect of the Old Convertible Notes as a result of any such Fundamental Change or event of default, plus

(viii) any remaining fees and expenses (including, but not limited to, any attorney’s, accountant’s, financial advisor’s or finder’s fees and any estimates thereof) as of the Determination Date, for which the Company is liable incurred by the Company in connection with this Agreement and the transactions contemplated hereby or otherwise.

Notwithstanding the foregoing, the amounts in clause (y) above shall exclude in each case all accrued expenses, contractual commitments, restructuring accruals, and fees and expenses, as applicable, to the extent related to (A) the Company’s 2010 annual stockholders meeting, (B) the audit of the Company’s financial statements for the year ended December 31, 2009, (C) the preparation of 2009 Tax Returns, (D) an audit of the Company’s terminated 401(k) plan for the year ended December 31, 2009, (E) the preparation of any Quarterly Report on Form 10-Q due after the Closing Date, including any quarterly review by external accountants, (F) license agreements related to Company Licensed Intellectual Property, including the cancellation thereof or any royalties payable thereunder, to the extent that such amounts payable have been set forth in the Company Disclosure Schedules as of the date hereof, (G) Company Owned Intellectual Property, including the prosecution, maintenance, abandonment or forfeiture thereof, other than legal and regulatory costs incurred in the ordinary course with respect to the Company’s patents, (H) any claim or litigation arising from allegations of breach of fiduciary duty relating to this Agreement or the Merger or of disclosure violations in securities filings made in connection with this Agreement, (I) responding to or resolving SEC comments on the Registration Statement or any Company SEC Reports in connection therewith, provided, however, that such expenses are reasonable, documented and itemized with reasonable particularity and (J) any cash premium payments and related tax gross-up payments to the Executives and current non-executive officers described in Section 7.06 hereof.

“ person ” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

“ Qualifying Confidentiality Agreement ” means an executed agreement with provisions requiring any person receiving nonpublic information with respect to the Company to keep such information confidential, which provisions to keep such information confidential are no less restrictive in the aggregate to such person than the Confidentiality Agreement is to BioSante, its affiliates, and their respective personnel and representatives (it being understood that such agreement with such person need not have comparable standstill provisions); provided , that no such confidentiality agreement shall conflict with any rights of BioSante or obligations of the Company and the Subsidiaries under this Agreement.

 

-8-

“ Release ” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, leaching, dispersal or migration on, into or through the Environment or, into, through or out of any property, facility or equipment.

“ subsidiary ” or “ subsidiaries ” of the Company, the Surviving Corporation, BioSante or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries.

“ Target Net Cash ” shall be equal to (i) if the Closing Date is on or before August 31, 2009, $22,950,000, (ii) if the Closing Date is on or between September 1, 2009 and September 30, 2009, $22,100,000, (iii) if the Closing Date is on or between October 1, 2009 and October 31, 2009, $21,250,000, (iv) if the Closing Date is on or between November 1, 2009 and November 30, 2009, $20,400,000, or (v) if the Closing Date is on or between December 1, 2009 and December 31, 2009, $19,650,000.

“ Tax Returns ” means any return, declaration, report, election, claim for refund or information return or other statement or form filed or required to be filed with any taxing authority relating to Taxes, including any schedule or attachment thereto or any amendment thereof.

“ Taxes ” means any and all (a) taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any taxing authority, including: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges, and (b) liability for the payment of any Tax of another person (i) as a result of being a member of a consolidated, combined, unitary or affiliated group that includes any other person, or (ii) by reason of transferee or successor liability imposed by law.

“ Taxing Authority ” means any Governmental Authority responsible for the imposition or collection of any Tax.

(b) The following terms have the meaning set forth in the Sections set forth below:

 

 

-9-

 

-10-

 

-11-

ARTICLE II

THE MERGER

SECTION 2.01. The Merger . At the Effective Time, upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, the Company shall be merged with and into BioSante. As a result of the Merger, the separate corporate existence of the Company shall cease and BioSante shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”), and the separate corporate existence of BioSante with all its rights, privileges, immunities, powers and franchises shall continue as contemplated hereby.

SECTION 2.02. Effective Time; Closing . As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII , the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL (the date and time of such filing of the Certificate of Merger (or such later time as may be agreed by each of the parties hereto and specified in the Certificate of Merger) being the “ Effective Time ”). Immediately prior to such filing of the Certificate of Merger, a closing of the Merger (the “ Closing ”) shall be held at the offices of O’Melveny & Myers LLP, 2765 Sand Hill Road, Menlo Park, California 94025, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VIII . The date of the Closing is referred to as the “ Closing Date .”

SECTION 2.03. Effect of the Merger . The effect of the Merger at and following the Effective Time shall be as provided in the applicable provisions of the DGCL and this Agreement.

SECTION 2.04. Conversion of Securities .

(a) Conversion of Company Common Stock . Subject to Section 3.01(e) , at the Effective Time, by virtue of the Merger and without any action on the part of BioSante or the Company, or any holder of any Shares (as defined herein), each share of common stock, par value $0.001 per share, of the Company (“ Company Common Stock ”) (all shares of Company Common Stock being collectively referred to as the “ Shares ”) issued and outstanding

 

-12-

immediately prior to the Effective Time (other than Shares to be canceled in accordance with Section 2.04(b) ) shall be converted into the right to receive a number of validly issued, fully paid and non-assessable BioSante Common Shares equal to the Exchange Ratio (the “ Per Share Merger Consideration ”).

(b) Cancellation of Certain Shares. At the Effective Time, by virtue of the Merger and without any action on the part of BioSante or the Company, all Shares owned by the Company or BioSante or any direct or indirect wholly owned subsidiary of the Company or BioSante immediately prior to the Effective Time shall, by virtue of the Merger, and without any action on the part of the holder thereof, automatically be canceled without any conversion thereof and retired and shall cease to exist and no consideration shall be delivered in exchange therefor, and each holder of a certificate or certificates representing any such Shares shall cease to have any rights with respect thereto.

(c) Capital Stock of BioSante. At the Effective Time, by virtue of the Merger and without any action on the part of BioSante or the Company, each BioSante Common Share issued and outstanding immediately prior to the Effective Time shall become one duly authorized, validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation and each Special Share issued and outstanding immediately prior to the Effective Time shall become one duly authorized, validly issued, fully paid and non-assessable share of Class C Special Shares, $0.0001 par value, of the Surviving Corporation.

SECTION 2.05. Company Stock Options .

(a) At a time mutually agreed upon by BioSante and the Company, but in no event less than 30 days prior to the Effective Time, the administrator of the Amended and Restated 1998 Incentive Stock Option Plan, the 2001 Nonstatutory Option Plan, the 2001 Non-Employee Directors Stock Option Plan and the 2005 Equity Incentive Plan (collectively, as amended, supplemented or modified, the “ Company Stock Option Plans ”) shall provide appropriate notice to holders of all options outstanding under the Company Stock Option Plans (the “ Company Stock Options ”) that such Company Stock Options other than the Company Stock Options listed on Schedule 2.05(a) hereto (the “ Specified Company Stock Options ”), whether or not vested and whether or not exercisable, shall be fully vested and exercisable until immediately prior to the Effective Time. Upon the Effective Time, all Company Stock Options other than the Specified Company Stock Options shall terminate. The Specified Company Stock Options, whether or not vested, shall by virtue of the Merger be assumed by BioSante and shall remain outstanding following the Effective Time. Each such Specified Company Stock Option so assumed by BioSante will continue to have, and be subject to, the same terms and conditions of such options immediately prior to the Effective Time (including, without limitation, any vesting provisions), except that: (i) each Specified Company Stock Option will be solely exercisable (or will become exercisable in accordance with its terms) for that number of whole BioSante Common Shares equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such Specified Company Stock Option immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole number of BioSante Common Shares; and (ii) the per share exercise price for the BioSante Common Shares issuable upon exercise of such assumed Specified Company Stock Option will be equal to the quotient determined by dividing the exercise price per share of Company

 

-13-

Common Stock at which such Specified Company Stock Option was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. BioSante shall comply with the terms of all such Specified Company Stock Options and use its reasonable best efforts to ensure, to the extent required by, and subject to the provisions of, the Company Stock Option Plans and permitted under the Code, that any Specified Company Stock Options that qualified for tax free treatment under Section 422 of the Code prior to the Effective Time continue to so qualify after the Effective Time. BioSante shall take all corporate actions necessary to reserve for issuance a sufficient number of BioSante Common Shares for delivery upon exercise of all Specified Company Stock Options pursuant to the terms set forth in this Section 2.05(a). From and after the Effective Time, all references to the Company in the Company Stock Option Plans and the applicable stock option agreements issued thereunder shall be deemed to refer to BioSante, which shall assume the Company Stock Options Plans as of the Effective Time by virtue of this Agreement and without any further action. Prior to the Effective Time, the Company shall take all actions necessary to effect the transactions contemplated by this Section 2.05(a). The Company will not take any action to accelerate the vesting, change the exercisability or extend the expiration date of any Specified Company Stock Options beyond what is contractually required as of April 1, 2009 (including those change of control agreements and arrangements with current executive officers identified in Section 4.10(a) of the Company Disclosure Schedule), and will take any action that is permitted to take so that the vesting, exercisability and expiration date of such Specified Company Stock Options is not accelerated or changed, and each Specified Company Stock Option shall be exercisable for a period of time determined in strict compliance with such contractual requirements.

(b) Each outstanding and unexercised warrant existing on the date of this Agreement (the “ Warrants ”) shall be treated in accordance with the terms of the Warrants as set forth in Section 4.03(2) of the Company Disclosure Schedule, and the contractual obligations thereunder shall, by virtue of the Merger, be assumed by BioSante to the extent such obligations would survive a Merger under the terms of the Warrants as set forth in Section 4.03(2) of the Company Disclosure Schedule; provided , however , that pursuant to the Warrant Exchange Agreement, dated as of May 17, 2009, by and between the Company and Capital Ventures International (the “ Warrant Exchange Agreement ”), the Company shall pay or cause to be paid the Company Call Consideration (as defined in the Warrant Exchange Agreement) at least three (3) Business Days prior to the anticipated Closing Date if Capital Ventures International (“ CVI ”) so consents (which the Company will use commercially reasonable efforts to obtain as promptly as practicable after the date hereof) or, if CVI does not so consent, immediately prior to the Closing with respect to the outstanding portion of the Remainder Warrant (as defined in the Warrant Exchange Agreement) and, upon such payment, the Remainder Warrant shall not be assumed by BioSante and shall be cancelled.

SECTION 2.06. Restricted Awards . Immediately prior to the Effective Time, any restricted stock, restricted stock units, other equity-based awards or any other outstanding rights of any kind to acquire or receive Company Common Stock (other than Company Stock Options) (each, a “ Company Restricted Award ”) outstanding immediately prior to the Effective Time that are unvested or subject to risk of forfeiture, restrictions on transfer or other restrictions or conditions under the Company Stock Option Plans, any applicable award agreement or any other agreement with the Company, shall be fully vested and no longer subject to any restriction or other condition to which the applicable Company Restricted Award was subject. At the

 

-14-

Effective Time, such fully vested Company Restricted Awards or, as the case may be, the number of shares of Company Common Stock subject to such Company Restricted Award, shall be exchanged for fully-vested BioSante Common Shares pursuant to Section 2.04 .

SECTION 2.07. Treatment of the Convertible Notes . The Convertible Notes defined in Section 4.03(a) shall be treated as set forth in Section 7.17.

SECTION 2.08. Certificate of Incorporation; Bylaws .

(a) At the Effective Time, the certificate of incorporation of BioSante as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by Law and such certificate of incorporation.

(b) At the Effective Time, the bylaws of BioSante as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended as provided by Law, the certificate of incorporation of the Surviving Corporation and such bylaws.

SECTION 2.09. Directors and Officers . At the Effective Time (and for the avoidance of doubt by virtue of the Merger and without any action on the part of BioSante or the Company or any holder of any Shares, BioSante Common Shares or Special Shares), the directors of BioSante (as approved by Company in accordance with Section 4.21 ) immediately prior to the Effective Time and Stephen A. Sherwin, M.D. and John T. Potts, Jr., M.D., shall be appointed as the initial directors of the Surviving Corporation, each such director to hold office in accordance with the DGCL, the certificate of incorporation and bylaws of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal, and the officers of BioSante immediately prior to the Effective Time shall, subject to the applicable provisions of the certificate of incorporation and bylaws of the Surviving Corporation, be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal.

SECTION 2.10. Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, properties, rights, privileges, immunities, powers and franchises of the Company and BioSante, the Company will take all such lawful and necessary action.

SECTION 2.11. Calculation of Net Cash .

(a) For the purposes of this Agreement, the “ Determination Date ” shall be the date that is ten (10) calendar days prior to the earlier to occur of the date originally scheduled for the BioSante Stockholder Meeting and the date originally scheduled for the Company Stockholder Meeting, as agreed upon by BioSante and the Company at least fifteen (15) calendar days prior to the earlier to occur of the date originally scheduled for the BioSante Stockholder Meeting and the date originally scheduled for the Company Stockholder Meeting. Within one (1) calendar day following the Determination Date, the Company shall deliver to BioSante a

 

-15-

schedule (a “ Net Cash Schedule ”) setting forth, in reasonable detail, the Company’s calculation of Net Cash (as determined in accordance with the definition of Net Cash set forth in Article I) (the “ Net Cash Calculation ”) as of such applicable Determination Date prepared by the Company’s Chief Financial Officer. The Company shall make the work papers and back-up materials used in preparing the applicable Net Cash Schedule available to BioSante and, if requested by BioSante, its accountants and counsel at reasonable times and upon reasonable notice.

(b) Within two (2) calendar days after the Company delivers the Net Cash Schedule to BioSante (the “ Response Date ”), BioSante shall have the right to dispute any part of such Net Cash Schedule by delivering a written notice to that effect to the Company (a “ Dispute Notice ”). Any Dispute Notice shall identify in reasonable detail the nature of any proposed revisions to the Net Cash Calculation and shall be accompanied by reasonably detailed materials supporting the basis for such proposed revisions.

(c) If on or prior to the Response Date, (i) BioSante notifies the Company in writing that it has no objections to the Net Cash Calculation set forth in the Net Cash Schedule or (ii) BioSante fails to deliver a Dispute Notice as provided in Section 2.11(b) , then the Net Cash Calculation as set forth in the Net Cash Schedule shall be deemed to have been finally determined for purposes of this Agreement and to represent the Net Cash at the Determination Date for purposes of this Agreement.

(d) If BioSante delivers a Dispute Notice on or prior to the Response Date as provided in Section 2.11(b) , then representatives of the Company and BioSante shall promptly meet and attempt in good faith to promptly resolve the disputed item(s) and negotiate an agreed-upon determination of Net Cash within two (2) calendar days after the Response Date, which agreed upon Net Cash amount shall be deemed to have been finally determined for purposes of this Agreement and to represent the Net Cash at the Determination Date for purposes of this Agreement.

(e) Once the Net Cash at the Determination Date has been finally determined, which shall be no later than five (5) calendar days after the Determination Date, the Company shall issue a press release publicly announcing (i) the Company’s Net Cash at the Determination Date, (ii) whether the minimum Net Cash condition set forth in Section 8.02(e) has been satisfied, and (iii) any adjustment to the Exchange Ratio based on the Company’s Net Cash at the Determination Date.

ARTICLE III

DELIVERY OF BIOSANTE COMMON SHARES

SECTION 3.01. Exchange of Certificates.

(a) Exchange Agent . From and after the Effective Time, BioSante shall deposit, or shall cause to be deposited, with Computershare or another bank or trust company selected by BioSante and reasonably acceptable to and approved in advance by the Company (the “ Exchange Agent ”), for the benefit of the holders of Shares, (i) for exchange in accordance

 

-16-

with this Article III through the Exchange Agent, certificates or, at BioSante’s option, evidence of shares in book entry form, representing BioSante Common Shares issuable to holders of Shares in the Merger pursuant to Section 2.04 as of the Effective Time, (ii) immediately available funds, from time to time as required to make payments in lieu of any fractional shares pursuant to Section 3.01(e) and (iii) any cash or other consideration from time to time as required for any dividends or other distributions pursuant to Section 3.01(c) (such cash and certificates (or, as the case may be, evidence of book entry form) for BioSante Common Shares, together with any dividends or distributions with respect thereto, being hereinafter referred to as the “ Exchange Fund ”). The Exchange Agent shall, pursuant to irrevocable instructions, deliver the BioSante Common Shares contemplated to be issued pursuant to Section 2.04 , dividends or other distributions contemplated to be delivered pursuant to Section 3.01(c) and the cash in lieu of fractional shares contemplated to be paid pursuant to Section 3.01(e) out of the Exchange Fund. Except as contemplated by Section 3.01(g) hereof, the Exchange Fund shall not be used for any other purpose.

(b) Exchange Procedures.

(i) As promptly as practicable after the Effective Time, BioSante shall cause the Exchange Agent to mail to each person who was, at the Effective Time, a holder of record of Shares whose Shares were converted into the right to receive the Per Share Merger Consideration pursuant to Section 2.04(a) : (A) a letter of transmittal (which shall be in customary form reasonably agreed upon by BioSante and Company, and shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the “ Certificates ”) shall pass, only upon proper delivery of the Certificates (or an affidavit of loss in lieu thereof) to the Exchange Agent); and (B) instructions for use in effecting the surrender of the Certificates (or an affidavit of loss in lieu thereof) pursuant to such letter of transmittal.

(ii) Upon surrender to the Exchange Agent of a Certificate (or an affidavit of loss in lieu thereof) for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor (A) a certificate or, at BioSante’s option, evidence of shares in book entry form, representing that number of whole BioSante Common Shares which such holder has the right to receive in respect of the Shares formerly represented by such Certificate (after taking into account all Shares then held by such holder), (B) cash in lieu of any fractional BioSante Common Shares to which such holder is entitled pursuant to Section 3.01(e) , and (C) any dividends or other distributions to which such holder is entitled pursuant to Section 3.01(c) , and the Certificate (or an affidavit of loss in lieu thereof) so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a certificate representing the proper number of BioSante Common Shares, cash in lieu of any fractional BioSante Common Shares to which such holder is entitled pursuant to Section 3.01(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 3.01(c) may be delivered to a transferee if the Certificate (or an affidavit of loss in lieu thereof) representing such Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer Taxes have been paid. Until surrendered as contemplated by this Section 3.01 , each Certificate shall be deemed at all times after the Effective Time to represent

 

-17-

only the right to receive upon such surrender the certificate representing BioSante Common Shares, cash in lieu of any fractional BioSante Common Shares to which such holder is entitled pursuant to Section 3.01(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 3.01(c) .

(c) Distributions with Respect to Unexchanged BioSante Common Shares. No dividends or other distributions declared or made after the Effective Time with respect to the BioSante Common Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the BioSante Common Shares represented thereby, and no cash payment in lieu of any fractional shares shall be paid to any such holder pursuant to Section 3.01(e) , until the holder of such Certificate shall surrender such Certificate (or an affidavit of loss in lieu thereof). Subject to the effect of escheat or other applicable Laws, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole BioSante Common Shares issued in exchange therefor, without interest, (i) the amount of any cash payable with respect to any fractional BioSante Common Shares to which such holder is entitled pursuant to Section 3.01(e) and the amount of dividends or other distributions with a record date after the Effective Time and theretofore paid with respect to such whole BioSante Common Shares, and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole BioSante Common Shares.

(d) No Further Rights in Company Common Stock. All BioSante Common Shares issued upon surrender of a Certificate in accordance with the terms of this Article III and any cash paid pursuant to Section 3.01(c) or Section 3.01(e) shall be deemed to have been issued in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificate.

(e) No Fractional Shares. No certificates or scrip representing fractional BioSante Common Shares shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of BioSante. Each holder of a fractional share interest (after aggregating all fractional BioSante Common Shares issuable to such holder) shall be paid an amount in cash (without interest, rounded to the nearest whole cent equal to the product obtained by multiplying (i) such fractional share interest to which such holder (after taking into account all fractional share interests then held by such holder) would otherwise be entitled by (ii) the BioSante Share Value. As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional share interests, the Exchange Agent shall so notify BioSante, and BioSante shall deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to such holders of fractional share interests subject to and in accordance with the terms of Section 3.01(b) and Section 3.01(c) .

(f) Adjustments of Exchange Ratio. If, between the date of this Agreement and the Effective Time, there is a reorganization, recapitalization, reclassification, stock split, reverse stock split, stock dividend or distribution (including any dividend or distribution of securities convertible into BioSante Common Shares or Company Common Stock), extraordinary cash dividend, subdivision, issuer tender or exchange offer, combination, exchange of shares or other similar change with respect to, or rights issued in respect of, the BioSante

 

-18-

Common Shares or Company Common Stock (each, an “ Adjustment ”), the Exchange Ratio shall be adjusted accordingly, without duplication, to provide the holders of Shares with the same economic effect as contemplated by this Agreement prior to such Adjustment.

(g) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the holders of the Shares for nine months after the Effective Time shall be delivered to BioSante, upon demand, and any holders of Shares who have not theretofore complied with this Article III shall thereafter look only to BioSante (subject to abandoned property, escheat or other similar laws) for the Per Share Merger Consideration, any cash in lieu of fractional BioSante Common Shares to which they are entitled pursuant to Section 3.01(e) and any dividends or other distributions with respect to the BioSante Common Shares to which they are entitled pursuant to Section 3.01(c) . Neither BioSante nor the Surviving Corporation shall be liable to any holder of Shares for any Per Share Merger Consideration (or dividends or distributions with respect to BioSante Common Shares), or other cash properly delivered to a public official pursuant to any abandoned property, escheat or similar Law.

(h) Withholding Rights. Each of the Company, the Surviving Corporation and BioSante shall be entitled to deduct and withhold from the consideration or other amounts payable pursuant to this Agreement to any holder of Shares, Company Stock Options, Company Restricted Awards or other interests in the Company such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Law relating to Taxes. To the extent that amounts are so withheld by the Company, the Surviving Corporation or BioSante, as the case may be, and paid to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares, Company Stock Options, Company Restricted Awards or other interests in the Company in respect of which such deduction and withholding was made by the Company, the Surviving Corporation or BioSante, as the case may be.

(i) Lost, Stolen, Destroyed or Unissued Certificates. If any Certificate shall have been lost, stolen or destroyed, or was never issued, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, destroyed or unissued and, if required by the Surviving Corporation in its reasonable discretion, the posting by such person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen, destroyed or unissued Certificate the whole number of BioSante Common Shares, any cash in lieu of fractional BioSante Common Shares to which the holders thereof are entitled pursuant to Section 3.01(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 3.01(c).

SECTION 3.02. Stock Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Shares that were outstanding immediately prior to the Effective Time thereafter on the records of the Company. From and after the Effective Time, the holders of Certificates representing Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or BioSante for any reason shall be canceled and converted in accordance with the terms of this Article III .

 

-19-

SECTION 3.03. No Appraisal Rights . In accordance with Section 262 of the DGCL, no appraisal rights shall be available to holders of Shares in connection with the Merger.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to BioSante to enter into this Agreement, except (i) as set forth in the Company Disclosure Schedule (with specific reference to the particular section or subsection of this Agreement to which the information set forth in the Company Disclosure Schedule relates; provided , that any information set forth in one section or subsection of the Company Disclosure Schedule shall be deemed to apply to each other section or subsection thereof to which its relevance is reasonably apparent); and (ii) as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “ Company 10-K ”) and other Company SEC Reports filed after the fiscal year ended December 31, 2008, but prior to the date of this Agreement (other than disclosures in the “Risk Factors” sections thereof or any disclosures included therein that are cautionary, predictive or forward-looking in nature) (the “ Current Company SEC Reports ”); provided , that in no event shall any disclosure contained in such Current Company SEC Reports be deemed to be an exception to any representation or warranty contained in Section 4.03(a) , Section 4.05(b) or Section 4.08 , and it being understood that any matter set forth in the Current Company SEC Reports shall be deemed to qualify any representation or warranty in this Article IV only to the extent that the description of such matter in such Current Company SEC Reports would be reasonably inferred to be a qualification with respect to such representation and warranty), the Company hereby represents and warrants to BioSante as follows:

SECTION 4.01. Organization and Qualification; Subsidiaries .

(a) Each of the Company and each subsidiary of the Company (each, a “ Subsidiary ”) is a legal entity duly organized, validly existing and in good standing (with respect to jurisdictions where such concept is applicable) under the laws of the jurisdiction of its organization and has the requisite corporate or similar power and authority and all necessary approvals from Governmental Authorities to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure of any Subsidiary to be so organized, existing or in good standing or to have such power, authority and approvals would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing (with respect to jurisdictions where such concept is applicable), in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary or desirable, except for such failures to be so qualified or licensed and in good standing that, individually or in the aggregate, would not have a Company Material Adverse Effect.

 

-20-

(b) Section 4.01(b) of the Company Disclosure Schedule sets forth all of the Subsidiaries of the Company in existence as of the date of this Agreement, together with the jurisdiction of incorporation or organization of each such Subsidiary and the percentage of the outstanding capital stock or other equity interests of each such Subsidiary owned by the Company and its other Subsidiaries. There are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire, or register under any securities Law, any Shares or any capital stock of any Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, the Company or any Subsidiary.

SECTION 4.02. Certificate of Incorporation and Bylaws . The Company has heretofore furnished to BioSante a complete and correct copy of the certificate of incorporation and the bylaws or equivalent organizational documents, each as amended to date, of the Company and each of the Subsidiaries. Such certificates of incorporation, bylaws or equivalent organizational documents are in full force and effect. Neither the Company nor any Subsidiary is in violation of any of the provisions of its certificate of incorporation, bylaws or equivalent organizational documents.

SECTION 4.03. Capitalization .

(a) The authorized capital stock of the Company consists of (i) 275,000,000 Shares, and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share (“ Company Preferred Stock ”). As of June 29, 2009, (i) 109,618,787 Shares were issued and outstanding (not including Shares held in the treasury of the Company), all of which are duly authorized, validly issued, fully paid and non-assessable, (ii) no Shares are held by the Subsidiaries, (iii) 12,729,729 Shares were reserved for future issuance for grant or available for grant Company Stock Options pursuant to the Company Stock Option Plans, (iv) 32,000 Shares were reserved for future issuance pursuant to outstanding Company Restricted Awards (together with the Company Stock Options, the “ Company Stock Awards ”), (v) 135,604 Shares were reserved for future issuance pursuant to the Company’s outstanding 3.125% Convertible Senior Notes due 2011 (the “ Old Convertible Notes ”), (vi) 30,563,235 Shares were reserved for future issuance pursuant to the Company’s outstanding 3.125% Convertible Senior Notes due 2013 (the “ New Convertible Notes ” and, together with the Old Convertible Notes, the “ Convertible Notes ”), (vii) 796,918 Shares were reserved for future issuance pursuant to outstanding warrants issued to Kingsbridge Capital Limited, (viii) 2,162,162 Shares were reserved for future issuance pursuant to outstanding warrants issued in the Company’s 2007 registered direct offerings, (ix) 1,848,467 Shares were reserved for future issuance pursuant to outstanding warrants issued pursuant to the Warrant Exchange Agreement (the “ CVI Warrant ”), and (x) no shares of Company Preferred Stock were issued and outstanding. Except as disclosed in Section 4.03(1) of the Company Disclosure Schedule, and except for the Preferred Shares Purchase Rights (the “ Company Rights ”) issued pursuant to the Company Rights Agreement, there are no options, warrants, convertible debt or other convertible instruments or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any shares of capital stock of, or other equity interests in, the Company. Section 4.03(2) of the Company Disclosure Schedule accurately sets forth each currently outstanding form of Warrant issued by the Company and the following information with respect to each such currently outstanding Warrant: (1) the aggregate number and type of

 

-21-

shares receivable upon exercise of such outstanding Warrants, the exercise price thereof, and the expiration date, (2) whether or not as a result of the Merger such Warrant by its terms will terminate, will not be assumed by BioSante and will no longer be outstanding immediately following the Merger and any required notices or consents with respect thereto, (3) whether or not as a result of the Merger such Warrant by its terms will be assumed by BioSante and the corresponding calculation of the adjustment to such Warrant’s number and type of shares receivable upon exercise thereof and the exercise price thereunder immediately after the Effective Time and any required notices or consents with respect thereto, and (4) whether or not as a result of the Merger such Warrant by its terms gives the Company or the Warrant Holder the right to call or put, as applicable, the Warrant for cash or shares and the corresponding cash or share consideration payable with respect thereto.

(b) The following information has been made available to BioSante prior to the date of this Agreement with respect to each Company Stock Award outstanding as of the date of this Agreement: (i) the name of the Company Stock Award recipient; (ii) the date on which such Company Stock Award was granted; (iii) the date on which such Company Stock Award expires; (iv) the exercise or purchase price of such Company Stock Award; (v) the number of Shares subject to such Company Stock Award; and (vi) the number of Shares vested pursuant to such Company Stock Award.

(c) No Subsidiary owns any capital stock of, or other equity interest in, the Company. Each outstanding share of capital stock of, or other equity interest in, each Subsidiary is duly authorized, validly issued, fully paid and non-assessable, and each such share is owned by the Company or another Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, limitations on the Company’s or any Subsidiary’s voting rights, charges and other encumbrances, except for limitations on transfer imposed by federal or state securities Laws. There are no options, warrants, convertible debt or other convertible instruments or other rights, agreements, arrangements or commitments relating to the issued or unissued capital stock of any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, any Subsidiary. Neither the Company nor any of its Subsidiaries owns any capital stock of, or other equity interest in, any third party (other than the Company’s ownership of capital stock of its Subsidiaries).

(d) The Company has made available to BioSante an accurate and complete copy of the Company Stock Option Plans pursuant to which Company has granted the Company Stock Awards that are currently outstanding and the form of all stock award agreements evidencing such Company Stock Awards. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable. All outstanding Shares, all outstanding Company Stock Awards, and all outstanding shares of capital stock of each Subsidiary have been issued and granted in compliance in material respects with (i) all applicable Laws, and (ii) all requirements set forth in applicable contracts.

(e) The exercise price of each of the Company Stock Options is the fair market value of the Company Common Stock on the date of grant of such option. Except pursuant to the terms of this Agreement or as set forth in the Current Company SEC Reports, there are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Stock Award as a result of the Merger (whether alone or upon the occurrence of any additional or subsequent events).

 

-22-

(f) Since March 31, 2009, other than (i) pursuant to the exercise of Company Stock Options outstanding as of December 31, 2008 issued pursuant to the Company Stock Option Plans, (ii) pursuant to and required by the terms of Company Stock Awards outstanding as of December 31, 2008, (iii) as permitted by the terms of Section 6.01 , (iv) pursuant to the terms of the Stock Purchase Agreement between the Company and BioMed Realty, L.P., dated as of April 8, 2009, (v) pursuant to the terms of the Warrant Exchange Agreement, and (vi) as a result of the exchange offer for the Old Convertible Notes, there has been no change in (i) the outstanding capital stock of the Company, (ii) the number of Company Stock Options or Company Stock Awards outstanding, or (iii) the number of other options, warrants or other rights to purchase Company capital stock.

(g) Since June 29, 2009, except as permitted by the terms of Section 6.01 , the Company has not prepaid, purchased, re-purchased or redeemed, in whole or in part, any Convertible Notes, or otherwise made any payment with respect thereto, other than payments of interest in accordance with the terms thereof.

(h) As of the date of this Agreement, the Conversion Price (as defined in the Old Notes Indenture (as defined in Section 7.17 hereof)) of the Old Convertible Notes is $9.10, and the Conversion Price (as defined in the New Notes Indenture (as defined in Section 7.17 hereof)) of the New Convertible Notes is $0.68, subject to adjustment after the date hereof as set forth therein.

SECTION 4.04. Authority Relative to This Agreement . The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the Company Stockholder Approval, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Merger, obtaining the Company Stockholder Approval and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by BioSante, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles. The Company Board has approved this Agreement and the transactions contemplated hereby and such approvals are sufficient so that the restrictions on business combinations set forth in Section 203(a) of the DGCL shall not apply to the Merger or any of the transactions contemplated hereby, and such approvals have not been withdrawn or modified. No other state “moratorium,” “control share,” “fair price” or other takeover statute or regulation is applicable to the Company with respect to the Merger or the other transactions contemplated by this Agreement.

 

-23-

SECTION 4.05. No Conflict; Required Filings and Consents .

(a) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the certificate of incorporation or bylaws or any equivalent organizational documents, each as amended to date, of the Company or any Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 4.05(b) have been obtained, that all filings and obligations described in Section 4.05(b) have been made and that the Company Stockholder Approval has been obtained, conflict with or violate any United States or non-United States (including without limitation any state, local, international or foreign) statute, law, ordinance, regulation, rule, code, writ, executive order, injunction, judgment, decree or other order (“ Law ”) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach of, loss of any benefit under, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property of any of them is bound or affected, except, with respect to clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences that, individually or in the aggregate, would not have a Company Material Adverse Effect.

(b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state, county or local or non-United States government, governmental, regulatory, Taxing or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a “ Governmental Authority ”), except (i) for applicable requirements, if any, of the Securities Act of 1933, as amended (the “Securities Act ”), the Exchange Act, state securities or “blue sky” laws (“ Blue Sky Laws ”) and filing and recordation of appropriate merger documents as required by the DGCL, and except as may be required in connection with Taxes described in Section 7.09 and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a Company Material Adverse Effect.

SECTION 4.06. Permits . Section 4.06 of the Company Disclosure Schedule sets forth a true and correct list of all material franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority held by the Company or any of its Subsidiaries (the “ Company Permits ”). Each of the Company and the Subsidiaries is in possession of Company Permits necessary for each of the Company or the Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted, except where the failure to have, or the suspension or cancellation of, any of the Company Permits would not, individually or in the aggregate, have a Company Material Adverse Effect. As of the date of this Agreement, no suspension or cancellation of any material Company Permit is pending or, to the knowledge of the Company, threatened.

 

-24-

SECTION 4.07. SEC Filings; Financial Statements .

(a) The Company has filed all forms, reports, statements, schedules and other documents required to be filed by it with the U.S. Securities and Exchange Commission (the “ SEC ”) since December 31, 2005 (collectively, the “ Company SEC Reports ”). The Company SEC Reports (i) at the time they were filed or, if amended, as of the date of such amendment, complied in all material respects with all applicable requirements of the Securities Act, or the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), as the case may be, and the rules and regulations promulgated thereunder, each as in effect on the date so filed, except to the extent updated, amended, restated or corrected by a subsequent Company SEC Report filed with or furnished to the SEC by the Company, and in either case, publicly available prior to the date of this Agreement and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except to the extent updated, amended, restated or corrected by a subsequent Company SEC Report. As of the date of this Agreement, the Company is eligible for the use of Form S-3 for purposes of eligibility for incorporation by reference on Form S-4. No Subsidiary is required to file any form, report or other document with the SEC. There are no outstanding comments from the Staff of the SEC with respect to any of the Company SEC Reports.

(b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports (or if amended prior to the date of this Agreement, as amended) complied as to form, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), was prepared in accordance with the then existing United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the consolidated financial position, changes in stockholders’ equity, results of operations and cash flows of the Company and the consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments).

(c) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Subsidiaries as of December 31, 2008, including the notes thereto (the “ Company Balance Sheet ”) or disclosed in the Company 10-K or other Current Company SEC Reports filed subsequent to the date of the Company 10-K, neither the Company nor any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities and obligations, (i) incurred in the ordinary course of business consistent with past practice since December 31, 2008, (ii) relating to payment or performance obligations under contracts that are either (1) disclosed in the Company Disclosure Schedule or (2) not required to be so disclosed by the terms of this Agreement (and including any of the foregoing types of contracts that are entered into or obtained after the date of this Agreement, as long as such action does not result in a breach of this Agreement) in accordance with the terms and conditions thereof which are not required by GAAP to be reflected on a regularly prepared balance sheet or (iii) incurred in connection with the performance by the Company of its obligations under this Agreement.

 

-25-

(d) The Company has heretofore furnished or made available to BioSante complete and correct copies of all material amendments and modifications that have not been filed by the Company with the SEC to all Company Material Contracts (except for such amendments or modifications as would not affect the surviving provisions of such Company Material Contracts as in effect on