AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 14, 2001
                                                      REGISTRATION NO. 333-64218

================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                          PRE-EFFECTIVE AMENDMENT NO. 1
                                       TO
                                    FORM SB-2

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

                         BIOSANTE PHARMACEUTICALS, INC.
                 (Name of small business issuer in its charter)

           DELAWARE                        2836                  58-2301143
(State or other jurisdiction of (Primary Standard Industrial   (I.R.S. Employer
incorporation or organization)   Classification Code Number) Identification No.)

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

                        111 BARCLAY BOULEVARD, SUITE 280
                          LINCOLNSHIRE, ILLINOIS 60069
                          TELEPHONE NO.: (847) 478-0500

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

                              PHILLIP B. DONENBERG
                CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
                         BIOSANTE PHARMACEUTICALS, INC.
                        111 BARCLAY BOULEVARD, SUITE 280
                          LINCOLNSHIRE, ILLINOIS 60069
                          TELEPHONE NO.: (847) 478-0500
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

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

                                    COPY TO:
                              AMY E. CULBERT, ESQ.
                        OPPENHEIMER WOLFF & DONNELLY LLP
                       45 SOUTH SEVENTH STREET, SUITE 3300
                          MINNEAPOLIS, MINNESOTA 55402
                                 (612) 607-7287

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

        Approximate date of commencement of proposed sale to the public:
     FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

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

    If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or reinvestment plans, check the following box: /X/

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

    If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /

    The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.

================================================================================

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE SECURITIES AND EXCHANGE COMMISSION
DECLARES OUR REGISTRATION STATEMENT EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                 Subject to Completion, dated September 14, 2001

PROSPECTUS

                                     [LOGO]

                                25,437,500 SHARES

                                  COMMON STOCK

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

Selling stockholders of BioSante Pharmaceuticals, Inc. are offering
25,437,500 shares of common stock. BioSante will not receive any proceeds
from the sale of shares offered by the selling stockholders.

The shares of common stock offered will be sold as described under the
heading "Plan of Distribution," beginning on page 20.

Our common stock is listed on the Over-the-Counter Bulletin Board under the
symbol "BTPH." On September 10, 2001, the last reported sale price of our
common stock on the OTC Bulletin Board was $0.68.

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

THE COMMON STOCK OFFERED INVOLVES A HIGH DEGREE OF RISK. WE REFER YOU TO
"RISK FACTORS," BEGINNING ON PAGE 6.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.

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

              The date of this prospectus is          , 2001

                                TABLE OF CONTENTS

                                                                                                               PAGE
                                                                                                               ----

RISK FACTORS......................................................................................................6

FORWARD-LOOKING STATEMENTS.......................................................................................16

USE OF PROCEEDS..................................................................................................16

DIVIDEND POLICY..................................................................................................16

SELLING STOCKHOLDERS.............................................................................................17

PLAN OF DISTRIBUTION.............................................................................................20

SELECTED CONSOLIDATED FINANCIAL DATA.............................................................................22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................................................................23

BUSINESS.........................................................................................................30

MANAGEMENT.......................................................................................................43

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................49

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................................................50

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT......................................................52

DESCRIPTION OF SECURITIES........................................................................................54

LEGAL MATTERS....................................................................................................56

EXPERTS..........................................................................................................56

WHERE YOU CAN FIND MORE INFORMATION..............................................................................57

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS......................................................................F-1

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

You should rely only on the information contained in this prospectus. We have
not authorized any other person to provide you with different information.
This prospectus may only be used where it is legal to sell these securities.
The information in this prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this
prospectus is accurate as of any other date.

                                     SUMMARY

THE ITEMS IN THE FOLLOWING SUMMARY ARE DESCRIBED IN MORE DETAIL LATER IN THIS
PROSPECTUS. THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION AND
DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER. THEREFORE, YOU
SHOULD ALSO READ THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS,
INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS.

                                   OUR COMPANY

We are a development stage biopharmaceutical company that is developing a
pipeline of hormone replacement products to treat hormone deficiencies in men
and in women. We also are engaged in the development of our proprietary
calcium phosphate, nanoparticulate-based platform technology, or CAP, for
vaccine adjuvants, proprietary novel vaccines, drug delivery systems and to
purify the milk of transgenic animals, which are animals that have been
genetically modified to produce certain desired results in their milk.

To enhance the value of our current pharmaceutical portfolio, we are pursuing
the following corporate growth strategies:

    o    accelerate the development of our hormone replacement products;

    o    continue to develop our nanoparticle-based platform technology, or CAP,
         and seek assistance in the development through corporate partner
         sub-licenses;

    o    license or otherwise acquire other drugs that will add value to our
         current product portfolio; and

    o    implement business collaborations or joint ventures with other
         pharmaceutical and biotechnology companies.

Our primary focus is to build a pipeline of hormone replacement products for
the treatment of human hormone deficiencies. Symptoms of hormone deficiency
in men include impotence, lack of sex drive, muscle weakness and
osteoporosis, and in women, menopausal symptoms, such as hot flashes, vaginal
atrophy, decreased libido and osteoporosis.

Our hormone replacement products, which we license on an exclusive basis from
Antares Pharma Inc., are gel formulations of testosterone, estradiol and a
combination of estradiol and a progestogen. The gels are designed to be
absorbed quickly through the skin after application on the arms, shoulders,
abdomen or thighs, delivering the hormone to the bloodstream evenly and in a
non-invasive, painless manner. Human clinical trials have begun on at least
two of our hormone replacement products, a necessary step in the process of
obtaining United States Food and Drug Administration, or FDA, approval to
market the products.

Our CAP technology, which we license on an exclusive basis from the
University of California, is based on the use of extremely small, solid,
uniform particles, which we call "nanoparticles," as immune system boosters,
for drug delivery and to purify the milk of transgenic animals. We have
identified four potential applications for our CAP technology:

    o    the creation of improved versions of current vaccines by the "adjuvant"
         activity of our proprietary nanoparticles that enhance the ability of a
         vaccine to stimulate an immune response;

                                       3

    o    the development of new, unique vaccines against diseases for which
         there currently are few or no effective methods of prevention (E.G.,
         genital herpes);

    o    the creation of inhaled forms of drugs that currently must be given by
         injection (E.G., insulin); and

    o    the purification of the milk of transgenic animals, in which protein
         pharmaceuticals are grown by selectively isolating biologically active
         therapeutic proteins from the transgenic milk.

                              CORPORATE INFORMATION

Our company, which was initially formed as a corporation organized under the
laws of the Province of Ontario on August 29, 1996, was continued as a
corporation under the laws of the State of Wyoming on December 19, 1996 and
was reincorporated under the laws of the State of Delaware on June 26, 2001.

In this prospectus, references to "BioSante," "the company," "we," and "our,"
unless the context otherwise requires, refer to BioSante Pharmaceuticals, Inc.

                          OFFICE AND WEB SITE LOCATION

Our principal executive offices are located at 111 Barclay Boulevard, Suite
280, Lincolnshire, Illinois 60069, and our telephone number is (847)
478-0500. Our web site is located at WWW.BIOSANTEPHARMA.COM. Our web site,
and the information contained on that site, or connected to that site, are
not intended to be part of this prospectus.

                                       4

                       SUMMARY CONSOLIDATED FINANCIAL DATA

The selected statement of operations data shown below for the years ended
December 31, 1998, 1999 and 2000 and the balance sheet data as of December
31, 1999 and 2000 are derived from our audited financial statements included
elsewhere in this prospectus. The selected statement of operations data shown
below for the period from August 29, 1996 (date of incorporation) to December
31, 1996 and for the year ended December 31, 1997 and the balance sheet data
as of December 31, 1996, 1997 and 1998 are derived from our audited financial
statements not included elsewhere in this prospectus. The selected financial
data for the six months ended June 30, 2000 and 2001 and as of June 30, 2001
have been derived from our unaudited financial statements included elsewhere
in this prospectus, which, in the opinion of management, include all
adjustments, consisting solely of normal recurring adjustments, necessary for
a fair presentation of the financial information shown in these statements.
The results for the six months ended June 30, 2000 and 2001 are not
necessarily indicative of the results to be expected for the full year or for
any future period. When you read this selected consolidated financial data,
it is important that you also read the historical financial statements and
related notes included in this prospectus, as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Historical results are not necessarily indicative of future results.

                                    PERIOD FROM
                                  AUGUST 29, 1996
                                     (DATE OF                                                          SIX MONTHS ENDED
                                   INCORPORATION)                YEAR ENDED DECEMBER 31,                  JUNE 30,
                                  TO DECEMBER 31,     --------------------------------------------   -------------------
                                       1996             1997        1998        1999        2000       2000       2001
                                   ------------       --------    ---------   ---------   --------   --------   --------
                                                            (in thousands, except per share data)
                                                                                           
STATEMENT OF OPERATIONS DATA:

Interest income..................  $         53       $    144    $     123   $     199   $    228   $    122   $     83
                                   ------------       --------    ---------   ---------   --------   --------   --------
Expenses:
   Research and development......            --            336        1,400         661      1,888      1,355        620
   General and administration....           547          1,618        1,112         853      1,679        608        963
   Depreciation and amortization.             1             52          140          91         98         49         49
   Loss on disposal of capital
     assets......................            --             28          130          --         --         --         --
                                   ------------       --------    ---------   ---------   --------   --------   --------
Total expenses...................           548          2,034        2,782       1,605      3,665      2,012      1,632
                                   ------------       --------    ---------   ---------   --------   --------   --------
Loss before other expenses.......          (495)        (1,890)      (2,659)     (1,406)    (3,437)    (1,890)    (1,549)
                                   ------------       --------    ---------   ---------   --------   --------   --------
   Cost of acquisition of
     Structured Biologicals,
     Inc.........................           375             --           --          --         --         --         --
   Purchased in-process research
     and development.............         5,377             --           --          --         --         --         --
                                   ------------       --------    ---------   ---------   --------   --------   --------
Total other expenses.............         5,752             --           --          --         --         --         --
                                   ------------       --------    ---------   ---------   --------   --------   --------
Net loss ........................  $     (6,247)      $ (1,890)   $  (2,659)  $  (1,406)  $ (3,437)  $ (1,890)  $ (1,549)
                                   ============       ========    =========   =========   ========   ========   ========
Basic and diluted net loss per
    share........................  $      (0.26)      $  (0.05)   $   (0.08)  $   (0.03)  $  (0.06)  $  (0.03)  $  (0.02)
                                   ============       ========    =========   =========   ========   ========   ========
Weighted average number of
    shares outstanding...........        24,366         35,962       34,858      49,424     57,537     57,451     62,087
                                   ------------       --------    ---------   ---------   --------   --------   --------

                                                             AS OF DECEMBER 31,                      AS OF JUNE 30,
                                          -------------------------------------------------------   ---------------
                                            1996       1997        1998       1999        2000           2001
                                          --------   --------   ---------   ---------   ---------   ---------------
                                                                        (in thousands)
                                                                                  
BALANCE SHEET DATA:
Cash and cash equivalents.............    $  3,474   $  1,750   $   2,841   $   5,275   $   2,612   $         4,782
Working capital.......................       2,236        356       2,099       5,004       1,735             3,905
Total assets..........................       3,519      2,450       3,449       5,780       3,067             5,210
Convertible debenture - current.......          --         --          --          --         500               500
Stockholders' equity..................       2,269      1,034       2,631       5,451       2,126             4,269

                                       5

                                  RISK FACTORS

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN SHARES OF
OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION OR OPERATING RESULTS COULD BE HARMED. IN THAT CASE, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE PART OR ALL
OF YOUR INVESTMENT. THESE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING BIOSANTE. ADDITIONAL RISKS AND UNCERTAINTIES NOT CURRENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS
OPERATIONS AND ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

RISKS RELATING TO OUR COMPANY

WE HAVE A HISTORY OF OPERATING LOSSES, EXPECT CONTINUING LOSSES FOR THE
FORESEEABLE FUTURE AND MAY NEVER ACHIEVE PROFITABILITY.

We have incurred losses in each year since our amalgamation in 1996 and
expect to incur substantial and continuing losses for the foreseeable future.
We incurred a net loss of $3,437,195 for the year ended December 31, 2000,
and as of December 31, 2000, our accumulated deficit was $15,639,672. We
incurred a net loss of $1,548,813 for the six months ended June 30, 2001, and
as of June 30, 2001, our accumulated deficit was $17,188,485.

All of our revenue to date has been derived from interest earned on invested
funds. We have not commercially introduced any products. We expect to incur
substantial and continuing losses for the foreseeable future as our own
product development programs expand and various preclinical and clinical
trials commence. The amount of these losses may vary significantly from
year-to-year and quarter-to-quarter and will depend upon, among other factors:

    o    the timing and cost of product development;

    o    the progress and cost of preclinical and clinical development programs;

    o    the costs of licensure or acquisition of new products; and

    o    the timing and cost of obtaining necessary regulatory approvals.

In order to generate revenues, we must successfully develop and commercialize
our own proposed products in pre-clinical development, in late-stage human
clinical development, or already on the market that we may in-license or
otherwise acquire, or enter into collaborative agreements with others who can
successfully develop and commercialize them. Even if our proposed products
and the products we may license or otherwise acquire are commercially
introduced, they may never achieve market acceptance and we may never
generate revenues or achieve profitability.

WE ARE A DEVELOPMENT STAGE COMPANY WITH A SHORT OPERATING HISTORY, MAKING IT
DIFFICULT FOR YOU TO EVALUATE OUR BUSINESS AND YOUR INVESTMENT.

We are in the development stage and our operations and the development of our
proposed products are subject to all of the risks inherent in the
establishment of a new business enterprise, including:

    o    the absence of an operating history;

                                       6

    o    the lack of commercialized products;

    o    insufficient capital;

    o    expected substantial and continual losses for the foreseeable future;

    o    limited experience in dealing with regulatory issues;

    o    the lack of manufacturing experience and limited marketing experience;

    o    an expected reliance on third parties for the development and
         commercialization of some of our proposed products;

    o    a competitive environment characterized by numerous, well-established
         and well-capitalized competitors; and

    o    reliance on key personnel.

Because we are subject to these risks, you may have a difficult time
evaluating our business and your investment in our company.

OUR PROPOSED PRODUCTS ARE IN THE RESEARCH AND DEVELOPMENT STAGES AND WILL
LIKELY NOT BE COMMERCIALLY INTRODUCED FOR SEVERAL YEARS, IF AT ALL.

Our proposed products are in the research and development stages and will
require further research and development, preclinical and clinical testing
and investment prior to commercialization in the United States and abroad. We
cannot assure you that any of our proposed products will:

    o    be successfully developed;

    o    prove to be safe and efficacious in clinical trials;

    o    meet applicable regulatory standards;

    o    demonstrate substantial protective or therapeutic benefits in the
         prevention or treatment of any disease;

    o    be capable of being produced in commercial quantities at reasonable
         costs; or

    o    be successfully marketed.

We do not anticipate that any of our proposed products will receive the
requisite regulatory approvals for commercialization in the United States or
abroad for a number of years, if at all, and we cannot assure you that any of
our proposed products, if approved and marketed, will generate significant
product revenue and provide an acceptable return on our investment.

WE WILL NEED TO RAISE SUBSTANTIAL ADDITIONAL CAPITAL IN THE FUTURE TO FUND
OUR OPERATIONS AND WE MAY BE UNABLE TO RAISE SUCH FUNDS WHEN NEEDED AND ON
ACCEPTABLE TERMS.

We currently do not have sufficient resources to complete the
commercialization of any of our proposed products. Therefore, we will need to
raise substantial additional capital to fund our operations sometime in the
future. We cannot be certain that any financing will be available when
needed. If we fail to raise

                                       7

additional financing as we need it, we may have to delay or terminate our own
product development programs or pass on opportunities to in-license or
otherwise acquire new products that we believe may be beneficial to our
business.

Our cash on hand as of June 30, 2001 was $4,782,058. We believe this cash
will be sufficient to fund our operations through December 2002. We have
based this estimate on assumptions that may prove to be wrong. As a result,
we may need to obtain additional financing prior to that time. In addition,
we may need to raise additional capital at an earlier time to fund our
ongoing research and development activities, acquire new products or take
advantage of other unanticipated opportunities. Any additional equity
financings may be dilutive to our existing stockholders, and debt financing,
if available, may involve restrictive covenants on our business. In addition,
insufficient funds may require us to delay, scale back or eliminate some or
all of our programs designed to facilitate the commercial introduction of our
proposed products, prevent commercial introduction of our products altogether
or restrict us from acquiring new products that we believe may be beneficial
to our business.

OUR STRATEGY TO ACQUIRE PRODUCTS IN THE LATE-STAGE DEVELOPMENT PHASE OR
PRODUCTS ALREADY ON THE MARKET IS RISKY AND THE MARKET FOR ACQUIRING THESE
PRODUCTS IS COMPETITIVE.

We may acquire, through outright purchase, license, joint venture or other
methods, products in the late-stage development phase and assist in the final
development and commercialization of those products or products already on
the market. There are a number of companies that have similar strategies to
ours, many of whom have substantially greater resources than us. It is
difficult to determine the value of a product that has not been fully
developed or commercialized, and the possibility of significant competition
for these products may tend to increase the cost to us of these products
beyond the point at which we will experience an acceptable return on our
investment. We cannot assure you that we will be able to acquire any products
on commercially acceptable terms or at all, that any product we may acquire
will be approved by the FDA or if approved, will be marketable, or that even
if marketed, that we will be able to obtain an acceptable return on our
investment.

While we have no current agreements or negotiations underway, if we purchase
any products, we could issue common or preferred stock that would dilute our
existing stockholders' percentage ownership, incur substantial debt or assume
contingent liabilities by paying cash for such products. For example, we paid
a $1.0 million upfront license fee for our hormone replacement products in
June 2000. In September 2000, we sublicensed some of these products to a
Canadian company and in connection with this transaction and subject to our
achieving certain milestones we agreed to sell shares of our common stock to
this licensee in the future at a premium of the then market value of our
common stock. Purchases of new products also involve numerous other risks,
including:

    o    problems assimilating the purchased products;

    o    unanticipated costs associated with the purchase;

    o    incorrect estimates made in the accounting for acquisitions; and

    o    risks associated with entering markets in which we have no or limited
         prior experience.

IF WE FAIL TO OBTAIN REGULATORY APPROVAL TO COMMERCIALLY MANUFACTURE OR SELL
ANY OF OUR FUTURE PRODUCTS, OR IF APPROVAL IS DELAYED, WE WILL BE UNABLE TO
GENERATE REVENUE FROM THE SALE OF OUR PRODUCTS.

We must obtain regulatory approval to sell any of our products in the United
States and abroad. In the United States, we must obtain the approval of the
FDA for each product or drug that we intend to

                                       8

commercialize. The FDA approval process is typically lengthy and expensive,
and approval is never certain. Products to be commercialized abroad are
subject to similar foreign government regulation.

Generally, only a very small percentage of newly discovered pharmaceutical
products that enter preclinical development are approved for sale. Because of
the risks and uncertainties in biopharmaceutical development, our proposed
products could take a significantly longer time to gain regulatory approval
than we expect or may never gain approval. If regulatory approval is delayed
or never obtained, our management's credibility, the value of our company and
our operating results and liquidity would be adversely affected.

TO OBTAIN REGULATORY APPROVAL TO MARKET OUR PRODUCTS, COSTLY AND LENGTHY
PRECLINICAL STUDIES AND CLINICAL TRIALS MAY BE REQUIRED, AND THE RESULTS OF
THE STUDIES AND TRIALS ARE HIGHLY UNCERTAIN.

As part of the FDA approval process, we must conduct, at our own expense,
preclinical studies on animals and clinical trials on humans on each of our
proposed products. We expect the number of preclinical studies and clinical
trials that the FDA will require will vary depending on the product, the
disease or condition the product is being developed to address and
regulations applicable to the particular product. We may need to perform
multiple preclinical studies using various doses and formulations before we
can begin clinical trials, which could result in delays in our ability to
obtain any regulatory approvals or to market any of our products.
Furthermore, even if we obtain favorable results in preclinical studies on
animals, the results in humans may be different.

After we have conducted preclinical studies in animals, we must demonstrate
that our products are safe and effective for use on human patients in order
to receive regulatory approval for commercial sale. The data obtained from
preclinical and clinical testing are subject to varying interpretations that
could delay, limit or prevent regulatory approval. Adverse or inconclusive
clinical results would prevent us from filing for regulatory approval of our
products. Additional factors that could cause delay or termination of our
clinical trials include:

    o    slow patient enrollment;

    o    longer treatment time required to demonstrate efficacy;

    o    adverse medical events or side effects in treated patients; and

    o    lack of effectiveness of the product being tested.

IF WE FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR PRODUCTS BY
THIRD PARTY PAYORS, THERE WOULD BE NO COMMERCIALLY VIABLE MARKETS FOR OUR
PRODUCTS.

Our ability to commercialize our products successfully will depend in part
upon the price we may be able to charge for our products and on the extent to
which reimbursement for the cost of our products and related treatment will
be available from government health administration authorities, private
health insurers and other third party payors. We currently have limited
expertise obtaining reimbursement. We will need to seek additional
reimbursement expertise unless we enter into collaborations with other
companies with the necessary expertise. Even if we are able to obtain
reimbursement from third party payors, we cannot be certain that
reimbursement rates will be high enough to allow us to profit from sales of
our products and realize an acceptable return on our investment in product
development.

                                       9

WE LICENSE OUR HORMONE REPLACEMENT PRODUCTS AND OUR CAP TECHNOLOGY FROM THIRD
PARTIES AND MAY LOSE THE RIGHTS TO LICENSE THEM.

We license our hormone replacement products from Antares Pharma, Inc. and our
CAP technology from the University of California. We may lose our right to
license these technologies if we breach our obligations under the license
agreements. Although we intend to use our reasonable best efforts to meet
these obligations, if we violate or fail to perform any term or covenant of
the license agreements or with respect to the University of California's
license agreement within 60 days after written notice from the University of
California, the other party to these agreements may terminate these
agreements or certain projects contained in these agreements. The termination
of these agreements, however, will not relieve us of our obligation to pay
any royalty or license fees owing at the time of termination. Our failure to
retain the right to license our hormone replacement products or CAP
technology could harm our business and future operating results. For example,
if we were to enter into an outlicense agreement with a third party under
which we agree to outlicense our hormone replacement products or CAP
technology for a license fee, the termination of the main license agreement
with Antares Pharma, Inc. or the University of California could either,
depending upon the terms of the outlicense agreement, cause us to breach our
obligations under the outlicense agreement or give the other party a right to
terminate that agreement, thereby causing us to lose future revenue generated
by the outlicense fees.

WE DO NOT HAVE ANY FACILITIES APPROPRIATE FOR CLINICAL TESTING, WE LACK
MANUFACTURING EXPERIENCE AND WE HAVE VERY LIMITED SALES AND MARKETING
PERSONNEL. WE WILL, THEREFORE, BE DEPENDENT UPON OTHERS FOR OUR CLINICAL
TESTING, MANUFACTURING, SALES AND MARKETING.

Our current facilities do not include accommodation for the testing of our
proposed products in animals or in humans for the clinical testing required
by the FDA. We do not have a manufacturing facility that can be used for
full-scale production of our products. In addition, at this time, we have
very limited sales and marketing personnel. In the course of our development
program, we will therefore be required to enter into arrangements with other
companies or universities for our animal testing, human clinical testing,
manufacturing, and sales and marketing activities. If we are unable to retain
third parties for these purposes on acceptable terms, we may be unable to
successfully develop, manufacture and market our proposed products. In
addition, any failures by third parties to adequately perform their
responsibilities may delay the submission of our proposed products for
regulatory approval, impair our ability to deliver our products on a timely
basis or otherwise impair our competitive position. Our dependence on third
parties for the development, manufacture, sale and marketing of our products
also may adversely affect our profit margins.

IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, WE MAY NOT BE ABLE TO
COMPETE AS EFFECTIVELY.

The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and
processes. Our success will depend, in part, upon our ability to obtain,
enjoy and enforce protection for any products we develop or acquire under
United States and foreign patent laws and other intellectual property laws,
preserve the confidentiality of our trade secrets and operate without
infringing the proprietary rights of third parties.

Where appropriate, we seek patent protection for certain aspects of our
technology. In February 2000 and June 1999, we filed patent applications
relating to our CAP technology. However, our owned and licensed patents and
patent applications may not ensure the protection of our intellectual
property for a number of other reasons:

                                       10

    o    We do not know whether our patent applications will result in actual
         patents. For example, we may not have developed a method for treating a
         disease or manufacturing a product before others have developed similar
         methods.

    o    Competitors may interfere with our patent process in a variety of ways.
         Competitors may claim that they invented the claimed invention before
         us or may claim that we are infringing on their patents and therefore
         we cannot use our technology as claimed under our patent. Competitors
         may also contest our patents by showing the patent examiner that the
         invention was not original or novel or was obvious.

    o    We are in the research and development stage and are in the process of
         developing proposed products. Even if we receive a patent, it may not
         provide much practical protection. If we receive a patent with a narrow
         scope, then it will be easier for competitors to design products that
         do not infringe on our patent. Even if the development of our proposed
         products is successful and approval for sale is obtained, there can be
         no assurance that applicable patent coverage, if any, will not have
         expired or will not expire shortly after this approval. Any expiration
         of the applicable patent could have a material adverse effect on the
         sales and profitability of our proposed product.

    o    Enforcing patents is expensive and may require significant time by our
         management. In litigation, a competitor could claim that our issued
         patents are not valid for a number of reasons. If the court agrees, we
         would lose those patents.

    o    We also may support and collaborate in research conducted by government
         organizations or universities. We cannot guarantee that we will be
         able to acquire any exclusive rights to technology or products derived
         from these collaborations. If we do not obtain required licenses or
         rights, we could encounter delays in product development while we
         attempt to design around other patents or we may be prohibited from
         developing, manufacturing or selling products requiring these licenses.
         There is also a risk that disputes may arise as to the rights to
         technology or products developed in collaboration with other parties.

It also is unclear whether our trade secrets will provide useful protection.
While we use reasonable efforts to protect our trade secrets, our employees
or consultants may unintentionally or willfully disclose our proprietary
information to competitors. Enforcing a claim that someone else illegally
obtained and is using our trade secrets, like patent litigation, is expensive
and time consuming, and the outcome is unpredictable. In addition, courts
outside the United States are sometimes less willing to protect trade
secrets. Finally, our competitors may independently develop equivalent
knowledge, methods and know-how.

CLAIMS BY OTHERS THAT OUR PRODUCTS INFRINGE THEIR PATENTS OR OTHER
INTELLECTUAL PROPERTY RIGHTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

The pharmaceutical industry has been characterized by frequent litigation
regarding patent and other intellectual property rights. Patent applications
are maintained in secrecy in the United States until the patents are issued
and also are maintained in secrecy for a period of time outside the United
States. Accordingly, we can conduct only limited searches to determine
whether our technology infringes any patents or patent applications of
others. Any claims of patent infringement would be time-consuming and could
likely:

    o    result in costly litigation;

                                       11

    o    divert the time and attention of our technical personnel and
         management;

    o    cause product development delays;

    o    require us to develop non-infringing technology; or

    o    require us to enter into royalty or licensing agreements.

Although patent and intellectual property disputes in the pharmaceutical
industry often have been settled through licensing or similar arrangements,
costs associated with these arrangements may be substantial and often require
the payment of ongoing royalties, which could hurt our gross margins. In
addition, we cannot be sure that the necessary licenses would be available to
us on satisfactory terms, or that we could redesign our products or processes
to avoid infringement, if necessary. Accordingly, an adverse determination in
a judicial or administrative proceeding, or the failure to obtain necessary
licenses, could prevent us from developing, manufacturing and selling some of
our products, which could harm our business, financial condition and
operating results.

BECAUSE WE ARE DEVELOPING NEW PRODUCTS, WE MAY FAIL TO GAIN MARKET ACCEPTANCE
FOR OUR PRODUCTS AND OUR BUSINESS COULD SUFFER.

None of the products we propose to develop or are developing have yet been
approved for marketing by regulatory authorities in the United States or
elsewhere. Even if our proposed products ultimately are approved for sale,
there can be no assurance that they will be commercially successful.

RISKS RELATING TO OUR INDUSTRY

BECAUSE OUR INDUSTRY IS VERY COMPETITIVE AND OUR COMPETITORS HAVE
SUBSTANTIALLY GREATER CAPITAL RESOURCES AND MORE EXPERIENCE IN RESEARCH AND
DEVELOPMENT, MANUFACTURING AND MARKETING THAN US, WE MAY NOT SUCCEED IN
DEVELOPING OUR PROPOSED PRODUCTS AND BRINGING THEM TO MARKET.

Competition in the pharmaceutical industry is intense. Potential competitors
in the United States are numerous and include pharmaceutical, chemical and
biotechnology companies, most of which have substantially greater capital
resources and more experience in research and development, manufacturing and
marketing than us. Academic institutions, hospitals, governmental agencies
and other public and private research organizations also are conducting
research and seeking patent protection and may develop and commercially
introduce competing products or technologies on their own or through joint
ventures. We cannot assure you that our competitors will not succeed in
developing similar technologies and products more rapidly than we do or that
these competing technologies and products will not be more effective than any
of those that we currently are developing or will develop.

WE ARE DEPENDENT UPON KEY PERSONNEL, MANY OF WHOM WOULD BE DIFFICULT TO
REPLACE.

Our success will be largely dependent upon the efforts of Stephen M. Simes,
our Vice Chairman, President and Chief Executive Officer, and other key
employees. We are not the stated beneficiary of key person life insurance on
any of our key personnel. Our future success also will depend in large part
upon our ability to identify, attract and retain other highly qualified
managerial, technical and sales and marketing personnel. Competition for
these individuals is intense. The loss of the services of any of our key
personnel, the inability to identify, attract or retain qualified personnel
in the future or delays in hiring qualified personnel, could make it more
difficult for us to manage our business and meet key objectives, such as the
timely introduction of our proposed products, which would harm our business,
financial condition and operating results.

                                       12

RISKS RELATING TO OUR COMMON STOCK

BECAUSE OUR COMMON STOCK IS TRADED ON THE OTC BULLETIN BOARD, YOUR ABILITY TO
SELL YOUR SHARES IN THE SECONDARY TRADING MARKET MAY BE LIMITED.

Our common stock currently is traded on the over-the-counter market on the
OTC Bulletin Board. Consequently, the liquidity of our common stock is
impaired, not only in the number of shares that are bought and sold, but also
through delays in the timing of transactions, and coverage by security
analysts and the news media, if any, of our company. As a result, prices for
shares of our common stock may be lower than might otherwise prevail if our
common stock was traded on the Nasdaq Stock Market or a national securities
exchange, like the American Stock Exchange.

BECAUSE OUR SHARES ARE "PENNY STOCKS," YOU MAY HAVE DIFFICULTY SELLING THEM
IN THE SECONDARY TRADING MARKET.

Federal regulations under the Securities Exchange Act of 1934 regulate the
trading of so-called "penny stocks," which are generally defined as any
security not listed on a national securities exchange or Nasdaq, priced at
less than $5.00 per share and offered by an issuer with limited net tangible
assets and revenues. Since our common stock currently trades on the OTC
Bulletin Board at less than $5.00 per share, our common stock is a "penny
stock" and may not be traded unless a disclosure schedule explaining the
penny stock market and the risks associated therewith is delivered to a
potential purchaser prior to any trade.

In addition, because our common stock is not listed on Nasdaq or any national
securities exchange and currently trades at less than $5.00 per share,
trading in our common stock is subject to Rule 15g-9 under the Exchange Act.
Under this rule, broker-dealers must take certain steps prior to selling a
"penny stock," which steps include:

    o    obtaining financial and investment information from the investor;

    o    obtaining a written suitability questionnaire and purchase agreement
         signed by the investor; and

    o    providing the investor a written identification of the shares being
         offered and the quantity of the shares.

If these penny stock rules are not followed by the broker-dealer, the
investor has no obligation to purchase the shares. The application of these
comprehensive rules will make it more difficult for broker-dealers to sell
our common stock and our stockholders, therefore, may have difficulty in
selling their shares in the secondary trading market.

SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK IN THE PUBLIC
MARKET, INCLUDING THE SHARES OFFERED HEREBY, COULD LOWER OUR STOCK PRICE AND
IMPAIR OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.

Future sales of a substantial number of shares of our common stock in the
public market, including the shares offered under this prospectus, or the
perception that such sales could occur, could adversely affect the prevailing
market price of our common stock and could make it more difficult for us to
raise additional capital through the sale of equity securities. We filed this
registration statement pursuant to subscription agreements with the holders
of the common stock and warrants purchased in our April 2001 private
placement. We are required under these subscription agreements to use our
reasonable best efforts to cause this registration statement to remain
effective until the earlier of (1) the sale of all the shares of

                                       13

our common stock covered by this registration statement; or (2) such time as
the selling stockholders named in this registration statement become eligible
to resell the shares of BioSante common stock and the shares of BioSante
common stock issuable upon exercise of warrants pursuant to Rule 144(k) under
the Securities Act.

OUR STOCK PRICE MAY BE VOLATILE AND YOUR INVESTMENT IN OUR COMMON STOCK COULD
SUFFER A DECLINE IN VALUE.

Our common stock has been listed on the OTC Bulletin Board since May 2000.
The market price of our common stock may fluctuate significantly in response
to a number of factors, some of which are beyond our control. These factors
include:

    o    progress of our products through the regulatory process;

    o    results of preclinical studies and clinical trials;

    o    announcements of technological innovations or new products by us or our
         competitors;

    o    government regulatory action affecting our products or our competitors'
         products in both the United States and foreign countries;

    o    developments or disputes concerning patent or proprietary rights;

    o    actual or anticipated fluctuations in our operating results;

    o    changes in our financial estimates by securities analysts;

    o    general market conditions for emerging growth and pharmaceutical
         companies;

    o    broad market fluctuations; and

    o    economic conditions in the United States or abroad.

WE MAY INCUR SIGNIFICANT COSTS FROM CLASS ACTION LITIGATION DUE TO OUR
EXPECTED STOCK VOLATILITY.

In the past, following periods of large price declines in the public market
price of a company's stock, holders of that stock occasionally have
instituted securities class action litigation against the company that issued
the stock. If any of our stockholders were to bring this type of lawsuit
against us, even if the lawsuit is without merit, we could incur substantial
costs defending the lawsuit. The lawsuit also could divert the time and
attention of our management, which would hurt our business. Any adverse
determination in litigation could also subject us to significant liabilities.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE OR
PREVENT A TAKEOVER, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR
STOCKHOLDERS.

Provisions of our certificate of incorporation and bylaws, as well as
provisions of Delaware law, could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders. These
provisions include:

    o    authorizing the issuance of "blank check" preferred that could be
         issued by our Board of Directors to increase the number of outstanding
         shares and thwart a takeover attempt; and

                                       14

    o    prohibiting cumulative voting in the election of directors, which would
         otherwise allow less than a majority of stockholders to elect director
         candidates.

We refer you to "Description of Securities--Undesignated Preferred Stock;
- --Anti-Takeover Provisions of Delaware Law" for more information on the
specific provisions of our certificate of incorporation, our bylaws and
Delaware law that could discourage, delay or prevent a change of control of
our company.

OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SUFFICIENT NUMBER OF SHARES OF OUR
CAPITAL STOCK TO CONTROL OUR COMPANY, WHICH COULD DISCOURAGE OR PREVENT A
TAKEOVER, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

Our directors and executive officers own or control approximately 50.9% of
our outstanding voting power. Accordingly, these stockholders, individually
and as a group, may be able to influence the outcome of stockholder votes,
involving votes concerning the election of directors, the adoption or
amendment of provisions in our certificate of incorporation and bylaws and
the approval of certain mergers or other similar transactions, such as a sale
of substantially all of our assets. Such control by existing stockholders
could have the effect of delaying, deferring or preventing a change in
control of our company. In addition, under a stockholders agreement entered
into in connection with our May 1999 private placement, several of our
stockholders entered into a voting agreement with respect to the election of
directors.

EXERCISE OF OUTSTANDING WARRANTS AND OPTIONS WILL DILUTE EXISTING
STOCKHOLDERS AND COULD DECREASE THE MARKET PRICE OF OUR COMMON STOCK.

As of August 15, 2001, we had issued and outstanding 62,834,133 shares of
common stock, 4,687,684 shares of our Class C stock and outstanding warrants
and options to purchase 23,392,157 additional shares of common stock. The
existence of the outstanding warrants and options may adversely affect the
market price of our common stock and the terms under which we could obtain
additional equity capital.

WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS IN THE FORESEEABLE FUTURE AND,
THEREFORE, ANY RETURN ON YOUR INVESTMENT IN OUR COMMON STOCK MUST COME FROM
INCREASES IN THE FAIR MARKET VALUE AND TRADING PRICE OF OUR COMMON STOCK.

We do not intend to pay any cash dividends in the foreseeable future and,
therefore, any return on your investment in our common stock must come from
increases in the fair market value and trading price of our common stock.

WE LIKELY WILL ISSUE ADDITIONAL EQUITY SECURITIES WHICH WILL DILUTE YOUR
SHARE OWNERSHIP.

We likely will issue additional equity securities to raise capital and
through the exercise of warrants and options that are outstanding or may be
outstanding. These additional issuances will dilute your share ownership.

                                       15

                           FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, primarily in the
sections entitled "Risk Factors," "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" and "Business." Generally,
you can identify these statements because they use phrases like
"anticipates," "believes," "expects," "future," "intends," "plans," and
similar terms. These statements are only predictions. Although we do not make
forward-looking statements unless we believe we have a reasonable basis for
doing so, we cannot guarantee their accuracy, and actual results may differ
materially from those we anticipated due to a number of uncertainties, many
of which are unforeseen. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this
prospectus. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including, among
others, the risks we face as described in the section entitled "Risk Factors"
and elsewhere in this prospectus.

We believe it is important to communicate our expectations to our investors.
There may be events in the future, however, that we are unable to predict
accurately or over which we have no control. The risk factors listed in the
section entitled "Risk Factors," as well as any cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Before you invest in our common
stock, you should be aware that the occurrence of the events described in the
in the section entitled "Risk Factors" and elsewhere in this prospectus could
negatively impact our business, operating results, financial condition and
stock price.

We are not obligated to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as otherwise required by law. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
prospectus and other statements made from time to time from us or our
representatives, might not occur. For these statements, we claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.

                                 USE OF PROCEEDS

BioSante will not receive any of the proceeds from the sale of shares offered
under this prospectus by the selling stockholders. This offering is intended
to satisfy our obligations to register, under the Securities Act of 1933, the
resale of the shares of our common stock, including shares of our common
stock that will be issued to the selling stockholders upon the exercise of
warrants held by them, that we issued to the selling stockholders in April
2001 and other registration rights obligations we owe to previous investors
in BioSante. The net proceeds from our sale of these shares to the selling
stockholders in May 1999 and in April 2001 has been and will be used for
general corporate purposes, including working capital.

                                 DIVIDEND POLICY

We never have declared or paid cash dividends. We currently intend to retain
all future earnings for the operation and expansion of our business. We do
not anticipate declaring or paying cash dividends on our common stock in the
foreseeable future. Any payment of cash dividends on our common stock will be
at the discretion of our Board of Directors and will depend upon our results
of operations, earnings, capital requirements, contractual restrictions and
other factors deemed relevant by our Board of Directors.

                                       16

                              SELLING STOCKHOLDERS

All of the selling stockholders named below acquired or have the right to
acquire upon the exercise of warrants the shares of our common stock being
offered under this prospectus directly from us in a private transaction in
May 1999 or in April 2001. The following table sets forth information known
to BioSante with respect to the beneficial ownership of BioSante common stock
as of August 15, 2001 by the selling stockholders. In accordance with the
rules of the SEC, beneficial ownership includes the shares issuable pursuant
to warrants and options that are exercisable within 60 days of August 15,
2001. Shares issuable pursuant to warrants and options are considered
outstanding for computing the percentage of the person holding the warrants
and options but are not considered outstanding for computing the percentage
of any other person.

The percentage of beneficial ownership for the following table is based on
62,834,133 shares of common stock outstanding as of August 15, 2001. To our
knowledge, except as indicated in the footnotes to this table, each person
named in the table has sole voting and investment power with respect to all
shares of common stock shown in the table to be beneficially owned by such
person.

Except as set forth below, none of the selling stockholders has had any
position, office or other material relationship with BioSante within the past
three years. The table assumes that the selling stockholders will sell all of
the shares offered by them in this offering. However, BioSante is unable to
determine the exact number of shares that will actually be sold or when or if
these sales will occur. BioSante will not receive any of the proceeds from
the sale of the shares offered under this prospectus.

                                                                                                            SHARES BENEFICIALLY
                                                                                                                OWNED AFTER
                                                             SHARES BENEFICIALLY                               COMPLETION OF
                                                         OWNED PRIOR TO THE OFFERING                            THE OFFERING
                                                         ---------------------------                        -------------------
                                                     SHARES
                                                   SUBJECT TO
                                                    OPTIONS,
                                                    WARRANTS,                                  NUMBER OF
                                                   AND CLASS C   TOTAL SHARES                   SHARES
                                                     SPECIAL     BENEFICIALLY                    BEING
SELLING STOCKHOLDER                                   STOCK         OWNED        PERCENTAGE     OFFERED      NUMBER      PERCENTAGE
- -------------------                                -----------   ------------    ---------     ---------   ---------     ----------
                                                                                                       
Edward S. Loeb Revocable Trust................        187,500       562,500          *          312,500      250,000          *
Sherwin and Sheri Zuckerman...................        500,000     1,500,000          2.4%       750,000      750,000          1.2%
The Levenstein & Resnick Profit
   Sharing Plan & Trust by Gary I. Levenstein.        151,250       453,750          *          203,750      250,000          *
James S. Levy.................................         31,250        93,750          *           93,750           --         --
James S. Levy Trust...........................        125,000       375,000          *          125,000      250,000          *
Stephen M. Simes (1)..........................      2,904,247     3,443,106          5.2%       125,000    3,318,106          5.3%
Stephen M. Simes Revocable Trust .............         62,500       187,500          *          187,500           --         --
Irving B. Harris Trust........................        583,334     1,750,001          2.8%     1,000,001      750,000          1.2%
Virginia H. Polsky Trust......................        291,666       874,999          1.4%       499,999      375,000          *
Roxanne H. Frank Trust........................        388,889     1,166,666          1.9%       666,666      500,000          *
Couderay Partners.............................        388,889     1,166,666          1.9%       666,666      500,000          *
Jerome Kahn, Jr. Revocable Trust..............         97,223       291,668          *          166,668      125,000          *
Fred Holubow (2)..............................        262,500       637,500          1.0%       312,500      325,000          *
Mitchell I. Dolins Revocable Trust............        225,000       675,000          1.1%       300,000      375,000          *
Sheldon M. Bulwa..............................        125,000       375,000          *          250,000      250,000          *
Morningstar Trust (3).........................        325,000     1,125,000          1.8%       475,000      650,000          1.0%
Faye Morgenstern (3)..........................        100,000       300,000          *          300,000           --         --
Victor Morgenstern (3)........................      1,025,000     2,925,000          4.6%     1,350,000    1,575,000          2.5%
Sibylla M. Mueller............................        312,500       937,500          1.5%       937,500           --         --
Hermann S. Graf Zu Munster....................        312,500       937,500          1.5%       937,500           --         --

                                       17

                                                                                                            SHARES BENEFICIALLY
                                                                                                                OWNED AFTER
                                                             SHARES BENEFICIALLY                               COMPLETION OF
                                                         OWNED PRIOR TO THE OFFERING                            THE OFFERING
                                                         ---------------------------                        -------------------
                                                     SHARES
                                                   SUBJECT TO
                                                    OPTIONS,
                                                    WARRANTS,                                  NUMBER OF
                                                   AND CLASS C   TOTAL SHARES                   SHARES
                                                     SPECIAL     BENEFICIALLY                    BEING
SELLING STOCKHOLDER                                   STOCK         OWNED        PERCENTAGE     OFFERED      NUMBER      PERCENTAGE
- -------------------                                -----------   ------------    ---------     ---------   ---------     ----------
                                                                                                       
Adolf Leuze...................................         62,500       187,500          *          187,500           --         --
Boyd B. Massagee, Jr..........................         78,125       234,375          *          234,375           --         --
Anne Marie Nicholson Trust....................         18,750        56,250          *           56,250           --         --
Roscoe F. Nicholson III Trust.................         18,750        56,250          *           56,250           --         --
Shirley M. Nicholson..........................         31,250        93,750          *           93,750           --         --
Roscoe F. Nicholson II........................        137,500       412,500          *          412,500           --         --
Eberhard Thyssen..............................        125,000       375,000          *          375,000           --         --
Florence A. Browning..........................         12,500        37,500          *           37,500           --         --
John E. Urheim................................         31,250        93,750          *           93,750           --         --
Egandale Associates...........................         31,250        93,750          *           93,750           --         --
Rotter Family Partnership.....................        125,000       375,000          *          375,000           --         --
Nancy Butler..................................         62,500       187,500          *          187,500           --         --
John E. Lee (4)...............................        206,250       218,750          *           18,750      200,000          *
Phillip B. Donenberg (5)......................        855,223       913,940          1.3%        18,750      895,190          1.3%
Steven J. Bell (6)............................        196,875       210,625          *            5,625      205,000          *
Ann Lehman (7)................................         50,000       150,000          *          150,000           --         --
Leah M. Lehman (7)............................        262,100       637,100          1.0%       562,500       74,600          *
James J. Pelts................................         25,000        75,000          *           75,000           --         --
Bradley S. Glaser & Amy E. Glaser as Tenants
   by the Entirety............................         31,250        93,750          *           93,750           --         --
Lawrence B. Dolins............................         18,750        56,250          *           56,250           --         --
James G. Hart.................................         62,500       187,500          *          187,500           --         --
Robert Leder, DDS.............................         31,250        93,750          *           93,750           --         --
James G. Johnson Trust........................        125,000       375,000          *          375,000           --         --
Robert Q. Calloway Trust......................         62,500       187,500          *          187,500           --         --
Patricia L. Calloway Trust....................         62,500       187,500          *          187,500           --         --
GOC Irr Tr U/A J.C. Warriner (8)..............        166,666       499,999          *          499,999           --         --
GOC Irr Tr U/A J.O. Cunningham (8)............        166,667       500,002          *          500,002           --         --
John S. Warriner (8)..........................        500,000     1,500,000          2.4%     1,500,000           --         --
GOC Irr Tr U/A A.C. McClure (8)...............        166,666       499,999          *          499,999           --         --
C. Frederick Cunningham II Revocable Trust (8)        125,000       375,000          *          375,000           --         --
Goldstein Asset Management....................         62,500       187,500          *           62,500      125,000          *
Lawrence Goldstein............................         62,500       187,500          *           62,500      125,000          *
John and Joanna Ruder.........................        125,000       375,000          *          125,000      250,000          *
Ronald Nash...................................        125,000       375,000          *          125,000      250,000          *
Stanley Ho (9)................................        750,000     2,250,000          3.6%       750,000    1,500,000          2.4%
King Cho Fung.................................      1,375,000     4,325,000          6.8%       750,000    3,575,000          5.7%
Marcus Jebsen.................................        750,000     2,250,000          3.6%       250,000    2,000,000          3.2%
Hans Michael Jebsen...........................      1,750,000     5,250,000          8.2%       750,000    4,500,000          7.1%
Howard Schraub................................        125,000       125,000          *          125,000           --         --
Anita Nagler..................................        750,000     2,250,000          3.6%       750,000    1,500,000          2.4%
Jarvis H. Friduss.............................         62,500       187,500          *           62,500      125,000          *
Gary N. Wilner................................        125,000       375,000          *          125,000      250,000          *
Steven J. Reid................................        250,000       750,000          1.2%       250,000      500,000          *
Resolute Partners (3).........................        250,000       750,000          1.2%       250,000      500,000          *
JO & Co. (8)..................................      3,750,000    11,250,000         17.1%     3,750,000    7,500,000         12.1%

- ----------------------------------
*        Less than one percent (1%)

                                       18

(1)      Mr. Simes is the Vice Chairman, President and Chief Executive Officer
         of BioSante.

(2)      Mr. Holubow is a director of BioSante.

(3)      Mr. Morgenstern beneficially owns a total of 5,050,000 shares of
         BioSante common stock. Of these shares, 300,000 shares are owned by
         Faye Morgenstern, Mr. Morgenstern's wife, and 825,000 shares held by
         Mr. Morgenstern's wife as trustee of the Morgenstern Trust, as to which
         Mr. Morgenstern disclaims control, direction or beneficial ownership.
         Mr. Morgenstern is a director of BioSante. Mr. Morgenstern is the
         managing director of Resolute Partners L.P.

(4)      Mr. Lee is the Vice President, Commercial Development of BioSante.

(5)      Mr. Donenberg is the Chief Financial Officer, Treasurer and Secretary
         of BioSante.

(6)      Dr. Bell is the Vice President, Research and Pre-Clinical Development
         of BioSante.

(7)      Dr. Lehman is the Vice President, Clinical Development of BioSante. Ann
         Lehman is Dr. Lehman's mother and Dr. Lehman disclaims beneficial
         ownership of Ann Lehman's shares.

(8)      Ross Mangano, a director of BioSante, acted as an advisor and trustee
         for these selling stockholders in connection with the stockholder's
         acquisition from us of the shares offered by these selling stockholders
         under this prospectus. Mr. Mangano is an investment advisor registered
         with the Securities and Exchange Commission under the Investment
         Advisors Act of 1940. These selling stockholders are advisory clients
         of Mr. Mangano, and the shares offered by these selling stockholders
         under this prospectus are held in discretionary client accounts managed
         by Mr. Mangano. Mr. Mangano is President of JO & Co.

(9)      Mr. Ho is the father of Angela Ho, a director of BioSante. Ms. Ho
         disclaims beneficial ownership of Stanley Ho's shares.

                                       19

                              PLAN OF DISTRIBUTION

The selling stockholders acquired their shares of BioSante common stock and
warrants to purchase BioSante common stock directly from us in a private
transaction in either May 1999 or April 2001. To our knowledge, none of the
selling stockholders has entered into any agreement, arrangement or
understanding with any particular broker or market maker with respect to the
shares offered under this prospectus, nor do we know the identity of any
broker or market maker that will participate in the offering. The shares of
common stock may be offered and sold from time to time by the selling
stockholders or by their respective pledgees, donees, transferees and other
successors in interest.

The selling stockholders will act independently of us in making decisions
with respect to the timing, manner and size of each sale. Sales may be made
over the OTC Bulletin Board, in the over-the-counter market, in privately
negotiated transactions or otherwise, at then prevailing market prices, at
prices related to prevailing market prices or at negotiated prices. Sales may
be made directly or through agents designated from time to time or through
dealers or underwriters to be designated or in negotiated transactions. The
shares may be sold by one or more of, or a combination of, the following
methods:

    o    a block trade in which the broker-dealer engaged by a selling
         stockholder will attempt to sell the shares as agent but may position
         and resell a portion of the block as principal to facilitate the
         transaction;

    o    purchases by the broker-dealer as principal and resale by the broker or
         dealer for its account pursuant to this prospectus;

    o    ordinary brokerage transactions and transactions in which the broker
         solicits purchasers; and

    o    privately negotiated transactions.

BioSante has been advised by the selling stockholders that they have not, as
of the date of this prospectus, entered into any arrangement with a
broker-dealer for the sale of shares through a block trade, special offering,
or secondary distribution of a purchase by a broker-dealer. In effecting
sales, broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate. Broker-dealers will receive commissions
or discounts from the selling stockholders in amounts to be negotiated
immediately prior to the sale.

In connection with distributions of the shares or otherwise, the selling
stockholders may, if permitted by law, also enter into hedging transactions.
For example, the selling stockholders may:

    o    enter into transactions involving short sales of the shares of common
         stock by broker-dealers;

    o    sell shares of common stock short and redeliver these shares to close
         out the short position;

    o    enter into option or other types of transactions that require the
         selling stockholders to deliver shares of common stock to a
         broker-dealer, who will then resell or transfer the shares of common
         stock under this prospectus; or

    o    loan or pledge shares of common stock to a broker dealer, who may sell
         the loaned shares or, in the event of default, sell the pledged shares.

Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from the selling stockholders or the purchasers of
the common stock in amounts to be negotiated in

                                       20

connection with the sale. Broker-dealers and any other participating
broker-dealers may be deemed to be underwriters within the meaning of the
Securities Act of 1933 in connection with the sales, and any commission,
discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any securities covered by
this prospectus which qualify for sale under Rule 144 of the Securities Act
may be sold under Rule 144 rather than under this prospectus. No period of
time has been fixed within which the shares covered by this prospectus may be
offered and sold.

We have advised the selling stockholders that the anti-manipulation rules
under the Exchange Act of 1934 may apply to sales of shares in the market and
to the activities of the selling stockholders and their affiliates.

This offering will terminate on the earlier to occur of:

    o    the date on which all shares offered have been sold by the selling
         stockholders; or

    o    the date on which all shares held by a selling shareholder may be sold
         by such selling stockholder in compliance with Rule 144 under the
         Securities Act within any three-month period.

We will pay the expenses of registering the shares under the Securities Act,
including registration and filing fees, printing expenses, fees and
disbursements of our counsel and accountants, all of our internal expenses,
and all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified. The selling
stockholders will bear all discounts, commissions or other amounts payable to
underwriters, dealers or agents.

To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution or a corporate
development. At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.

                                       21

                      SELECTED CONSOLIDATED FINANCIAL DATA

The selected statement of operations data shown below for the years ended
December 31, 1998, 1999 and 2000 and the balance sheet data as of December
31, 1999 and 2000 are derived from our audited financial statements included
elsewhere in this prospectus. The selected statement of operations data shown
below for the period from August 29, 1996 (date of incorporation) to December
31, 1996 and for the year ended December 31, 1997 and the balance sheet data
as of December 31, 1996, 1997 and 1998 are derived from our audited financial
statements not included elsewhere in this prospectus. The selected financial
data for the six months ended June 30, 2000 and 2001 and as of June 30, 2001
have been derived from our unaudited financial statements included elsewhere
in this prospectus, which, in the opinion of management, include all
adjustments, consisting solely of normal recurring adjustments, necessary for
a fair presentation of the financial information shown in these statements.
The results for the six months ended June 30, 2000 and 2001 are not
necessarily indicative of the results to be expected for the full year or for
any future period. When you read this selected consolidated financial data,
it is important that you also read the historical financial statements and
related notes included in this prospectus, as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Historical results are not necessarily indicative of future results.

                                        PERIOD FROM
                                        AUGUST 29,
                                       1996 (DATE OF                                                       SIX MONTHS ENDED
                                      INCORPORATION)               YEAR ENDED DECEMBER 31,                     JUNE 30,
                                      TO DECEMBER 31,   -----------------------------------------------   -------------------
                                            1996          1997         1998        1999         2000        2000       2001
                                       ------------     --------    ---------    ---------    ---------   --------   --------
                                                                (in thousands, except per share data)
                                                                                                
STATEMENT OF OPERATIONS DATA:

Interest income......................  $         53     $    144    $     123    $     199    $     228   $    122   $     83
                                       ------------     --------    ---------    ---------    ---------   --------   --------
Expenses:
   Research and development..........            --          336        1,400          661        1,888      1,355        620
   General and administration........           547        1,618        1,112          853        1,679        608        963
   Depreciation and amortization.....             1           52          140           91           98         49         49
   Loss on disposal of capital assets            --           28          130           --           --         --         --
                                       ------------     --------    ---------    ---------    ---------   --------   --------
Total expenses.......................           548        2,034        2,782        1,605        3,665      2,012      1,632
                                       ------------     --------    ---------    ---------    ---------   --------   --------
Loss before other expenses...........          (495)      (1,890)      (2,659)      (1,406)      (3,437)    (1,890)    (1,549)
                                       ------------     --------    ---------    ---------    ---------   --------   --------
   Cost of acquisition of Structured
     Biologicals, Inc................           375           --           --           --           --         --         --
   Purchased in-process research and
     development.....................         5,377           --           --           --           --         --         --
                                       ------------     --------    ---------    ---------    ---------   --------   --------
Total other expenses.................         5,752           --           --           --           --         --         --
                                       ------------     --------    ---------    ---------    ---------   --------   --------
Net loss ............................  $     (6,247)    $ (1,890)   $  (2,659)   $  (1,406)   $  (3,437)  $ (1,890)  $ (1,549)
                                       ============     ========    =========    =========    =========   ========   ========
Basic and diluted net loss per
    share............................  $      (0.26)    $  (0.05)   $   (0.08)   $   (0.03)   $   (0.06)  $  (0.03)  $  (0.02)
                                       ============     ========    =========    =========    =========   ========   ========
Weighted average number of shares
    outstanding......................        24,366       35,962       34,858       49,424       57,537     57,451     62,087
                                       ------------     --------    ---------    ---------    ---------   --------   --------

                                                             AS OF DECEMBER 31,                      AS OF JUNE 30,
                                            1996       1997        1998        1999        2000           2001
                                          --------   --------   ---------   ---------   ---------   ---------------
                                                                        (in thousands)
                                                                                  
BALANCE SHEET DATA:
Cash and cash equivalents.............    $  3,474   $  1,750   $   2,841   $   5,275   $   2,612   $         4,782
Working capital.......................       2,236        356       2,099       5,004       1,735             3,905
Total assets..........................       3,519      2,450       3,449       5,780       3,067             5,210
Convertible debenture - current.......          --         --          --          --         500               500
Stockholders' equity..................       2,269      1,034       2,631       5,451       2,126             4,269

                                       22

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

GENERAL

We are a development stage biopharmaceutical company engaged in the
development and commercialization of hormone replacement products to treat
hormone deficiencies in men and in women. We also are engaged in the
development and commercialization of vaccine adjuvants or immune system
boosters, proprietary novel vaccines, drug delivery systems and the
purification of the milk of transgenic animals using calcium phosphate
nanoparticles, or CAP.

Our hormone replacement products, which we license on an exclusive basis from
Antares Pharma, Inc., address a variety of hormone deficiencies that affect
both men and women. Symptoms of these hormone deficiencies include impotence,
lack of sex drive, muscle weakness and osteoporosis in men and menopausal
symptoms in women including hot flashes, vaginal atrophy, decreased libido
and osteoporosis.

The products we in-license from Antares are gel formulations of testosterone
(the natural male hormone), estradiol (the natural female hormone), and a
combination of estradiol and a progestogen (another female hormone). The gels
are designed to be quickly absorbed through the skin after application on the
arms, abdomen or thighs, delivering the hormone to the bloodstream evenly and
in a non-invasive, painless manner. The gels are formulated to be applied
once per day and to be absorbed into the skin without a trace of residue.

Under the terms of our license agreement with Antares, we acquired exclusive
marketing rights, with the right to grant sub-licenses, to the single active
ingredient testosterone and estradiol products for all therapeutic
indications in the U.S., Canada, Mexico, Israel, Australia, New Zealand,
China, Malaysia, Indonesia and South Africa. We acquired exclusive marketing
rights, with the right to grant sub-licenses, for the combination estradiol
and progestogen product in the U.S. and Canada. In partial consideration for
the license of the hormone replacement products, we paid Antares an up-front
license fee of $1.0 million. In addition, under the terms of the license
agreement, we agreed to fund the development of the proposed products, make
milestone payments and, after all necessary regulatory approvals are
received, pay royalties to Antares on sales of the products.

In September 2000, we sub-licensed the marketing rights to our portfolio of
female hormone replacement products in Canada to Paladin Labs Inc. In
exchange for the sub-license, Paladin agreed to make an initial investment in
our company, make future milestone payments and pay royalties on sales of the
products in Canada. The milestone payments will be in the form of a series of
equity investments by Paladin in our company's common stock at a 10 percent
premium to the market price of our stock at the time the equity investment is
made. Upon execution of the sub-license agreement, Paladin made an initial
investment of $500,000 in our company in the form of a convertible debenture,
convertible into our common stock at $1.05 per share. In August 2001, we
converted Paladin's debenture into 476,190 shares of our common stock.

In August 2001, we sub-licensed U.S. and Canadian marketing rights to our
estrogen/progestogen combination transdermal hormone replacement gel product
to Solvay Pharmaceuticals, B.V. In exchange for the sub-license, Solvay paid
us an up-front license fee of $2.5 million and has agreed to make future
milestone and escalating sales-based royalty payments. In accordance with our
agreements with Antares and Paladin as a result of the Solvay transaction, we
owe Antares and Paladin cash and shares of our common stock. Therefore, the
net cash to BioSante as a result of the Solvay transaction is approximately
$2.1 million and we will issue 174,000 shares of our common stock.

Our strategy with respect to our hormone replacement product portfolio is to
conduct human clinical trials of our proposed hormone replacement products,
which trials are required to obtain FDA approval to

                                       23

market the products in the United States. Further, we are seeking to
out-license or leverage our rights outside of the United States.

Our CAP technology, which we license on an exclusive basis from the
University of California, is based on the use of extremely small, solid,
uniform particles, which we call "nanoparticles," as immune system boosters
and for drug delivery. We have identified four potential applications for our
CAP technology:

    o    the creation of improved versions of current vaccines by the "adjuvant"
         activity of our proprietary nanoparticles that enhance the ability of a
         vaccine to stimulate an immune response;

    o    the development of new, unique vaccines against diseases for which
         there currently are few or no effective methods of prevention (E.G.,
         genital herpes);

    o    the creation of inhaled forms of drugs that currently must be given by
         injection (E.G., insulin); and

    o    the purification of the milk of transgenic animals, in which protein
         pharmaceuticals are grown by selectively isolating biologically active
         therapeutic proteins from the transgenic milk.

Our strategy with respect to CAP over the next 12 months, is to continue
development of our nanoparticle technology and actively seek collaborators
and licensees to accelerate the development and commercialization of products
incorporating this technology. We received FDA clearance in August 2000 to
initiate a Phase I human clinical trial of our CAP as a vaccine adjuvant and
delivery system based on an Investigational New Drug Application that we
filed with the FDA in July 2000. The Phase I human clinical trial was a
double-blind, placebo-controlled trial in 18 subjects to determine the safety
of CAP as a vaccine adjuvant. The trial was completed and there was no
apparent difference in side effect profile between CAP and the placebo.

Our goal is to develop and commercialize our hormone replacement products and
CAP technology into a wide range of pharmaceutical products and to expand
this product portfolio as appropriate. Our strategy to obtain this goal is to:

    o    Accelerate the development of our hormone replacement products.

    o    Continue to develop our nanoparticle-based CAP platform technology and
         seek assistance in the development through corporate partner
         sub-licenses.

    o    License or otherwise acquire other drugs that will add value to our
         current product portfolio.

    o    Implement business collaborations or joint ventures with other
         pharmaceutical and biotechnology companies.

We currently expect to add employees as we continue to develop and
commercialize our hormone replacement products and products incorporating our
CAP technology or in-license or otherwise acquire products in the late-stage
human clinical development.

We incurred a net loss of $3,437,195 for the year ended December 31, 2000,
resulting in an accumulated deficit of $15,639,672. We incurred a net loss of
$1,548,813 for the six months ended June 30, 2001, and as of June 30, 2001,
our accumulated deficit was $17,188,485.

                                       24

All of our revenue to date has been derived from interest earned on invested
funds. We have not commercially introduced any products. Since our inception,
we have experienced significant operating losses. We expect to incur
continuing losses for the foreseeable future as our product development
programs expand and various preclinical and clinical trials commence. The
amount of these losses may vary significantly from year-to-year and
quarter-to-quarter and will depend upon, among other factors:

    o    the timing and cost of product development;

    o    the progress and cost of preclinical and clinical development programs;

    o    the costs of licensure or acquisition of new products; and

    o    the timing and cost of obtaining necessary regulatory approvals.

In order to generate revenues, we must successfully develop and commercialize
our proposed products in pre-clinical development, in late-stage human
clinical development, or already on the market that we may in-license or
otherwise acquire or enter into collaborative agreements with others who can
successfully develop and commercialize them. Even if our proposed products
and the products we may license or otherwise acquire are commercially
introduced, they may never achieve market acceptance and we may never
generate revenues or achieve profitability.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

General and administrative expenses increased from $307,280 during the three
month period ended June 30, 2000 to $497,972 during the three month period
ended June 30, 2001. This increase of approximately 62% is due primarily to
expenses related to new personnel and the higher legal expenses related to
the increase in our patent, collaboration and licensing activities.

Research and development expenses decreased from $1,164,039 during the three
month period ended June 30, 2000 to $387,236 during the three month period
ended June 30, 2001. This overall decrease is the result of a $1.0 million
upfront license fee paid to Antares during the three month period ended June
30, 2000, offset by increased expenses during the three month period ended
June 30, 2001 associated with the clinical development of our hormone
replacement product portfolio. As a result of our hormone replacement product
in-license entered into in June 2000, we expect that our research and
development expenses will increase significantly. We also are required under
the terms of our license agreement with the University of California to have
available certain amounts of funds dedicated to research and development
activities. We expect, however, our research and development expenditures to
fluctuate from quarter-to-quarter and year-to-year depending upon: (1) the
resources available; (2) our development schedule; (3) results of studies,
clinical trials and regulatory decisions; and (4) competitive developments.

Interest income decreased from $61,504 during the three month period ended
June 30, 2000 to $50,843 during the three month period ended June 30, 2001 as
a result of lower invested cash balances in the three month period ended June
30, 2001.

We incurred a net loss of $858,913 for the three month period ended June 30,
2001, compared to a net loss of $1,434,174 for the three month period ended
June 30, 2000. The overall decrease in the net loss is the result of a $1.0
million upfront license fee paid to Antares during the three month period
ended June 30, 2000, offset by increased expenses during the three month
period ended June 30, 2001 associated with

                                       25

(1) new personnel, (2) increased patent, collaboration and licensing
activities, and (3) increased clinical development of our hormone replacement
product portfolio. We anticipate that our operating losses will continue for
the foreseeable future.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

General and administrative expenses increased from $608,455 during the six
month period ended June 30, 2000 to $963,030 during the six month period
ended June 30, 2001. This increase of approximately 58% is due primarily to
expenses related to hiring new personnel and higher legal expenses related to
our increased patent, collaboration and licensing activities.

Research and development expenses decreased from $1,355,214 during the six
month period ended June 30, 2000 to $620,225 during the six month period
ended June 30, 2001. This overall decrease is the result of a $1.0 million
upfront license fee paid to Antares during the six month period ended June
30, 2000, offset by increased expenses during the six month period ended June
30, 2001 associated with the clinical development of our hormone replacement
product portfolio. As a result of our hormone replacement product in-license
entered into in June 2000, we expect that our research and development
expenses will increase significantly. We are required under the terms of our
license agreement with the University of California to make available certain
amounts of funds dedicated to research and development activities. We expect
our research and development expenditures to fluctuate from
quarter-to-quarter and year-to-year depending upon: (1) the resources
available; (2) our development schedule; (3) results of studies, clinical
trials and regulatory decisions; and (4) competitive developments.

Interest income decreased from $121,886 during the six month period ended
June 30, 2000 to $82,952 during the six month period ended June 30, 2001. We
expect interest income to decline in future periods as we use our cash
balances for operations.

BioSante incurred a net loss of $1,548,813 for the six month period ended
June 30, 2001, compared to a net loss of $1,889,994 for the six month period
ended June 30, 2000. The overall decrease in the net loss is the result of a
$1.0 million upfront license fee paid to Antares during the six month period
ended June 30, 2000, offset by increased expenses during the six month period
ended June 30, 2001 associated with (1) new personnel, (2) increased patent,
collaboration and licensing activities, and (3) increased clinical
development of our hormone replacement product portfolio. We anticipate that
our operating losses will continue for the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

To date, we have raised equity financing to fund our operations, and we
expect to continue this practice to fund our ongoing operations. Since
inception, we have raised net proceeds of approximately $12.9 million from
private equity financings, class A and class C stock conversions, warrant
exercises and in the third quarter 2000, the issuance of a $500,000
convertible debenture. In April 2001, we closed on a $3.7 million private
placement of units. Each unit consisted of one share of common stock plus a
five-year warrant to purchase one half-share of common stock and was sold for
$0.40 per unit, the approximate market price of our common stock at closing.
We sold an aggregate of 4,625,000 units, or an aggregate of 9,250,000 shares
of common stock and warrants to purchase an aggregate of 4,625,000 shares of
common stock. The exercise price of the warrant is $0.50 per full share.

Our cash and cash equivalents were $4,782,058 and $2,611,755 at June 30, 2001
and December 31, 2000, respectively. The increase in our cash balances is due
to our $3.7 million private placement closed in April 2001. We used cash in
operating activities of $1,481,763 for the six month period ended June 30,
2001 versus cash used in operating activities of $1,904,082 for the six month
period ended June 30, 2000.

                                       26

This change reflects increased general and administrative expenses as a
result of an increase in the number of personnel and an increase in legal
fees associated with our increased patent, licensing and collaboration
activities and clinical development activities relating to our hormone
replacement product portfolio. Offsetting these increased expenses for the
six month period ended June 30, 2001 versus the six month period ended June
30, 2000 is the decrease in research and development expenses due primarily
to the $1.0 million upfront license fee paid to Antares in June 2000. Net
cash used in investing activities was $22,546 for the six month period ended
June 30, 2001 versus $27,367 used in investing activities for the six month
period ended June 30, 2000. The uses of cash in investing activities during
both six month periods ended June 30, 2001 and 2000 were capital expenditures
for the purchases of computer equipment. Net cash provided by financing
activities was $3,674,612 for the six months ended June 30, 2001 compared to
$22,960 for the six months ended June 30, 2000. Net cash provided during the
six months ended June 30, 2001 was the result of the receipt of cash proceeds
(net of transaction costs) as described above as a result of our private
placement of units which closed in April 2001, while net cash provided during
the six months ended June 30, 2000 was the result of the conversion of class
C stock into common stock.

We did not have any material commitments for capital expenditures as of June
30, 2001. We have, however, several financial commitments including product
development milestone payments under our license agreement with Antares,
payments under our license agreement with the University of California, as
well as minimum annual lease payments, as described below under the heading
"Commitments."

Our cash on hand as of June 30, 2001 was $4,782,058. We believe this cash
will be sufficient to fund our operations through December 2002. We have
based this estimate, however, on assumptions that may prove to be wrong. As a
result, we may need to obtain additional financing prior to that time. In
addition, we may need to raise additional capital at an earlier time to fund
our ongoing research and development activities, acquire new products or take
advantage of other unanticipated opportunities. Any additional equity
financings may be dilutive to our existing stockholders, and debt financing,
if available, may involve restrictive covenants on our business. In addition,
insufficient funds may require us to delay, scale back or eliminate some or
all of our programs designed to facilitate the commercial introduction of our
proposed products, prevent commercial introduction of our products altogether
or restrict us from acquiring new products that we believe may be beneficial
to our business.

2000 VERSUS 1999

We used cash in operating activities of $3,207,604 for the year ended
December 31, 2000 versus cash used in operating activities of $1,787,822 for
the year ended December 31, 1999. This change was driven by an increase in
our research and development expenses, including the hormone product
portfolio in-license upfront payment of $1.0 million to Antares during 2000.
Net cash used in investing activities was $43,238 for the year ended December
31, 2000 versus $4,219 for the year ended December 31, 1999. The significant
uses of cash in investing activities for the year ended December 31, 2000
were capital expenditures for the purchase of office furniture and computer
equipment. The significant uses of cash in investing activities for the year
ended December 31, 1999 included capital expenditures for office furniture
and a computer. Net cash provided by financing activities was $588,045 for
the year ended December 31, 2000 compared to $4,225,343 for the year ended
December 31, 1999. Net cash provided during 2000 was primarily the result of
a $500,000 convertible debenture issued to Paladin Labs Inc. pursuant to a
sub-license agreement related to our female hormone replacement products. Net
cash provided in 1999 was primarily the result of our private placement in
May 1999.

                                       27

1999 VERSUS 1998

We used cash in operating activities of $1,787,822 for the year ended
December 31, 1999 versus cash used in operating activities of $3,041,425 for
the year ended December 31, 1998. This change was driven by a reduction in
both personnel-related expenses in research and development and a similar
reduction in general and administrative expenses during 1999. Net cash used
in investing activities was $4,219 for the year ended December 31, 1999
versus $124,984 for the year ended December 31, 1998. The significant uses of
cash in investing activities during 1999 were capital expenditures for the
purchase of office furniture and a computer. The significant uses of cash in
investing activities for the year ended December 31, 1998 included capital
expenditures for laboratory equipment and laboratory office furniture. Net
cash provided by financing activities was $4,225,343 for the year ended
December 31, 1999 compared to $4,257,328 for the year ended December 31,
1998. Net cash provided during 1999 was primarily the result of our private
placement in May 1999. Net cash provided in 1998 was primarily the result of
the conversion of class A and class C special stock into common stock.

COMMITMENTS

We have several financial commitments, including the following minimum annual
lease payments:

                                                  MINIMUM ANNUAL
                            YEAR                  LEASE PAYMENTS
                          --------              ------------------
                                             
                            2001                      $114,084
                            2002                      $138,828
                            2003                      $138,828

Under our license agreement with the University of California, we are
required to:

    o    pay the following minimum annual royalties on February 28 of each year
         beginning in the year 2004, to be credited against earned royalties,
         for the life of the agreement (2013):

                                                   MINIMUM ANNUAL
                            YEAR                    ROYALTY DUE
                          --------              ------------------
                                             
                            2004                     $  50,000
                            2005                     $ 100,000
                            2006                     $ 150,000
                            2007                     $ 200,000
                            2008                     $ 400,000
                            2009                     $ 600,000
                            2010                     $ 800,000
                            2011                    $1,500,000
                            2012                    $1,500,000
                            2013                    $1,500,000

    o    maintain an annual minimum amount of available capital for development
         and commercialization of products incorporating the licensed technology
         until a product is introduced to the market; and

    o    pay the costs of patent prosecution and maintenance of the patents
         included in the agreement.

Our fixed expenses, such as rent, license payments and other contractual
commitments, may increase in the future, as we may enter into additional
leases for new facilities and capital equipment and enter into additional
licenses and collaborative agreements.

                                       28

OUTLOOK

We expect to continue to spend capital on:

    o    preclinical studies and clinical trials;

    o    research and development programs;

    o    regulatory processes;

    o    establishment of our own marketing capabilities or a search for third
         party manufacturers and marketing partners to manufacture and market
         our products for us; and

    o    the licensure or acquisition of new products.

The amount of capital we may need will depend upon many factors, including the:

    o    progress, timing and scope of our preclinical studies and clinical
         trials;

    o    progress, timing and scope of our research and development programs;

    o    time and cost necessary to obtain regulatory approvals;

    o    time and cost necessary to seek third party manufacturers to
         manufacture our products for us;

    o    time and cost necessary to establish our own sales and marketing
         capabilities or to seek marketing partners to market our products for
         us;

    o    time and cost necessary to respond to technological and market
         developments;

    o    changes made or new developments in our existing collaborative,
         licensing and other commercial relationships; and

    o    new collaborative, licensing and other commercial relationships that we
         may establish.

Management estimates that it currently is expending approximately $150,000 to
$200,000 per month on research and development activities and approximately
$250,000 to $300,000 per month in total expenses, including research and
development activities. We expect to spend approximately $25,000 to $50,000
in capital expenditures during the next 12 months.

                                       29

                                    BUSINESS

GENERAL

We are a development stage biopharmaceutical company that is developing a
pipeline of hormone replacement products to treat hormone deficiencies in men
and in women. We also are engaged in the development of our proprietary
calcium phosphate, nanoparticulate-based platform technology, or CAP, for
vaccine adjuvants, proprietary novel vaccines, drug delivery systems and to
purify the milk of transgenic animals.

To enhance the value of our current pharmaceutical portfolio, we are pursuing
the following corporate growth strategies:

    o    accelerate the development of our hormone replacement products;

    o    continue to develop our nanoparticle-based platform technology, or CAP,
         and seek assistance in such development through corporate partner
         sub-licenses;

    o    license or otherwise acquire other drugs that will add value to our
         current product portfolio; and

    o    implement business collaborations or joint ventures with other
         pharmaceutical and biotechnology companies.

Our primary focus is to build a pipeline of hormone replacement products for
the treatment of human hormone deficiencies. Symptoms of hormone deficiency
in men include impotence, lack of sex drive, muscle weakness and
osteoporosis, and in women, menopausal symptoms, such as hot flashes, vaginal
atrophy, decreased libido and osteoporosis.

Our hormone replacement products, which we license on an exclusive basis from
Antares Pharma Inc., are gel formulations of testosterone, estradiol and a
combination of estradiol and a progestogen. The gels are designed to be
absorbed quickly through the skin after application on the arms, shoulders,
abdomen or thighs, delivering the hormone to the bloodstream evenly and in a
non-invasive, painless manner. We have begun human clinical trials on two of
our hormone replacement products, a necessary step in the process of
obtaining United States Food and Drug Administration, or FDA, approval to
market the products.

Our CAP technology, which we license on an exclusive basis from the
University of California, is based on the use of extremely small, solid,
uniform particles, which we call "nanoparticles," as immune system boosters,
for drug delivery and to purify the milk of transgenic animals. We have
identified four potential initial applications for our CAP technology:

    o    the creation of improved versions of current vaccines by the "adjuvant"
         activity of our proprietary nanoparticles that enhance the ability of a
         vaccine to stimulate an immune response;

    o    the development of new, unique vaccines against diseases for which
         there currently are few or no effective methods of prevention (E.G.,
         genital herpes);

    o    the creation of inhaled forms of drugs that currently must be given by
         injection (E.G., insulin); and

    o    the purification of the milk of transgenic animals, in which protein
         pharmaceuticals are grown by selectively isolating biologically active
         therapeutic proteins from the transgenic milk.

                                       30

Our company, which was initially formed as a corporation organized under the
laws of the Province of Ontario on August 29, 1996, was continued as a
corporation under the laws of the State of Wyoming on December 19, 1996 and
reincorporated in Delaware on June 26, 2001. Our company is the continuing
corporation resulting from an amalgamation, or consolidation, of three
companies, our company, which was previously named "Ben-Abraham Technologies
Inc.", Structured Biologicals Inc., a corporation organized under the laws of
the Province of Ontario, and 923934 Ontario Inc., a corporation organized
under the laws of the Province of Ontario and a wholly owned subsidiary of
Structured Biologicals. The amalgamation was approved by our stockholders on
November 27, 1996 and the articles of arrangement were filed and became
effective as of December 6, 1996. In November 1999, our stockholders approved
the change of our corporate name from Ben-Abraham Technologies Inc. to
BioSante Pharmaceuticals, Inc. In June 2001, our stockholders approved our
reincorporation to Delaware.

BUSINESS STRATEGY

Our goal is to develop and commercialize our hormone replacement products and
CAP technology into a wide range of pharmaceutical products. Key elements of
our strategy to obtain this goal are to:

    o    ACCELERATE THE DEVELOPMENT OF OUR HORMONE REPLACEMENT PRODUCTS. We are
         focused on building a pipeline of hormone replacement products for the
         treatment of human hormone deficiencies. Symptoms of hormone deficiency
         in men include impotence, lack of sex drive, muscle weakness and
         osteoporosis, and in women, menopausal symptoms, such as hot flashes,
         vaginal atrophy, decreased libido and osteoporosis.

    o    CONTINUE TO DEVELOP OUR NANOPARTICLE-BASED CAP PLATFORM TECHNOLOGY AND
         SEEK ASSISTANCE IN THE DEVELOPMENT THROUGH CORPORATE PARTNER
         SUB-LICENSES. We are seeking opportunities to enter into business
         collaborations, joint ventures or sub-licenses with companies that have
         businesses or technologies complementary to our CAP technology
         business, such as vaccine and drug delivery pharmaceutical companies
         and transgenic milk companies. We believe that this partnering strategy
         will enable us to capitalize on our partner's strengths in product
         development, manufacturing and commercialization and thereby enable us
         to introduce into the market products incorporating our CAP technology
         sooner than which we otherwise would be able. In addition, such
         collaborations would significantly reduce our cash requirements for
         developing and commercializing products incorporating our CAP
         technology and thereby permit us to spend cash on accelerating the
         human clinical development of our hormone replacement products.

    o    LICENSE OR OTHERWISE ACQUIRE OTHER DRUGS THAT WILL ADD VALUE TO OUR
         CURRENT PRODUCT PORTFOLIO. We intend to seek opportunities to
         in-license or otherwise acquire other products in the late-stage
         development phase or products already on the market. In seeking such
         opportunities, we intend to target products that cover therapeutic
         areas treated by a limited number of physicians and drugs that are in
         or require human clinical trials that involve a limited number of
         patients and not a significant amount of time and cost needed to
         complete them. We believe that targeting these products that are
         currently in or ready for human clinical trials would decrease the
         risks associated with product development and would likely shorten the
         time before we can introduce the products into the market. In addition
         to late-stage development products, we intend to seek opportunities to
         in-license or otherwise acquire products that (1) have FDA approval,
         (2) have been or are about to be commercially introduced into the U.S.
         markets, (3) have a concentrated physician prescriber audience, and (4)
         have the potential to generate significant sales.

    o    IMPLEMENT BUSINESS COLLABORATIONS OR JOINT VENTURES WITH OTHER
         PHARMACEUTICAL AND BIOTECHNOLOGY companies. We intend to seek
         opportunities to enter into business collaborations or joint ventures
         with entities that have businesses or technology complementary to our
         business.

                                       31

         We are particularly interested in entering into product co-development
         and co-marketing arrangements.

DESCRIPTION OF OUR HORMONE REPLACEMENT PRODUCTS

We are focused on building a pipeline of hormone replacement products to
treat hormone deficiencies in men and in women. Our hormone replacement
products are gel formulations of testosterone (the natural male hormone),
estradiol (the natural female hormone), and a combination of estradiol and a
progestogen (another female hormone). The gels are designed to be quickly
absorbed through the skin after application on the arms, shoulders, abdomen
or thighs, delivering the hormone to the bloodstream evenly and in a
non-invasive, painless manner. The gels are formulated to be applied once per
day and to be absorbed into the skin without a trace of residue.

Testosterone deficiency in men is known as hypogonadism. Low levels of
testosterone may result in lethargy, depression, decreased sex drive,
impotence, low sperm count and increased irritability. Men with severe and
prolonged reduction of testosterone may also experience loss of body hair,
reduced muscle mass, osteoporosis and bone fractures due to osteoporosis.
Approximately five million men in the United States, primarily in the over
age 40 male population group, have lower than normal levels of testosterone.
Testosterone replacement therapy has been shown to restore levels of
testosterone with minimal side effects.

Testosterone often is delivered through injections or dermal, or skin,
patches. Delivery of testosterone through dermal patches was developed
primarily to promote the therapeutic effects of testosterone replacement
therapy without the often painful side effects associated with testosterone
injections. Dermal patches, however, have been associated with skin
irritation. Our testosterone-formulated gel product is designed to deliver
the required amount of testosterone without the pain of injections and the
skin irritation and discomfort associated with dermal patches. We are aware
of one gel testosterone product currently on the market in the United States
and several in development.

Estrogen deficiency in women can result in hot flashes, vaginal atrophy,
decreased libido and osteoporosis. Hormone replacement in women decreases the
chance that women will experience the symptoms of estrogen deficiency.
According to industry estimates, approximately twenty million women in the
U.S. currently are receiving some form of estrogen or combined estrogen
hormone replacement therapy.

Estrogen is most commonly given orally in pill or tablet form. There are
several potential side effects, however, with the use of oral estrogen,
including insufficient absorption by the circulatory system, gallstones and
blood clots. Although dermal patches have been shown to avoid some of these
problems, delivery of estrogen through dermal patches, like testosterone
patches, can result in skin irritation. Our estrogen formulated gel product
is designed to deliver estrogen without the skin irritation associated with
dermal patches. We are also in the process of developing a combined
estrogen/progestogen formulated gel product. Women whose uterus is intact
often use a combined hormone replacement therapy because evidence suggests
adding progestogen may reduce the potential risks of uterine cancer and
endometrial hyperplasia associated with estrogen therapy in these women.

We believe our hormone replacement products have a number of benefits,
including the following:

    o    estrogen and testosterone gels can be spread over large areas of skin
         where they dry rapidly and decrease the chance for skin irritation
         versus hormone patches;

                                       32

    o    estrogen and estrogen/progestogen gels may have fewer side effects than
         many pills which have been known to cause gallstones, blood clots and
         complications related to metabolism;

    o    adding progestogen to estrogen may reduce the potential risks of
         uterine cancer and endometrial hyperplasia of estrogen therapy alone
         when the uterus is intact;

    o    testosterone gel has been shown to be absorbed evenly, thus allowing
         clinical testosterone levels to reach the systemic circulation; and

    o    clinical trials involving the hormone products are expected to be
         relatively smaller requiring fewer patients than most drug development
         projects which will keep our costs, time and risks associated with the
         FDA approval process down.

We have begun human clinical trials on two of our hormone replacement
products, which is required to obtain FDA approval to market the products.

We license our hormone replacement products on an exclusive basis from
Antares Pharma, Inc. under a license agreement we entered into in June 2000.
Under the terms of our license agreement with Antares, we acquired exclusive
marketing rights, with the right to grant sub-licenses, to the single active
ingredient testosterone and estradiol products for all therapeutic
indications in the U.S., Canada, Mexico, Israel, Australia, New Zealand,
China, Malaysia, Indonesia and South Africa. We acquired exclusive marketing
rights, with the right to grant sub-licenses, for the combination estradiol
and progestogen product in the U.S. and Canada.

In September 2000, we sublicensed our female hormone replacement products to
Paladin Labs Inc. for sale in Canada. In August 2001, we sublicensed our
estrogen/progestogen combination transdermal hormone replacement gel product
to Solvay Pharmaceuticals, B.V. for sale in the U.S. and Canada.

DESCRIPTION OF OUR CAP TECHNOLOGY AND CAP TECHNOLOGY PRODUCTS

We believe our CAP technology will serve as an effective vehicle for
delivering drugs and vaccines and enhancing the effects of vaccines. The key
component, calcium phosphate, or CAP, is on the FDA's GRAS (Generally
Regarded as Safe) list. Our nanoparticles have successfully passed the first
stage of toxicity studies for administration orally, into muscles, under the
skin, and into the lungs by inhalation.

Research and development involving our CAP technology originated in a project
set up under an agreement dated April 6, 1989 between the University of
California and our predecessor company, Structured Biologicals, relating to
viral protein surface absorption studies. The discovery research was
performed by Structured Biologicals at UCLA School of Medicine and was based,
in essence, on the use of extremely small, solid, uniform particles as
components that could increase the stability of drugs and act as systems to
deliver drugs into the body.

These ultra fine particles are made from inert, biologically acceptable
materials, such as ceramics, pure crystalline carbon or biodegradable calcium
phosphate. The size of the particles is in the nanometer range. A nanometer
is one millionth of a millimeter and typically particles measure
approximately 1,000 nanometers (nm). For comparison, a polio virus particle
is about 27 nm in diameter, a herpes virus particle has a central core
measuring 100 nm in diameter, contained in an envelope measuring 150-200 nm,
while a tuberculosis bacterium is rod-shaped, about 1,200 nm long by 300 nm
across. Because the size of these particles is measured in nanometers, we use
the term "nanoparticles" to describe them.

                                       33

We use the nanoparticles as the basis of a delivery system by applying a
layer of a "bonding" coating of cellobiose or another carbohydrate
derivative. The critical property of these coated nanoparticles is that
biologically active molecules, proteins, peptides or pharmacological agents,
for example, vaccine components like bacterial or viral antigens or proteins
like insulin, attached to them retain their activity and can be protected
from natural alterations to their molecular structure by adverse
environmental conditions. It has been shown in studies conducted by us that,
when these combinations are injected into animals, the attachment can
actually enhance the biological activity as compared to injection of the
molecule alone in solution.

A major immune response that is triggered by these combination particles is
the creation of antibody molecules, which can then specifically counteract an
invading virus or bacterium. Similarly, a drug will produce an effect on an
organ system only if it can attach to specific receptors on the surface of
target cells (E.G., tumor cells). The stabilizing and slow release
capabilities of a drug carrier and delivery system based on this discovery
can lead to significant advances towards finding more effective and less
toxic or harmful molecules to seek out and attach to such receptors.

We believe our CAP technology has a number of benefits, including the
following:

    o    it is biodegradable (capable of being decomposed by natural biological
         processes) and non-toxic and therefore potentially safe to use and
         introduce into the human body;

    o    it is fast, easy and inexpensive to manufacture, which will keep our
         costs down and potentially improve our profit margins;

    o    the nanometer (one-millionth of a millimeter) size range makes it ideal
         for delivering drugs through aerosol sprays or inhalation instead of
         using painful injections; and

    o    it has excellent "loading" capacity -- the amount of molecules that can
         bond with the nanoparticles -- thereby potentially decreasing the dose
         needed to be taken by patients while enhancing the release
         capabilities.

Research in these areas has resulted in the issuance of a number of patents
that we license from the University of California.

We plan to develop commercial applications of our CAP technology and any
proprietary technology developed as a result of our ongoing research and
development efforts. Initially, we plan to pursue the development of (1)
vaccine adjuvants, (2) new virus vaccines, including vaccines to treat or
prevent disease such as Herpes viruses, (3) drug delivery systems, including
a method of delivering proteins (e.g., insulin) through inhalation, and (4)
the purification of the milk of transgenic animals. Our pre-clinical research
team in our laboratory in Smyrna, Georgia is currently pursuing the
development of our CAP technology.

VACCINE ADJUVANTS. We believe that our CAP nanoparticles may offer a means of
preparing new improved formulations of current vaccines that are equal or
better in their immunogenicity, that is, in their capacity to elicit an
immune response, compared to alum-formulated and non-adjuvanted vaccines but
may be injected in lower concentrations and less often which could result in
certain benefits, including cost savings and improved patient compliance.

Our nanoparticles when combined with vaccine antigens have been shown in
animal studies conducted by us and others to possess an ability to elicit a
higher immune response than non-adjuvanted vaccines and an immune response of
the same magnitude as alum-formulated vaccines but up to 100 times lower

                                       34

concentrations. These preclinical studies also have shown that our CAP
nanoparticles also may sustain higher antibody levels over a longer time
period than both alum-formulated vaccines and non-adjuvanted vaccines.
Because our CAP nanoparticles are made of calcium phosphate, which has a
chemical nature similar to normal bone material and therefore is natural to
the human body, as opposed to aluminum hydroxide, or alum, which is not
natural to the human body, we believe that our nanoparticles may be safer to
use than alum. In our animal studies, we observed no material adverse
reactions when our CAP nanoparticles were administered at effective levels.

We filed an investigational new drug, or IND, application with the FDA in
July 2000 to commence a Phase I human clinical trial. We completed our Phase
I human clinical trial in October 2000. As discussed in more detail under the
heading "Government Regulation," the purpose of a Phase I trial is to
evaluate the metabolism and safety of the experimental product in humans, the
side effects associated with increasing doses, and, if possible, to gain
early evidence of possible effectiveness. The Phase I trial of our CAP
specifically looked at safety parameters, including local irritation and
blood chemistry changes. The trial was completed and there was no apparent
difference in the side effects profile between CAP and placebo.

In addition to continuing our own research and development in this area, we
intend to seek opportunities to enter into business collaborations or joint
ventures with vaccine companies and others interested in co-development and
co-marketing arrangements with respect to our CAP nanoparticles for use as a
vaccine adjuvant. These arrangements also could include out-licenses of our
CAP technology to vaccine companies and others for further development in
their on-going vaccine development.

Our outlicensing activities with respect to our adjuvant for use in other
companies' vaccines have to date included meeting with target companies and,
in some cases, agreeing that the target company will test our adjuvant in
their animal models. Thereafter, the target company may send to us its
vaccine antigen or DNA which we will then formulate with our nanoparticles
and return for use in the target company's animal models. Once this is
completed, if the results are positive, we would negotiate an out-license
agreement with the target company.

In November 1999, we announced that we formed a collaborative research
alliance with Antares Pharma, Inc. to evaluate the efficacy of combining our
nanoparticle drug delivery and adjuvant or immune system boosters with
Antares' needle-free pressure injection. This research alliance will evaluate
the ability of the combined systems to deliver DNA vaccines as part of a DNA
vaccine program at a major U.S. university. In August 2000, we announced
initial preclinical results from our collaboration with Antares. The initial
tests demonstrated that Antares' needle-free pressure assisted injections
containing our CAP technology produced better cellular immune responses in
the injected animals than the injections without our CAP technology.

In June 2000, we announced an option license agreement with ID Biomedical
Corporation to use CAP as an adjuvant in a second-generation vaccine against
group-A streptococcus ("GAS"). GAS is considered a worldwide public health
threat causing strep-throat, skin infections, rheumatic fever, invasive
fasciitis (flesh eating disease), toxic shock syndrome and other diseases.

We announced in August 2000, a non-exclusive option license agreement with
Antex Biologics, Inc. to conduct preclinical tests of CAP in vaccines against
CHLAMYDIA PNEUMONIAE and H. PYLORI.

NEW VACCINES. We believe our nanoparticle technology presents a new, and more
effective and safer, approach to vaccine preparation. As with our vaccine
adjuvant technology, we are continuing our own research and development in
this area, but we also intend to seek opportunities to enter into business
collaborations or joint ventures with vaccine companies and others interested
in co-development and co-

                                       35

marketing arrangements. We believe these collaborations may enable us to
accelerate the development of potential improved vaccines for any products
developed from our CAP technology. These arrangements also could include
out-licenses of our CAP technology to vaccine companies and others for
further development and marketing. We have begun discussions with other
companies to out-license our adjuvant for use in those companies' new vaccine
development.

DRUG DELIVERY SYSTEMS. The third field of use in which we are exploring
applying our CAP technology involves creating novel and improved forms of
delivery of drugs, including proteins (E.G., insulin). The attachment of
drugs to CAP may enhance their stability in the body or enable the addition
of further protective coatings to permit oral, delayed-release and mucosal
(through mucous membranes) applications. Currently, insulin is given by
frequent, inconvenient and often painful injections. However, several
companies are in the process of developing and testing products that will
deliver insulin orally or through inhalation. We believe we may have
successfully created a formulation for the inhaled delivery of insulin. Our
research and development efforts in this area are ongoing. We are in the
process of contacting and meeting the insulin manufacturers and companies
with devices for inhalation of drugs to pursue collaborations for this
development.

TRANSGENIC MILK PURIFICATION. The fourth field of use in which we are
exploring applying our CAP technology is in the purification of the milk of
transgenic animals in which protein drugs are grown. This is achieved by
selectively isolating biologically active therapeutic proteins from the
transgenic milk. This method uses our CAP technology to recover greater than
90% of drug protein from the milk in a way that may require less downstream
processing and may produce higher overall yields at lower cost than currently
used methods.

SALES AND MARKETING

We currently have very limited sales and marketing personnel to sell on a
commercial basis any of our proposed products. If and when we are ready to
commercially launch a product, we will either hire qualified sales and
marketing personnel or seek a joint marketing partner to assist us with this
function.

RESEARCH AND PRODUCT DEVELOPMENT

We expect to spend a significant amount of our financial resources on
research and development activities. We spent approximately $620,225 in the
six months ended June 30, 2001 and $1,355,214 in the six months ended June
30, 2000, and we spent approximately $1,888,000 in 2000 and $661,000 in 1999
on research and development activities. Since we are not yet engaged in the
commercial distribution of any products and we have no revenues from the sale
of our products, these research and development costs must be financed by us.
We estimate that we are currently spending approximately $150,000 to $200,000
per month on research and development activities. This amount is expected to
increase as we begin to develop the hormone replacement product portfolio.
These expenditures, however, may fluctuate from quarter-to-quarter and
year-to-year depending upon the resources available and our development
schedule. Results of preclinical studies, clinical trials, regulatory
decisions and competitive developments may significantly influence the amount
of our research and development expenditures. In addition, we expect that our
spending on product development will increase if we are successful at
in-licensing or otherwise acquiring other late-stage development products.

MANUFACTURING

We currently do not have any facilities suitable for manufacturing on a
commercial scale basis any of our proposed products nor do we have any
experience in volume manufacturing. If, and when we are ready to commercially
launch a product, we will either find our own manufacturing facilities, hire
additional

                                       36

personnel with manufacturing experience and comply with the extensive Good
Manufacturing Practices, or GMP, regulations of the FDA and other regulations
applicable to such a facility or we will more likely rely upon third-party
manufacturers to manufacture our proposed products in accordance with these
regulations.

In September 1999, we entered into an arrangement with the University of Iowa
to manufacture our CAP nanoparticles for use in our Phase I human clinical
trial. Under the arrangement, the University of Iowa manufactured both a
trial batch of our CAP nanoparticles and a clinical batch which was used in
the clinical trial.

Currently, our gel hormone products are manufactured through an exclusive
agreement with Antares Pharma, Inc.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

Our success depends and will continue to depend in part upon our ability to
maintain our exclusive licenses, to maintain patent protection for our
products and processes, to preserve our proprietary information and trade
secrets and to operate without infringing the proprietary rights of third
parties. Our policy is to attempt to protect our technology by, among other
things, filing patent applications or obtaining license rights for technology
that we consider important to the development of our business.

ANTARES PHARMA, INC. In June 2000, we entered into a license agreement with
Antares Pharma, Inc. pursuant to which Antares has granted us an exclusive
license to four hormone replacement products for the treatment of
testosterone deficiency in men and estrogen deficiency in women, including
rights to sublicense the hormone replacement technology in order to develop
and market the hormone replacement technology in certain territories. Antares
has an issued patent for these technologies in the United States and has
filed patent applications for this licensed technology in several foreign
jurisdictions, including Argentina, Australia, Canada, Europe, Italy, Japan,
Korea, New Zealand, South Africa, and Taiwan.

The license agreement with Antares required us to pay a $1,000,000 up-front
license fee to Antares, which we paid in June 2000. Also pursuant to the
terms of the Antares license agreement, we expect to:

    o    pay royalties to Antares based on a percentage of the net sales of any
         products incorporating the licensed technology;

    o    accelerate the human clinical development of the hormone product
         portfolio, including:

                  >>  testing proposed products;

                  >>  conducting clinical trials;

                  >>  obtaining government approvals;

                  >>  introducing products incorporating the licensed technology
                      into the market; and

    o    enter into sub-license arrangements or agreements with other entities
         regarding development and commercialization of the technology covered
         by the license.

UNIVERSITY OF CALIFORNIA. In June 1997, we entered into a licensing agreement
with the Regents of the University of California pursuant to which the
University has granted us an exclusive license to nine United States patents
owned by the University, including rights to sublicense such patents, in
fields of use pertaining to: (1) vaccine adjuvants; (2) vaccine constructs or
combinations for use in immunization against herpes virus; (3) drug delivery
systems; and (4) red blood cell surrogates. The University of

                                       37

California has filed patent applications for this licensed technology in
several foreign jurisdictions, including Canada, Europe and Japan.

The license agreement with the University of California requires us to
undertake various obligations, including:

    o    payment of royalties to the University based on a percentage of the net
         sales of any products incorporating the licensed technology;

    o    payment of minimum annual royalties on February 28 of each year
         beginning in the year 2004 in the amounts set forth below, to be
         credited against earned royalties, for the life of the agreement
         (2013);

                                YEAR ROYALTY DUE                MINIMUM ANNUAL
                                ----------------                --------------
                                                          
                                       2004                       $    50,000
                                       2005                       $   100,000
                                       2006                       $   150,000
                                       2007                       $   200,000
                                       2008                       $   400,000
                                       2009                       $   600,000
                                       2010                       $   800,000
                                       2011                       $ 1,500,000
                                       2012                       $ 1,500,000
                                       2013                       $ 1,500,000

    o    maintaining an annual minimum amount of available capital for
         development and commercialization of products incorporating the
         licensed technology until a product is introduced to the market;

    o    payment of the costs of patent prosecution and maintenance of the
         patents included in the agreement which amounted to $11,722 in fiscal
         2000;

    o    meeting performance milestones relating to:

                  >>  hiring or contracting with personnel to perform research
                      and development, regulatory and other activities relating
                      to the commercial launch of a proposed product;

                  >>  testing proposed products;

                  >>  conducting clinical trials;

                  >>  obtaining government approvals;

                  >>  introducing products incorporating the licensed technology
                      into the market; and

    o    entering into partnership or alliance arrangements or agreements with
         other entities regarding commercialization of the technology covered by
         the license.

The license agreement further provides that we have the right to abandon any
project in any field of use without abandoning our license to pursue other
projects in that or other fields of use covered by the agreement. In May
1999, we notified the University that we would not pursue the red blood cell
surrogate use because we did not believe it will be proven an effective use
of CAP. In October 1999, we signed an amendment to our license agreement with
the University, which removed the red-blood cell surrogate use from the
agreement. In addition, under the terms of the amendment, the University
agreed to make other changes we suggested to the license agreement, including
delaying minimum royalty

                                       38

payments until 2004 and limiting the University's rights to terminate the
agreement in cases where we do not perform under the agreement. If we violate
or fail to perform any term or covenant of the license agreement and fail to
cure this default within 60 days after written notice from the University,
the University may terminate some projects included in the agreement.

PATENTS AND PATENT APPLICATIONS. We own one United States patent and no
foreign patents. In June 1999, we filed a patent for our advanced method of
selectively isolating biologically active therapeutic proteins from
transgenic milk. This patent was issued in the first quarter of 2001. In
February 2000, we filed a patent application with the U.S. Patent and
Trademark Office relating to our development work with vaccine adjuvants,
conventional DNA and RNA vaccines and drug delivery, including aerosol
delivery into the lungs.

TRADEMARKS AND TRADEMARK APPLICATIONS. We have filed a U.S. trademark
application and received a Notice of Allowance for the mark BIOSANTE for
vaccines and vaccine adjuvants. We have also filed a U.S. application for
BIOSANTE for hormone replacement products, and nine applications for products
in development. We have also filed 21 trademark applications in the European
Union and other countries for marks including the BIOSANTE mark. The
Community Trademark application for BIOSANTE has been published for
opposition. The BIOSANTE mark has registered in Israel. We do not have any
other registered trademarks.

CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS AGREEMENTS. We require our
employees, consultants and advisors having access to our confidential
information to execute confidentiality agreements upon commencement of their
employment or consulting relationships with us. These agreements generally
provide that all confidential information we develop or make known to the
individual during the course of the individual's employment or consulting
relationship with us must be kept confidential by the individual and not
disclosed to any third parties. We also require all of our employees and
consultants who perform research and development for us to execute agreements
that generally provide that all inventions conceived by these individuals
will be our property.

COMPETITION

Competition in the biopharmaceutical industry is intense both in hormone
replacement therapy and the development of products for prevention and/or
treatment of the same infectious diseases we target and in the acquisition of
products in the late-stage development phase or already on the market.
Potential competitors in the United States are numerous and include major
pharmaceutical and specialized biotechnology companies, universities and
other institutions. In general, competition in the pharmaceutical industry
can be divided into four categories: (1) corporations with large research and
developmental departments that develop and market products in many
therapeutic areas; (2) companies that have moderate research and development
capabilities and focus their product strategy on a small number of
therapeutic areas; (3) small companies with limited development capabilities
and only a few product offerings; and (4) university and other research
institutions.

All of our competitors in categories (1) and (2) and some of our competitors
in category (3) have longer operating histories, greater name recognition,
substantially greater financial resources and larger research and development
staffs than we do, as well as substantially greater experience than us in
developing products, obtaining regulatory approvals, and manufacturing and
marketing pharmaceutical products.

A significant amount of research in the field is being carried out at
academic and government institutions. These institutions are becoming
increasingly aware of the commercial value of their findings and are becoming
more aggressive in pursuing patent protection and negotiating licensing
arrangements to collect royalties for use of technology that they have
developed. These institutions also may market competitive

                                       39

commercial products on their own or in collaboration with competitors and
will compete with us in recruiting highly qualified scientific personnel.

We expect our products, if and when approved for sale, to compete primarily
on the basis of product efficacy, safety, patient convenience, reliability
and patent position. In addition, the first product to reach the market in a
therapeutic or preventative area is often at a significant competitive
advantage relative to later entrants in the market.

We are aware of certain programs and products under development by others
which may compete with our hormone replacement products and products we
develop that incorporate our CAP technology. Several competing companies,
including Wyeth-Ayerst Pharmaceuticals, Novartis AG, Solvay Pharmaceuticals,
Inc., Noven Pharmaceuticals, Inc. and Berlex Laboratories, Inc., dominate the
international hormone replacement industry. The international vaccine
industry is dominated by three companies: SmithKline Beecham plc,
Rhone-Poulenc S.A. (through its subsidiaries, including Institut Merieux
International, Pasteur Merieux Serums et Vaccins, Connaught Laboratories
Limited and Connaught Laboratories, Inc.) and Merck & Co., Inc.

There are several firms currently marketing or developing transdermal hormone
replacement products. They include The Proctor & Gamble Company, Noven
Pharmaceuticals, Inc., Novavax, Inc., Cellegy Pharmaceuticals, Inc., Auxilium
A2, Inc., Watson Pharmaceuticals Inc. and Solvay Pharmaceuticals, Inc.

With regard to our CAP technology, the larger, better known pharmaceutical
companies have generally focused on a traditional synthetic drug approach,
although some have substantial expertise in biotechnology. During the last
decade, however, significant research activity in the biotechnology industry
has been completed by smaller research and development companies, like us,
formed to pursue new technologies. Competitive or comparable companies to us
include Corixa Corporation, generally regarded as the leader in vaccine
adjuvant development, ID Biomedical Corporation and Antex Biologicals Inc.,
which both develop sub-unit vaccines from mycobacteria and other organisms.

GOVERNMENTAL REGULATION

Pharmaceutical products intended for therapeutic use in humans are governed
by extensive Food and Drug Administration regulations in the United States
and by comparable regulations in foreign countries. Any products developed by
us will require FDA approvals in the United States and comparable approvals
in foreign markets before they can be marketed. The process of seeking and
obtaining FDA approval for a previously unapproved new human pharmaceutical
product generally requires a number of years and involves the expenditure of
substantial resources.

Following drug discovery, the steps required before a drug product may be
marketed in the United States include:

    o    preclinical laboratory and animal tests;

    o    the submission to the FDA of an investigational new drug application,
         commonly known as an IND application;

    o    clinical and other studies to assess safety and parameters of use;

    o    adequate and well-controlled clinical trials to establish the safety
         and effectiveness of the drug product;

                                       40

    o    the submission to the FDA of a new drug application, commonly known as
         an NDA; and

    o    FDA approval of the NDA prior to any commercial sale or shipment of the
         product.

Typically, preclinical studies are conducted in the laboratory and in animals
to gain preliminary information on a proposed product's uses and
physiological effects and harmful effects, if any, and to identify any
potential safety problems that would preclude testing in humans. The results
of these studies, together with the general investigative plan, protocols for
specific human studies and other information, are submitted to the FDA as
part of the IND application. The FDA regulations do not, by their terms,
require FDA approval of an IND. Rather, they allow a clinical investigation
to commence if the FDA does not notify the sponsor to the contrary within 30
days of receipt of the IND. As a practical matter, however, FDA approval is
often sought before a company commences clinical investigations. That
approval may come within 30 days of IND receipt but may involve substantial
delays if the FDA requests additional information.

The initial phase of clinical testing, which is known as Phase I, is
conducted to evaluate the metabolism, uses and physiological effects of the
experimental product in humans, the side effects associated with increasing
doses, and, if possible, to gain early evidence of possible effectiveness.
Phase I studies can also evaluate various routes, dosages and schedules of
product administration. These studies generally involve a small number of
healthy volunteer subjects, but may be conducted in people with the disease
the product is intended to treat. The total number of subjects is generally
in the range of 20 to 80. A demonstration of therapeutic benefit is not
required in order to complete Phase I trials successfully. If acceptable
product safety is demonstrated, Phase II trials may be initiated.

Phase II trials are designed to evaluate the effectiveness of the product in
the treatment of a given disease and involve people with the disease under
study. These trials often are well controlled, closely monitored studies
involving a relatively small number of subjects, usually no more than several
hundred. The optimal routes, dosages and schedules of administration are
determined in these studies. If Phase II trials are completed successfully,
Phase III trials are often commenced, although Phase III trials are not
always required.

Phase III trials are expanded, controlled trials that are performed after
preliminary evidence of the effectiveness of the experimental product has
been obtained. These trials are intended to gather the additional information
about safety and effectiveness that is needed to evaluate the overall
risk/benefit relationship of the experimental product and provide the
substantial evidence of effectiveness and the evidence of safety necessary
for product approval. Phase III trials usually include from several hundred
to several thousand subjects.

A clinical trial may combine the elements of more than one Phase and
typically two or more Phase III studies are required. A company's designation
of a clinical trial as being of a particular Phase is not necessarily
indicative that this trial will be sufficient to satisfy the FDA requirements
of that Phase because this determination cannot be made until the protocol
and data have been submitted to and reviewed by the FDA. In addition, a
clinical trial may contain elements of more than one Phase notwithstanding
the designation of the trial as being of a particular Phase. The FDA closely
monitors the progress of the Phases of clinical testing and may, at its
discretion, reevaluate, alter, suspend or terminate the testing based on the
data accumulated and its assessment of the risk/benefit ratio to patients. It
is not possible to estimate with any certainty the time required to complete
Phase I, II and III studies with respect to a given product.

Upon the successful completion of clinical testing, an NDA is submitted to
the FDA for approval. This application requires detailed data on the results
of preclinical testing, clinical testing and the composition

                                       41

of the product, specimen labeling to be used with the drug, information on
manufacturing methods and samples of the product. The FDA typically takes
from six to 18 months to review an NDA after it has been accepted for filing.
Following its review of an NDA, the FDA invariably raises questions or
requests additional information. The NDA approval process can, accordingly,
be very lengthy. Further, there is no assurance that the FDA will ultimately
approve an NDA. If the FDA approves that NDA, the new product may be
marketed. The FDA often approves a product for marketing with a modification
to the proposed label claims or requires that post-marketing surveillance, or
Phase IV testing, be conducted.

All facilities and manufacturing techniques used to manufacture products for
clinical use or sale in the United States must be operated in conformity with
current "good manufacturing practice" regulations, commonly referred to as
"GMP" regulations, which govern the production of pharmaceutical products. We
currently do not have manufacturing capability. In the event we undertake any
manufacturing activities or contract with a third-party manufacturer to
perform our manufacturing activities, we intend to establish a quality
control and quality assurance program to ensure that our products are
manufactured in accordance with the GMP regulations and any other applicable
regulations.

Products marketed outside of the United States are subject to regulatory
approval requirements similar to those in the United States, although the
requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. No action can
be taken to market any product in a country until an appropriate application
has been approved by the regulatory authorities in that country. The current
approval process varies from country to country, and the time spent in
gaining approval varies from that required for FDA approval. In certain
European countries, the sales price of a product must also be approved. The
pricing review period often begins after market approval is granted. We
intend to seek and utilize foreign partners to apply for foreign approvals of
our products.

EMPLOYEES

We had seven full-time employees as of August 15, 2001, including four in
research and development and three in management or administrative positions.
None of our employees is covered by a collective bargaining agreement. We
believe we have an excellent relationship with our employees.

PROPERTIES

Our principal executive office is located in Lincolnshire, Illinois. In
September 2001, we entered into a new lease agreement for approximately 4,034
square feet of office space for approximately $6,200 per month, which lease
expires in December 2003. We also have four more lease payments remaining on
our previous lease for approximately $2,100 per month. Our CAP research and
development operations are located in Smyrna, Georgia where we lease
approximately 11,840 square feet of laboratory space for approximately $5,400
per month. This lease expires in October 2003. We also lease approximately
2,600 square feet of office space in Atlanta, Georgia for approximately
$3,500 per month. This lease expires in mid-September 2002. In September
1999, we entered into a sublease agreement for the Atlanta office space under
which we receive approximately $3,400 per month from the sub-tenant through
mid-September 2002. Management of our company considers our leased properties
suitable and adequate for our current and immediately foreseeable needs.

LEGAL PROCEEDINGS

We are not a party to any material, threatened or pending legal proceedings.

                                       42

                                   MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

Set forth below is information concerning our executive officers, directors and
key employees, including their age, as of August 15, 2001:

                   NAME                       AGE                             TITLE
- ----------------------------------------    -------   -----------------------------------------------------
                                                
Stephen M. Simes........................       49     Vice Chairman, President and Chief Executive Officer
Phillip B. Donenberg....................       40     Chief Financial Officer, Treasurer and Secretary
John E. Lee.............................       51     Vice President, Commercial Development
Leah M. Lehman, Ph.D....................       38     Vice President, Clinical Development
Steven J. Bell, Ph.D....................       41     Vice President, Research and Pre-Clinical Development
Louis W. Sullivan, M.D. (1)(2)(3).......       67     Chairman of the Board
Victor Morgenstern (2)..................       58     Director
Fred Holubow (3)........................       62     Director
Ross Mangano (1)........................       55     Director
Edward C. Rosenow III, M.D. (3).........       66     Director
Angela Ho (2)...........................       48     Director
Peter Kjaer (1).........................       40     Director
Avi Ben-Abraham, M.D....................       43     Director

- -------------------------------------------
(1) Member of the audit and finance committee
(2) Member of the compensation committee
(3) Member of the scientific review committee

STEPHEN M. SIMES has served as our Vice Chairman, President and a director of
our company since January 1998 and Chief Executive Officer since March 1998.
From October 1994 to January 1997, Mr. Simes was President, Chief Executive
Officer and a Director of Unimed Pharmaceuticals, Inc., a company with a
product focus on infectious diseases, AIDS, endocrinology and oncology. From
1989 to 1993, Mr. Simes was Chairman, President and Chief Executive Officer
of Gynex Pharmaceuticals, Inc., a company which concentrated on the AIDS,
endocrinology, urology and growth disorders markets. In 1993, Gynex was
acquired by Bio-Technology General Corp., and from 1993 to 1994, Mr. Simes
served as Senior Vice President and director of Bio-Technology General Corp.
Mr. Simes' career in the pharmaceutical industry started in 1974 with G.D.
Searle & Co.

PHILLIP B. DONENBERG, CPA has served as our Chief Financial Officer,
Treasurer and Secretary since July 1998. Before joining our company, Mr.
Donenberg was Controller of Unimed Pharmaceuticals, Inc. from January 1995 to
July 1998. From 1993 to 1994, Mr. Donenberg was Controller of Molecular
Geriatrics Corporation, a biotechnology corporation. Prior to Molecular
Geriatrics Corporation, Mr. Donenberg held similar positions with other
pharmaceutical companies, including Gynex Pharmaceuticals, Inc. and
Xtramedics, Inc.

JOHN E. LEE has served as our Vice President, Commercial Development since
August 2000. Before joining our company, Mr. Lee was Vice President, Sales
and Marketing at Questcor Pharmaceuticals (formerly Cypros Pharmaceuticals,
Inc.) from March 1999 to May 2000. From 1996 to March 1998, Mr. Lee was Vice
President, Commercial Development at Unimed Pharmaceuticals and has held
various sales and marketing positions at G.D. Searle & Co.

LEAH M. LEHMAN, PH.D. has served as our Vice President, Clinical Development
since January 2001. Prior to joining our company, Dr. Lehman was Director of
Clinical Research with Scientific Research

                                       43

Development Corp. from April 1995 to December 2000. From 1993 to 1995, Dr.
Lehman was a clinical statistician at Abbott Laboratories.

STEVEN J. BELL, PH.D. has served as our Vice President, Research and
Pre-Clinical Development since October 2000 and served as a Director of
Research and Development of BioSante from July 1997 to October 2000. Prior to
joining our company Dr. Bell held various positions with Boehringer Mannheim,
Hoffman-LaRoche, The Upjohn Company and Boehringer Ingelheim.

THE HONORABLE LOUIS W. SULLIVAN, M.D. has been our Chairman of the Board of
Directors since March 1998 and has been a director of our company since its
formation. Dr. Sullivan served as Secretary of Health and Human Services in
the cabinet of President George Bush from 1989 to 1993. Since retiring from
the Bush Administration, Dr. Sullivan has been President of the Morehouse
School of Medicine in Atlanta, Georgia. He had previously served as President
and Dean of the School from 1981 to 1985. Since 1993, Dr. Sullivan has served
and continues to serve on the Boards of several large U.S. corporations,
including 3M Corp., Bristol-Myers Squibb Company, Cigna Corporation, Georgia
Pacific Corp. and Household International Inc.

VICTOR MORGENSTERN was elected a director of our company in July 1999. Mr.
Morgenstern has more than 32 years of investment experience and is the
Chairman of the Board of Trustees of The Oakmark Funds, an open-end
registered investment company and serves as managing director of Resolute
Partners L.P. He is a trustee of the Illinois Institute of Technology.

FRED HOLUBOW was elected a director of our company in July 1999. Mr. Holubow
has been a Vice President of Pegasus Associates since he founded Pegasus in
1982. Pegasus Associates is currently an operating division of William Harris
Investors, a registered investment advisory firm. He specializes in analyzing
and investing in pharmaceutical and biotechnology companies. Mr. Holubow has
served on the Boards for Bio-Technology General Corp., ThermoRetec
Corporation, Unimed Pharmaceuticals, Inc. and Gynex Pharmaceuticals, Inc.

ROSS MANGANO was elected a director of our company in July 1999. Mr. Mangano
has been the President and a director of Oliver Estate, Inc., a management
company specializing in investments in public and private companies since
1971. He is the Chairman of Cerprobe Corporation, and serves as a director
for Blue Chip Casino, Inc., Orchard Software Corporation, and U.S. RealTel
Inc.

EDWARD C. ROSENOW, III, M.D. has been a director of our company since
November 1997. Dr. Rosenow is a Master Fellow of the American College of
Physicians as well as Master Fellow of the American College of Chest
Physicians. Dr. Rosenow was the Arthur M. and Gladys D. Gray Professor of
Medicine at the Mayo Clinic from 1988 until his recent retirement. Beginning
with his residency in 1960, Dr. Rosenow has worked at the Mayo Clinic in many
professional capacities including as a Consultant in Internal Medicine
(Thoracic Diseases) from 1966 to 1996, an Assistant Professor, Associate
Professor and Professor of Medicine at the Mayo Clinic Medical School,
President of the Mayo Clinic Staff in 1986, and Chair of the Division of
Pulmonary and Critical Care Medicine from 1987 to 1994. Dr. Rosenow has also
served as a consultant to NASA, space station FREEDOM at the Johnson Space
Center in Houston, Texas from 1989 to 1990 and as the President of the
American College of Chest Physicians from 1989 to 1990. In 1998, he received
the Mayo Distinguished Alumnus Award.

ANGELA HO has been a director of our company since June 1998. Ms. Ho was
elected to our Board of Directors as a representative of certain major
investors in Hong Kong. Ms. Ho has been the Vice Chairman and Chief Managing
Officer of Jet-Asia Ltd., a Hong Kong-based aircraft and management company,
since April 1996. From June 1996 to June 1998, Ms. Ho was the President of Ho
Galleries Ltd., a New York art gallery.

                                       44

PETER KJAER has been a director of our company since July 1999 and is a
representative of certain major investors in Hong Kong. Mr. Kjaer has been
President and Chief Executive Officer of Jet-Asia Ltd., a Hong Kong-based
aircraft and management company, since April 1996. From April 1989 to July
1996, Mr. Kjaer was the General Manager and a director of the Gallery of
Contemporary Living Ltd., a Hong Kong-based art gallery.

AVI BEN-ABRAHAM, M.D. founded our company and has been a director of our
company since inception. Dr. Ben-Abraham was the Chairman of the Board of
Directors and Chief Executive Officer of our company from inception to March
1998. Dr. Ben-Abraham was a trustee of the Morehouse School of Medicine in
Atlanta, Georgia until December 1998. From July 1995 to March 1998, Dr.
Ben-Abraham served as Chairman, Chief Executive Officer and Director of
Structured Biologicals, Inc., a predecessor company of BioSante.

BOARD COMMITTEES

The Board of Directors has an Audit and Finance Committee, Compensation
Committee and Scientific Review Committee.

AUDIT AND FINANCE COMMITTEE. The Audit and Finance Committee provides
assistance to the Board of Directors in satisfying its fiduciary
responsibilities relating to our accounting, auditing, operating and
reporting practices, and reviews our annual financial statements, the
selection and work of our independent auditors and the adequacy of internal
controls for compliance with corporate policies and directives. The Audit and
Finance Committee consists of Mr. Kjaer, Mr. Mangano and Dr. Sullivan.

COMPENSATION COMMITTEE.  The Compensation Committee:

    o    reviews general programs of compensation and benefits for all of our
         employees;

    o    makes recommendations to the Board of Directors concerning matters as
         compensation to be paid to our officers and directors; and

    o    administers our stock option plan, pursuant to which stock options may
         be granted to our eligible employees, officers, directors and
         consultants.

The Compensation Committee consists of Dr. Sullivan, Ms. Ho and Mr.
Morgenstern.

SCIENTIFIC REVIEW COMMITTEE. The Scientific Review Committee assists in
evaluating potential new licenses or new products. The Scientific Review
Committee consists of Dr. Rosenow, Mr. Holubow and Dr. Sullivan.

DIRECTOR COMPENSATION

We do not pay fees to our directors. We do, however, periodically compensate
our directors through the granting of stock options. On January 1, 2001, we
granted stock options to purchase 25,000 shares of common stock to each of
our non-employee directors. These options have an exercise price of $0.67 per
share, fully vest on January 1, 2002 and expire ten years from the date of
grant. All directors are reimbursed for travel expenses for attending
meetings of the Board of Directors and any Board committees.

                                       45

EXECUTIVE COMPENSATION

The following table provides summary information concerning cash and non-cash
compensation paid to or earned by our President and Chief Executive Officer
and our executive officers, who received or earned cash and non-cash salary
and bonus of more than $100,000, for the fiscal year ended December 31, 2000.

                           SUMMARY COMPENSATION TABLE

                                                                                    LONG-TERM
                                                 ANNUAL COMPENSATION               COMPENSATION
                                           ----------------------------------      ------------
                                                                                    SECURITIES
                                                                                    UNDERLYING          ALL OTHER
NAME AND PRINCIPAL POSITION                YEAR     SALARY ($)     BONUS ($)        OPTIONS (#)      COMPENSATION ($)
- ---------------------------                ----     ----------    -----------      ------------      ----------------
                                                                                      
Stephen M. Simes........................   2000      $275,000     $125,000 (1)               0          $29,317 (2)
   VICE CHAIRMAN, PRESIDENT AND            1999       250,000      115,000           1,856,250           21,882 (2)
   CHIEF EXECUTIVE OFFICER                 1998       218,795            0           1,000,000           16,333 (2)

Phillip B. Donenberg....................   2000       127,000       33,000 (3)               0           13,286 (4)
   CHIEF FINANCIAL OFFICER, TREASURER      1999       110,000       15,000             521,875           13,001 (4)
   AND SECRETARY                           1998        49,359            0             340,000            5,984 (4)

- --------------------------
(1)      Represents a cash bonus of $75,000 and a stock bonus of 163,859 shares
         of common stock valued at $50,000.

(2)      Represents an auto allowance ($12,000 in 2000, $12,000 in 1999 and
         $11,333 in 1998), a 401(k) matching contribution ($5,250 in 2000, and
         $5,000 in each of 1999 and 1998) and insurance premiums and taxes
         associated with the premiums of $12,067 paid by BioSante in 2000.

(3)      Represents a cash bonus of $25,000 and a stock bonus of 26,217 shares
         of common stock valued at $8,000.

(4)      Represents an auto allowance ($7,200 in 2000, $7,200 in 1999 and $3,484
         in 1998), a 401(k) matching contribution ($5,250 in 2000, $5,000 in
         1999 and $2,500 in 1998) and insurance premiums paid and taxes
         associated with the premiums of $836 paid by BioSante in 2000.

OPTION GRANTS IN LAST FISCAL YEAR

None of the executive officers named in the Summary Compensation Table were
granted options during the fiscal year ended December 31, 2000.

                                       46

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table summarizes the number and value of options held by each
of the executive officers named in the Summary Compensation Table at December
31, 2000. None of these executive officers exercised any stock options during
2000.

                                                     NUMBER OF SECURITIES               VALUE OF UNEXERCISED
                                                    UNDERLYING UNEXERCISED              IN-THE-MONEY OPTIONS
                                                 OPTIONS AT DECEMBER 31, 2000          AT DECEMBER 31, 2000 (1)
                                                 ----------------------------          ------------------------
NAME                                            EXERCISABLE      UNEXERCISABLE      EXERCISABLE      UNEXERCISABLE
- ----                                            -----------      -------------      -----------      -------------
                                                                                         
Stephen M. Simes........................         2,240,199          616,051          $1,113,070         $316,190
Phillip B. Donenberg....................           628,993          232,882          $  313,901         $117,274

- -------------
(1)      Value based on the difference between the fair market value of one
share of our common stock at December 31, 2000 ($.75), and the exercise price of
the options ranging from $0.23 to $0.29 per share. Options are in-the-money if
the market price of the shares exceeds the option exercise price.

EMPLOYMENT AGREEMENTS

SIMES EMPLOYMENT AGREEMENT

In January 1998, we entered into a letter agreement with Stephen M. Simes
pursuant to which Mr. Simes serves as our Vice Chairman, President and Chief
Executive Officer. The term of this agreement continues until December 31,
2003, after which time the term will be automatically extended for three
additional years unless on or before October 1 immediately preceding the
extension, either party gives written notice to the other of the termination
of the agreement.

Mr. Simes is entitled to receive an annual performance bonus of up to 50%,
subject to compensation committee review and decision, of his then base
salary if certain performance criteria are met. If Mr. Simes is terminated
without cause or upon a change in control or if he terminates his employment
for good reason, all of his options will become immediately exercisable and
will remain exercisable for a period of one year (for the remainder of their
term in the event of a change in control), and he will be entitled to a
minimum severance payment of 12 months base salary. Mr. Simes also is subject
to assignment of inventions, confidentiality and non-competition provisions.

DONENBERG EMPLOYMENT AGREEMENT

In June 1998, we entered into a letter agreement with Phillip B. Donenberg
pursuant to which Mr. Donenberg serves our Chief Financial Officer. The term
of this agreement continues until either party gives 30 days written notice
to the other of the termination of the agreement.

Mr. Donenberg is entitled to receive an annual performance bonus of up to
30%, subject to compensation committee review and decision, of his then base
salary if certain performance criteria are met. If Mr. Donenberg is
terminated without cause or upon a change in control or if he terminates his
employment for good reason, all of his options will become immediately
exercisable and will remain exercisable for a period of one year (for the
remainder of their term in the event of a change in control), and he will be
entitled to a minimum severance payment of 12 months base salary. Mr.
Donenberg also is subject to assignment of inventions, confidentiality and
non-competition provisions.

                                       47

CHANGE IN CONTROL ARRANGEMENTS

Under our 1998 Stock Option Plan, options granted under that plan will become
fully exercisable following certain changes in control of our company, such
as:

    o    the sale, lease, exchange or other transfer of all or substantially all
         of the assets of our company to a corporation that is not controlled by
         us;

    o    the approval by our stockholders of any plan or proposal for the
         liquidation or dissolution of our company;

    o    certain merger or business combination transactions;

    o    more than 50% of our outstanding voting shares are acquired by any
         person or group of persons who did not own any shares of common stock
         on the effective date of the plan; and

    o    certain changes in the composition of our Board of Directors.

STOCK OPTION PLAN

From time to time we grant options under our Amended and Restated 1998 Stock
Option Plan. The option plan was approved by our Board of Directors on
December 8, 1998 and approved by our stockholders on July 13, 1999. The
option plan has been amended several times to increase the number of shares
reserved for issuance. The option plan provides for the grant to employees,
officers, directors, consultants and independent contractors of our company
and our subsidiaries of options to purchase shares of common stock that
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, as well as non-statutory options
that do not qualify as incentive stock options. This plan is administered by
the Compensation Committee of our Board of Directors, which determines the
persons who are to receive awards, as well as the type, terms and number of
shares subject to each award.

We have reserved an aggregate of 8,500,000 shares of common stock for awards
under the option plan. As of August 15, 2001, options to purchase an
aggregate of 6,944,657 shares of common stock were outstanding under the
option plan, of which 4,406,302 were fully vested, and a total of 1,555,343
shares of common stock remained available for grant. As of August 15, 2001,
the outstanding options under the plan were held by an aggregate of 15
individuals and were exercisable at prices ranging from $0.23 to $1.04 per
share of common stock.

Incentive stock options granted under the plan may not have an exercise price
less than the fair market value of the common stock on the date of the grant
(or, if granted to a person holding more than 10% of our voting stock, at
less than 110% of fair market value). Non-statutory stock options granted
under the plans may not have an exercise price less than 85% of fair market
value on the date of grant. Aside from the maximum number of shares of common
stock reserved under the plans, there is no minimum or maximum number of
shares that may be subject to options under the plans. However, the aggregate
fair market value of the stock subject to incentive stock options granted to
any optionee that are exercisable for the first time by an optionee during
any calendar year may not exceed $100,000. Options generally expire when the
optionee's employment or other service is terminated with us. Options
generally may not be transferred, other than by will or the laws of descent
and distribution, and during the lifetime of an optionee, may be exercised
only by the optionee. The term of each option, which is fixed by our Board of
Directors at the time of grant, except that an incentive stock option may be
exercisable only for 10 years

                                       48

and an incentive stock option granted to a person holding more than 10% of
our voting stock may be exercisable only for five years.

The option plan contains provisions under which options would become fully
exercisable following certain changes in control of our company, such as (1)
the sale, lease, exchange or other transfer of all or substantially all of
the assets of our company to a corporation that is not controlled by us, (2)
the approval by our stockholders of any plan or proposal for the liquidation
or dissolution of our company, (3) certain merger or business combination
transactions, (4) more than 50% of our outstanding voting shares are acquired
by any person or group of persons who did not own any shares of common stock
on the effective date of the plan, or (5) certain changes in the composition
of our Board of Directors.

Payment of an option exercise price may be made in cash, or at the
Compensation Committee's discretion, in whole or in part by tender of a
broker exercise notice, a promissory note or previously acquired shares of
our common stock having an aggregate fair market value on the date of
exercise equal to the payment required.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

DIRECTOR RELATIONSHIPS

Messrs. Morgenstern, Holubow and Mangano were elected to our Board of
Directors in July 1999 as representatives of the lead investors in the May
1999 private placement. We refer you to the discussion under the heading "May
1999 Private Placement" below.

Ms. Ho and Mr. Kjaer were elected to our Board of Directors as
representatives of several investors located in Hong Kong. Neither Ms. Ho or
Mr. Kjaer has entered into any voting agreements with these Hong Kong
investors nor does Ms. Ho or Mr. Kjaer otherwise have any control over the
voting of shares held by these investors.

MAY 1999 PRIVATE PLACEMENT

In connection with our May 1999 private placement, we entered into a
stockholders' agreement with the investors, which included Stephen M. Simes,
Victor Morgenstern, an affiliated trust and a partnership, Fred Holubow, JO &
Co., of which Ross Mangano is President, and certain of our major investors
located in Hong Kong, including Hans Michael Jebsen, Marcus Jebsen and King
Cho Fung. This agreement contains, among other things, a voting agreement
with respect to the election of directors.

APRIL 2001 PRIVATE PLACEMENT

In connection with our April 2001 private placement, we sold units consisting
of an aggregate of 9,250,000 shares of our common stock and warrants to
purchase an aggregate of 4,625,000 shares of our common stock for $0.40 per
unit, each unit consisting of one share of common stock and a five-year
warrant to purchase 0.50 shares of our common stock, for an aggregate
purchase price of $3,700,000, to accredited investors, including certain
existing stockholders, directors and officers.

                                       49

            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE

Our common stock has traded in the United States in the over-the-counter
market on the OTC Bulletin Board, under the symbol "BTPH," since May 5, 2000.
Our common stock traded in Canada on the Canadian Venture Exchange, formerly
known as the Alberta Stock Exchange, under the symbol "BAI," from December
20, 1996 to July 20, 2001. From September 10, 1999 to May 4, 2000, our common
stock traded in the United States on the National Quotation Bureau, commonly
referred to as the "Pink Sheets," under the symbol "BTPH."

The following table sets forth, in U.S. dollars and in dollars and cents (in
lieu of fractions), the high and low sales prices for each of the calendar
quarters indicated, as reported by the OTC Bulletin Board and the Pink
Sheets. The prices in the table may not represent actual transactions. These
quotations reflect inter-dealer prices, without retail mark up, mark down or
commissions and may not represent actual transactions.

                  OTC BULLETIN BOARD                    HIGH                  LOW
                                                        ----                  ---
                                                                        
                  2001
                  ----
                  First Quarter................         $0.75                 $0.38
                  Second Quarter...............         $1.07                 $0.39

                  2000
                  ----
                  Second Quarter...............         $1.25                 $0.47
                  Third Quarter................         $1.03                 $0.80
                  Fourth Quarter...............         $0.92                 $0.52

                  NATIONAL QUOTATION BUREAU ("PINK SHEETS")

                  2000                                  HIGH                  LOW
                  ----                                  ----                  ---
                  First Quarter................         $1.50                 $0.28

                  1999                                   HIGH                 LOW
                  ----                                  ----                  ---
                  Third Quarter................         $0.51                 $0.27
                  Fourth Quarter...............         $1.13                 $0.18

The following table sets forth, in U.S. dollars and in dollars and cents (in
lieu of fractions), the high and low sales prices for each of the calendar
quarters indicated, as reported by the Canadian Venture Exchange.

              CANADIAN VENTURE EXCHANGE                 HIGH                  LOW
                                                        ----                  ---
                                                                        
              2001
              ----
              First Quarter....................         $0.72                 $0.46
              Second Quarter...................         $1.07                 $0.35

              2000
              ----
              First Quarter....................         $1.38                 $0.22
              Second Quarter...................         $1.07                 $0.46
              Third Quarter....................         $1.01                 $0.71
              Fourth Quarter...................         $0.95                 $0.49

                                       50

              1999
              ----
              First Quarter....................         $0.24                 $0.15
              Second Quarter...................         $0.50                 $0.21
              Third Quarter....................         $0.37                 $0.23
              Fourth Quarter...................         $0.48                 $0.45

                                       51

                  SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
                                 AND MANAGEMENT

The following table sets forth information known to us with respect to the
beneficial ownership of each class of our capital stock as of August 15, 2001
for (1) each person known by us to beneficially own more than 5% of any class
of our voting securities, (2) each of the executive officers named in the
Summary Compensation Table under the heading "Management" (3) each of our
directors and (4) all of our executive officers and directors as a group.
Except as otherwise indicated, we believe that each of the beneficial owners
of our capital stock listed below, based on information provided by these
owners, has sole investment and voting power with respect to its shares,
subject to community property laws where applicable.

Unless otherwise noted, each of the stockholders listed in the table
possesses sole voting and investment power with respect to the shares
indicated. Shares not outstanding but deemed beneficially owned by virtue of
the right of a person or member of a group to acquire them within 60 days are
treated as outstanding only when determining the amount and percent owned by
such person or group.

                                                                             CLASS C            COMMON STOCK    PERCENT OF
                                                COMMON STOCK               SPECIAL STOCK         AND COMMON       TOTAL
                                         -------------------------     ---------------------        STOCK         VOTING
NAME                                        NUMBER         PERCENT      NUMBER       PERCENT     EQUIVALENTS     POWER (1)
- -------------------------------------    -------------     -------     ---------     -------    -------------   -----------
                                                                                              
Stephen M. Simes (2).................    3,630,606 (3)        5.5%       --           --          3,630,606         5.2%
Louis W. Sullivan, M.D. (2)..........      125,000 (4)       *         1,000,000       21.3%      1,125,000         1.7%
Edward C. Rosenow III, M.D. (2)......      150,000 (5)       *           --           --            150,000         *
Victor Morgenstern (2)...............    5,100,000 (6)        7.9%       --           --          5,100,000         7.4%
Fred Holubow (2).....................      637,500 (7)        1.0%       --           --            637,500         *
Ross Mangano (2).....................   15,025,000 (8)       22.2%       --           --         15,025,000        20.7%
Angela Ho (2)........................      725,000 (9)        1.2%     1,000,000       21.3%      1,725,000         2.7%
Peter Kjaer (2)......................       75,000 (10)      *           --           --             75,000         *
Avi Ben-Abraham, M.D. (2)............   10,954,800 (11)      17.4%       --           --         10,954,800        16.2%
Phillip B. Donenberg (2).............      913,940 (12)       1.4%       --           --            913,940         1.3%
JO & Co..............................   11,550,000 (13)      17.3%       --           --         11,550,000        16.2%
Hans Michael Jebsen..................    4,250,000 (14)       6.8%     1,000,000       21.3%      5,250,000         7.8%
King Cho Fung........................    3,700,000 (15)       5.9%       625,000       13.3%      4,325,000         6.4%
Marcus Jebsen........................    1,750,000 (16)       2.8%       500,000       10.7%      2,250,000         3.3%
All executive officers and directors
as a group (13 persons)..............  38,450,821(17)        51.4%     2,000,000       42.7%     40,450,821        50.9%

- ---------------------
* less than 1%.
(1)      In calculating the percent of total voting power, the voting power of
         shares of our class C special stock and our common stock is combined.

(2)      Address:  111 Barclay Boulevard, Suite 280, Lincolnshire, IL  60069.

(3)      Mr. Simes' beneficial ownership includes 2,779,247 shares of common
         stock issuable upon exercise of stock options and 187,500 shares of
         common stock issuable upon exercise of warrants.

(4)      Dr. Sullivan's beneficial ownership includes 125,000 shares of common
         stock issuable upon exercise of a stock option.

(5)      Dr. Rosenow's beneficial ownership includes 150,000 shares of common
         stock issuable upon exercise of stock options.

                                       52

(6)      Mr. Morgenstern's beneficial ownership includes: (1) 75,000 shares of
         common stock issuable upon exercise of a stock option, (2) 950,000
         shares of common stock issuable upon exercise of warrants, (3) 325,000
         shares of common stock issuable upon exercise of warrants and 800,000
         shares of common stock held by Mr. Morgenstern's wife as trustee of the
         Morningstar Trust, as to which Mr. Morgenstern disclaims control,
         direction or beneficial ownership, (4) 100,000 shares of common stock
         issuable upon exercise of a warrant and 200,000 shares of common stock
         held by Mr. Morgenstern's wife, as to which Mr. Morgenstern disclaims
         control, director or beneficial ownership, and (5) 250,000 shares of
         common stock issuable upon exercise of a warrant and 500,000 shares of
         common stock held by Resolute Partners L.P. Victor Morgenstern is a
         managing director of Resolute Partners L.P.

(7)      Mr. Holubow's beneficial ownership includes 187,500 shares of common
         stock issuable upon exercise of warrants and 75,000 shares of common
         stock issuable upon exercise of a stock option.

(8)      Mr. Mangano's beneficial ownership includes: (1) 75,000 shares of
         common stock issuable upon exercise of a stock option, (2) 3,750,000
         shares of common stock issuable upon exercise of a warrant and
         7,800,000 shares of common stock held by JO & Co., of which Mr. Mangano
         is President, and (4) an aggregate of 2,250,001 shares of common stock
         and an aggregate of 1,124,999 shares of common stock issuable upon
         exercise of warrants held in various accounts, of which Mr. Mangano is
         an advisor and/or a trustee. Mr. Mangano has sole dispositive power
         over these shares. See note (13) below.

(9)      Ms. Ho's beneficial ownership includes 125,000 shares of common stock
         issuable upon exercise of stock options.

(10)     Mr. Kjaer's beneficial ownership includes 75,000 shares of common stock
         issuable upon exercise of a stock option.

(11)     Dr. Ben-Abraham's beneficial ownership includes 25,000 shares of common
         stock issuable upon exercise of a stock option. Dr. Ben-Abraham has
         entered into an agreement limiting the voting rights with respect to
         his shares of common stock in certain circumstances. His percentage
         ownership has been calculated without taking these restrictions into
         account.

(12)     Mr. Donenberg's beneficial ownership includes 848,973 shares of common
         stock issuable upon exercise of stock options and 6,250 shares of
         common stock issuable upon exercise of a warrant.

(13)     Includes 3,750,000 shares of common stock issuable upon exercise of a
         warrant. Ross Mangano, a director of BioSante, has sole voting power
         over these shares. See note (8) above. The address for JO & Co. is 112
         West Jefferson Boulevard, Suite 613, South Bend, Indiana 46634.

(14)     Mr. Jebsen's beneficial ownership includes 750,000 shares of common
         stock issuable upon exercise of a warrant. Mr. Jebsen's address is c/o
         Jebsen & Co. Ltd., 28/F Caroline Center, 28 Yun Ping Road, Causeway
         Bay, Hong Kong.

(15)     Mr. Fung's beneficial ownership includes 750,000 shares of common stock
         issuable upon exercise of a warrant. Mr. Fung's address is c/o SP2
         15/F, 46 Lyndhurst Terrace, Central Hong Kong.

(16)     Mr. Jebsen's beneficial ownership includes 250,000 shares of common
         stock issuable upon exercise of a warrant. Mr. Jebsen's address is c/o
         Jebsen & Co. Ltd., 28/F Caroline Center, 28 Yun Ping Road, Causeway
         Bay, Hong Kong.

(17)     The amount beneficially owned by all current directors and executive
         officers as a group includes 6,387,195 shares issuable upon exercise of
         warrants and stock options held by these individuals and 5,549,999
         shares issuable upon exercise of warrants held by entities affiliated
         with these individuals. See notes (6), (8) and (13) above.

                                       53

                            DESCRIPTION OF SECURITIES

AUTHORIZED SHARES

We are authorized to issue 100,000,000 shares of common stock, $0.0001 par
value per share, and 10,000,000 shares of undesignated preferred stock,
$0.0001 par value per share. The following is a summary of the material terms
and provisions of our capital stock. Because it is a summary, it does not
include all of the information that is included in our certificate of
incorporation. The text of our certificate of incorporation, which is
attached as an exhibit to this registration statement, is incorporated into
this section by reference.

COMMON STOCK

We are authorized to issue 100,000,000 shares of common stock, of which
62,834,133 shares were issued and outstanding as of August 15, 2001. Each
share of our common stock entitles its holder to one vote per share. Holders
of our common stock are entitled to receive dividends as and when declared by
our Board of Directors from time to time out of funds properly available to
the payment of dividends. Subject to the liquidation rights of any
outstanding preferred stock, the holders of our common stock are entitled to
share pro rata in the distribution of the remaining assets of our company
upon a liquidation, dissolution or winding up of our company. The holders of
our common stock have no cumulative voting, preemptive, subscription,
redemption or sinking fund rights.

CLASS C SPECIAL STOCK

We are authorized to issue 4,687,684 shares of class C special stock, of
which 4,687,684 shares were issued and outstanding as of August 15, 2001.
Each share of class C special stock entitles its holder to one vote per
share. Each share of our class C special stock is exchangeable, at the option
of the holder, for one share of common stock, at an exchange price of $0.25
per share, subject to adjustment upon certain capitalization events. Holders
of our class C special stock are not entitled to receive dividends. Holders
of our class C special stock are not entitled to participate in the
distribution of our assets upon any liquidation, dissolution or winding-up of
our company. The holders of our class C special stock have no cumulative
voting, preemptive, subscription, redemption or sinking fund rights.

UNDESIGNATED PREFERRED STOCK

We are authorized to issue 10,000,000 shares of preferred stock, none of
which are issued and outstanding. Our Board of Directors is authorized to
issue one or more series of preferred stock with such rights, privileges,
restrictions and conditions as our Board may determine. The preferred stock,
if issued, may be entitled to rank senior to our common stock with respect to
the payment of dividends and the distributions of assets in the event of a
liquidation, dissolution or winding-up of our company.

OPTIONS AND WARRANTS

As of August 15, 2001, we had outstanding options to purchase an aggregate of
6,944,657 shares of common stock at a weighted average exercise price of
$0.37 per share. All outstanding options provide for antidilution adjustments
in the event of certain mergers, consolidations, reorganizations,
recapitalizations, stock dividends, stock splits or other similar changes in
our corporate structure and shares of our capital stock. We typically grant
options with a ten-year term. We have outstanding warrants to purchase an
aggregate of 16,447,500 shares of common stock at a weighted average exercise
price of $0.37 per share with a majority of those warrants having a five-year
term. The warrants provide for antidilution adjustments in the event of
certain mergers, consolidations, reorganizations,

                                       54

recapitalizations, stock dividends, stock splits or other changes in our
corporate structure of our company and, subject to certain exceptions, the
issuance by our company of any securities for a purchase price of less than
$0.40 per share.

REGISTRATION RIGHTS

The holders of the common stock and warrants purchased in our April 2001
private placement are entitled to certain registration rights under the
Securities Act. No later than 90 days after April 4, 2001, we were required
to file a registration statement to register under the Securities Act the
resale of the shares of BioSante common stock underlying the shares of common
stock and warrants purchased in our April 2001 private placement. The
registration statement, of which this prospectus is a part, satisfies this
requirement. We are required to use our reasonable best efforts to cause this
registration statement to become effective under the Securities Act as
promptly as practicable and to use our reasonable best efforts to cause this
registration statement to remain effective until the earlier of (1) the sale
of all the shares of BioSante common stock covered by this registration
statement; or (2) such time as the selling stockholders named in this
registration statement become eligible to resell the shares of BioSante
common stock and the shares of BioSante common stock issuable upon exercise
of the warrants pursuant to Rule 144(k) under the Securities Act.

The holders of the common stock and warrants purchased in our May 1999
private placement are entitled to certain registration rights under the
Securities Act. If at any time after we become listed on Nasdaq, the holders
of a specified amount of these registrable shares request that we file a
registration statement covering the shares, we will use commercially
reasonable efforts to cause these shares to be registered. We are not
required to file more than two registration statements under these demand
rights, or more than one registration statement in any twelve-month period.
In addition, the holders of these registrable shares are entitled to have
their shares included in a registration statement under the Securities Act in
connection with the public offering of our securities. In any underwritten
public offering, the registration rights are limited to the extent that the
managing underwriter has the right to (1) limit the number of registrable
shares to be included in the registration statement; (2) prohibit the sale of
any of our securities other than those registered and included in the
underwritten offering for a period of 180 days; and (3) require holders of
registrable shares not to sell or otherwise dispose of any securities of our
company (other than securities included in the registration) without the
prior written consent of the underwriters for a period of up to 180 days from
the effective date of such registration. These registration rights will
terminate as to any registrable shares when such registrable shares are
effectively registered and sold by the holder thereof or when such
registrable shares are sold pursuant to Rule 144(k) or are sold pursuant to
Rule 144 under the Securities Act.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION

We are subject to Section 203 of the Delaware General Corporation Law. In
general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a business combination with an interested stockholder for a
period of three years following the date the person became an interested
stockholder, unless the business combination or the transaction in which the
person became an interested stockholder is approved in a prescribed manner.
Generally, a business combination includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. Generally, an interested stockholder is a person who, together
with affiliates and associates, owns or, in the case of affiliates or
associates of the corporation, within three years prior to the determination
of interested stockholder status, did own 15% or more of a corporation's
voting stock. The existence of this provision could have anti-takeover
effects with respect to transactions not approved in advance by the Board of
Directors, such as discouraging takeover attempts that might result in a
premium over the market price of the common stock.

                                       55

There are several provisions of our amended and restated certificate of
incorporation that may have the effect of deterring or discouraging hostile
takeovers or delaying changes in control of our company. In addition,
stockholders are not entitled to cumulative voting in the election of
directors. Our certificate of incorporation has authorized undesignated
preferred stock which could make it possible for our Board of Directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to effect a change of control of our
company.

LIMITATIONS ON LIABILITY OF DIRECTORS AND INDEMNIFICATION

Our certificate of incorporation limits our directors' liability to the
fullest extent permitted under Delaware's corporate law. Specifically, our
directors are not liable to us or our stockholders for monetary damages for
any breach of fiduciary duty by a director, except for liability for:

    o    any breach of the director's duty of loyalty to us or our stockholders;

    o    acts or omissions not in good faith or which involve intentional
         misconduct or a knowing violation of law;

    o    dividends or other distributions of our corporate assets that are in
         contravention of restrictions in Delaware law, our amended and restated
         certificate of incorporation, bylaws or any agreement to which we are a
         party; and

    o    any transaction from which a director derives an improper personal
         benefit.

This provision generally does not limit liability under federal or state
securities laws.

Delaware law, and our certificate of incorporation, provide that we will, in
some situations, indemnify any person made or threatened to be made a party
to a proceeding by reason of that person's former or present official
capacity with our company against judgments, penalties, fines, settlements
and reasonable expenses including reasonable attorney's fees. Any person is
also entitled, subject to some limitations, to payment or reimbursement of
reasonable expenses in advance of the final disposition of the proceeding.

TRANSFER AGENTS AND REGISTRARS

The transfer agents and registrars for our common stock in Canada is
Computershare Trust Company of Canada, formerly Montreal Trust of Canada, and
in the United States is American Securities Transfer & Trust, Inc.

                                  LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon
for BioSante by Oppenheimer Wolff & Donnelly LLP, Minneapolis, Minnesota.

                                     EXPERTS

The financial statements as of December 31, 2000 and 1999 and for each of the
two years in the period ended December 31, 2000, included in this prospectus,
have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing herein (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to the developmental
stage nature of BioSante).

                                       56

The financial statements as of December 31, 1998 and for the year then ended,
included in this prospectus, have been audited by Deloitte & Touche LLP
(Canada) independent auditors, as stated in their report appearing herein
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to the developmental stage nature of BioSante). These
reports have been so included in reliance upon the reports of such firms
given upon their authority as experts in accounting and auditing.

                       WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the Securities
and Exchange Commission. Copies of our reports, proxy statements and other
information may be inspected and copied at the following public reference
facilities maintained by the SEC:

Judiciary Plaza            Citicorp Center             7 World Trade Center
450 Fifth Street, N.W.     500 West Madison Street     Suite 1300
Washington, D.C. 20549     Chicago, Illinois 60621     New York, New York 10048

Copies of these materials also can be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a web site that contains reports, proxy statements and other
information regarding us. The address of the SEC web site is
HTTP://WWW.SEC.GOV. The Securities Act file number for our SEC filings is
0-28637.

We have filed a registration statement on Form SB-2 with the SEC for the
common stock offered by the selling stockholders under this prospectus. This
prospectus does not include all of the information contained in the
registration statement. You should refer to the registration statement and
its exhibits for additional information that is not contained in this
prospectus. Whenever we make reference in this prospectus to any of our
contracts, agreements or other documents, you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document.

We also file annual audited and interim unaudited financial statements, proxy
statements and other information with the Ontario, Alberta and British
Columbia Securities Commissions. Copies of these documents that are filed
through the System for Electronic Document Analysis and Retrieval of the
Canadian Securities Administrators are available at its web site
HTTP://WWW.SEDAR.COM.

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

This prospectus does not constitute an offer to sell, or a solicitation of an
offer to purchase, the securities offered by this prospectus or the
solicitation of a proxy, in any jurisdiction to or from any person to whom or
from whom it is unlawful to make an offer, solicitation of an offer or proxy
solicitation in that jurisdiction. Neither the delivery of this prospectus
nor any distribution of securities pursuant to this prospectus shall, under
any circumstances, create any implication that there has been no change in
the information set forth or incorporated herein by reference or in our
affairs since the date of this prospectus.

                                       57

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Description                                                                                                    Page
- -----------                                                                                                    ----
                                                                                                            
Balance Sheets as of June 30, 2001 and December 31, 2000 (Unaudited)............................................F-2

Statements of Operations for the three and six months ended June 30, 2001 and 2000 and
the cumulative period from August 29, 1996 (date of incorporation) to June 30, 2001 (Unaudited).................F-3

Statements of Cash Flows for the six months ended June 30, 2001 and 2000 and
the cumulative period from August 29, 1996 (date of incorporation) to June 30, 2001 (Unaudited).................F-4

Notes to the Financial Statements for the six months ended June 30, 2001 and 2000 (Unaudited).............F-5 - F-7

Independent Auditors' Reports.............................................................................F-8 - F-9

Balance Sheets as of December 31, 2000 and 1999................................................................F-10

Statements of Operations for the years ended December 31, 2000, 1999 and 1998 and the
cumulative period from August 29, 1996 (date of incorporation) to December 31, 2000............................F-11

Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998
and the cumulative period from August 29, 1996 (date of incorporation) to December 31, 2000....................F-12

Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998
and the cumulative period from August 29, 1996 (date of incorporation)
to December 31, 2000...........................................................................................F-13

Notes to the Financial Statements for the years ended December 31, 2000, 1999
and 1998 and the cumulative period from August 29, 1996 (date of incorporation)
to December 31, 2000....................................................................................F-14 - F-27

                                      F-1

                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------

                                                                                          JUNE 30,             DECEMBER 31,
                                                                                           2001                    2000
                                                                                        -----------            ------------
                                                                                                         
ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                                           $ 4,782,058            $  2,611,755
    Prepaid expenses and other sundry assets                                                 63,263                  64,341
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                          4,845,321               2,676,096

PROPERTY AND EQUIPMENT, NET                                                                 364,857                 390,821
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                        $ 5,210,178            $  3,066,917
- ---------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                                     $  193,672              $   44,746
    Accrued compensation                                                                    162,147                 258,598
    Other accrued expenses                                                                   84,906                 137,919
    Convertible debenture                                                                   500,000                 500,000
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                            940,725                 941,263
- ---------------------------------------------------------------------------------------------------------------------------
COMMITMENTS
STOCKHOLDERS' EQUITY
    Capital stock
      Issued and Outstanding
           4,687,684 (2000 - 4,687,684) Class C special stock                                   469                     469
          62,202,943 (2000 - 52,952,943) Common stock                                    21,457,469              17,782,857
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                         21,457,938              17,783,326

    Deferred unearned compensation                                                                -                 (18,000)
    Deficit accumulated during the development stage                                    (17,188,485)            (15,639,672)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                          4,269,453               2,125,654
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                        $ 5,210,178            $  3,066,917
- ---------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the financial statements.

                                      F-2

ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 AND THE CUMULATIVE PERIOD FROM
AUGUST 29, 1996 (DATE OF INCORPORATION) TO JUNE 30, 2001 (UNAUDITED)
- --------------------------------------------------------------------------------

                                                                                                               CUMULATIVE
                                                                                                               PERIOD FROM
                                              THREE MONTHS ENDED                 SIX MONTHS ENDED            AUGUST 29, 1996
                                                    JUNE 30,                         JUNE 30,                   (DATE OF
                                           --------------------------        ------------------------       INCORPORATION) TO
                                              2001            2000             2001           2000             JUNE 30, 2001
                                           ---------        ---------        ---------      ---------       -----------------
                                                                                             
REVENUE
    Interest income                        $  50,843        $  61,504        $  82,952      $ 121,886             $   829,488
- -----------------------------------------------------------------------------------------------------------------------------

EXPENSES
    Research and development                 387,236        1,164,039          620,225      1,355,214               4,904,597
    General and administration               497,972          307,280          963,030        608,455               6,773,268
    Depreciation and amortization             24,548           24,359           48,510         48,211                 430,344
    Loss on disposal of capital assets             -                -                -              -                 157,545
    Costs of acquisition of Structured
      Biologicals Inc.                             -                -                -              -                 375,219
    Purchased in-process research
      and development                              -                -                -              -               5,377,000
- -----------------------------------------------------------------------------------------------------------------------------
                                             909,756        1,495,678        1,631,765      2,011,880              18,017,973
- -----------------------------------------------------------------------------------------------------------------------------

NET LOSS                                 $  (858,913)    $ (1,434,174)     $(1,548,813)   $(1,889,994)          $ (17,188,485)
- -----------------------------------------------------------------------------------------------------------------------------

BASIC AND DILUTED NET LOSS
    PER SHARE                             $    (0.01)       $   (0.02)       $   (0.02)     $   (0.03)            $     (0.38)
- -----------------------------------------------------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER
    OF SHARES OUTSTANDING                 66,484,034       57,450,551       62,086,760     57,450,551              44,877,041
- -----------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the financial statements.

                                      F-3

ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000 AND THE CUMULATIVE PERIOD FROM
AUGUST 29, 1996 (DATE OF INCORPORATION) TO JUNE 30, 2001 (UNAUDITED)
- --------------------------------------------------------------------------------

                                                                                                                CUMULATIVE
                                                                                                               PERIOD FROM
                                                                                                             AUGUST 29, 1996
                                                                                                                (DATE OF
                                                                         SIX MONTHS ENDED JUNE 30,          INCORPORATION) TO
                                                                    ----------------------------------           JUNE 30,
                                                                        2001                 2000                  2001
                                                                    -------------        -------------      -----------------
                                                                                                   
CASH FLOWS USED IN OPERATING ACTIVITIES
    Net loss                                                        $ (1,548,813)        $ (1,889,994)          $ (17,188,485)
    Adjustments to reconcile net loss to
      net cash used in operating activities
         Depreciation and amortization                                    48,510               48,211                 430,344
         Amortization of deferred unearned compensation                   18,000                    -                  42,290
         Purchased in-process research and development                         -                    -               5,377,000
         Loss on disposal of equipment                                         -                    -                 157,545
    Changes in other assets and liabilities
      affecting cash flows from operations
         Prepaid expenses and other sundry assets                          1,078               19,599                 (60,295)
         Accounts payable and accrued expenses                              (538)             (81,898)               (299,462)
         Due from SBI                                                          -                    -                (128,328)
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                                 (1,481,763)          (1,904,082)            (11,669,391)
- -----------------------------------------------------------------------------------------------------------------------------

CASH FLOWS USED IN INVESTING ACTIVITIES
    Purchase of capital assets                                           (22,546)             (27,367)               (918,636)
- -----------------------------------------------------------------------------------------------------------------------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
    Issuance of convertible debenture                                          -                    -                 500,000
    Proceeds from sale or conversion of shares                         3,674,612               22,960              16,870,085
- -----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                              3,674,612               22,960              17,370,085
- -----------------------------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                               2,170,303           (1,908,489)              4,782,058

CASH AND CASH EQUIVALENTS
    AT BEGINNING OF PERIOD                                             2,611,755            5,274,552                       -
- -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $4,782,058          $ 3,366,063            $  4,782,058
- -----------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL SCHEDULE OF
    CASH FLOW INFORMATION
      Acquisition of SBI
         Purchased in-process research and development                $        -          $         -            $  5,377,000
         Other net liabilities assumed                                         -                    -                (831,437)
- -----------------------------------------------------------------------------------------------------------------------------
                                                                               -                    -               4,545,563
         Less:  common stock issued therefor                                   -                    -               4,545,563
- -----------------------------------------------------------------------------------------------------------------------------
                                                                      $        -          $         -            $          -
- -----------------------------------------------------------------------------------------------------------------------------

      Income tax paid                                                 $        -          $         -            $          -
- -----------------------------------------------------------------------------------------------------------------------------

      Interest paid                                                   $        -          $         -            $          -
- -----------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the financial statements.

                                      F-4

                         BIOSANTE PHARMACEUTICALS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                     SIX MONTHS ENDED JUNE 30, 2001 AND 2000

1. INTERIM FINANCIAL INFORMATION

         In the opinion of management, the accompanying unaudited financial
statements contain all necessary adjustments, which are of a normal recurring
nature, to present fairly the financial position of BioSante Pharmaceuticals,
Inc. as of June 30, 2001, the results of operations for the three and six
months ended June 30, 2001 and 2000 and for the cumulative period from August
29, 1996 (date of incorporation) to June 30, 2001, and the cash flows for the
six months ended June 30, 2001 and 2000 and for the cumulative period from
August 29, 1996 (date of incorporation) to June 30, 2001, in conformity with
accounting principles generally accepted in the United States of America.
Operating results for the three and six month periods ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2001.

         These unaudited interim financial statements should be read in
conjunction with the financial statements and related notes contained in
BioSante's Annual Report on Form 10-KSB for the year ended December 31, 2000.

2.  BASIC AND DILUTED NET LOSS PER SHARE

         The basic and diluted net loss per share is computed based on the
weighted average number of shares of common stock and class C stock
outstanding, all being considered as equivalent of one another. Basic net
loss per share is computed by dividing the net loss by the weighted average
number of shares outstanding for the reporting period. Diluted net loss per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock. Because BioSante has incurred net losses from operations in each of
the periods presented, there is no difference between basic and diluted net
loss per share amounts. The computation of diluted net loss per share does
not include options and warrants with dilutive potential that would have an
antidilutive effect on net loss per share.

3.  LICENSE AND SUPPLY AGREEMENTS

         On June 13, 2000, BioSante entered into a licensing agreement and a
supply agreement with Antares Pharma Inc. (the entity that resulted from the
merger of Permatec Technologie, AG with Medi-Ject Corporation), covering four
hormone products for the treatment of hormone deficiencies in men and women.
The agreement requires BioSante to pay Antares a percentage of future net
sales, if any, as a royalty. Under the terms of the license agreement,
BioSante is also obligated to make milestone payments upon the occurrence of
certain future events. Under terms of the supply agreement, Antares has
agreed to manufacture or have manufactured and sell exclusively to BioSante,
and BioSante has agreed to purchase exclusively from Antares, BioSante's
total requirements for the products covered under the license agreement
between the two parties.

         As allowed by the licensing agreement with Antares, on September 1,
2000, BioSante entered into a sub-license agreement with Paladin Labs Inc.
("Paladin") to market the female hormone replacement products in Canada. In
exchange for the sub-license, Paladin agreed to make an initial investment in
BioSante, make future milestone payments and pay royalties on sales of the
products in Canada. The milestone payments will be in the form of a series of
equity investments by Paladin in BioSante's common stock at a 10% premium to
the market price of BioSante's common stock at the date of the equity
investment.

                                      F-5

4.  CONVERTIBLE DEBENTURE

         In connection with entering into the sub-license agreement with
Paladin as described in Note 3, BioSante issued a convertible debenture to
Paladin in the principal amount of $500,000. The debenture matures on
September 1, 2001 and does not accrue interest unless it is not paid, or has
not been converted into BioSante common stock, by the maturity date. If
unpaid, interest accrues at a rate of 10% from September 1, 2001 until paid
or converted. The convertible debenture is convertible into BioSante common
stock at $1.05 per share, which conversion price is subject to adjustment
under certain circumstances. Commencing January 1, 2001, the debenture may be
converted at the option of Paladin. In the event Paladin has not converted
the debenture prior to March 31, 2001, BioSante has the right, in its sole
discretion, after March 31, 2001, to require the debenture to be converted.
To date, BioSante has not exercised this right.

5.  PRIVATE PLACEMENT FINANCING

         On April 4, 2001, BioSante closed a private placement raising $3.7
million upon the issuance of units, which consisted of an aggregate of
9,250,000 shares of common stock and five-year warrants to purchase an
aggregate of 4,625,000 shares of common stock. The price of each unit, which
consisted of one share of common stock plus a warrant to purchase one
half-share of common stock was $0.40, the approximate market price of
BioSante's common stock at closing. The exercise price of the warrant is
$0.50 per full share. Transaction costs related to the private placement have
been netted against the proceeds.

6.       COMMITMENTS

       UNIVERSITY OF CALIFORNIA LICENSE

       BioSante's license agreement with the University of California requires
       it to undertake various obligations, including:

       o       Payment of royalties to the University based on a percentage of
               the net sales of any products incorporating the licensed
               technology;

       o       Payment of minimum annual royalties on February 28 of each year
               beginning in the year 2004 in the amounts set forth below, to be
               credited against earned royalties, for the life of the agreement;

                                             Minimum
                    Year                  Annual Royalty
                                               Due
                 ----------               --------------
                                       
                    2004                  $       50,000
                    2005                         100,000
                    2006                         150,000
                    2007                         200,000
                    2008                         400,000
                    2009                         600,000
                    2010                         800,000
                    2011                       1,500,000
                    2012                       1,500,000
                    2013                       1,500,000

                                      F-6

6.       COMMITMENTS (CONTINUED)

         o        Development of products incorporating the licensed technology
                  until a product is introduced to the market;

         o        Payment of the costs of patent prosecution and maintenance of
                  the patents included in the agreement which for the year ended
                  December 31, 2000 have amounted to $11,722 and which
                  management estimates will equal approximately $15,000 per
                  year;

         o        Meeting performance milestones relating to:

                      o        Hiring or contracting with personnel to perform
                               research and development, regulatory and other
                               activities relating to the commercial launch of
                               a proposed product;

                      o        Testing proposed products and obtaining
                               government approvals;

                      o        Conducting clinical trials; and

                      o        Introducing products incorporating the licensed
                               technology into the market.

         o        Entering into partnership or alliance arrangements or
                  agreements with other entities regarding commercialization of
                  the technology covered by the license.

         o        BioSante has agreed to indemnify, hold harmless and defend the
                  University of California and its affiliates, as designated in
                  the license agreement, against any and all claims, suits,
                  losses, damage, costs, fees and expenses resulting from or
                  arising out of exercise of the license agreement, including
                  but not limited to, any product liability claims.

ANTARES PHARMA, INC. LICENSE

BioSante's license agreement with Antares required BioSante to make a $1.0
million upfront payment to Antares. BioSante expects to fund the development
of the products, make milestone payments and once regulatory approval to
market is received, pay royalties on the sales of products.

BioSante's sub-license agreement (of the Antares license) with Paladin Labs
Inc. required Paladin to make an initial investment in BioSante of $500,000
in the form of a convertible debenture. Paladin will also make milestone
payments to BioSante in the form of a series of equity investments at a 10
percent premium to BioSante's market price at the time the equity investment
is made. In addition, Paladin will pay BioSante a royalty on sales of the
sub-licensed products.

                                      F-7

INDEPENDENT AUDITORS' REPORT

Board of Directors
BioSante Pharmaceuticals, Inc.
Lincolnshire, Illinois

We have audited the accompanying balance sheets of BioSante Pharmaceuticals,
Inc. (a development stage company) as of December 31, 2000 and 1999 and the
related statements of operations, stockholders' equity and cash flows for
each of the two years ended December 31, 2000, and for the period from August
29, 1996 (date of incorporation) through December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits. The Company's financial statements as of and for the year
ended December 31, 1998 and for the period from August 29, 1996 (date of
incorporation) through December 31, 1998 were audited by other auditors whose
report, dated February 19, 1999, expressed an unqualified opinion on those
statements. The financial statements for the period August 29, 1996 (date of
incorporation) through December 31, 1998 reflect total revenues and net loss
of $320,135 and $10,796,218, respectively, of the related totals. The other
auditors' report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for such prior period, is based solely on the
report of such other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, such
financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2000 and 1999 and the results of
its operations and its cash flows for each of the two years ended December
31, 2000, and for the period from August 29, 1996 (date of incorporation)
through December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Company is in the
development stage.

/s/ Deloitte & Touche LLP

February 16, 2001
Chicago, Illinois

                                      F-8

INDEPENDENT AUDITORS' REPORT

Board of Directors
BioSante Pharmaceuticals, Inc.
(formerly Ben-Abraham Technologies Inc.)

We have audited the balance sheet of BioSante Pharmaceuticals, Inc. (formerly
Ben-Abraham Technologies Inc.), a development stage company, as of December
31, 1998 and the related statements of operations, stockholders' equity and
cash flows for the year ended December 31, 1998, and for the period from
August 29, 1996 (date of incorporation) to December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
the results of its operations and its cash flows for the year ended December
31, 1998, and for the period from August 29, 1996 (date of incorporation)
through December 31, 1998 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Company is in the
development stage.

/s/ Deloitte & Touche LLP

Chartered Accountants

Toronto, Ontario
February 19, 1999

                                      F-9

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------

                                                                                                  2000                1999
                                                                                               ----------          ----------
                                                                                                             
ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                                                  $2,611,755          $5,274,552
    Prepaid expenses and other sundry assets                                                       64,341              58,994
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                2,676,096           5,333,546

PROPERTY AND EQUIPMENT, NET (Note 4)                                                              390,821             446,083
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                               $3,066,917          $5,779,629
- -----------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable (Note 11)                                                                  $  44,746           $  76,057
    Accrued compensation                                                                          258,598             182,973
    Other accrued expenses                                                                        137,919              45,085
    Convertible debenture (Note 6)                                                                500,000                   -
    Due to licensor                                                                                     -              25,000
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                  941,263             329,115
- -----------------------------------------------------------------------------------------------------------------------------

COMMITMENTS (Notes 10 and 12)

STOCKHOLDERS' EQUITY (Note 7)
    Capital stock
      Issued and Outstanding
            4,687,684 (1999 - 4,807,865) Class C special stock                                        469                 481
           52,952,943 (1999 - 52,642,686) Common stock                                         17,782,857          17,652,510
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                               17,783,326          17,652,991

    Deferred unearned compensation                                                                (18,000)                  -
    Deficit accumulated during the development stage                                          (15,639,672)        (12,202,477)
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                2,125,654           5,450,514
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                               $3,066,917          $5,779,629
- -----------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the financial statements.

                                      F-10

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
AND THE CUMULATIVE PERIOD FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO
DECEMBER 31, 2000
- --------------------------------------------------------------------------------

                                                                                                                    CUMULATIVE
                                                                                                                    PERIOD FROM
                                                                                                                  AUGUST 29, 1996
                                                                                                                     (DATE OF
                                                   YEAR ENDED            YEAR ENDED            YEAR ENDED        INCORPORATION) TO
                                                  DECEMBER 31,          DECEMBER 31,          DECEMBER 31,          DECEMBER 31,
                                                     2000                   1999                  1998                  2000
                                                  ------------          ------------          ------------          ------------
                                                                                                    
REVENUE
    Interest income                                $ 227,718            $   198,683           $   123,061           $   746,536
- ----------------------------------------------------------------------------------------------------------------------------------

EXPENSES
    Research and development                       1,887,832                660,588             1,400,129             4,284,372
    General and administration                     1,678,581                853,389             1,112,647             5,810,238
    Depreciation and amortization                     98,500                 90,965               139,769               381,834
    Loss on disposal of capital assets                     -                      -               129,931               157,545
    Costs of acquisition of Structured
      Biologicals Inc.                                     -                      -                     -               375,219
    Purchased in-process research
      and development                                      -                      -                     -             5,377,000
- ----------------------------------------------------------------------------------------------------------------------------------
                                                   3,664,913              1,604,942             2,782,476            16,386,208
- ----------------------------------------------------------------------------------------------------------------------------------

NET LOSS                                        $ (3,437,195)          $ (1,406,259)         $ (2,659,415)        $ (15,639,672)
- ----------------------------------------------------------------------------------------------------------------------------------

BASIC AND DILUTED NET LOSS
    PER SHARE (Note 2)                          $      (0.06)          $      (0.03)         $      (0.08)        $       (0.36)
- ----------------------------------------------------------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER
    OF SHARES OUTSTANDING                         57,536,761             49,424,140            34,858,243            42,914,244
- ----------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the financial statements.

                                      F-11

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
AND THE CUMULATIVE PERIOD FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO
DECEMBER 31, 2000
- --------------------------------------------------------------------------------

                                      Class A               Class C
                                   Special Shares        Special Shares         Common Stock
                               ---------------------   ------------------   ---------------------
                                  Shares      Amount    Shares     Amount    Shares      Amount
                               -------------------------------------------------------------------
                                                                     
BALANCE, AUGUST 29, 1996,
    DATE OF INCORPORATION                -     $   -           -   $    -           -  $        -
Issuance of Class "C" shares
     August 29, 1996 ($0.0001
     per share)                          -         -   4,150,000      415           -           -
Issuance of Class "A" shares
     September 23, 1996                                                             -           -
     ($0.0001 per share)        20,000,000     2,000           -        -           -           -
Issuance of common shares                -         -           -        -           -           -
    September 23, 1996                   -         -           -        -   4,100,000   4,100,000
    Financing fees accrued               -         -           -        -           -    (410,000)
    November 27, 1996 - issued
      as consideration upon
      acquisition of SBI
      (Note 3)                           -         -           -        -   7,434,322   4,545,563
    Exercise of Series "X"
      warrants (Note 7)                  -         -           -        -     215,714     275,387
    Exercise of Series "Z"
      warrants (Note 7)                  -         -           -        -       1,428       2,553
Net loss                                 -         -           -        -           -           -
- --------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996      20,000,000     2,000   4,150,000      415  11,751,464   8,513,503
Conversion of shares
    January 13, 1997                     -         -    (282,850)     (28)    282,850      70,741
    January 13, 1997                     -         -     (94,285)      (9)     94,285      23,580
    December 2, 1997                     -         -    (106,386)     (11)    106,386      26,607
    December 2, 1997                     -         -    (100,000)     (10)    100,000      25,010
Exercise of Series "V"
    warrants (Note 7)                    -         -           -        -      24,000      36,767
Exercise of Series "X"
    warrants (Note 7)                    -         -           -        -      28,571      36,200
Exercise of Series "W"
    warrants (Note 7)                    -         -           -        -      20,000      25,555
Adjustment for partial shares
    issued upon amalgamation             -         -           -        -         130           -
     Financing fees reversed             -         -           -        -           -     410,000
Net loss                                 -         -           -        -           -           -
- --------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997      20,000,000     2,000   3,566,479      357  12,407,686   9,167,963
Conversion of shares
    March 4, 1998                        -         -     (20,000)      (2)     20,000       5,002
    March 16, 1998                       -         -     (10,000)      (1)     10,000       2,501
    May 8, 1998                (15,000,000)   (1,500)          -        -  15,000,000   3,751,500
    June 1, 1998                (1,000,000)     (100)          -        -   1,000,000     250,100
    June 1, 1998                (1,000,000)     (100)          -        -   1,000,000     250,100
Return of shares to treasury
    May 8, 1998                 (1,468,614)     (147)          -        -           -           -
    May 8, 1998                          -         -    (250,000)     (25)          -           -
Net loss                                 -         -           -        -           -           -
- --------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998       1,531,386       153   3,286,479      329  29,437,686  13,427,166
Conversion of shares
    February 2, 1999                     -         -     (10,000)      (1)     10,000       2,501
Private placement of common
    shares, net
    May 6, 1999                          -         -           -        -  23,125,000   4,197,843
Share redesignation
    July 13, 1999               (1,531,386)     (153)  1,531,386      153           -           -
Issuance of common shares
    August 15, 1999                      -         -           -        -      70,000      25,000
Net loss                                 -         -           -        -           -           -
- --------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999               -         -   4,807,865      481  52,642,686  17,652,510
Conversion of shares
    March 17, 2000                       -         -     (10,000)      (1)     10,000       2,501
    March 24, 2000                       -         -     (31,840)      (3)     31,840       7,963
    June 12, 2000                        -         -     (50,000)      (5)     50,000      12,505
    July 13, 2000                        -         -     (28,341)      (3)     28,341       7,088
Issuance of common shares
    July 18, 2000                        -         -           -        -     190,076      58,000
Issuance of warrants for
    services received                                                   -           -      42,290
Amortization of deferred
    unearned compensation                -         -           -        -           -           -
Net loss                                 -         -           -        -           -           -
==================================================================================================
BALANCE, DECEMBER 31, 2000               -         $   4,687,684      $469 52,952,943 $17,782,857
==================================================================================================

                                              Deficit
                                            Accumulated
                                 Deferred    During the
                                 Unearned   Development
                               Compensation    Stage       Total
                               ------------------------------------
                                                
BALANCE, AUGUST 29, 1996,
    DATE OF INCORPORATION       $      -     $       -   $        -
Issuance of Class "C" shares
     August 29, 1996 ($0.0001
     per share)                        -             -          415
Issuance of Class "A" shares
     September 23, 1996                -             -            -
     ($0.0001 per share)               -             -        2,000
Issuance of common shares              -             -            -
    September 23, 1996                 -             -    4,100,000
    Financing fees accrued             -             -     (410,000)
    November 27, 1996 - issued
      as consideration upon
      acquisition of SBI
      (Note 3)                         -             -    4,545,563
    Exercise of Series "X"
      warrants (Note 7)                -             -      275,387
    Exercise of Series "Z"
      warrants (Note 7)                -             -        2,553
Net loss                               -    (6,246,710)  (6,246,710)
- -------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996                  (6,246,710)   2,269,208
Conversion of shares
    January 13, 1997                   -             -       70,713
    January 13, 1997                   -             -       23,571
    December 2, 1997                   -             -       26,596
    December 2, 1997                   -             -       25,000
Exercise of Series "V"
    warrants (Note 7)                  -             -       36,767
Exercise of Series "X"
    warrants (Note 7)                  -             -       36,200
Exercise of Series "W"
    warrants (Note 7)                  -             -       25,555
Adjustment for partial shares
    issued upon amalgamation           -             -            -
     Financing fees reversed           -             -      410,000
Net loss                               -    (1,890,093)  (1,890,093)
- -------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997             -    (8,136,803)   1,033,517
Conversion of shares
    March 4, 1998                      -             -        5,000
    March 16, 1998                     -             -        2,500
    May 8, 1998                        -             -    3,750,000
    June 1, 1998                       -             -      250,000
    June 1, 1998                       -             -      250,000
Return of shares to treasury
    May 8, 1998                        -             -         (147)
    May 8, 1998                        -             -          (25)
Net loss                               -    (2,659,415)  (2,659,415)
- -------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998             -   (10,796,218)   2,631,430
Conversion of shares
    February 2, 1999                   -             -        2,500
Private placement of common
    shares, net
    May 6, 1999                        -             -    4,197,843
Share redesignation
    July 13, 1999                      -             -            -
Issuance of common shares
    August 15, 1999                    -             -       25,000
Net loss                               -    (1,406,259)  (1,406,259)
- -------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999             -   (12,202,477)   5,450,514
Conversion of shares
    March 17, 2000                     -             -        2,500
    March 24, 2000                     -             -        7,960
    June 12, 2000                      -             -       12,500
    July 13, 2000                      -             -        7,085
Issuance of common shares
    July 18, 2000                      -             -       58,000
Issuance of warrants for
    services received            (42,290)            -
Amortization of deferred
    unearned compensation         24,290             -       24,290
Net loss                               -    (3,437,195)  (3,437,195)
===================================================================
BALANCE, DECEMBER 31, 2000      $(18,000) $(15,639,672) $ 2,125,654
===================================================================

See accompanying notes to the financial statements.

                                      F-12

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOW
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
AND THE CUMULATIVE PERIOD FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO
DECEMBER 31, 2000
- --------------------------------------------------------------------------------

                                                                                                                    CUMULATIVE
                                                                                                                    PERIOD FROM
                                                                                                                   AUGUST 29, 1996
                                                                                                                      (DATE OF
                                                           YEAR ENDED           YEAR ENDED       YEAR ENDED      INCORPORATION) TO
                                                           DECEMBER 31,        DECEMBER 31,     DECEMBER 31,       DECEMBER 31,
                                                              2000                 1999             1998               2000
                                                          -------------       -------------     ------------     -----------------
                                                                                                     
CASH FLOWS USED IN OPERATING ACTIVITIES
   Net loss                                               $ (3,437,195)       $ (1,406,259)     $ (2,659,415)      $ (15,639,672)
   Adjustments to reconcile net loss to
       net cash used in operating activities
         Depreciation and amortization                          98,500              90,965           139,769             381,834
         Amortization of deferred unearned compensation         24,290                   -                 -              24,290
         Purchased in-process research and development               -                   -                 -           5,377,000
         Loss on disposal of equipment                               -                   -           129,931             157,545
   Changes in other assets and liabilities
       affecting cash flows from operations
         Prepaid expenses and other sundry assets               (5,347)             16,272           (53,376)            (61,373)
         Accounts payable and accrued expenses                 137,148            (386,483)         (598,334)           (298,924)
         Due to licensor                                       (25,000)           (102,317)                -                   -
         Due from SBI                                                -                   -                 -            (128,328)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                       (3,207,604)         (1,787,822)       (3,041,425)        (10,187,628)
- --------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS USED IN INVESTING ACTIVITIES
   Purchase of capital assets                                  (43,238)             (4,219)         (124,984)           (896,090)
- --------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
   Issuance of convertible debenture                           500,000                   -                 -             500,000
   (Conversion) issuance of Class "A" shares                         -                   -            (1,847)                  -
   (Conversion) issuance of Class "C" shares                       (12)                  -               (28)                469
   Proceeds from sale or conversion of shares                   88,057           4,225,343         4,259,203          13,195,004
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                      588,045           4,225,343         4,257,328          13,695,473
- --------------------------------------------------------------------------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH
   AND CASH EQUIVALENTS                                     (2,662,797)          2,433,302         1,090,919           2,611,755

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                    5,274,552           2,841,250         1,750,331                   -
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                $  2,611,755        $  5,274,552      $  2,841,250        $  2,611,755
- --------------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL SCHEDULE OF
   CASH FLOW INFORMATION
       Acquisition of SBI
         Purchased in-process research and development      $        -        $        -         $        -        $   5,377,000
         Other net liabilities assumed                               -                 -                  -             (831,437)
- --------------------------------------------------------------------------------------------------------------------------------
                                                                     -                 -                  -            4,545,563
         Less: subordinate voting shares issued
           therefor                                                  -                 -                  -            4,545,563
- --------------------------------------------------------------------------------------------------------------------------------

                                                            $        -        $        -         $        -        $           -
- --------------------------------------------------------------------------------------------------------------------------------

       Income tax paid                                      $        -        $        -         $        -        $           -
- --------------------------------------------------------------------------------------------------------------------------------

       Interest paid                                        $        -        $        -         $        -        $           -
- --------------------------------------------------------------------------------------------------------------------------------

                                      F-13

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

1.     ORGANIZATION

       On December 19, 1996, Ben-Abraham Technologies, Inc. ("BAT") was
       continued under the laws of the State of Wyoming, U.S.A. Previously, BAT
       had been incorporated under the laws of the Province of Ontario effective
       August 29, 1996. Pursuant to the shareholders meeting to approve the
       arrangement on November 27, 1996 and subsequent filing of the articles of
       arrangement December 6, 1996, BAT acquired Structured Biologicals Inc.
       and its wholly-owned subsidiary 923934 Ontario Inc. ("SBI"), a Canadian
       public company listed on the Alberta Stock Exchange. The "acquisition"
       was effected by a statutory amalgamation wherein the stockholders of BAT
       were allotted a significant majority of the shares of the amalgamated
       entity. Upon amalgamation, the then existing stockholders of SBI received
       7,434,322 subordinate voting shares of BAT (1 such share for every 3 1/2
       shares held in SBI). On November 10, 1999, BAT changed its name to
       BioSante Pharmaceuticals, Inc. ("the Company").

       The Company was established to develop prescription pharmaceutical
       products, vaccines and vaccine adjuvants using its nanoparticle
       technology ("CAP") licensed from the University of California. The
       research and development on the CAP technology is conducted in the
       Company's Smyrna, Georgia laboratory facility. In addition to its
       nanoparticle technology, the Company also is developing its pipeline of
       hormone replacement products to treat testosterone deficiency in men and
       estrogen deficiency in women. The business office is located in
       Lincolnshire, Illinois.

       The Company has been in the development stage since its inception. The
       Company's successful completion of its development program and its
       transition to profitable operations is dependent upon obtaining
       regulatory approval from the United States (the "U.S.") Food and Drug
       Administration ("FDA") prior to selling its products within the U.S., and
       foreign regulatory approval must be obtained to sell its products
       internationally. There can be no assurance that the Company's products
       will receive regulatory approvals, and a substantial amount of time may
       pass before the achievement of a level of sales adequate to support the
       Company's cost structure. The Company will also incur substantial
       expenditures to achieve regulatory approvals and will need to raise
       additional capital during its developmental period. Obtaining marketing
       approval will be directly dependent on the Company's ability to implement
       the necessary regulatory steps required to obtain marketing approval in
       the United States and in other countries. It is not possible at this time
       to predict with assurance the outcome of these activities.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       BASIS OF PRESENTATION

       These financial statements are expressed in U.S. dollars.

       The financial statements have been prepared in accordance with accounting
       principles generally accepted in the United States of America ("generally
       accepted accounting principles") and Statement of Financial Accounting
       Standards ("SFAS") No. 7 "Accounting and Reporting by Development Stage
       Enterprises". The preparation of financial statements in conformity with

                                      F-14

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

       generally accepted accounting principles requires management to make
       estimates and assumptions that affect the reported amounts of assets and
       liabilities, the disclosure of contingent assets and liabilities at the
       date of the financial statements, and the reported amounts of revenues
       and expenses during the reporting period. Actual results could differ
       from those estimates.

       CASH AND CASH EQUIVALENTS

       For purposes of reporting cash flows, the Company considers all
       instruments with original maturities of three months or less to be cash
       equivalents.

       PROPERTY AND EQUIPMENT

       Property and equipment is stated at cost less accumulated depreciation
       and amortization. Depreciation of computer, office and laboratory
       equipment is computed primarily by accelerated methods over estimated
       useful lives of seven years. Leasehold improvements are amortized on a
       straight-line basis over the terms of the leases, plus option renewals.

       RESEARCH AND DEVELOPMENT

       Research and development costs are charged to expense as incurred.

       BASIC AND DILUTED NET LOSS PER SHARE

       The basic and diluted net loss per share is computed based on the
       weighted average number of the aggregate of common stock and Class C
       shares outstanding, all being considered as equivalent of one another.
       Basic earnings (loss) per share is computed by dividing income (loss)
       available to common stockholders by the weighted average number of shares
       outstanding for the reporting period. Diluted earnings (loss) per share
       reflects the potential dilution that could occur if securities or other
       contracts to issue common stock were exercised or converted into common
       stock. The computation of diluted earnings (loss) per share does not
       include the Company's stock options, warrants or convertible debt with
       dilutive potential because of their antidilutive effect on earnings
       (loss) per share.

       STOCK-BASED COMPENSATION

       The Company follows the provisions of APB Opinion No. 25, which requires
       compensation cost for stock-based employee compensation plans be
       recognized based on the difference, if any, between the quoted market
       price of the stock on the date of grant and the amount the employee must
       pay to acquire the stock. As a result of the Company continuing to apply
       APB No. 25, SFAS No. 123, "Accounting for Stock-Based Compensation,"
       requires certain additional disclosures of the pro forma compensation
       expense arising from the Company's fixed and performance stock
       compensation plans. The expense is measured as the fair value of the
       award at the date it was granted using an option-pricing model that takes
       into account the exercise price and the expected

                                      F-15

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

       term of the option, the current price of the underlying stock, its
       expected volatility, expected dividends on the stock and the expected
       risk-free rate of return during the term of the option. The compensation
       cost is recognized over the service period, usually the period from the
       grant date to the vesting date. The Company has disclosed the required
       pro forma net loss and loss per share data in Note 8 as if the Company
       had recorded compensation expense using the fair value method per SFAS
       No. 123. Warrants issued to non-employees as compensation for services
       rendered are valued at their fair value on the date of issue.

       INTEREST INCOME

       Interest income on invested cash is recorded as earned following the
       accrual basis of accounting.

       NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

       In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVES
       INSTRUMENTS AND HEDGING ACTIVITIES. This Statement establishes accounting
       and reporting standards for derivative instruments, including certain
       derivative instruments embedded in other contracts, and for hedging
       activities. It requires that an entity recognize all derivatives as
       either assets or liabilities in the statement of financial position and
       measure those instruments at fair value. The Company adopted this
       statement effective January 1, 2001. No cumulative transition adjustment
       was required.

3.     ACQUISITION

       Pursuant to the shareholders meeting to approve the arrangement held on
       November 27, 1996 and the subsequent filing of the articles of
       arrangement December 6, 1996, the Company completed the acquisition of
       100% of the outstanding shares of SBI. The acquisition was effected by a
       statutory amalgamation wherein the stockholders of the Company were
       allotted a significant majority of the shares of the amalgamated entity.
       Upon amalgamation, the then existing shareholders of SBI received
       7,434,322 shares of common stock of the Company (1 such share for every
       3 1/2 shares they held in SBI). SBI's results of operations have been
       included in these financial statements from the date of acquisition. The
       acquisition was accounted for by using the purchase method of accounting,
       as follows:

                                                              
      ASSETS
        In-process research and development                      $     5,377,000
        Other                                                             37,078
- --------------------------------------------------------------------------------
                                                                       5,414,078
- --------------------------------------------------------------------------------
      LIABILITIES
        Current liabilities                                              679,498
        Due to directors                                                  60,689
        Due to the Company                                               128,328
- --------------------------------------------------------------------------------
                                                                         868,515
- --------------------------------------------------------------------------------
        Net assets acquired                                      $     4,545,563
- --------------------------------------------------------------------------------
      CONSIDERATION
        Common stock                                             $     4,545,563
- --------------------------------------------------------------------------------

                                      F-16

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

3.     ACQUISITION (CONTINUED)

       In connection with the acquisition of SBI, accounted for under the
       purchase method, the Company acquired the rights to negotiate with the
       Regents of the University of California for licenses of specific
       CAP-related technologies and products. The specific technologies and
       products relate to investigative research funded by SBI. At the time of
       acquisition, the technologies and products had not yet been approved for
       human clinical research. The value ascribed to the rights, based on an
       independent evaluation, was $5,377,000. This amount was immediately
       expensed as the technologies and products did not have their
       technological feasibility established and had no identified future
       alternative use.

       As of the date of acquisition, the technology related to the development
       of products for six indications (i.e. applications of the technology).
       The Company determined the value of the in process research and
       development related to the acquired rights based on an independent
       valuation using discounted cash flows. Principle assumptions used in the
       valuation were as follows:

       o   FDA approval for the CAP-related for the six indications was expected
           to be received at various dates between 2002 and 2004, however, there
           are many competitive products in development. There are also many
           requirements that must be met before FDA approval is secured. There
           is no assurance that the products will be successfully developed,
           proved to be safe in clinical trials, meet applicable regulatory
           standards, or demonstrate substantial benefits in the treatment or
           prevention of any disease.

       o   The estimated additional research and development expenditures
           required before FDA approval was $26.5 million, to be incurred over 8
           to 10 years.

       o   Future cash flows were estimated based on estimated market size, with
           costs determined based on industry norms, an estimated annual growth
           rate of 3%.

       o   The cash flows were discounted at 25%. The rate was preferred due to
           the high-risk nature of the biopharmaceutical business.

       o   The Company is continuing to develop the technology related to five
           of the six indications.

       o   In June 1997, the Company exercised its option and entered into a
           license agreement with UCLA for the technology that it had previously
           supported.

                                      F-17

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

4.     PROPERTIES AND EQUIPMENT

       Property and equipment, net of accumulated depreciation at December 31
comprise:

                                                            2000            1999
                                                      ---------------   ------------
                                                                  
     Computer equipment                               $        61,643   $     23,951
     Office equipment                                          34,208         32,862
     Laboratory equipment                                     103,012        103,012
     Leasehold improvements - Laboratory                      474,294        470,094
- ------------------------------------------------------------------------------------
                                                              673,157        629,919
     Accumulated depreciation and amortization               (282,336)      (183,836)
- ------------------------------------------------------------------------------------
                                                      $       390,821   $    446,083
====================================================================================

5.     INCOME TAXES

       The components of the Company's net deferred tax asset at December 31,
       2000, 1999 and 1998 were as follows:

                                                  2000            1999           1998
                                               -----------    ------------   -----------
                                                                    
Net operating loss carryforwards               $ 3,886,495    $ 2,367,292    $ 1,778,246
Amortization of intangibles                      1,468,699      1,613,942      1,759,186
Research & development credits                     191,358        235,310        144,310
Other                                               60,993         38,794         16,594
                                               -----------    ------------   -----------
                                                 5,607,545      4,255,338      3,698,336
Valuation allowance                             (5,607,545)    (4,255,338)    (3,698,336)
                                               -----------    ------------   -----------

                                               $         -    $          -   $         -
                                               -----------    ------------   -----------

       The Company has no current tax provision due to its accumulated losses,
       which result in net operating loss carryforwards. At December 31, 2000,
       the Company had approximately $10,500,000 of net operating loss
       carryforwards that are available to reduce future taxable income for a
       period of up to 20 years. The net operating loss carryforwards expire in
       the years 2011-2020. The net operating loss carryforwards as well as
       amortization of various intangibles, principally acquired in-process
       research and development, generate deferred tax benefits, which have been
       recorded as deferred tax assets and are entirely offset by a tax
       valuation allowance. The valuation allowance has been provided at 100% to
       reduce the deferred tax assets to zero, the amount management believes is
       more likely than not to be realized. Additionally, the Company has
       approximately $191,000 of research and development credits available to
       reduce future income taxes through the year 2014.

                                      F-18

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

5.     INCOME TAXES  (CONTINUED)

       The provision for income taxes differs from the amount computed by
       applying the statutory federal income tax rate of 34% to pre-tax income
       as follows:

                                                          2000                1999                 1998
                                                      ------------         -----------          -----------
                                                                                       
Tax at U.S. federal statutory rate                    $ (1,160,388)        $  (469,799)         $  (904,201)
State taxes, net of federal benefit                       (195,854)            (91,015)             (90,810)
Change in valuation allowance                            1,352,207             556,972              986,730
Other, net                                                   4,035               3,842                8,281
                                                      ------------         -----------          -----------

                                                      $          -         $         -          $         -
                                                      ============         ===========          ===========

6.     CONVERTIBLE DEBENTURE

       In September 2000, in connection with entering into a sub-license
       agreement, the Company issued a convertible debenture to Paladin Labs
       Inc. ("Paladin") in the face amount of $500,000. The debenture does not
       bear interest and is due September 1, 2001, unless converted into shares
       of the Company's common stock. If the debenture is not converted and not
       paid in full by September 1, 2001, then any unpaid principal shall bear
       interest at a rate of 10 percent from September 1, 2001 forward, until
       paid in full. The debenture is convertible at the conversion price of
       $1.05 per share, subject to adjustment in certain situations, at the
       option of Paladin at anytime after January 1, 2001. The Company can
       declare the debenture mandatorily convertible in full at any time after
       March 31, 2001 if Paladin has not previously converted the debenture.

7.     STOCKHOLDERS' EQUITY

       By articles of amendment dated July 20, 1999 (effective as of July 13,
       1999), the subordinate voting shares of the Company were redesignated as
       common stock, the Class A special shares were reclassified as Class C
       special shares and the Class B special shares were eliminated. There were
       no changes in the number of shares outstanding.

       a)    AUTHORIZED

             PREFERENCE SHARES

             An unlimited number of preference shares issuable in series subject
             to limitation, rights, and privileges as determined by the
             directors. No preference shares have been issued as of December 31,
             2000.

                                      F-19

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

7.     STOCKHOLDERS' EQUITY  (CONTINUED)

           SPECIAL SHARES

           An unlimited number of Class C special shares without par value,
           convertible to common stock on the basis of one Class C special share
           and U.S. $0.25. These shares are not entitled to a dividend and carry
           one vote per share.

           COMMON STOCK

           An unlimited number of common shares of stock without par value,
           which carry one vote per share.

           SIGNIFICANT EQUITY TRANSACTIONS

           Significant equity transactions since the date of the Company's
           incorporation are as follows:

           o        Prior to the Amalgamation on December 6, 1996, the Company
                    issued 20,000,000 shares of the Company's Class A stock for
                    $0.0001 per share, 4,150,000 shares of Class C stock for
                    $0.0001 per share and 4,100,000 shares of the Company's
                    common stock for $1.00 per share.

           o        Pursuant to the shareholders meeting to approve the
                    arrangement held on November 27, 1996 and the subsequent
                    filing of articles of arrangement on December 6, 1996, the
                    Company completed the acquisition of 100% of the outstanding
                    shares of SBI. Upon the effectiveness of this Amalgamation,
                    the then existing stockholders of SBI received 7,434,322
                    shares of common stock of the Company (1 common share of
                    the Company for every 3 1/2 shares of SBI). The deemed fair
                    market value of this stock was $4,545,563.

           o        In May 1998, the Company and Avi Ben-Abraham, M.D., a
                    director and a founder of the Company and the Company's then
                    Chief Executive Officer and Chairman of the Board, entered
                    into an agreement pursuant to which Dr. Ben-Abraham would
                    relinquish his executive position and remain as a director
                    of the Company. Pursuant to the agreement, Dr. Ben-Abraham
                    converted shares of the Company's Class A stock held by him
                    into 15,000,000 shares of common stock at $0.25 per share
                    for proceeds to the Company of $3,750,000. In addition,
                    Dr. Ben-Abraham agreed to return to the Company 1,468,614
                    shares of Class A stock and 250,000 shares of Class C stock
                    to the Company, and also agreed not to sell any of his
                    shares of common stock or any other securities of the
                    Company for a period of 15 months. The Company and
                    Dr. Ben-Abraham agreed to cross-indemnify each other upon
                    the occurrence of certain events.
           o        In June 1998, the Company issued an aggregate of 2,000,000
                    shares of common stock pursuant to the conversion of
                    Class A stock at a conversion price of $0.25 per share.

                                      F-20

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

7.     STOCKHOLDERS' EQUITY  (CONTINUED)

           o        On May 6, 1999, the Company sold an aggregate of 23,125,000
                    common shares and warrants to purchase 11,562,500 shares of
                    common stock at an exercise price of $0.30 per share to
                    31 accredited investors in a private placement, including
                    several current members of the board of directors and one
                    executive officer. Net proceeds to the Company from this
                    private placement were approximately $4.2 million.

           o        In August 1999, an outstanding liability of $25,000 was
                    converted into 70,000 shares of common stock.

           o        In July 2000, 190,076 shares of common stock were issued to
                    certain corporate officers in lieu of a cash bonus.

       b)    WARRANTS

             The Company, upon the acquisition of SBI, assumed 2,577,129
             exercisable warrants to purchase common stock, all of which expired
             prior to or as of December 31, 1998. Of this amount, 72,571 were
             exercised in 1997 prior to their expiration.

             Pursuant to the Company's private placement financing in May 1999,
             warrants to purchase an aggregate of 11,562,500 shares of common
             stock were issued at an exercise price of $0.30 per share with a
             term of five years. These warrants remain outstanding and are all
             exercisable as of December 31, 2000.

             In June 2000, a five-year warrant to purchase 250,000 shares of
             common stock at an exercise price of $0.88 was issued to a
             communications firm for various consulting services. The warrant
             vests quarterly over the first year. As of December 31, 2000,
             125,000 of these shares were exercisable. The Company recognized
             expense in 2000 of approximately $18,000 for this warrant grant,
             and will recognize a similar amount in 2001.

                                      F-21

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

8.     STOCK OPTIONS

       The Company has a stock option plan for certain officers, directors and
       employees whereby 7,000,000 shares of common stock have been reserved for
       issuance. Options for 5,263,125 shares of common stock have been granted
       as of December 31, 2000 at prices equal to either the ten-day weighted
       average closing price, or the closing price of the stock at the date of
       the grant, and are exercisable and vest in a range substantially over a
       three-year period. The options expire either in five or ten years from
       the date of the grants.

       The Company applies APB Opinion No. 25 and related interpretations in
       accounting for its plan. Accordingly, no compensation cost has been
       recognized for the plan. Had the compensation cost for the Company's plan
       been determined based on the fair value of the awards under the plan
       consistent with the method of SFAS No. 123 the Company's net loss,
       cumulative net loss, and basic net loss per common share would have been
       increased to the pro forma amounts indicated below:

                                                                     2000               1999              1998
                                                               ---------------    ---------------   ---------------
                                                                                           
      Net loss
         As reported                                           $    (3,437,195)   $    (1,406,259)  $    (2,659,415)
         Pro forma                                             $    (3,960,210)   $    (1,713,693)  $    (2,771,391)

      Basic and diluted net loss per share
         As reported                                           $         (0.06)   $         (0.03)  $         (0.08)
         Pro forma                                             $         (0.07)   $         (0.03)  $         (0.08)

      Cumulative net loss
         As reported                                           $   (15,639,672)                --                --
         Pro forma                                             $   (16,817,160)                --                --

      Cumulative basic and diluted net loss per share
         As reported                                           $         (0.36)                --                --
         Pro forma                                             $         (0.39)                --                --

                                      F-22

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

8.     STOCK OPTIONS  (CONTINUED)

       The weighted average fair value of the options at the date of the grant
       for options granted during 2000, 1999 and 1998 was $0.90, $0.33 and $0.44
       was estimated using the Cox Rubinstein binomial model and the
       Black-Scholes option-pricing model with following weighted average
       assumptions:

                                                                        2000            1999            1998
                                                                      -------          -------         -------
                                                                                              
      Expected option life (years)                                     10                5               5
      Risk free interest rate                                           6.03%            4.59%           5.05%
      Expected stock price volatility                                 157.06%          238.08%         350.00%
      Dividend yield                                                    -                -               -

       The following table summarizes the Company's stock option activity:

                                              Weighted                      Weighted                     Weighted
                                               Average                       Average                      Average
                                              Exercise                      Exercise                     Exercise
                                 2000          Price           1999          Price          1998           Price
                               ---------      --------       ---------      --------      ---------       -------
                                                                                      
Options outstanding,
   Beginning of period         4,973,125      $  0.30        2,465,000      $  0.37         250,000       $  1.07
Options granted                  510,000      $  0.91        3,068,125      $  0.24       2,225,000       $  0.29
Options cancelled/expired       (220,000)     $  1.00         (560,000)     $  0.31         (10,000)      $  0.29
Options exercised                      -      $     -                -      $     -               -       $     -
                               ---------                     ---------                    ---------
Options outstanding,
   End of period               5,263,125      $  0.33        4,973,125      $  0.30       2,465,000       $  0.37
                               ---------      -------        ---------      -------       ---------       -------
Options exercisable,
   End of year                 3,865,025      $  0.28        2,117,113      $  0.35         674,500       $  0.60
                               ---------      -------        ---------      -------       ---------       -------

                                      F-23

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

8.     STOCK OPTIONS  (CONTINUED)

       The following table summarizes information about stock options
       outstanding at December 31, 2000:

                                     Outstanding Options                           Options Exercisable
                     ----------------------------------------------------   -------------------------------
    Range of                         Weighted Avg.          Weighted Avg.                     Weighted Avg.
    Exercise            Number         Remaining              Exercise         Number           Exercise
     Prices           Outstanding   Contractual Life           Price        Outstanding           Price
- ------------------   ------------   ----------------        -------------   -----------       -------------
                                                                               
     $0.23             2,378,125       3.2 YEARS              $   0.23       1,680,692           $   0.23
 $0.28 - $0.29         2,325,000       3.1 YEARS              $   0.28       2,046,833           $   0.28
 $0.75 - $1.04           560,000       9.4 YEARS              $   0.92         137,500           $   0.96
                       ---------                                             ---------
                       5,263,125                                             3,865,025
                       =========                                             =========

9.     RETIREMENT PLAN

       In July 1998, the Company began offering a discretionary 401(k) Plan (the
       Plan) to all of its employees. Under the Plan, employees may defer income
       on a tax-exempt basis, subject to IRS limitation. Under the Plan the
       Company can make discretionary matching contributions. Company
       contributions expensed in 2000, 1999 and 1998 totaled $26,296, $23,899
       and $21,799, respectively.

10.    LEASE ARRANGEMENTS

       The Company has entered into lease commitments for rental of its office
       space and laboratory facilities. The future minimum lease payments are:

                                                 
                    2001                            $    89,401
                    2002                                 68,254
                    2003                                 57,239
                    THEREAFTER                                -
- --------------------------------------------------------------------------------
                                                    $   214,894
================================================================================

       Rent expense amounted to $82,069, $89,110 and $134,788 for the years
       ended December 31, 2000, 1999 and 1998, respectively. Effective September
       16, 1999, the Company entered into a sublease agreement for its Atlanta
       office space under which the Company receives approximately $3,400 per
       month from the sub-tenant through September 14, 2002.

                                      F-24

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

11.    RELATED PARTY TRANSACTIONS

                                                                            2000         1999           1998
                                                                         ---------    ---------     ------------
                                                                                           
       Management fees paid to a company controlled
         by a former member of management, who was also a shareholder
         and was a member of the Board of Directors                      $       -    $       -     $     94,200

       Included in current liabilities are $379, $5,588, and $133,901 which
       represent amounts due to directors and officers of the Company as of
       December 31, 2000, 1999 and 1998, respectively.

       Prior to the Amalgamation on December 6, 1996, the Company issued
       20,000,000 shares of class A stock and 4,150,000 shares of class C stock
       for $0.0001 per shares. 17,000,000 of the class A shares were sold to a
       director of the Company. 1,050,000 of the class C shares were sold to the
       same director of the Company to be held by him in trust for the benefit
       of others; 500,000 of the class C shares were sold to a separate company
       controlled by a then officer of the Company; and 2,000,000 of the class C
       shares were sold to other directors of the Company.

       The 20,000,000 class A shares and 4,150,000 class C shares were founder's
       shares and the terms under the authorization of these shares, provided
       for their conversion to common stock at $0.25 per share.

       In May 1998, the Company and Avi Ben-Abraham, M.D., a director and a
       founder of the Company and the Company's then Chief Executive Officer and
       Chairman of the Board, entered into an agreement pursuant to which Dr.
       Ben-Abraham would relinquish his executive position and remain as a
       director of the Company. See Note 7.

       In connection with the May 1999 private placement of 23,125,000 shares of
       common stock and warrants to purchase 11,562,500 shares of common stock,
       the Company's Chief Executive Officer purchased 250,000 shares of the
       common stock sold and warrants to purchase 125,000 shares of common
       stock. Three other individuals, who purchased either individually or
       through affiliated entities, an aggregate 10,250,000 shares of common
       stock and warrants to purchase 5,125,000 shares of common stock, became
       directors of the Company upon their acquisition of the shares or sometime
       later.

                                      F-25

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

12.    COMMITMENTS

       UNIVERSITY OF CALIFORNIA LICENSE

       The Company's license agreement with the University of California
       requires it to undertake various obligations, including:

       o   Payment of royalties to the University based on a percentage of the
           net sales of any products incorporating the licensed technology;

       o   Payment of minimum annual royalties on February 28 of each year
           beginning in the year 2004 in the amounts set forth below, to be
           credited against earned royalties, for the life of the agreement
           (2013);

                                                   Minimum
                          Year                  Annual Royalty
                                                     Due
                       ----------               --------------
                                             
                          2004                  $       50,000
                          2005                         100,000
                          2006                         150,000
                          2007                         200,000
                          2008                         400,000
                          2009                         600,000
                          2010                         800,000
                          2011                       1,500,000
                          2012                       1,500,000
                          2013                       1,500,000

       o   Development of products incorporating the licensed technology until a
           product is introduced to the market;

       o   Payment of the costs of patent prosecution and maintenance of the
           patents included in the agreement which for the year ended December
           31, 2000 have amounted to $11,722 and which management estimates will
           equal approximately $15,000 per year;

                                      F-26

BIOSANTE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998, AND THE CUMULATIVE PERIOD
FROM AUGUST 29, 1996 (DATE OF INCORPORATION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------

12.    COMMITMENTS (CONTINUED)

       o Meeting performance milestones relating to:

           o      Hiring or contracting with personnel to perform research and
                  development, regulatory and other activities relating to the
                  commercial launch of a proposed product;

           o      Testing proposed products;

           o      Obtaining government approvals;

           o      Conducting clinical trials; and

           o      Introducing products incorporating the licensed technology
                  into the market.

       o   Entering into partnership or alliance arrangements or agreements with
           other entities regarding commercialization of the technology covered
           by the license.

       o   The Company has agreed to indemnify, hold harmless and defend the
           University of California and its affiliates, as designated in the
           license agreement, against any and all claims, suits, losses, damage,
           costs, fees and expenses resulting from or arising out of exercise of
           the license agreement, including but not limited to, any product
           liability claims.

       ANTARES PHARMA, INC. LICENSE

       The Company's license agreement with Antares Pharma, Inc. (formerly known
       as Permatec Technologie, AG) required the Company to make a $1.0 million
       upfront payment to Antares. The Company expects to fund the development
       of the products, make milestone payments and once regulatory approval to
       market is received, pay royalties on the sales of products.

       The Company's sub-license agreement (of the Antares license) with Paladin
       Labs Inc. required Paladin to make an initial investment in the Company
       of $500,000 in the form of a convertible debenture. Paladin will also
       make milestone payments to the Company in the form of a series of equity
       investments at a 10 percent premium to the Company's market price at the
       time the equity investment is made. In addition, Paladin will pay the
       Company a royalty on sales of the sub-licensed products.

                                      F-27

                                     [LOGO]

                                25,437,500 SHARES

                                  COMMON STOCK

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

                                   PROSPECTUS

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

                                            , 2001

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

BioSante's Certificate of Incorporation limits the liability of its directors
to the fullest extent permitted by the Delaware General Corporation Law.
Specifically, Article VII of BioSante's Certificate of Incorporation provides
that no director of BioSante shall be personally liable to BioSante or its
stockholders for monetary damages for any breach of fiduciary duty by such a
director as a director, except to the extent provided by applicable law (i)
for any breach of the director's duty of loyalty to BioSante or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which such director derived an improper personal benefit. If
the Delaware General Corporation Law is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of BioSante shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so
amended. No amendment to or repeal of Article VII shall apply to or have any
effect on the liability or alleged liability of any director of BioSante for
or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.

BioSante's Certificate of Incorporation provides for indemnification of
BioSante's directors and officers. Specifically, Article VI provides that
BioSante shall indemnify, to the fullest extent authorized or permitted by
law, as the same exists or may thereafter be amended, any person who was or
is made or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of BioSante), by
reason of the fact that such person is or was a director or officer of
BioSante, or is or was serving at the request of BioSante as a director,
officer, employee or agent of any other company, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise; provided, however, that BioSante shall not indemnify any director
or officer in connection with any action by such director or officer against
BioSante unless BioSante shall have consented to such action. BioSante may,
to the extent authorized from time to time by BioSante's Board of Directors,
provide rights to indemnification to employees and agents of BioSante similar
to those conferred in Article VI to directors and officers of BioSante. No
amendment or repeal of Article VI shall apply to or have any effect on any
right to indemnification provided thereunder with respect to any acts or
omission occurring prior to such amendment or repeal.

BioSante maintains an insurance policy for its directors and executive
officers pursuant to which its directors and executive officers are insured
against liability for certain actions in their capacity as directors and
executive officers of BioSante.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to BioSante's directors, officers or persons controlling
BioSante pursuant to the foregoing provisions, BioSante is aware that in the
opinion of the Securities and Exchange Commission that this indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.

We also maintain a directors and officers insurance policy pursuant to which
our directors and officers are insured against liability for actions in their
capacity as directors and officers.

                                      II-1

ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The following table sets forth the costs and expenses payable by
BioSante in connection with the issuance and distribution of the Shares being
registered. All such expenses are estimated except for the SEC registration fee.

                                                                  
         SEC registration fee.....................................   $         5,088
         Printing expenses........................................             1,000
         Fees and expenses of counsel for BioSante................            40,000
         Fees and expenses of accountants for BioSante............             8,000
         Blue sky fees and expenses...............................            10,000
         Miscellaneous............................................            10,000
                                                                     ---------------
                  *Total..........................................   $        74,088
                                                                     ===============

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

* None of the expenses listed above will be borne by the Selling Stockholders.

ITEM 26.  RECENT SALES OF UNREGISTERED SECURITIES.

         Since January 1, 1997, BioSante has issued the following securities
without registration under the Securities Act:

1.       In January 1997, we issued: (1) an aggregate of 24,000 shares of common
         stock pursuant to the exercise of warrants issued prior to the
         Amalgamation, at an exercise price of $1.53 per share, for an aggregate
         payment of $36,720; (2) 377,135 shares of common stock (94,285 of such
         shares to Wagner-Bartak Holdings Inc. and 282,850 of such shares to an
         unaffiliated accredited investor) pursuant to the conversion of an
         aggregate of 377,135 class C stock, at a conversion price of $0.25 per
         share, for an aggregate payment of $94,283.75 to us; and (3) an
         aggregate of 28,571 shares of common stock pursuant to the exercise of
         warrants issued prior to the Amalgamation, at an exercise price of
         $1.28 per share, for an aggregate payment of $36,570.88.

2.       In July 1997, we issued an aggregate of 20,000 shares of common stock
         pursuant to the exercise of warrants issued prior to the Amalgamation,
         at an exercise price of $1.28 per share for an aggregate payment of
         $25,500.

3.       In December 1997, we issued an aggregate of 206,386 shares of common
         stock (106,386 of such shares to Wagner-Bartak Holdings Inc. and
         100,000 of such shares to Marblegate Holdings Limited) pursuant to the
         conversion of an aggregate of 206,386 class C stock at a conversion
         price of $0.25 per share for an aggregate payment of $51,596.50.

4.       In March 1998, we issued 30,000 shares of common stock to one
         accredited investor pursuant to the conversion of class C stock, at a
         conversion price of $0.25 per share for an aggregate payment of $7,500.

5.       In May 1998, we issued 15,000,000 shares of common stock to Dr.
         Ben-Abraham pursuant to his conversion of class A stock at a conversion
         price of $0.25 per share for a payment of $3,750,000. In addition, Dr.
         Ben-Abraham returned 1,468,614 class A stock and 250,000 class C stock
         to our treasury for no consideration.

                                      II-2

6.       In June 1998, we issued an aggregate of 2,000,000 shares of common
         stock pursuant to the conversion of class A stock to two accredited
         investors, at a conversion price of $0.25 per share for an aggregate
         payment of $500,000.

7.       In February 1999, we issued 10,000 shares of common stock to an
         accredited investor pursuant to the conversion of class C stock, at a
         conversion price of $0.25 per share, which was satisfied by the
         settlement of claims.

8.       In May 1999, we issued an aggregate of 23,125,000 shares of common
         stock and warrants to purchase 11,562,500 shares of common stock at an
         exercise price of $0.30 per share to 31 accredited investors pursuant
         to a private placement of our stock for an aggregate payment of
         $4,372,500. Stephen Simes purchased 250,000 shares of common stock,
         Victor Morgenstern, including an affiliated Trust and a Partnership,
         purchased an aggregate of 2,500,000 shares of common stock, Fred
         Holubow purchased 250,000 shares of common stock and JO & Co. purchased
         7,500,000 shares of common stock to which Ross Mangano has sole voting
         power.

9.       In August 1999, an outstanding liability of $25,000 was converted into
         70,000 shares of common stock to an accredited investor at
         approximately $.36 per share for executive placement services.

10.      In March and June 2000, we issued 91,840 shares of common stock to
         accredited investors pursuant to the conversion of Class C stock, at a
         conversion price of $0.25 per share for an aggregate payment of
         $22,960.

11.      In September 2000, we issued a $500,000 convertible debenture to
         Paladin Labs Inc.

12.      In July 2000, we issued an aggregate of 190,076 shares of common stock
         (163,859 shares to Stephen Simes and 26,217 shares to Phillip
         Donenberg) pursuant to the granting of common stock bonuses, in lieu of
         cash valued at $58,000.

13.      In July 2000, we issued 28,341 shares of common stock to an accredited
         investor pursuant to the conversion of Class C stock, at a conversion
         price of $0.25 per share for a payment of $7,085.25.

14.      In April 2001, we issued an aggregate of 9,250,000 shares of our common
         stock and warrants to purchase an aggregate of 4,625,000 shares of our
         common stock for $0.40 per unit, each unit consisting of one share of
         common stock and a warrant to purchase 0.50 shares of our common stock,
         for an aggregate purchase price of $3,700,000, to 49 accredited
         investors, including certain existing stockholders, directors and
         officers. Stephen Simes purchased 125,000 shares of common stock and a
         warrant to purchase 62,500 shares of common stock, Leah Lehman
         purchased 375,000 shares of common stock and a warrant to purchase
         187,500 shares of common stock, Fred Holubow purchased 125,000 shares
         of common stock and a warrant to purchase 62,500 shares of common
         stock, Victor Morgenstern, including an affiliated trust and his wife,
         purchased an aggregate of 750,000 shares of common stock and warrants
         to purchase an aggregate of 375,000 shares of common stock, Phillip
         Donenberg and John Lee, each purchased 12,500 shares of common stock
         and a warrant to purchase 6,250 shares of common stock, Steve Bell
         purchased 3,750 shares of common stock and a warrant to purchase 1,875
         shares of common stock, and Ross Mangano, as a trustee and investment
         advisor purchased an aggregate of 2,250,001 shares of common stock and
         warrant to purchase an aggregate of 1,124,999 shares of common stock.

15.      In August 2001, we issued 476,190 shares of our common stock upon
         conversion of a $500,000 convertible debenture to Paladin Labs Inc. at
         a conversion price of $1.05 per share.

                                     II-3

16.      In August 2001, we issued a stock bonus of 125,000 shares of common
         stock to Stephen Simes at a price of $0.60 per share, a stock bonus of
         20,000 shares of our common stock to Phillip Donenberg at a price of
         $0.60 per share, and a stock bonus of 10,000 shares of common stock to
         Steve Bell at a price of $0.60 per share.

         No underwriting commissions or discounts were paid with respect to the
sales of the unregistered securities described above. In addition, all of the
above sales were made in reliance on either Section 4(2) of the Securities Act
as transactions by an issuer not involving any public offering or Regulation D
of the Securities Act. In all such transactions, certain inquiries were made by
BioSante to establish that such sales qualified for such exemption from the
registration requirements. In particular, BioSante confirmed that with respect
to the exemption claimed under Section 4(2) of the Securities Act (i) all offers
of sales and sales were made by personal contact from officers and directors of
BioSante or other persons closely associated with BioSante, (ii) each investor
made representations that he or she was sophisticated in relation to this
investment (and BioSante has no reason to believe that such representations were
incorrect), (iii) each purchaser gave assurance of investment intent and the
certificates for the shares bear a legend accordingly, and (iv) offers and sales
within any offering were made to a limited number of persons.

ITEM 28.  UNDERTAKINGS.

(a)      The undersigned Registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

                  (i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

                  (ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;

                  (iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

         (2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

(b)     Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of

                                     II-4

the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

                                      II-5

                                   SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Pre-Effective Amendment No. 1 to this registration
statement on Form SB-2 to be signed on its behalf by the undersigned,
thereunto duly authorized in City of Lincolnshire, State of Illinois.

Dated:  September 12, 2001             BIOSANTE PHARMACEUTICALS, INC.

                                       By   /s/ Stephen M. Simes
                                         --------------------------------------
                                            Stephen M. Simes
                                            Vice Chairman, President and Chief
                                            Executive Officer

                                       By   /s/ Phillip B. Donenberg
                                         --------------------------------------
                                            Phillip B. Donenberg
                                            Chief Financial Officer, Treasurer
                                            and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Pre-Effective Amendment No. 1 to this registration statement on Form SB-2 has
been signed by the following persons in the capacities indicated, on
September 12, 2001.

                 NAME AND SIGNATURE                                                TITLE
                 ------------------                                                -----

/s/ Stephen M. Simes                                  Vice Chairman, President and Chief Executive Officer
- -------------------------------------------------     (Principal Executive Officer)
Stephen M. Simes

/s/ Phillip B. Donenberg                              Chief Financial Officer, Treasurer and Secretary (Principal
- -------------------------------------------------     Financial and Accounting Officer)
Phillip B. Donenberg

                        *                             Chairman of the Board
- -------------------------------------------------
Louis W. Sullivan, M.D.

                        *                             Director
- -------------------------------------------------
Edward C. Rosenow, III, M.D.

                        *                             Director
- -------------------------------------------------
Victor Morgenstern

                        *                             Director
- -------------------------------------------------
Ross Mangano

                        *                             Director
- -------------------------------------------------
Peter Kjaer

                                      II-6

                        *                             Director
- -------------------------------------------------
Fred Holubow

                        *                             Director
- -------------------------------------------------
Angela Ho

                                                      Director
- -------------------------------------------------
Director Avi Ben-Abraham, M.D.

/s/ Phillip B. Donenberg                              Attorney-in-Fact
- -------------------------------------------------
Phillip B. Donenberg

                                     II-7

                         BIOSANTE PHARMACEUTICALS, INC.

                       REGISTRATION STATEMENT ON FORM SB-2

                                  EXHIBIT INDEX

EXHIBIT NO.                                      EXHIBIT                                 METHOD OF FILING
- -----------                                      -------                                 ----------------
                                                                                   
2.1                Arrangement Agreement, dated October 23, 1996, between Structured
                   Biologicals Inc. and BioSante Pharmaceuticals,
                   Inc. ...............................................................  Incorporated by reference to
                                                                                         Exhibit 2.1 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

3.1                Amended and Restated Certificate of Incorporation of BioSante
                   Pharmaceuticals, Inc................................................  Previously filed

3.2                Bylaws of BioSante Pharmaceuticals, Inc.............................  Previously filed

4.1                Form of Warrant issued in connection with May 1999 Private
                   Placement...........................................................  Incorporated by
                                                                                         reference to Exhibit 4.1
                                                                                         contained in BioSante's
                                                                                         Registration Statement on
                                                                                         Form 10-SB, as amended
                                                                                         (File No. 0-28637)

4.2                Form of Warrant issued in connection with April 2001 Private
                   Placement...........................................................  Previously filed

5.1                Opinion of Oppenheimer Wolff & Donnelly LLP.........................  Previously filed

10.1               License Agreement, dated June 18, 1997, between BioSante
                   Pharmaceuticals, Inc. and The Regents of the University of
                   California (1)......................................................  Incorporated by reference to
                                                                                         Exhibit 10.1 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.2               Amendment to License Agreement, dated October 26, 1999, between
                   BioSante Pharmaceuticals, Inc. and the Regents of the University of
                   California (1)......................................................  Incorporated by reference to
                                                                                         Exhibit 10.2 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

                                      II-8

10.3               Amended and Restated 1998 Stock Option Plan.........................  Previously filed

10.4               Stock Option Agreement, dated December 7, 1997,
                   between BioSante Pharmaceuticals, Inc. and Edward C. Rosenow, III,
                   M.D.................................................................  Incorporated by reference to
                                                                                         Exhibit 10.5 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.5               Stock Option Agreement, dated December 8, 1998, between BioSante
                   Pharmaceuticals, Inc. and Stephen M. Simes..........................  Incorporated by reference to
                                                                                         Exhibit 10.6 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.6               Stock Option Agreement, dated December 8, 1998, between BioSante
                   Pharmaceuticals, Inc. and Stephen M. Simes..........................  Incorporated by reference to
                                                                                         Exhibit 10.7 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.7               Stock Option Agreement, dated March 30, 1999, between BioSante
                   Pharmaceuticals, Inc. and Stephen M. Simes..........................  Incorporated by reference to
                                                                                         Exhibit 10.8 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.8               Escrow Agreement, dated December 5, 1996, among BioSante
                   Pharmaceuticals, Inc., Montreal Trust Company of Canada, as Escrow
                   Agent, and certain stockholders of BioSante Pharmaceuticals, Inc....  Incorporated by reference
                                                                                         to Exhibit 10.9 contained
                                                                                         in BioSante's Registration
                                                                                         Statement on Form 10-SB,
                                                                                         as amended (File No. 0-28637)

                                      II-9

10.9               Shareholders' Agreement, dated May 6, 1999, between BioSante
                   Pharmaceuticals, Inc., Avi Ben-Abraham, M.D. and certain
                   stockholders of BioSante Pharmaceuticals, Inc.......................  Incorporated by reference to
                                                                                         Exhibit 10.12 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.10              Registration Rights Agreement, dated May 6, 1999, between BioSante
                   Pharmaceuticals, Inc. and certain stockholders of BioSante
                   Pharmaceuticals, Inc. ..............................................  Incorporated by reference to
                                                                                         Exhibit 10.13 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.11              Securities Purchase Agreement, dated May 6, 1999, between BioSante
                   Pharmaceuticals, Inc. and certain stockholders of BioSante
                   Pharmaceuticals, Inc. ..............................................  Incorporated by reference to
                                                                                         Exhibit 10.14 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.12              Lease, dated September 15, 1997, between BioSante Pharmaceuticals,
                   Inc. and Highlands Park Associates..................................  Incorporated by reference to
                                                                                         Exhibit 10.15 contained in
                                                                                         BioSante's Registration
                                                                                         Statement on Form 10-SB, as
                                                                                         amended
                                                                                         (File No. 0-28637)

10.13              Employment Agreement, dated January 21, 1998, between
                   BioSante Pharmaceuticals, Inc. and Stephen M. Simes, as amended.....

                                                                                         Incorporated by reference
                                                                                         to Exhibit 10.16 contained
                                                                                         in BioSante's Registration
                                                                                         Statement on Form 10-SB,
                                                                                         as amended (File No. 0-28637)

                                      II-10

10.14              Employment Agreement, dated June 11, 1998, between BioSante
                   Pharmaceuticals, Inc. and Phillip B. Donenberg, as amended..........  Incorporated by reference
                                                                                         to Exhibit 10.17 contained
                                                                                         in BioSante's Registration
                                                                                         Statement on Form 10-SB,
                                                                                         as amended (File No. 0-28637)

10.15              License Agreement, dated June 13, 2000, between Permatec
                   Technologie, AG and BioSante Pharmaceuticals, Inc. (1)..............  Incorporated by reference to
                                                                                         Exhibit 10.1 contained in
                                                                                         BioSante's Current Report
                                                                                         on Form 8-K on July 11, 2000
                                                                                         (File No. 0-28637)

10.16              Supply Agreement, dated June 13, 2000, between Permatec
                   Technologie, AG and BioSante Pharmaceuticals, Inc. (1)..............  Incorporated by reference to
                                                                                         Exhibit 10.2 contained in
                                                                                         BioSante's Current Report
                                                                                         on Form 8-K on July 11, 2000
                                                                                         (File No. 0-28637)

10.17              Employment Agreement, dated August 1, 2000, between BioSante
                   Pharmaceuticals, Inc. and John E. Lee...............................  Incorporated by reference to
                                                                                         Exhibit 10.18 contained in
                                                                                         BioSante's Annual Report
                                                                                         on Form 10-KSB on March 30, 2001
                                                                                         (File No. 0-28637)

10.18              Employment Agreement, dated December 15, 2000, between BioSante
                   Pharmaceuticals, Inc. and Leah M. Lehman, Ph.D......................  Incorporated by reference to
                                                                                         Exhibit 10.19 contained in
                                                                                         BioSante's Annual Report
                                                                                         on Form 10-KSB on March 30, 2001
                                                                                         (File No. 0-28637)

10.19              Form of Subscription Agreement in connection with the April 2001
                   Private Placement...................................................  Previously filed

10.20              Sublease Agreement, dated August 29, 2001, between ICON
                   InfoSystems, Inc. and BioSante Pharmaceuticals, Inc.................  Filed herewith electronically

23.1               Consent of Deloitte & Touche LLP....................................  Filed herewith electronically

23.2               Consent of Deloitte & Touche LLP (Canada)...........................  Filed herewith electronically

                                      II-11

23.3               Consent of Oppenheimer Wolff & Donnelly LLP (included in
                   Exhibit 5.1)........................................................  Previously filed

24.1               Power of Attorney (Included on page II-5)...........................  Previously filed

- --------------------------
(1)  Confidential treatment under Rule 24b-2 of the Securities Exchange Act
of 1934, as amended has been granted with respect to designated portions of this
document.

                                     II-12

                               SUBLEASE AGREEMENT

This Sublease Agreement is made this 29th day of August 2001, by and between
ICON InfoSystems, Inc., an Illinois corporation (hereinafter referred to as
"Tenant" or "Sub-Landlord") and BioSante Pharmaceuticals, Inc., a Delaware
corporation ("Sub-Tenant").

                                    RECITALS

A.       Sub-Landlord currently occupies Suite 280 of the building commonly
         known as 111 Barclay Boulevard Building in Lincolnshire Corporate
         Center, Lincolnshire, Illinois, pursuant to that certain Office Lease
         Agreement dated February 11, 1998 by and between Tenant and American
         National Bank and Trust Company of Chicago, as Trustee under Trust No.
         113370-03 (now LaSalle Bank N.A., as successor trustee aforesaid, being
         hereafter referred to as "Landlord"), which was amended by the same
         parties by a First Amendment to Lease dated October 1, 1999, and be a
         Second Amendment to Lease dated December 23, 1999 (said Lease, as
         amended, being hereafter referred to as "Prime Lease").

B.       Sub-Tenant desires to Sublease said Suite 280 from Sub-Lessor upon the
         terms and conditions set forth below.

         Therefore, in consideration of the mutual undertakings hereinafter set
         forth and other good and valuable consideration, receipt of which is
         hereby acknowledged, the parties hereto hereby as follows:

1.       DEFINITIONS:
         For the purpose of this Sublease Agreement, the following terms shall
         have the following meanings:

         a.       SUBLEASED PREMISES: Suite 280, 111 Barclay Boulevard Building
                  in the Lincolnshire Corporate Center referred to in the Prime
                  Lease and shown on Exhibit A attached hereto.

         b.       SUBLEASE TERM: A period of time beginning on the Sublease
                  Commencement Date and ending on the Expiration Date.

         c.       SUBLEASE COMMENCEMENT DATE: September 1, 2001. Notwithstanding
                  anything contained herein to the contrary, the Sublease
                  Commencement Date shall not be deemed to occur unless and
                  until: (a) this Sublease has been fully executed by all
                  parties hereto, and (b) the Landlord consents to same in
                  writing.

         d.       RENT PAYMENT COMMENCEMENT DATE: The Sublease Commencement
                  Date.

         e.       EXPIRATION DATE:  December 31, 2003.

         f.       RENT:  $6,219.08 per month, gross.

         g.       SUBLEASE PAYMENT ADDRESS: ICON InfoSystems, Inc., Suite 110,
                  111 Barclay Boulevard, Lincolnshire, Illinois 60069.

         h.       USE: The Subleased Premises may be used for general business
                  offices.

         i.       SUBLEASE:  This Sublease Agreement.

2.       SUBLEASED PREMISES:
         Sub-Landlord does hereby sublease to Sub-Tenant and Sub-Tenant hires
         and takes from Sub-Landlord the Subleased Premises as defined in
         Section l.a.

3.       SUBLEASE TERM:
         The Sublease Term shall be as described in Section 1.b.

4.       PRIME LEASE:
         Sub-Landlord represents that a true and complete copy of the Prime
         Lease is attached hereto as Exhibit B and such Prime Lease has not been
         further amended or modified and remains in full force and effect. All
         terms, covenants and conditions of the Prime Lease are incorporated
         herein by reference, with the same force and effect as if set forth at
         length herein, and shall be binding upon both Sub-Landlord and
         Sub-Tenant. This sublease and all of the rights of Sub-Tenant hereunder
         with respect to the Premises are subject to the terms, conditions and
         provisions of the Prime Lease. Sub-Tenant hereby assumes and agrees to
         perform faithfully and be bound by all of Sub-Landlord's obligations,
         covenants, agreements and liabilities under the Prime Lease (except
         that Sub-Tenant shall not be obligated to pay any Base Rent or
         Additional Rent under Sections 1 or 2 of the Prime Lease); provided,
         however in no event shall Sub-Tenant be responsible for the restoration
         of the Premises to any condition other than the condition same is on
         Sublease Commencement date; normal wear and tear and damage and/or loss
         by casualty or condemnation excepted..

         (A)      Without limitation of the foregoing:

                  (i)      Sub-Tenant shall not make any changes, alterations or
                           additions in or to the Premises except as otherwise
                           expressly provided herein;

                  (ii)     If Sub-Tenant desires to take any other action and
                           the Prime Lease would require that Sub-Landlord
                           obtain the consent of Landlord before undertaking any
                           action of the same kind, Sub-Tenant shall not
                           undertake the same without the prior written consent
                           of Sub-Landlord. Sub-Landlord may condition its
                           consent on the consent of Landlord being obtained and
                           may require Sub-Tenant to contact Landlord directly
                           for such consent; provided, however, where consent is
                           so required, Sub-Landlord will not unreasonably
                           withhold, condition, or delay its consent, and
                           Sub-Landlord will reasonably assist Sub-Tenant in
                           pursuing such consent from the Landlord.

                  (iii)    Sub-Landlord shall have all other rights, and all
                           privileges, options, reservations and remedies,
                           granted or allowed to, or held by, Landlord

                           under the Prime Lease; and Sub-Tenant shall be
                           entitled to all of Sub-Landlord's rights and benefits
                           as "Tenant" under the Prime Lease, except as
                           otherwise stated herein.

                  (iv)     Sub-Tenant shall not do anything or suffer or permit
                           anything to be done which could result in a default
                           under the Prime Lease or permit the Prime Lease to be
                           cancelled or terminated.

                  (v)      Sub-Tenant shall not assign, mortgage, pledge,
                           hypothecate or otherwise transfer or permit the
                           transfer of this Sublease or any interest of
                           Sub-Tenant in this Sublease, by operation of law or
                           otherwise, or permit the use of the Premises or any
                           part thereof by any persons other than Sub-Tenant and
                           Sub-Tenant's employees, or sublet the Premises or any
                           part thereof,

                  (vi)     Neither rental nor other payments hereunder shall
                           abate by reason of any damage to or destruction of
                           the Premises, the premises subject to the Prime
                           Lease, or the Building or any part thereof, unless,
                           and then only to the extent that, rental and such
                           other payments actually abate under the Prime Lease
                           with respect to the Premises on account of such
                           event.

                  (vii)    In the event of any conflict between the terms,
                           conditions and provisions of the Prime Lease and of
                           this Sublease, the terms, conditions and provisions
                           of this Sublease shall, in all instances, govern and
                           control; with respect to Sub-Tenant's and
                           Sub-Landlord's relationship hereunder.
                           Notwithstanding anything contained herein to the
                           contrary, Sub-Tenant shall not be responsible for any
                           of Sub-Landlord's financial or other obligations
                           arising before the Sublease Term, except as otherwise
                           stated herein.

         (B)      It is expressly understood and agreed that Sub-Landlord does
                  not assume and shall not have any of the obligations or
                  liabilities of Landlord under the Prime Lease and that
                  Sub-Landlord is not making the representations or warranties,
                  if any, made by Landlord in the Prime Lease. With respect to
                  work, services, repairs and restoration or the performance of
                  other obligations required of Landlord under the Prime Lease,
                  Sub-Landlord's sole obligation with respect thereto shall be
                  to request the same, upon written request from Sub-Tenant, and
                  to use reasonable efforts to obtain the same from Landlord.
                  Sub-Landlord shall not be liable in damages, nor shall rent
                  abate hereunder, for or on account of any failure by Landlord
                  to perform the obligations and duties imposed on it under the
                  Prime Lease. In the event Sub-Landlord is entitled to any
                  abatement, offset, or the like under the Lease, Sublandlord
                  shall be entitled to same as to this Sublease.

5.       RENT PAYMENT:
         Sub-Tenant shall pay to Sub-Landlord during the Sublease Term, Rent as
         defined in Section 1.f. Rent shall be paid monthly in advance. The
         payment for the first month of the Sublease Term shall be due five days
         prior to the Sublease Commencement Date; and

         subsequent payments shall be due on the fifth day prior to the first
         day of each month thereafter during the Sublease Term.

6.       UTILITIES:
         Electricity is currently separately metered and Sub-Tenant shall
         promptly pay all charges for electricity used during the Sublease Term.

7.       INSURANCE:
         Sub-Landlord agrees to maintain the insurance of the kinds and amounts
         required to be maintained by Sub-Landlord as tenant under Prime Lease
         and that it shall name Sub-Tenant as an additional named insured.
         Sub-Landlord will provide Sub-Tenant with copies of the policies or
         certificates evidencing that such insurance is in full force and effect
         and stating the terms thereof.

8.       DESTRUCTION OR CONDEMNATION:
         In the event that the Subleased Premises are (a) damaged or destroyed
         by fire, explosion or any other casualty or taken by eminent domain (or
         by deed in given lieu of condemnation), and (b) as a result cannot be
         reasonably used by Sub-Tenant, Sub-Tenant may terminate the Sublease by
         giving written notice thereof to Sub-Landlord within thirty (30) days
         of the occurrence of either such event. In no event, however, shall
         tenant share in any award whatsoever.

9.       DEFAULT BY SUB-TENANT:

         a.       Upon the happening of any of the following:

                  (i)      Sub-Tenant fails to pay any Base Rent or Additional
                           Rent within five (5) days after the date it is due
                           except that no more frequently than twice in any
                           calendar year, Tenant shall be entitled to 5 days'
                           prior notice of non-payment during which time it may
                           cure such non-payment;

                  (ii)     Sub-Tenant fails to pay any other amount due from
                           Sub-Tenant hereunder and such failure continues for
                           five (5) days after notice thereof from Sub-Landlord
                           to Sub-Tenant;

                  (iii)    Sub-Tenant fails to perform or observe any other
                           covenant or agreement set forth in this Sublease and
                           such failure continues for thirty (30) days after
                           notice thereof from Sub-Landlord to Sub-Tenant;

                  (iv)     any other event occurs which results from the action
                           or failure to act by Sub-Tenant (as opposed to
                           Sub-Landlord) which would constitute a Default (which
                           is defined in the Prime Lease as a default after the
                           expiration of applicable cure periods) under the
                           Prime Lease if it involved Sub-Landlord or the
                           premises covered by the Prime Lease:

Sub-Tenant shall be deemed to be in default hereunder, and Sub-Landlord may
exercise, without limitation of any other rights and remedies available to it
hereunder or at law or in equity, any

and all rights and remedies of Landlord set forth in the Prime Lease in the
event of a default by Sub-Landlord thereunder, but only to the extent applicable
hereunder.

         b.       In the event Sub-Tenant fails or refuses to make any payment
                  or perform any covenant or agreement to be performed hereunder
                  by Sub-Tenant, Sub-Landlord may make such payment or undertake
                  to perform such covenant or agreement (but shall not have any
                  obligation to Sub-Tenant to do so). In such event, amounts so
                  paid and amounts expended in undertaking such performance,
                  together with all direct, actual, and reasonable costs,
                  expenses and attorneys' fees incurred by Sub-Landlord in
                  connection therewith, shall be additional rent hereunder.

10.      WAIVER OF CLAIMS AND INDEMNITY:

         a.       Sub-Tenant hereby releases and waives any and all claims
                  against Landlord and Sub-Landlord and each of their respective
                  officers directors, partners, agents and employees for injury
                  or damage to person, property or business sustained in or
                  about the Building, the premises subject to the Prime Lease,
                  or the Premises by Sub-Tenant other than by reason of gross
                  negligence or willful misconduct and except in any case which
                  would render this release and waiver void under law.

         b.       Sub-Landlord hereby releases and waives any and all claims
                  against Sub-Tenant and its officers, directors, partners,
                  agents and employees for injury or damage to person, property
                  or business sustained in or about the Building, the premises
                  subject to the Prime Lease, or the Premises by Sub-Landlord
                  other than by reason of gross negligence or willful misconduct
                  and except in any case which would render this release and
                  waiver void under law.

         c.       Sub-Tenant agrees to indemnify, defend and hold harmless
                  Landlord and its beneficiaries, Sub-Landlord and the managing
                  agent of the Building and each of their respective officers,
                  directors, partners, agents and employees, from and against
                  any and all claims, demands, costs and expenses of every kind
                  and nature, including attorneys' fees and litigation expenses,
                  arising from Sub-Tenant's specific use of the Premises,
                  Sub-Tenant's construction of any leasehold improvements in the
                  Premises or from any breach or default on the part of
                  Sub-Tenant in the performance of any agreement or covenant of
                  Sub-Tenant to be performed or performed under this Sublease or
                  pursuant to the terms of this Sublease, or from any negligence
                  or willful misconduct of Sub-Tenant or its agents, officers,
                  employees, guests, servants, invitees or customers in or about
                  the Premises. In case any such proceeding, as aforesaid, is
                  brought against any of said indemnified parties. Sub-Tenant
                  covenants, if requested by Sub-Landlord, to defend such
                  proceeding at its sole cost and expense by legal counsel
                  reasonably satisfactory to Sub-Landlord.

11.      SECURITY DEPOSIT:

         Sub-Tenant shall deposit with Sub-Landlord no later than August 29,
         2001, Eighteen Thousand Six Hundred Fifty-seven and 25/100 Dollars
         ($18,657.25) as security for the full and faithful performance of every
         provision of this Sublease to be performed by Sub-

         Tenant. If Sub-Tenant defaults with respect any provision of this
         Sublease, including, but not limited to, the provisions relating to the
         payment of rent, Sub-Landlord may use, apply or retain all or any part
         of said security deposit for the payment of any rent and any other sum
         in default, or for the payment of any other amount which Sub-Landlord
         may spend or become obligated to spend by reason of Sub-Tenant's
         default or to compensate Sub-Landlord for any other direct and actual
         loss or damage which Sub-Landlord may suffer by reason of Sub-Tenant's
         default. If Sub-Tenant shall fully and faithfully perform every
         provision of this Sublease to be performed by it, said security deposit
         or any balance thereof shall be returned to Sub-Tenant within thirty
         (30) days after the expiration of the term and Sub-Tenant's vacation of
         the Premises. Nothing herein shall be construed to limit the amount of
         damages recoverable by or any other remedy to Sub-Landlord. Tenant may
         substitute a Letter of Credit for the Security Deposit (in which event
         the Sub-Landlord, upon receipt of the Letter of Credit shall return the
         cash security deposit to Sub-Tenant), provided that the expiration date
         thereof is no later earlier than 30 days following the expiration of
         the Sublease Term, is in the face amount of $18,657.25, is a "clean"
         letter of credit payable to Sub-Landlord on demand and in form and
         drawn on a bank reasonably acceptable to Sub-Landlord. Failure to
         deposit the Security Deposit (or Letter of Credit) by August 29, 2001
         shall constitute Sub-Tenant's default hereunder and Tenant shall not be
         permitted to occupy the Premises.

12.      PARKING:
         Sub-Tenant shall be permitted exclusive use of two (2) of the exterior
         reserved parking spaces so allocated to Sub-Landlord under the Prime
         Lease. Sub-Tenant shall promptly pay all costs for signage and
         installation.

13.      BROKERS:
         The parties warrant to each other that neither has used the services of
         any broker in connection with this Sub-Lease except for Van Vlissingen
         and Co. Sub-Landlord shall pay all of Van Vlissingen's commissions in
         connection with this Sub-Lease per Sub-Landlord's contract with Van
         Vlissingen and Co. Each of the parties ("Indemnifying Party") shall
         indemnify the other party and shall hold said other party harmless
         against any and all other claims for brokerage commissions claimed to
         have arisen through the dealings or activities of said Indemnifying
         Party.

14.      RECITALS: The Recitals set forth above are incorporated in and made
         apart of this Sublease.

15.      LANDLORD'S CONSENT: This Sublease is subject to and contingent upon the
         Landlord Consenting hereto as provided in paragraph 13 of the Prime
         Lease.

16.      REPRESENTATIONS AND WARRANTIES OF SUB-LANDLORD. In addition to the
         other representations and warranties of Sub-Landlord hereunder,
         Sub-Landlord represents and warrants to Sub-Tenant that: (a) neither
         Sub-Landlord nor, to the best of Sub-Landlord's knowledge, Landlord is
         in default under the terms of the Lease; and (b) there is no known
         circumstances existing under which Sub-Landlord or Landlord may be
         deemed in default pursuant to the Lease merely upon the service of
         notice or passage of time, or both.

17.      COVENANT OF QUIET ENJOYMENT. So long as Sub-Tenant is not in default
         under this Sublease beyond all applicable cure periods, Sub-Landlord
         shall not interfere with Sub-Tenant's uses and enjoyment of, or access
         to, the Premises.

18.      NOTICES. Notices and communications ("Notices") required or permitted
         to be given shall be mailed, by certified mail or registered United
         State mail, postage prepaid; sent via facsimile followed by submission
         of the original; or delivered (either personal delivery or delivery by
         private express courier service such as Federal Express).

                           Address for Notices:

                           SUB-LANDLORD:

                                    ICON InfoSystems, Inc.
                                    Suite 110
                                    111 Barclay Boulevard
                                    Lincolnshire, Illinois 60069

                                    SUB-TENANT

                                    BioSante Pharmaceuticals, Inc.
                                    Suite 280
                                    111 Barclay Boulevard
                                    Lincolnshire, IL 60069

                                    with a copy to:

                                    Gary I. Levenstein
                                    Ungaretti & Harris
                                    3500 Three First National Plaza
                                    Chicago, Illinois 60602

The addresses for Notices for a party may be changed by that party by written
notice to the other party in accordance with this Paragraph. Notices sent in
accordance with this Paragraph shall be deemed effective upon receipt or on the
date of first refusal to accept delivery of such notice.

Agreed by the Parties:

BIOSANTE PHARMACEUTICALS, INC.              ICON INFOSYSTEMS, INC.

/s/ Stephen M. Simes                        By:  /s/ Charles Dorfman
- ----------------------------------              -------------------------------
By:   Stephen M. Simes                            Charles Dorfman
Its:  President & CEO                       Its:  President

Received and Approved:  Van Vlissingen and Co.

By:
   -------------------------------

                                    EXHIBIT A

                               SUBLEASED PREMISES

                                    EXHIBIT B

                                   PRIME LEASE

                               CONSENT TO SUBLEASE

         This Agreement, made this 29th day of August, 2001 by and among
LaSalle Bank National Association, not personally but as Successor Trustee to
American National Bank and Trust Company of Chicago under Trust Agreement
dated January 1, 1991 and known as Trust No. 11-3370-03 ("Landlord"), ICON
InfoSystems, Inc., an Illinois corporation ("Tenant") and Biosante
Pharmaceuticals, Inc., a Delaware corporation ("Subtenant").

                                   WITNESSETH:

         WHEREAS, Landlord and Tenant are parties to a written lease dated
February 11, 1998, as amended (the lease as heretofore amended herein called
the "Lease"), under which Lease Landlord demised to Tenant certain premises
known as Suites 280 and 110 in the building located at 111 Barclay Boulevard,
Lincolnshire, Illinois (the "Premises"); and

         WHEREAS, Tenant and Subtenant have entered into the sublease (the
"Sublease") attached hereto as Exhibit A for Suite 280 of the Premises
(herein called the "Subleased Premises") and have requested Landlord's
consent to the Sublease; and

         WHEREAS, Landlord is willing to consent to the Sublease on the terms
and conditions hereinafter provided.

         NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto agree as follows.

         1.   CONSENT. Landlord hereby consents to the Sublease subject to
the terms and conditions of this Agreement all of which shall to the extent
not otherwise reflected in the Sublease, be deemed incorporated in the
Sublease.

         2.   USE OF SUBLEASED PREMISES. Subtenant will use and occupy the
Premises for the purposes set forth in the Lease and shall not use or occupy,
or permit the use or occupancy of, the Subleased Premises or any part
thereof, for any purpose other than such purpose or in any manner which, in
Landlord's reasonable judgment, materially adversely shall affect or
interfere with any services required to be furnished by Landlord or Tenant or
with the proper and economical rendition of any such service.

         3.   SUBTENANT ALTERATIONS. No alterations shall be made by
Subtenant in the Subleased Premises without the prior written consent of
Landlord pursuant to and in accordance with the provisions of the Lease.

         4.   WAIVER OF CERTAIN CLAIMS; INDEMNITY BY SUBTENANT.

              a.       To the extent not expressly prohibited by law,
         Subtenant releases Landlord and its beneficiaries, and their agents,
         servants, and employees, from and waives all claims for damages to
         person or property sustained by the Subtenant or by any occupant of
         the Subleased Premises, or by any other person, resulting directly
         or indirectly from fire or other casualty, cause, or any existing or
         future condition, defect, matter, or thing in or about the Subleased
         Premises, or any part of it, or from any equipment or

         appurtenance therein, or from any accident in or about the Subleased
         Premises, or from any act or neglect of any tenant or other occupant
         of the building located on the Subleased Premises or any part
         thereof or of any other person. The foregoing release shall not
         operate as a release of Landlord from liability for the negligent or
         intentionally wrongful conduct of Landlord or its agent or
         employees. This Paragraph shall apply especially, but not
         exclusively, to damage caused by water, snow, frost, steam,
         excessive heat or cold, sewerage, gas, odors, or noise, or the
         bursting or leaking of pipes or plumbing fixtures, broken glass,
         sprinkling or air conditioning devices or equipment, or flooding of
         basements, and shall apply without distinction as to the person
         whose act or neglect was responsible for the damage and whether the
         damage was due to any of the acts specifically enumerated above, or
         from any other thing or circumstance, whether of a like nature or of
         a wholly different nature. Subject to Section 5(a), if any damage to
         the Subleased Premises or any equipment or appurtenance therein,
         whether belonging to Landlord or to other tenants or occupants or
         otherwise, results from any negligent or wrongful acts of the
         Subtenant, its employees, agents, or invitees, Subtenant shall be
         liable therefor and Landlord may, at its option, repair such damage
         and Subtenant shall upon demand by Landlord reimburse Landlord for
         all reasonable costs of such repairs and damages in excess of
         amounts, if any, paid to Landlord under insurance covering such
         damages. All personal property belonging to the Subtenant or any
         occupant of the Subleased Premises that is in the Subleased Premises
         shall be there at the risk of the Subtenant or other person only and
         Landlord shall not be liable for damage thereto or theft or
         misappropriation thereof

              b.  To the extent not expressly prohibited by law, Subtenant
         agrees to hold Landlord and its beneficiaries, and their agents,
         servants, and employees, harmless and to indemnify each of them
         against claims and liabilities, including reasonable attorneys'
         fees, for injuries to all persons and damage to or theft or
         misappropriation or loss of property occurring in or about the
         Subleased Premises arising from Subtenant's negligence or wrongful
         acts or from any breach or default on the part of Subtenant in the
         performance of any covenant or agreement on the part of Tenant to be
         performed pursuant to the terms of this Agreement or the Sublease or
         due to any other act or omission of the Subtenant, its agents, or
         employees.

         5.   SUBROGATION AND INSURANCE.

              a.  Landlord and Subtenant agree to have all physical damage or
         material damage insurance which may be carried by either of them,
         and Subtenant agrees to have all business interruption insurance
         which it carries, if any, endorsed to provide that any release from
         liability of, or waiver of claim for, recovery from the other party
         entered into in writing by the insured thereunder prior to any loss
         or damage shall not affect the validity of said policy or the right
         of the insured to recover thereunder and providing further that the
         insurer waives all rights of subrogation which such insurer might
         have against the other party. Without limiting any release or waiver
         of liability or recovery contained in any other section of this
         Agreement, but rather in confirmation and furtherance thereof, each
         of the parties hereto waives all claims for recovery from the other
         party for any loss or damage to any of its property or damages as a
         result of business interruption. Notwithstanding the foregoing or
         anything contained in this

                                        2

         Agreement to the contrary, any release and any waiver of claims
         shall not be operative, nor shall the foregoing endorsements be
         required, in any case where the effect of such release and waiver is
         to invalidate insurance coverage or increase the cost thereof
         (provided that, in the case of increased cost, the other party shall
         have the right, within ten (10) days following written notice, to
         pay such increased cost keeping such release and waiver in full
         force and effect).

              b.  Subtenant shall carry insurance during the entire term of
         the Sublease insuring Subtenant and Landlord and Landlord's agents
         and beneficiaries with terms, coverages, and in companies reasonably
         satisfactory to Landlord and with such commercially reasonable
         increases in limits as Landlord may reasonably from time to time
         request, but initially Subtenant shall maintain the coverages
         required of Tenant under the Lease. The foregoing insurance may be
         provided by a company-wide blanket insurance policy or policies
         maintained by or on behalf of Subtenant, provided that the same is
         reasonably satisfactory to Landlord.

              c.  Subtenant shall, prior to the commencement of the term of
         the Sublease and thereafter during said term, furnish to Landlord
         certificates issued by the respective carriers evidencing such
         coverage or replacements and renewals thereof, which policies or
         certificates shall state that the insurance agents shall endeavor
         not to change or cancel such policies without at least ten (10)
         days' prior written notice to Landlord and Subtenant. Each insurance
         policy carried by Subtenant shall contain, where appropriate, a
         clause stating that such policy will be considered as primary
         insurance for Landlord and its agents and beneficiaries and not call
         into contribution any other insurance that may be available to
         Landlord.

         6.   RETURN OF SUBLEASED PREMISES. If for any reason, at any time
prior to the expiration date of the Sublease, the term of the Lease shall
terminate or be terminated by operation of any provisions of the Lease or of
law, the Sublease and the term thereby granted shall terminate, and, on or
prior to the date of such termination of the Sublease, Subtenant, at
Subtenant's sole cost and expense, (i) shall quit and surrender the Subleased
Premises to Landlord, broom clean and in good order and condition, ordinary
wear excepted, (ii) shall remove all of Subtenant's property and all other
property and effects of Subtenant and all persons claiming through or under
Subtenant from the Subleased Premises, and (iii) shall repair all damage to
the Subleased Premises occasioned by such removal. Landlord shall have the
right to retain any property and effects which shall remain in the Subleased
Premises after such termination, and any net proceeds from the sale thereof,
without waiving Landlord's rights with respect to any default by Subtenant
under the foregoing provisions of this paragraph. If the date of such
termination shall fall on a Sunday or holiday, then Subtenant's obligations
under the first sentence of this paragraph shall be performed on or prior to
the Saturday or business day immediately preceding such Sunday or holiday.
Subtenant's obligations under this paragraph shall survive the expiration or
sooner termination of the terms of the Lease and Sublease. The foregoing
provisions of this paragraph notwithstanding, if Subtenant shall be required
to attorn pursuant to the provisions of Paragraph 9 of this Agreement, the
foregoing provisions of this Paragraph shall have no force or effect.
Notwithstanding anything contained herein or in the Lease to the contrary,
Subtenant shall only be required to return possession to the Premises in the

                                        3

condition same was in as of the date of full execution of this Agreement,
normal wear and tear, and loss or damage by casualty or condemnation excepted.

          7.  EMINENT DOMAIN. Subtenant shall not seek or accept, and
Subtenant shall have no right to, any condemnation or eminent domain proceeds
or awards made with respect to the Subleased Premises, or any interest
therein, except to the extent permitted of Tenant under the Lease.
Notwithstanding the foregoing, Subtenant may make a separate claim for trade
fixtures taken and moving expenses if separately allocated.

         8.   SUBTENANT ASSIGNMENT AND SUBLETTING. Subtenant for itself, its
heirs, distributees, executors, administrators, legal representatives,
successors and assigns, covenants that without the prior written consent of
Landlord in each instance as provided for and in accordance with the Lease,
it shall not (i) assign, mortgage or encumber its interest in the Sublease,
or (ii) sublet or permit the subletting of, the Subleased Premises or any
part thereof, or (iii) permit the Subleased Premises or any part thereof to
be occupied, or used for desk space, mailing privileges or otherwise, by any
person other than Subtenant, employees and usual and customary business
guests and invitees.

         9.   ATTORNMENT. If for any reason the term of the Lease shall
terminate or be terminated by operation of any provisions of the Lease or of
law prior to the Lease Expiration Date, Subtenant agrees, at the election and
upon demand of Landlord or any other owner of the Leased Premises or of the
holder of any mortgage in possession of the Leased Premises or of any lessee
under any lease to which the Sublease shall be subject and subordinate, to
attorn, from time to time, to Landlord or any such owner, holder or lessee,
upon the then executory terms and conditions set forth in the Sublease. The
foregoing provisions of this Paragraph shall inure to the benefit of any such
owner, holder or lessee, shall apply notwithstanding that, as a matter of
law, the Sublease may terminate upon the termination of the Lease, shall be
self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions. Upon demand of Landlord or any
such owner, holder or lessee, Subtenant agrees, however, to execute, from
time to time, instruments in confirmation of the foregoing provisions of this
paragraph, satisfactory to Landlord or any such owner, holder or lessee, in
which Subtenant shall acknowledge such attornment and shall set forth the
terms and conditions of its tenancy. Nothing contained in this Paragraph
shall be construed to impair any right otherwise exercisable by Landlord or
any such owner, holder or lessee. Upon request of Landlord or any such owner,
holder or lessee, whether made prior or subsequent to such termination,
Tenant and Subtenant shall deliver an executed counterpart of the Sublease to
Landlord.

         10.  MISCELLANEOUS.

              a.  The Sublease is subject and subordinate in all respects to
         the Lease and to all of the terms, covenants and conditions thereof.

              b.  Subtenant shall not violate or permit the violation of any
         of the terms, covenants and conditions of the Lease including, but
         not limited to, any rules and regulations applicable to the
         Subleased Premises.

                                        4

              c.  Subtenant shall not pay to Tenant any advance rent in an
         amount greater than one (1) month's rent.

              d.  The Sublease shall not be modified without the prior
         written consent of Landlord.

              e.  If Tenant shall terminate or shall give any notice to
         Subtenant terminating the Sublease, Tenant shall promptly notify
         Landlord thereof.

              f.  Notices and demands required or permitted to be given by
         any party shall be in writing and shall be given in accordance with
         the terms of the Lease. Any party may change its address for receipt
         of notices by giving notice to the other parties.

              g.  Tenant agrees to pay to Landlord, upon demand, as
         additional rent, Landlord's reasonable counsel fees incurred in
         connection with the preparation and execution of this Agreement.

              h.  All capitalized terms used herein shall have the same
         meanings as in the Lease unless otherwise defined herein.

         11.  PAYMENT OF RENT UPON DEFAULT. Notwithstanding anything in the
Sublease to the contrary, if Tenant is in default under the Lease, upon
written notice from Landlord to Tenant and Subtenant, Subtenant shall
thereafter make all rent payments under the Sublease directly to Landlord,
and Tenant hereby releases Subtenant from any and all payments due Tenant
under the Sublease and so made to Landlord pursuant to Landlord's notice.

         12.  NO RELEASE OF TENANT LIABILITY. Neither this Agreement, nor the
Sublease, nor any acceptance of rent by Landlord from Subtenant shall operate
to waive, modify, release or in any manner affect Tenant's liability under
the Lease. No other or further sublease of all or of any part of the Premises
shall be made by Tenant without the prior written approval of the Landlord
pursuant to and in accordance with the provisions of the Lease.

         13.  CONFLICTING PROVISIONS. In the event that there shall be any
conflict between the terms, covenants and conditions of this Agreement and
the terms, covenants arid conditions of the Sublease as same relate to the
Landlord's and Subtenant's relationship (but not the Tenant's and Subtenant's
relationship), then the terms, covenants and conditions of this Agreement
shall prevail in each instance, and any conflicting terms, covenants or
conditions of the Sublease shall be deemed modified to conform with the
terms, covenants and conditions of this Agreement.

         14.  REAL ESTATE BROKERS. Tenant and Subtenant shall jointly and
severally indemnify and hold Landlord harmless from all damages, liability,
and expense (including reasonable attorneys' fees) arising from any claims or
demands of any broker or brokers or finders other than Van Vlissingen and Co.
for any commission alleged to be due such broker or brokers in connection
with the Sublease.

         15.  ESTOPPEL. Tenant hereby acknowledges that as of the date
hereof, Tenant has no claims arising under the Lease against Landlord, its
agents or beneficiaries, or any one or

                                        5

more of the foregoing, and that Tenant knows of no default or failure on the
part of Landlord to keep or perform any covenant, condition or undertaking to
be kept or performed by it under the Lease. Tenant hereby releases Landlord
from any liability arising under the Lease prior to the date hereof.

         16.  EXCULPATION. It is expressly understood and agreed by and
between the parties hereto, anything herein to the contrary notwithstanding,
that each and all of the representations, warranties, covenants,
undertakings, and agreements herein made on the part of any Landlord while in
form purporting to be the representations, warranties, covenants,
undertakings, and agreements of such Landlord are nevertheless each and every
one of them made and intended, not as personal representations, warranties,
covenants, undertakings, and agreements by such Landlord or for the purpose
or with the intention of binding such Landlord personally, but are made and
intended for the purpose only of subjecting such Landlord's interest in the
Subleased Premises to the terms of this Agreement and for no other purpose
whatsoever, and in case of default hereunder by any Landlord (or default
through, under, or by any of its beneficiaries, or agents or representatives
of said beneficiaries), the Tenant shall look solely to the interests of such
Landlord in the Subleased Premises; that Landlord nor any of its
beneficiaries or their partners, shareholders, directors, officers, agents,
employees, legal representatives, successors, or assigns shall have any
personal liability to pay any indebtedness accruing hereunder or to perform
any covenant, either express or implied, herein contained and no liability or
duty shall rest upon any Landlord which is a land trust to sequester the
rents, issues, and profits arising from the trust estate, or the proceeds
arising from any sale or other disposition thereof; that no personal
liability or personal responsibility of any sort is assumed by, nor shall at
any time be asserted or enforceable against, Landlord, LaSalle Bank National
Association, individually or personally, but only as trustee under the
provisions of a Trust Agreement dated January 1, 1991, and known as its Trust
No. 11-3370-03 or against any of the beneficiaries under the said Trust No.
11-3370-03 or any beneficiaries under any land trust which may become the
owner of the Subleased Premises, on account of this Agreement or on account
of any representation, warranty, covenant, undertaking, or agreement of
Landlord in this Agreement contained, either express or implied, all such
personal liability, if any, being expressly waived and released by Tenant and
by all persons claiming by, through, or under Tenant; and that this Agreement
is executed and delivered by the undersigned Landlord not in its own right,
but solely in the exercise of the powers conferred upon it as such Trustee.

                                        6

         IN WITNESS WHEREOF, the parties hereto shall be deemed to have executed
this Consent to Sublease on the date first above written.

                                           LANDLORD:

                                           LASALLE BANK NATIONAL
                                           ASSOCIATION, not personally, but as
                                           Trustee aforesaid

                                           By:    /s/ Charles R. Lamphere
                                                  ----------------------------
                                           Title: President
                                                  ----------------------------
                                                  Van Vlissingen and Co.
                                                  Its Duly Authorized Agent

                                           TENANT:

                                           ICON INFOSYSTEMS, INC.

                                           By:     /s/ Charles Dorfman
                                                  ----------------------------
                                           Title:  President
                                                  ----------------------------

                                           SUBTENANT:

                                           BIOSANTE PHARMACEUTICALS, INC.

                                           By:     /s/ Phillip B. Donenberg
                                                  ----------------------------
                                           Title:  CFO
                                                  ----------------------------

                                        7

                                    EXHIBIT A

                                    SUBLEASE

                                       8

                              111 BARCLAY BOULEVARD

                          LINCOLNSHIRE CORPORATE CENTER

                                  OFFICE LEASE

                                     BETWEEN

                        AMERICAN NATIONAL BANK AND TRUST
                      COMPANY OF CHICAGO, as Trustee under
                      Trust Agreement dated January 1, 1991
                        and known as Trust No. 113370-03

                                    LANDLORD

                                       AND

                             ICON INFOSYSTEMS, INC.

                                     TENANT

                                       FOR

                                      SUITE

                                       280

                           DATED: February 11th, 1998

                                TABLE OF CONTENTS

SCHEDULE OF SIGNIFICANT TERMS..............................................i

1.       Base Rent.........................................................1
2.       Additional Rent...................................................1
3.       Use of Premises...................................................9
4.       Prior Occupancy..................................................10
5.       Delivery of Possession...........................................10
6.       Alterations......................................................11
7.       Services.........................................................12
8.       Condition and Care of Premises...................................15
9.       Return of Premises...............................................16
10.      Holding Over.....................................................17
11.      Rules and Regulations............................................17
12.      Rights Reserved to Landlord......................................17
13.      Assignment and Subletting........................................19
14.      Waiver of Certain Claims; Indemnity by Tenant....................22
15.      Damage or Destruction by Casualty................................23
16.      Eminent Domain...................................................25
17.      Default; Landlord's Rights and Remedies..........................25
18.      Subordination....................................................29
19.      Mortgagee Protection.............................................30
20.      Default Under Other Leases.......................................31
21.      Subrogation and Insurance........................................31
22.      Nonwaiver........................................................32
23.      Estoppel Certificate.............................................32
24.      Tenant Authority to Execute Lease................................33
25.      Real Estate Brokers..............................................33
26.      Notices..........................................................33
27.      Miscellaneous....................................................34
28.      Landlord's Authority and Quiet Enjoyment.........................35
29.      Landlord.........................................................35
30.      Title and Covenant Against Liens.................................36
31.      Relocation of Tenant.............................................36
32.      Parking..........................................................36
33.      Security Deposit.................................................37

                  LEASE WITH ICON INFOSYSTEMS, INC. ("TENANT")

       on Premises at 111 Barclay Boulevard, Lincolnshire Corporate Center
                             Lincolnshire, Illinois

         This Lease, made as of the Date of Lease set forth in the following
Schedule (the "Schedule"), by and between American National Bank and Trust
Company of Chicago as Trustee under Trust No. 113370-03 ("Landlord"), and the
Tenant identified immediately above.

                          SCHEDULE OF SIGNIFICANT TERMS

         For purposes of this Lease, the terms set forth below shall have the
meanings or be assigned the amounts as follows:

DATE OF LEASE:                                 February 11, 1998

BASE RENT (annual amount):                     3/1/98 - 2/28/99  $53,058.04
                                               3/1/99 - 2/29/00  $54,649.78
                                               3/1/00 - 2/28/01  $56,289.27

MONTHLY BASE RENT:                             3/1/98 - 2/28/99  $4,421.50
                                               3/1/99 - 2/29/00  $4,554.15
                                               3/1/00 - 2/28/01  $4,690.77

COMMENCEMENT DATE:                             March 1, 1998, subject to the
                                               provisions of Section 5 of the
                                               Lease

EXPIRATION DATE:                               February 28, 2001, or such
                                               earlier date as this Lease is
                                               terminated as provided herein.

BUILDING:                                      The improvements commonly known
                                               as 111 Barclay Boulevard,
                                               Lincolnshire Corporate
                                               Center, Lincolnshire, Illinois.

PREMISES:                                      Those certain premises outlined
                                               on the floor plan attached hereto
                                               as Exhibit A, on the second floor
                                               of the Building, known as Suite
                                               280, and containing approximately
                                               4,034 square feet.

TENANT'S PROPORTIONATE SHARE:                  5.16%

BASE CPI AMOUNT:                               N/A

EXPENSE STOP AMOUNT:                           $-0-

TAX STOP AMOUNT:                               $-0-

CPI ADJUSTMENT DATES:                          N/A

Security Deposit:                              $7,010.42

EXTERIOR PARKING SPACES (MAXIMUM):             15 (2 of which shall be
                                               identified as reserved parking)

BROKER:                                        Van Vlissingen and Co. and Grubb
                                               & Ellis

TENANT'S ADDRESS FOR NOTICES:
                                               --------------------------------

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

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

TENANT'S AUTHORIZED REPRESENTATIVE:
                                               --------------------------------

GUARANTOR (if any):
                                               --------------------------------

ATTACHMENTS TO LEASE (check if applicable):

              Guaranty
                                               ------

              Workletter
                                               ------

              Attachment(s) to Workletter
                                               ------

              Rider A:                            X   (Rules and Regulations)
                                               ------

              Rider B:                            X   (Cleaning Schedule)
                                               ------

                                       2

                             SUPPLEMENTAL PROVISIONS

S.1 OPTION TO EXTEND. If Tenant shall timely and faithfully perform all of the
terms, covenants and conditions of this Lease, and provided that Tenant (and not
a sublessee or assignee, other than under an assignment made pursuant to Section
13 hereof) shall then be in occupancy of all or substantially all of the Leased
Premises, Tenant shall have the right, exercisable by giving written notice
thereof to Landlord at least nine (9) months prior to the expiration of the
original term of this Lease, to extend the term of this Lease for an additional
term of two (2) years, upon all of the terms, covenants and conditions contained
in this Lease, except that the Base Rent during the additional term shall be as
follows:

                                                                Monthly
         Period                      Annual Rent                Installments
                                                          
         03/1/01 - 02/28/02          $57,977.95                 $4,831.50
         03/1/02 - 02/29/03          $59,717.29                 $4,976.44

S.2 ICO LEASE TERMINATION CONTINGENCY. Notwithstanding anything set forth
herein, this Lease is expressly conditioned upon receipt by Landlord of a lease
termination agreement (the "Termination") between Landlord and ICO Services,
Inc., effective February 28, 1998, with respect to the Premises, in form and
content acceptable to Landlord. If the Termination is not received by Landlord
on or before February 28, 1998, then this Lease shall terminate in its entirety.

S.3 REPAIRS. Notwithstanding anything set forth in Section 5 of this Lease to
the contrary, Landlord shall perform the following repairs to the Premises, at
its sole cost and expense:

         (a)      interior painting of the Premises;
         (b)      repair of the scratch in the glass; and
         (c)      removal of the visible pipes from the conference room.

                                       3

                                   WITNESSETH:

         Landlord hereby leases to Tenant, and Tenant hereby accepts the
Premises, for a term (herein called the "Term") commencing on the commencement
Date and ending on the Expiration Date, paying as rent therefor the sums
hereinafter provided, without any setoff, abatement, counterclaim, or deduction
whatsoever, except as herein expressly provided.

        IN CONSIDERATION THEREOF, THE PARTIES HERETO COVENANT AND AGREE:

         1. BASE RENT. Subject to periodic adjustment as hereinafter provided,
Tenant shall pay an annual base rent (herein called "Base Rent") to Landlord for
the Premises in the amount stipulated in the Schedule, payable in monthly
installments (herein called "Monthly Base Rent") in the amount stipulated in the
Schedule, in advance on the first day of the first full calendar month and on
the first day of each calendar month thereafter of the Term, and at the same
rate prorated for fractions of a month if the Term shall begin on any date
except the first day, or shall end on any day except the last day of a calendar
month. Base Rent, Additional Rent (as hereinafter defined), Additional Rent
Progress Payment (as hereinafter defined) and all other amounts becoming due
from Tenant to Landlord herein (herein collectively called the "Rent") shall be
paid in lawful money of the United States to One Overlook Point at its office as
designated in Section 26 hereof, or as otherwise designated from time to time by
written notice from Landlord to Tenant. The obligation to pay Rent hereunder is
independent of each and every other covenant and agreement contained in this
Lease.

         2. ADDITIONAL RENT. In addition to paying the Base Rent specified in
Section 1 hereof, Tenant shall pay as additional rent the amounts determined in
accordance with the following provisions of this Section 2 (herein called
"Additional Rent"):

                  (a) DEFINITIONS. As used in this Lease:

                           (i) "Adjustment Date" shall mean the first day of the
                  Term and each January 1 thereafter falling within the Term.

                           (ii) "Adjustment Year" shall mean each calendar year
                  during which an Adjustment Date falls.

                           (iii) "Expenses" shall mean and include those costs
                  and expenses paid or incurred by Landlord in connection with
                  the ownership, operation, management, and maintenance of the
                  Building and the land on which the Building is situated in a
                  manner deemed reasonable by Landlord and appropriate and for
                  the best interests of the Building and the tenants in the
                  Building, including, but not limited to, the following:

                                    (A) All costs and expenses directly related
                           to the Building for operating and cleaning tenant,
                           common and public areas, for utilities, for the
                           payment of salaries and fringe benefits for personnel
                           of the grade of building manager and below, for
                           removing snow, ice, and debris, and costs of
                           property, liability, rent loss, and other insurance;

                                       1

                                    (B) All costs and expenses of replacing
                           paving, curbs, walkways, landscaping (including
                           replanting and replacing flowers and other
                           plantings), common and public parking and lighting
                           facilities in the Building and the areas immediately
                           adjacent thereto;

                                    (C) Electricity for lighting the common and
                           public areas and for running the elevators and other
                           building equipment and systems, fuel and water used
                           in heating, ventilating, and air-conditioning of the
                           Building and water for drinking, lavatory and toilet
                           purposes;

                                    (D) Maintenance of mechanical and electrical
                           equipment, including heating, ventilating and
                           air-conditioning equipment in the Building, but
                           excluding capital expenditures (except as set forth
                           in (H) below) which under generally accepted
                           accounting principles are required to be capitalized;

                                    (E) Window cleaning and janitor and cleaning
                           service, including janitor and cleaning equipment and
                           supplies for tenant, common and public areas;

                                    (F) Maintenance of elevators, alarm, and
                           security systems, rest rooms, sprinklers, and
                           plumbing systems, lobbies, hallways, and other common
                           and public areas of the Building;

                                    (G) A management fee for the managing agent
                           of the Building at actual cost not to exceed four
                           percent (4%) of Landlord's gross receipts from
                           operation of the Building;

                                    (H) The cost of any capital improvement made
                           at any time, whether before or after the Date of
                           Lease, which reduces some of the costs included
                           within Expenses or which is required under any
                           governmental laws, regulations, or ordinances which
                           were not applicable to the Building at any time prior
                           to the Commencement Date, amortized on an annual
                           basis to the extent of the annual savings effected by
                           such capital improvement or equipment (as reasonably
                           determined by Landlord); and

                                    (I) Legal and other professional expenses
                           incurred in respect of the operation, use,
                           occupation, or maintenance of the Building and in
                           seeking or obtaining reductions in and refunds of
                           Taxes, but excluding legal costs in leasing space or
                           incurred in disputes with tenants.

                                    (J) Common area maintenance and other costs
                           allocable to the Building under the Declaration of
                           Protective Covenants for Lincolnshire Corporate
                           Center (Unit III) applicable to the Building.

                                    (K) Expenses shall not include the
                           following: costs or other items included within the
                           meaning of the term "Taxes" (as hereinafter defined);
                           costs of capital improvements to the Building (except
                           as set forth

                                       2

                           in H above); depreciation; expenses incurred in
                           leasing or procuring tenants (including, without
                           limitation, lease commissions, advertising expenses,
                           and expenses of renovating apace for tenants);
                           interest or amortization payments on any mortgage or
                           mortgages; rental under any ground or underlying
                           lease or leases; wages, salaries, or other
                           compensation paid to any executive employees above
                           the grade of building manager; wages, salaries, or
                           other compensation paid for clerks or attendants in
                           concessions or newsstands operated by the Landlord;
                           the cost of correcting defects (latent or otherwise)
                           which arise within one (1) year after initial
                           construction of the Building in the construction of
                           the Building, except that conditions (not occasioned
                           by construction defects) resulting from ordinary wear
                           and tear shall not be deemed defects; the cost of
                           installing, operating, and maintaining a specialty
                           improvement, including, without limitation, an
                           observatory, or broadcasting, cafeteria, or dining
                           facility, or athletic, luncheon, or recreational
                           club; any cost or expense representing an amount paid
                           to a related entity which is in excess of the amount
                           which would be paid in the absence of such
                           relationship; and any expenditures for which Landlord
                           has been reimbursed (other than pursuant to rent
                           adjustment, escalation, or additional rent provisions
                           in leases).

                           Notwithstanding the foregoing provisions of this
                           Section 2(a)(iii), for any Adjustment Year in which
                           the aggregate usable office space of the Building has
                           not been one hundred percent (100%) occupied during
                           the entire Adjustment Year, Expenses shall include
                           any expenses which Landlord shall reasonably
                           determine would have been incurred had the Building
                           been one hundred percent (100%) occupied.

                           (iv) "Taxes" shall mean all real estate taxes,
                  assessments (whether they be general or special), sewer rents,
                  rates and charges, transit taxes, taxes based upon the receipt
                  of rent, and any other federal, state or local governmental
                  charge, general, special, ordinary or extraordinary (but not
                  including income or franchise taxes (other than personal
                  property replacement income taxes) or any other taxes imposed
                  upon or measured by Landlord's income or profits, unless the
                  same shall be imposed in lieu of the real estate taxes or
                  other ad valorem taxes), which may now or hereafter be levied,
                  imposed or assessed against the Building or the land on which
                  the Building is located (the "Land"), or both. The Building
                  and the Land are herein collectively called the "Real
                  Property."

                  Notwithstanding the foregoing provisions of this Section 2
(a)(iv):

                                    (A) If at any time during the Term of this
                           Lease the method of taxation then prevailing shall be
                           altered so that any new tax, assessment, levy,
                           imposition or charge or any part thereof shall be
                           imposed upon Landlord in addition to, or in place or
                           partly in place of any such Taxes, or contemplated
                           increase therein, and shall be measured by or be
                           based in whole or in part upon the Real Property or
                           the rents or other income

                                       3

                           therefrom, then all such new taxes, assessments,
                           levies, impositions or charges or part thereof, to
                           the extent that they are so measured or based, shall
                           be included in Taxes levied, imposed, or assessed
                           against real property to the extent that such items
                           would be payable if the Real Property were the only
                           property of Landlord subject thereto and the income
                           received by Landlord from the Real Property were the
                           only income of Landlord.

                                    (B) Notwithstanding the year for which any
                           such taxes or assessments are levied, (i) in the case
                           of special taxes or special assessments which may be
                           payable in installments, the amount of each
                           installment, plus any interest payable thereon (but
                           not including penalty interest), paid during a
                           calendar year shall be included in Taxes for that
                           year and (ii) if any taxes or assessments payable
                           during any calendar year shall be computed with
                           respect to a period in excess of twelve calendar
                           months, but not to exceed thirteen calendar months,
                           then taxes or assessments applicable to the excess
                           period shall be included in Taxes for that year.
                           Except as provided in the preceding sentence, for
                           purposes of this Section 2, all references to Taxes
                           "for" a particular year shall be deemed to refer to
                           taxes levied, assessed or otherwise imposed for such
                           year without regard to when such taxes are payable.

                                    (C) Taxes shall also include any personal
                           property taxes (attributable to the calendar year in
                           which paid) imposed upon the furniture, fixtures,
                           machinery, equipment, apparatus, systems and
                           appurtenances used in connection with the Real
                           Property or the operation thereof and located at the
                           Building.

                           (v) "Tenant's Proportionate Share" shall mean the
                  percentage stipulated in the Schedule which is the percentage
                  obtained by dividing the Rentable Area of the Premises by the
                  Rentable Area of the Building.

                           (vi) Intentionally Deleted.

                           (vii) Intentionally Deleted.

                           (viii) Intentionally Deleted.

                           (ix) Intentionally Deleted.

                           (x) Intentionally Deleted.

                           (xi) "Additional Rent" shall mean all amounts
                  determined pursuant to this Section 2, including any amounts
                  payable by Tenant to Landlord on account thereof.

                  (b) COMPUTATION OF ADDITIONAL RENT. Tenant shall pay
         Additional Rent for each Adjustment Year determined as hereinafter set
         forth. Additional Rent payable by

                                       4

Tenant with respect to each Adjustment Year during which an Adjustment Date
falls shall include the following amounts:

                  (i)      the amount by which Tenant's Proportionate Share,
         multiplied by the Expenses for such Adjustment Year exceeds the Expense
         Stop Amount stipulated in the Schedule (said excess being called the
         "Expense Adjustment"); plus

                  (ii)     the amount by which Tenant's Proportionate Share,
         multiplied by the Taxes for such Adjustment Year exceeds the Tax Stop
         Amount stipulated in the Schedule (said excess being called the "Tax
         Adjustment"); plus

                  (iii)    Intentionally Deleted.

         (c)      PAYMENTS OF ADDITIONAL RENT; PROJECTIONS. Tenant shall pay
Additional Rent to Landlord in the manner hereinafter provided.

                  (i)      EXPENSE ADJUSTMENT AND TAX ADJUSTMENT. Tenant shall
         make payments on account of the Expense Adjustment and Tax Adjustment
         (the aggregate of such payments with respect to any Adjustment Year
         being called "Additional Rent Progress Payment") effective as of the
         Adjustment Date for each Adjustment Year as follows:

                           (A)      Landlord may, prior to each Adjustment Date
                  or from time to time during the Adjustment Year in which such
                  Adjustment Date falls, deliver to Tenant a written notice or
                  notices ("Projection Notice") setting forth (1) Landlord's
                  reasonable estimates, forecasts or projections (collectively,
                  the "Projections") of Taxes and Expenses for such Adjustment
                  Year based on Landlord's budgets of Expenses and estimate of
                  Taxes, and (2) Tenant's Additional Rent Progress Payment with
                  respect to each component of Additional Rent for such
                  Adjustment Year based upon the Projections. Landlord's budgets
                  of Expenses and the Projections based thereon shall assume
                  full occupancy and use of the Building and may be revised by
                  Landlord from time to time based on changes in rates and other
                  criteria which are components of budget items.

                           (B)      Until such time as Landlord furnishes a
                  Projection Notice for an Adjustment Year, Tenant shall, at the
                  time of each payment of Monthly Base Rent, pay to Landlord a
                  monthly installment of Additional Rent Progress Payment with
                  respect to each component of Additional Rent equal to the
                  greater of the latest monthly installment of Additional Rent
                  Progress Payment or one-twelfth (1/12) of Tenant's latest
                  determined Expense Adjustment and Tax Adjustment. On or before
                  the first day of the next calendar month following Landlord's
                  service of a Projection Notice, and on or before the first day
                  of each month thereafter, Tenant shall pay to Landlord
                  one-twelfth (1/12) of the Additional Rent Progress Payments
                  shown in the Projection Notice. Within thirty (30) days

                                      5

                  following Landlord's service of a Projection Notice, Tenant
                  shall also pay Landlord a lump sum equal to the Additional
                  Rent Progress Payment shown in the Projection Notice less (1)
                  any previous payments on account of Additional Rent Progress
                  Payment made during such Adjustment Year and (2) monthly
                  installments on account of Additional Rent Progress Payment
                  due for the remainder of such Adjustment Year.

                  (ii)     CPI ADJUSTMENT. Intentionally Deleted.

         (d)      READJUSTMENTS. The following readjustments with regard to the
Tax Adjustment and Expense Adjustment shall be made by Landlord and Tenant:

                  (i)      Following the end of each Adjustment Year and after
         Landlord shall have determined the amounts of Expenses to be used in
         calculating the Expense Adjustment for such Adjustment Year, Landlord
         shall notify Tenant in writing ("Landlord's Statement") of such
         Expenses for such Adjustment Year. If the Expense Adjustment owed for
         such Adjustment Year exceeds the Expense Adjustment component of the
         Additional Rent Progress Payment paid by Tenant during such Adjustment
         Year, then Tenant shall, within thirty (30) days after the date of
         Landlord's Statement, pay to Landlord an amount equal to the excess of
         the Expense Adjustment over the Expense Adjustment component of the
         Additional Progress Payment paid by Tenant during such Adjustment Year.
         If the Expense Adjustment component of the Additional Rent Progress
         Payment paid by Tenant during such Adjustment Year exceeds the Expense
         Adjustment owed for such Adjustment Year, then Landlord shall credit
         such excess to Rent payable after the date of Landlord's Statement, or
         may, at its option, credit such excess to any Rent then due and owing,
         until such excess has been exhausted. If the Expiration Date shall
         occur prior to full application of such excess, Landlord shall pay to
         Tenant the balance thereof not theretofore applied against Rent and not
         reasonably required for payment of Additional Rent for the Adjustment
         Year in which the Expiration Date occurs, within thirty (30) days after
         the Expiration Date.

                  (ii)     Following the end of each Adjustment Year and after
         Landlord shall have determined the actual amounts of Taxes to be used
         in calculating the Tax Adjustment for such Adjustment Year, Landlord
         shall notify Tenant in writing ("Landlord's Statement") of such Taxes
         for such Adjustment Year. If the Tax Adjustment owed for such
         Adjustment Year exceeds the Tax Adjustment component of the Additional
         Rent Progress Payment paid by Tenant during such Adjustment Year, then
         Tenant shall, within thirty (30) days after the date of Landlord's
         Statement, pay to Landlord an amount equal to the excess of the Tax
         Adjustment over the Tax Adjustment component of the Additional Rent
         Progress Payment paid by Tenant during such Adjustment Year. If the Tax
         Adjustment component of the Additional Rent Progress Payment paid by
         Tenant during such Adjustment Year exceeds the Tax Adjustment owed for
         such Adjustment Year, then Landlord shall credit such excess to Rent
         payable after the date of Landlord's Statement, or may, at its
         election, credit such excess to any Rent then due and

                                      6

         owing, until such excess has been exhausted. If the Expiration Date
         shall occur prior to full application of such excess, Landlord shall
         pay to Tenant the balance thereof not theretofore applied against Rent
         and not reasonably required for payment of Additional Rent for the
         Adjustment Year in which the Expiration Date occurs, within thirty (30)
         days after the Expiration Date.

                  (iii)    No interest or penalties shall accrue on any amounts
         which Landlord is obligated to credit or pay to Tenant by reason of
         this Section 2(d).

         (e)      BOOKS AND RECORDS. Landlord shall maintain books and records
     showing Expenses and Taxes in accordance with sound accounting and
     management practices. Tenant and its employees and accountants and
     attorneys shall have the right to examine Landlord's books and records
     showing Expenses and Taxes upon five (5) days prior written notice and
     during normal business hours within forty-five (45) days following the
     furnishing by the Landlord to the Tenant of Landlord's Statement provided
     for in Section 2(d). The results of such examination shall be for the
     benefit of Landlord and Tenant only, shall be maintained in confidence by
     Tenant and Tenant's employees, accountants and attorneys and shall not be
     disseminated or furnished to any other person or entity. No person retained
     by Tenant to conduct such review shall be compensated on a contingency
     basis. Unless the Tenant shall take written exception to any item within
     sixty (60) days after the furnishing of the Landlord's Statement containing
     said item, such Landlord's Statement shall be considered as final and
     accepted by the Tenant. If Tenant takes exception to any item in Landlord's
     Statement within the applicable time period and if Landlord and Tenant are
     unable to agree on the correctness of said item, then either party may
     refer the decision of said issue to a reputable firm of independent
     certified public accountants designated by Landlord and the decision of
     said accountants shall be conclusively binding on the parties. The party
     required to make payment under such adjustment shall pay all fees and
     expenses involved in such decision unless the payment represents five
     percent (5%) or less of the annual Expense Adjustment shown on Landlord's
     Statement, in which case Tenant shall bear all such fees and expenses.

         (f)      PRORATION AND SURVIVAL. With respect to any Adjustment Year
     which does not fall entirely within the term, Tenant shall be obligated to
     pay as Additional Rent for such adjustment year only a pro rata share of
     Additional Rent as hereinabove determined, based upon the number of days of
     the Term falling within the Adjustment Year. Following expiration or
     termination of this Lease, Tenant shall pay any Additional Rent due to the
     Landlord within thirty (30) days after the date of Landlord's Statement
     sent to Tenant. Without limitation on other obligations of Tenant which
     shall survive the expiration of the Term, the obligations of Tenant to pay
     Additional Rent provided for in this Section 2 shall survive the expiration
     or termination of this Lease.

         (g)      NO DECREASE IN BASE RENT. In no event shall any Additional
     Rent result in a decrease of the Base Rent payable hereunder as set forth
     in Section 1 hereof.

         (h)      ADDITIONAL RENT. All amounts payable by Tenant as or on
     account of Additional Rent shall be deemed to be additional rent becoming
     due under this Lease.

                                      7

         (i)      ADJUSTMENT OF TENANT'S PROPORTIONATE SHARE. If at any time in
     the future the number of rentable square feet of office space in the
     Building is reduced, by reason of change in the Building structure or by
     reason of the separation of ownership of a portion of the Building by a
     device such as vertical subdivision or submission of the Building to a
     condominium form of ownership, with the result that Tenant's Proportionate
     Share no longer reflects the percentage of office space in the Building for
     which Landlord is responsible for Taxes and Expenses, then Landlord shall
     be entitled to make an equitable adjustment in Tenant's Proportionate Share
     to reflect the change in such circumstances.

     3.  USE OF PREMISES.

         (a)      Tenant shall use and occupy the Premises for Tenant's
     executive and general offices and for such related purposes as are
     described in subsection (b) of this Section 3 and for no other purpose. For
     the purposes of this Section 3, Tenant shall be deemed to include Tenant's
     permitted subtenants, assigns, and occupants.

         (b)      Landlord agrees that, in connection with and incidental to
     Tenant's use of the Premises for the office purposes set forth in
     subsection (a) of this Section 3, provided Tenant, at Tenant's sole cost
     and expense, obtains any special amendments to the certificate of occupancy
     for the Premises and any other permits required by any governmental
     authority having jurisdiction thereof, if any, Tenant may use portions of
     the Premises for (i) the preparation and service of food and beverages from
     a pantry kitchen or lounge all for the exclusive use by officers, employees
     and business guests of Tenant (but not for use as a public restaurant or by
     other tenants of the Building), (ii) the operation of vending machines for
     the exclusive use of officers, employees and business guests of Tenant,
     provided that each vending machine, where necessary, shall have a
     waterproof pan thereunder and be connected to a drain, and (iii) the
     installation, maintenance and operation of electronic data processing
     equipment, computer processing facilities and business machines, provided
     that such equipment is contained within the Premises and does not cause
     vibrations, noise electrical interference or other disturbance to other
     tenants of the Building or the elevators or other equipment in the
     Building. With respect to any use permitted under this Section 3, any such
     use shall not violate any laws or requirements of public authorities,
     constitute a public or private nuisance, interfere with or cause physical
     discomfort to any of the other tenants or occupants of the Building,
     interfere with the operation of the Building or the maintenance of same as
     a first-class office building, or violate any of Tenant's other obligations
     under this Lease.

         (c)      Tenant hereby represents, warrants, and agrees that Tenant's
     business is not and shall not be photographic, multilith, or multigraph
     reproductions or offset printing. Anything contained herein to the contrary
     notwithstanding, Tenant shall not use the Premises or any part thereof, or
     permit the Premises or any part thereof to be used, (i) for the business of
     photographic, multilith, or multigraph reproductions or offset printing,
     (ii) for a retail banking, trust company, depository, guarantee, or safe
     deposit business open to the general public, (iii) as a savings bank, a
     savings and loan association, or as a loan company open to the general
     public, (iv) for the sale to the general public of travelers checks, money
     orders, drafts, foreign exchange or letters of credit or for the

                                      8

     receipt of money for transmission, (v) as a stock broker's or dealer's
     office or for the underwriting or sale of securities open to the general
     public, (vi) except as provided in subsection (b) of this Section 3, as a
     restaurant or bar or for the sale of confectionery, soda, beverages,
     sandwiches, ice cream, or baked goods or for the preparation, dispensing,
     or consumption of food or beverages in any manner whatsoever, (vii) as a
     news or cigar stand, (viii) as an employment agency, labor union office,
     physician's or dentist's office, dance, or music studio, school (except for
     the training of employees of Tenant), (ix) as a travel agency, or (x) as a
     barber shop or beauty salon. Nothing in this subsection (c) shall preclude
     Tenant from using any part of the Premises for photographic, multilith, or
     multigraph reproductions in connection with, either directly or indirectly,
     its own business or activities.

     4.    PRIOR OCCUPANCY. Landlord may authorize Tenant to take possession of
all or any part of the Premises prior to the beginning of the Term or
substantial completion of any work to be performed by Landlord pursuant to the
Workletter, if any, attached hereto. If Tenant does take possession pursuant to
authority so given, all of the covenant 3 and conditions of this Lease shall
apply to and shall control such occupancy. Rent for such occupancy shall be paid
upon occupancy and on the first of each calendar month thereafter at the rate
set forth in Section 1 and Section 2 hereof. If the Premises are occupied for a
fractional month, Rent shall be prorated on a per diem basis. Notwithstanding
the foregoing, if Landlord gives possession prior to the Commencement Date to
enable Tenant to fit the Leased Premises to its use, such occupancy shall be
subject to all the terms and conditions of this Lease (except that Tenant shall
not be required to pay rent during such occupancy).

     5.    DELIVERY OF POSSESSION. Landlord shall deliver possession of the
Premises to Tenant in its current "as-is" condition (reasonable wear and tear
excepted). If the Landlord shall be unable to give possession of the Premises on
the Commencement Date set forth in the Schedule of Significant Terms for any
reason, Landlord shall not be subject to any liability for failure to give
possession. Under such circumstances the Rent reserved and covenanted to be paid
herein shall commence on the date provided in the Workletter attached hereto, if
any, for the commencement of Rent, or if no such Workletter is attached, then on
the date possession is delivered to Tenant or would have been delivered to
Tenant but for Tenant de1ays described in the Workletter attached hereto, if
any, or otherwise due in whole or in part, to any delay or fault on the part of
Tenant. No such failure to give possession on the Commencement Date shall affect
either the validity of this Lease or the obligations of the Tenant or Landlord
hereunder, and the same shall not be construed to extend the Term.
Notwithstanding the foregoing, if Landlord has not delivered possession of the
Premises to Tenant by April 1, 1998, Tenant shall have the right to terminate
the Lease, by written notice thereof to Landlord on or before April 6, 1998.

     6.    ALTERATIONS. Tenant shall not, without the prior written consent of
Landlord in each instance, make any alterations, improvements, or additions to
the Premises, except for those which do not require a building permit and cost
less than $10,000.00. If Landlord consents to alterations, improvements, or
additions requiring Landlord's consent, it may impose such conditions with
respect thereto as Landlord deems appropriate, including, without limitation,
requiring Tenant to furnish Landlord with security for the payment of all costs
to be incurred in connection with such work, insurance against liabilities which
may arise out of such work, plans and specifications and permits necessary for
such work. The work necessary to make any

                                      9

alterations, improvements, or additions to the Premises shall be done at
Tenant's expense by employees of, or contractors hired by, Landlord, except to
the extent Landlord gives its prior written consent to Tenant's hiring
contractors. Tenant shall promptly pay to Landlord or to Tenant's contractors,
as the case may be, when due, the cost of all such work and of all decorating
required by reason thereof. Tenant will also pay to Landlord an amount equal to
ten percent (10%) of all of the costs of such work to reimburse Landlord for its
overhead and construction management services allocable to such work. Upon
completion, Tenant shall deliver to Landlord, if payment is made directly to
contractors, evidence of payment, contractors' affidavits and full and final
waivers of all liens for labor, services or materials. Tenant shall defend and
hold Landlord and the holder of any legal or beneficial interest in the land or
Building harmless from all costs, damages, liens, and expenses related to such
work. All work done by Tenant or its contractors pursuant to Sections 6 or 11
hereof shall be done in a first-class workmanlike manner using only good grades
of materials and shall comply with all insurance requirements and all applicable
laws and ordinances and rules and regulations of governmental departments or
agencies and the rules and regulations adopted by the Landlord for the Building.
Within thirty (30) days after substantial completion of any such work by Tenant
or its contractors, Tenant shall furnish to Landlord "as built" drawings of such
work.

     7.    SERVICES.

           (a)    The Landlord, as long as the Tenant is not in default under
     any of the covenants of this Lease, shall furnish:

                  (i)    Air-conditioning and heat when necessary to provide a
           temperature condition required, in Landlord's judgment, for
           comfortable occupancy of the Premises under normal business
           operations, daily from 8:00 a.m. to 6:00 p.m. (Saturdays 8:00 a.m. to
           1:00 p.m.), Sundays and holidays (as hereinafter defined) excepted.
           The term "holidays" as used herein shall mean New Year's Day,
           Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
           Christmas Day. Landlord's agreements hereunder are subject to
           Presidential and governmental restrictions on energy use;

                  (ii)   Cold water in common with other tenants from Village of
           Lincolnshire mains for drinking, lavatory, and toilet purposes drawn
           through fixtures installed by the Landlord, or by Tenant in the
           Premises with Landlord's written consent, and hot water in common
           with other tenants for lavatory purposes from regular Building
           supply. Tenant shall pay Landlord as additional rent at rates fixed
           by Landlord for water furnished for any other purpose. Tenant shall
           pay Landlord the coat of any meters or submeters installed to measure
           Tenant's water usage for such other purposes. The Tenant shall not
           waste or permit the waste of water;

                  (iii)  Janitor service and customary cleaning provided nightly
           in and about the Premises, Saturdays, Sundays, and holidays excepted,
           in accordance with the cleaning schedule attached hereto as Rider B.
           The Tenant shall not provide any janitor services or cleaning without
           the Landlord's written consent, and then only subject to supervision
           of Landlord and at Tenant's sole

                                      10

           responsibility and cost (and without compensation to Tenant or
           reduction in Rent) and by a janitor or cleaning contractor or
           employees at all times satisfactory to Landlord;

                  (iv)   Passenger elevator service in common with Landlord and
           other tenants, daily from 8:00 a.m. to 8:00 p.m. (Saturdays from 8:00
           a.m. to 1:00 p.m.), Sundays and holidays excepted, and freight
           elevator service in common with Landlord and other tenants, daily
           from 7:00 a.m. to 3:30 p.m., Saturdays, Sundays, and holidays
           excepted. Such normal elevator service, passenger or freight, if
           furnished at other times shall be optional with Landlord and shall
           never be deemed a continuing obligation. The Landlord, however, shall
           provide limited passenger elevator service daily at all times such
           normal passenger service is not furnished. Operatorless automatic
           elevator service shall be deemed "elevator service" within the
           meaning of this paragraph;

                  (v)    Electricity shall not be furnished by Landlord, but
           shall be furnished by an approved electric utility company serving
           the Building. Landlord shall permit the Tenant to receive such
           service direct from such utility company at Tenant's cost, and shall
           permit Landlord's wire and conduits, to the extent available,
           suitable, and safely capable, to be used for such purposes. Tenant
           shall make all necessary arrangements with the utility company for
           metering and paying for electric current furnished by it to Tenant
           and Tenant shall pay for all charges for electric current consumed on
           the Premises during Tenant's occupancy thereof. The electricity used
           during the performance of janitor service, the making of alterations
           or repairs in the Premises, the operation of the Buildings HVAC
           System at times other than as provided in Section 7(a) (i) or the
           operation of any special air conditioning systems which may be
           required for data processing equipment or for other special equipment
           or machinery installed by Tenant, shall be paid for by Tenant. Tenant
           shall make no alterations or additions to the electric equipment or
           appliances installed by Tenant without the prior written consent of
           the Landlord in each instance, which consent shall not be
           unreasonably withheld. Tenant also agrees to purchase from the
           Landlord or its agent at competitive prices all lamps, bulbs,
           ballasts, and starters used in the Premises during the Term hereof.
           The electrical feeder or riser capacity serving the Premises on the
           Commencement Date shall be adequate to provide Building Standard
           electrical loads. Any additional feeders or risers to supply Tenant's
           additional electrical requirements, and all other equipment proper
           and necessary in connection with such feeders or risers, shall be
           installed by Landlord upon Tenant's request, at the sole cost and
           expense of Tenant, provided that, in Landlord's judgment, such
           additional feeders or risers are necessary and are permissible under
           applicable laws and insurance regulations and the installation of
           such feeders or risers will not cause permanent damage or injury to
           the Building or the Premises or cause or create a dangerous or
           hazardous condition or entail excessive or unreasonable alterations
           or interfere with or disturb other tenants or occupants or the
           Building and Tenant deposits with Landlord funds or other security
           acceptable to Landlord in the estimated amount of the cost of such
           installation, as determined by Landlord. Tenant covenants and agrees
           that at all

                                      11

           times its use of electric current shall never exceed the capacity of
           the feeders to the Building or the risers or wiring installed
           thereon;

                  (vi)   Landlord shall cause the Building and adjacent walkways
           and parking areas to be maintained in operating condition and
           reasonably free from debris, snow, and ice consistent with the
           operation of a first-class office building in the North Suburban
           Chicago area.

                  (vii)  Landlord shall provide such extra or additional
           services as it is reasonably possible for the Landlord to provide,
           and as the Tenant may from time to time request, within a reasonable
           period after the time such extra or additional services are
           requested. Tenant shall, for such extra or additional cervices, pay
           at Landlord's scheduled rates therefor; such amount to be considered
           additional rent hereunder. All charges for such extra or additional
           services shall be due and payable at the same time as the installment
           of Base Rent with which they are billed. Any such billings for extra
           or additional services shall include an itemization of the extra or
           additional services rendered, and the charge for each such service.
           Landlord's applicable schedule of charge rates for certain extra or
           additional services will be published from time to time by Landlord
           and made available to tenant at its request. Such schedule shall be
           subject to change during the Term from time to time.

           (b)    Failure by Tenant to promptly pay Landlord's proper charges
     for water (other than for drinking, lavatory, and toilet purposes) or other
     services shall give Landlord, upon not less than ten (10) days' notice, the
     right to discontinue furnishing the services, and no such discontinuance
     shall be deemed an eviction or disturbance of Tenant's use of the Premises
     or render Landlord liable for damages or relieve Tenant from performance of
     Tenant's obligations under this Lease.

           (c)    Tenant agrees that Landlord and its beneficiaries and their
     agents shall not be liable in damages, by abatement of Rent or otherwise,
     for failure to furnish or delay in furnishing any service when such failure
     or delay is occasioned, in whole or in part, by repairs, renewals, or
     improvements, by any strike, lockout, or other labor trouble, by inability
     to secure electricity, gas, water, or other fuel at the Building after
     reasonable effort so to do, by any accident or casualty whatsoever, by the
     act or default of Tenant or other parties including without limitation
     Tenant's failure to maintain the Premises in good condition and repair, or
     by any cause beyond the reasonable control of Landlord; and such failures
     or delays shall never be deemed to constitute an eviction or disturbance of
     the Tenant's use and possession of the Premises or relieve the Tenant from
     paying Rent or performing any of its obligations under this Lease. Tenant
     shall notify Landlord if any service shall be stopped, whereupon Landlord
     will proceed diligently to restore such service as soon as reasonably
     possible.

           (d)    Tenant agrees to cooperate fully, at all times, with Landlord
     in abiding by all reasonable regulations and requirements which Landlord
     may prescribe for the proper functioning and protection of all utilities
     and services reasonably necessary for the operation of the Premises and the
     Building.

                                      12

           (e)    Landlord, throughout the Term of this Lease, shall have free
     access to any and all mechanical installations, and Tenant agrees that
     there shall be no construction of partitions or other obstructions which
     might interfere with the moving of the servicing equipment of Landlord to
     or from the enclosures containing said installations. Tenant further agrees
     that neither Tenant, nor its servants, employees, agents, visitors,
     licensees, or contractors shall at any time tamper with, adjust, or
     otherwise in any manner affect Landlord's mechanical installations.

           (f)    Tenant shall make arrangements directly with the telephone
     company servicing the Building for such telephone service in the Premises
     as may be desired by Tenant. If Tenant desires telegraphic, telephonic,
     burglar alarm, computer installations or signal service (which service
     shall be installed and maintained at Tenant's sole expense), Landlord
     shall, upon request, direct where and how all connections and wiring for
     such service shall be introduced and run. Landlord additionally shall have
     the right to approve or disapprove all plans and specifications for such
     service prior to any installation and to refuse permission for such
     installation if Landlord determines same could adversely affect an existing
     system. In the absence of such directions, Tenant shall make no borings or
     cutting or install any wires or cables in or about the Premises and/or the
     Building.

     8.    CONDITION AND CARE OF PREMISES.

           (a)    Tenant's taking possession of the Premises shall be conclusive
     evidence against Tenant, and upon said taking of possession Tenant shall
     execute an agreement with Landlord stating that the Premises were then in
     good order and satisfactory condition, except for any so-called "punchlist"
     items detailed in said agreement and latent defects attendant to Landlord's
     Work under any Workletter attached hereto and made a part hereof, and upon
     completion of any punchlist items, Tenant shall also execute a supplement
     to said agreement accepting completion of the punchlist items. No promises
     of the Landlord to alter, remodel, improve, repair, decorate, or clean the
     Premises or any part thereof have been made, and no representation
     respecting the condition of the Premises, the Building, or the Land, has
     been made to Tenant by or on behalf of Landlord except to the extent
     expressly set forth herein, or in the aforesaid Workletter. This Lease does
     not grant any rights to light or air over or about the property of
     Landlord.

           (b)    Except for any damage resulting from any wanton or negligent
     act of Landlord or its employees and agents, and subject to the provisions
     of Section 15 hereof, Tenant shall, at its own expense, keep the Premises
     in good repair and condition and shall promptly and adequately repair all
     damage to the Premises caused by Tenant or any of its employees, agents, or
     invitees, including replacing or repairing all damaged or broken glass,
     fixtures, and appurtenances resulting from any such damage, under the
     supervision and with the approval of Landlord and within any reasonable
     period of time specified by Landlord. Tenant's obligation to maintain and
     repair the Premises, shall include but is not limited to, all electrical,
     plumbing and mechanical systems serving the Premises from the point said
     systems connect to the Premises. Landlord shall be responsible for the
     maintenance and repair of said systems from the point said systems connect
     to the base building systems on each floor to the Premises. If Tenant does
     not do so promptly and

                                      13

     adequately, Landlord may, but need not, make such repairs and replacements
     and Tenant shall pay Landlord the cost thereof on demand. Tenant shall take
     special care to keep all areas of the Premises which are visible by or
     accessible to the public, such as elevator lobbies and corridors, in good
     order and appearance consistent with the high standards and quality of a
     first-class office building.

           (c)    Whenever, in Landlord's opinion, Tenant's use or occupation of
     the Premises, including lighting, personnel, heat generating machines, or
     equipment, individually or cumulatively, causes the design loads for the
     system providing heat and air-cooling to be exceeded, to affect the
     temperature or humidity otherwise maintained by the heating, ventilating,
     and air conditioning system in the Premises or Building, Landlord may, but
     shall not be obligated to, temper such excess loads by installing
     supplementary heating or air-conditioning units in the Premises or
     elsewhere where necessary. In such event, the cost of such units and the
     expense of installation, including, without limitation, the cost of
     preparing working drawings and specifications, shall be paid by Tenant as
     additional rent within ten (10) days after Landlord's demand therefor.
     Alternatively, Landlord may require Tenant to install such supplementary
     heating or air-conditioning unit at Tenant's sole expense. Landlord may
     operate and maintain any such supplementary units, but shall have no
     continuing obligation to do so or liability in connection therewith. The
     expense resulting from the operation and maintenance of any such
     supplementary heating or air conditioning units, including rent for space
     occupied by any supplementary heating or air conditioning units installed
     outside the Premises, shall be paid by Tenant to Landlord as additional
     rent at rates fixed by Landlord. Alternatively, Landlord may require Tenant
     to operate and maintain any such supplementary units, also at Tenant's sole
     expense.

     9.    RETURN OF PREMISES.

           (a)    At the termination of this Lease by lapse of time or otherwise
     or upon termination of Tenant's right of possession without terminating
     this Lease, Tenant shall surrender possession of the Premises to Landlord
     and deliver all keys and access cards to the Building, the premises and
     the Building garage to Landlord and make known to the Landlord the
     combination of all locks of vaults then remaining in the Premises, and
     shall (subject to the provisions of Sections 9(b) and 9(c) below) return
     the Premises and all equipment and fixtures of the Landlord therein to
     Landlord in as good condition as when Tenant originally took possession,
     ordinary wear, loss or damage by fire or other insured casualty, damage
     resulting from the wanton or negligent act of Landlord or its employees and
     agents excepted, failing which Landlord may restore the Premises and such
     equipment and fixtures to such condition and Tenant shall pay the cost
     thereof to Landlord on demand.

           (b)    All installations, additions, partitions, hardware, light
     fixtures, supplementary heat or air-conditioning units, non-trade fixtures
     and improvements, temporary or permanent, except movable furniture, movable
     partitions and equipment belonging to Tenant, in or upon the Premises,
     whether placed there by Tenant or Landlord, shall be Landlord's property
     and shall remain upon the Premises, all without compensation, allowance or
     credit to Tenant; provided, however, that if Landlord directs

                                      14

     that Tenant remove any of said items at the end of the Term, then Tenant
     (unless prior to installation, Tenant has received Landlord's written
     agreement that Landlord will not require removal thereof at the end of the
     Term), at Tenant' s sole cost and expense, shall promptly remove such of
     the installations, additions, partitions, hardware, light fixtures,
     non-trade fixtures, and improvements placed in the Premises by or on behalf
     of Tenant as are so designated by Landlord and repair any damage to the
     Premises caused by such removal, failing which Landlord may remove the same
     and repair the Premises and Tenant shall pay the cost thereof to Landlord
     on demand.

           (c)    At the sole option of Landlord, Tenant shall leave in place
     any floor covering without compensation to Tenant, or Tenant shall remove
     any floor covering and all fastenings, paper, glue, bases, or other
     vestiges and restore the floor surface to its previous condition. Tenant
     shall remove Tenant's furniture, machinery, safes, trade fixtures, and
     other items of movable personal property of every kind and description from
     the Premises prior to the expiration of the Term or ten (10) days following
     termination of this Lease or Tenant's right of possession, whichever might
     be earlier, failing which Landlord may do so and thereupon the provisions
     of Section 17(f) shall apply.

           (d)    All obligations of Tenant hereunder shall survive the
     expiration of the Term or sooner termination of this Lease.

     10.   HOLDING OVER. The Tenant shall pay Landlord for each month (or
fraction thereof) Tenant retains possession of the Premises or any part thereof
after termination of this Lease, by lapse of time or otherwise, an amount which
is double the amount of rent for each month based on the annual rate of Rent
applicable under Sections 1 and 2 to the period in which such possession occurs,
and Tenant shall also pay all damages, consequential as well as direct,
sustained by Landlord by reason of such retention. Nothing in this Section
contained, however, shall be construed or operate as a waiver of Landlord's
right of reentry or any other right of Landlord.

     11.   RULES AND REGULATIONS. Tenant agrees to observe the rights reserved
to Landlord contained in Section 12 hereof and agrees, for itself, its
employees, agents, clients, customers, invitees and guests, to comply with the
rules and regulations set forth in Rider A attached to this Lease and made a
part hereof and such other reasonable rules and regulations as shall be adopted
by Landlord pursuant to Section 12(1) of this Lease. Any violation by Tenant of
any of the rules and regulations contained in Rider A attached to this Lease or
other Section of this Lease, or as may hereafter be adopted by Landlord pursuant
to Section 12(1) of this Lease, may be restrained; but whether or not so
restrained, Tenant acknowledges and agrees that it shall be and remain liable
for all damages, loss, costs and expense resulting from any violation by the
Tenant of any of said rules and regulations. Nothing in this Lease contained
shall be construed to impose upon Landlord any duty or obligation to enforce
said rules and regulations, or the terms, covenants and conditions of any other
lease against any other tenant or any other persons, and Landlord and its
beneficiary shall not be liable to Tenant for violation of the same by any other
tenant, its employees, agents, invitees, or by any other person.

     12.   RIGHTS RESERVED TO LANDLORD. Landlord reserves the following rights,
exercisable without notice and without liability to Tenant for damage or injury
to property,

                                      15

person or business and without effecting an eviction or disturbance of Tenant's
use or possession or giving rise to any claim for setoff or abatement of Rent or
affecting any of Tenant's obligations under this Lease:

           (a)    To change the name or street address of the Building.

           (b)    To install and maintain signs on the exterior and interior of
     the Building.

           (c)    To prescribe the location and style of the suite number and
     identification sign or lettering for the Premises occupied by the Tenant.

           (d)    To retain at all times, and to use in appropriate instances,
     pass keys to the Premises.

           (e)    To grant to anyone the right to conduct any business or render
     any service in the Building, whether or not it is the same as or similar to
     the use expressly permitted to Tenant by Section 3.

           (f)    To exhibit the Premises during the last nine (9) months of the
     Term at reasonable hours, and to decorate, remodel, repair, alter, or
     otherwise prepare the Premises for reoccupancy at any time after Tenant
     vacates or abandons the Premises.

           (g)    To enter the Premises at reasonable hours for reasonable
     purposes, including inspection and supplying janitor service or other
     service to be provided to Tenant hereunder.

           (h)    To require all persons entering or leaving the Building during
     such hours as Landlord may from time to time reasonably determine to
     identify themselves to watchmen by registration or otherwise, and to
     establish their right to enter or leave in accordance with the provisions
     of applicable rules and regulations adopted by Landlord. Landlord shall not
     be liable in damages for any error with respect to admission to or eviction
     or exclusion from the Building of any person. In case of fire, invasion,
     insurrection, mob, riot, civil disorder, public excitement or other
     commotion, or threat thereof, Landlord reserves the right to limit or
     prevent access to the Building during the continuance of the same, shut
     down elevator service, activate elevator emergency controls, or otherwise
     take such action or preventive measures deemed necessary by Landlord for
     the safety of the tenants or other occupants of the Building or the
     protection of the Building and the property in the Building. Tenant agrees
     to cooperate in any reasonable safety program developed by Landlord.

           (i)    To control and prevent access to common areas and other
     non-general public areas pursuant to the provisions of applicable rules and
     regulations adopted by Landlord.

           (j)    Provided that reasonable access to the Premises shall be
     maintained and the business of Tenant shall not be interfered with or
     disrupted unreasonably, Landlord reserves the right to relocate, enlarge,
     reduce or change lobbies, exits or entrances in or to the Building and to
     decorate and to make, at its own expense, repairs, alterations,

                                      16

     additions and improvements, structural or otherwise, in or to the Building
     or any part thereof, and any adjacent building, land, street or alley,
     including for the purpose of connection with or entrance into or use of the
     Building in conjunction with any adjoining or adjacent building or
     buildings, now existing or hereafter constructed, and may for such purposes
     erect scaffolding and other structures reasonably required by the character
     of the work to be performed, and during such operations may enter upon the
     Premises and take into and upon or through any part of the Building,
     including the Premises, all materials that may be required to make such
     repairs, alterations, improvements, or additions, and in that connection
     Landlord may temporarily close public entry ways, other public spaces,
     stairways or corridors and interrupt or temporarily suspend any services or
     facilities agreed to be furnished by Landlord, all without the same
     constituting an eviction of Tenant in whole or in part and without
     abatement of Rent by reason of loss or interruption of the business of
     Tenant or otherwise and without in any manner rendering Landlord liable for
     damages or relieving Tenant from performance of Tenant's obligations under
     this Lease. Landlord may at its option make any repairs, alterations,
     improvements and additions in and about the Building and the Premises
     during ordinary business hours and, if Tenant desires to have such work
     done during other than business hours, Tenant shall pay all overtime and
     additional expenses resulting therefrom.

           (k)    From time to time to make and adopt such reasonable rules and
     regulations, in addition to or other than or by way of amendment or
     modification of the rules and regulations contained in Rider A attached to
     this Lease or other Sections of this Lease, for the protection and welfare
     of the Building and its tenants and occupants, as the Landlord may
     determine.

     13.   ASSIGNMENT AND SUBLETTING.

           (a)    Except as otherwise expressly provided herein, Tenant shall
     not, without the prior written consent of Landlord in each instance, (1)
     convey, mortgage, pledge, hypothecate, or encumber, or subject to or permit
     to exist upon or be subjected to any lien or charge, this Lease or any
     interest under it, (ii) allow to exist or occur any transfer of or lien
     upon this Lease or the Tenant's interest herein by operation of law, (iii)
     assign this Lease or any of Tenant's rights hereunder, (iv) sublet the
     Premises or any part thereof, or (v) permit the use or occupancy of the
     Premises or any part thereof for any purpose not provided for under Section
     3 of this Lease or by anyone other than the Tenant and Tenant's employees.
     Landlord has the absolute right to withhold its consent, without giving any
     reason whatsoever, except as herein expressly provided to the contrary. The
     foregoing prohibitions shall also apply to any assignee or subtenant of
     Tenant.

           (b)    Prior to the Commencement Date, Tenant shall not assign this
     Lease or sublet all or any part of the Premises. If, after the Commencement
     Date, Tenant has procured an assignee or sublessee, Tenant shall, by
     written notice to Landlord, advise Landlord of its intention from, on and
     after a stated date (which shall not be less than thirty (30) days after
     the date of Tenant's notice) to assign this Lease to such proposed assignee
     or sublet any part or all of the Premises to such proposed subtenant for
     the balance or any part of the Term. Upon receipt of such notice, Landlord
     shall have the right, to be exercised by giving written notice to Tenant
     within fifteen (15) days after

                                      17

     receipt of Tenant's notice, to cancel the lease in the case of a proposed
     assignment of this Lease or a proposed subleasing of all the Premises, or
     to cancel the lease with respect to the portion to be so subleased by
     notice to Tenant in which latter event the Rent and Tenant's Proportionate
     Share as defined herein shall be adjusted on the basis of the number of
     square feet of Rentable Area of the Premises retained by Tenant, and this
     Lease as so amended shall continue thereafter in full force and effect. If
     Landlord wishes to exercise such option to cancel, Landlord shall, within
     fifteen (15) days after Landlord's receipt of such notice from Tenant, send
     to Tenant a notice so stating and in such notice Landlord shall specify the
     date as of which such cancellation is effective, which date shall be not
     less than fifteen (15) and not more than thirty (30) days after the date on
     which Landlord sends such notice. Tenant's notice given pursuant to this
     Section 13(b) shall state the name and address of the proposed subtenant or
     assignee, and a true and complete copy of the proposed sublease or
     assignment and sufficient information to permit Landlord to determine the
     financial responsibility and character of the proposed subtenant or
     assignee shall be delivered to Landlord with said notice.

           (c)    If Landlord, upon receiving Tenant's notice given pursuant to
     Section 13(b), shall not exercise its right to cancel, Landlord will not
     unreasonably withhold its consent to Tenant's assignment of this Lease or
     subletting the space covered by its notice. In each case, such subletting
     or assignment shall also be subject to the following conditions:

                  (i)    Tenant is not in default of the lease;

                  (ii)   Tenant has fully complied with the provisions of this
           Section 13;

                  (iii)  The assignee or subtenant is not a tenant of the
           Lincolnshire Corporate Center or a government (or subdivision or
           agency thereof);

                  (iv)   Tenant has furnished Landlord with copies of all
           documents relating to the sublease or assignment arrangement between
           Tenant and the proposed subtenant or assignee, including financial
           statements, if requested by Landlord;

                  (v)    The proposed sublease or proposed assignment does not
           extend for a term beyond the initial Term of this Lease, nor does the
           sublease or assignment contain any options to extend or renew the
           term thereof beyond the initial Term of this Lease;

                  (vi)   The subtenant or assignee is of a character or engaged
           in a business which is, and the subtenant's or assignee's proposed
           use of the Premises, or portions thereof, is consistent with the
           standards of Landlord for the Building and the use permitted
           hereunder;

                  (vii)  A subletting will not result in more than two occupants
           of the Premises, including Tenant and all subtenants;

                                      18

                  (viii) The space to be subleased and the remaining portion of
           the Premises are both legally leasable units and suitable for normal
           renting;

                  (ix)   The assignee or subtenant is sufficiently financially
           responsible to perform its obligations under the sublease or
           assignment; and

                  (x)    The intended use by or business of the proposed
           assignee or sublessee will not conflict with any commitment by
           Landlord to any other tenant in the Lincolnshire Corporate Center.

     Landlord agrees to respond to Tenant's request for approval within thirty
     (30) days after submission of all documents.

           (d)    Notwithstanding the provisions of subparagraphs (a), (b), and
     (c) above, Landlord agrees that (1) as to an assignment or transfer by
     operation of law, Landlord shall have the right of consent pursuant to
     subparagraph (c) above, but shall not have the option to cancel the lease,
     provided such assignment or transfer is to a corporation which acquires
     substantially all of the stock of the Tenant; and (2) as to an assignment
     of the lease to a wholly-owned subsidiary of Tenant, Landlord shall not
     have the option to cancel nor shall Landlord have a right of consent.

           (e)    Consent by Landlord to any assignment, subletting, use, or
     occupancy or transfer shall not operate to relieve the Tenant from any
     covenant or obligation hereunder, and shall not be deemed to be a consent
     to or relieve Tenant, or any subtenant or assignee, from obtaining
     Landlord's consent to any subsequent assignment, transfer, lien, charge,
     subletting, use, or occupancy. Tenant shall pay all of Landlord's costs,
     charges and expenses, including attorneys' fees, incurred in connection
     with any assignment, transfer, lien, charge, subletting, use or occupancy
     made or requested by Tenant.

           (f)    If Tenant, having first obtained Landlord's consent to any
     sublease or assignment, or if Tenant or a trustee in bankruptcy for Tenant,
     pursuant to Section 365 of the Bankruptcy Code, shall assign this Lease or
     sublet the Premises, or any part thereof, then in addition to the Rent then
     payable hereunder, Tenant shall pay to Landlord, as further additional rent
     on the first day of each month during the term of any such assignment or
     sublease, one hundred percent (100%) of the amount, if any, by which (x)
     the Assigned Area Rent exceeds (y) the product of the Current Monthly Rent
     multiplied by the Assigned Area. As used herein:

                  (i)    "Assigned Area" shall mean the number of square feet
           of Rentable Area of the Premises (in the case of an assignment or
           sublet of the entire Premises) or of the Rentable Area of any space
           sublet by Tenant (in the case of a sublet of less than the entire
           Premises).

                  (ii)   "Current Monthly Rent" shall mean the aggregate of all
           Monthly Base Rent and Additional Rent Progress Payments being paid by
           Tenant as of the effective date of an assignment or sublet, divided
           by the number of square feet of Rentable Area of the Premises.

                                      19

                  (iii)  "Assigned Area Rent" shall mean the current monthly
           base rent and other amounts payable by the subtenant or assignee for
           the Assigned Area.

           (g)    If Tenant is a corporation (other than a corporation whose
     stock is traded through a national or regional exchange or
     over-the-counter), any transaction or series of transactions (including
     without limitation any dissolution, merger, consolidation or other
     reorganization of Tenant, or any issuance, sale, gift, transfer or
     redemption of any capital stock of Tenant, whether voluntary, involuntary
     or by operation of law, or any combination of any of the foregoing
     transactions) resulting in the transfer of control of Tenant, other than by
     reason of death, shall be deemed to be transfer of Tenant's interest under
     this Lease for the purpose of Section 13. If Tenant is a partnership, any
     transaction or series of transactions (including without limitation any
     withdrawal or admittance of a partner or any change in any partners'
     interest in Tenant, whether voluntary, involuntary or by operation of law,
     or any combination of any of the foregoing transactions) resulting in the
     transfer of control of Tenant, other than by reason of death, shall be
     deemed to be a transfer of Tenant's interest under this Lease for the
     purpose of Section 13. The term "control" as used in this Section 13(g)
     means the power to directly or indirectly direct or cause the direction of
     the management or policies of Tenant. If Tenant is a corporation, a change
     or series of changes in ownership of stock which would result in direct or
     indirect change in ownership by the stockholders or an affiliated group of
     stockholders of less than fifty percent (50%) of the outstanding voting
     stock of Tenant as of the date of the execution and delivery of this Lease
     shall not be considered a change of control.

     14.   WAIVER OF CERTAIN CLAIMS; INDEMNITY BY TENANT.

           (a)    To the extent not expressly prohibited by law, Tenant releases
     Landlord and its beneficiaries, and their agents, servants, and employees,
     from and waives all claims for damages to person or property sustained by
     the Tenant or by any occupant of the Premises or the Building, or by any
     other person, resulting directly or indirectly from fire or other casualty,
     cause, or any existing or future condition, defect, matter, or thing in or
     about the Premises, the Building or any part of it, or from any equipment
     or appurtenance therein, or from any accident in or about the Building, or
     from any act or neglect of any tenant or other occupant of the Building or
     any part thereof or of any other person. This Section 14(a) shall not
     operate as a release of Landlord from liability for the negligent or
     intentionally wrongful conduct of Landlord or its agent or employees. This
     Section 14 shall apply especially, but not exclusively, to damage caused by
     water, snow, frost, steam, excessive heat or cold, sewerage, gas, odors, or
     noise, or the bursting or leaking of pipes or plumbing fixtures, broken
     glass, sprinkling or air conditioning devices or equipment, or flooding of
     basements, and to any damage to automobiles parked in the garage in the
     Building or outside the Building and shall apply without distinction as to
     the person whose act or neglect was responsible for the damage and whether
     the damage was due to any of the acts specifically enumerated above, or
     from any other thing or circumstance, whether of a like nature or of a
     wholly different nature. If any damage to the Premises or the building or
     any equipment or appurtenance therein, whether belonging to Landlord or to
     other tenants or occupants of the Building or otherwise, results from any
     negligent or wrongful acts of the Tenant, its employees, agents, or
     invitees, Tenant shall be liable therefor and Landlord may, at its option,
     repair such

                                      20

     damage and Tenant shall upon demand by Landlord reimburse Landlord for all
     reasonable costs of such repairs and damages in excess of amounts, if any,
     paid to Landlord under insurance covering such damages. All personal
     property belonging to the Tenant or any occupant of the Premises that is in
     the Building or the Premises shall be there at the risk of the Tenant or
     other person only and Landlord shall not be liable for damage thereto or
     theft or misappropriation thereof. All vehicles parked in the Building's
     garage or in the parking lots shall be parked at the sole risk of the
     owner, and Landlord assumes no responsibility for any damage to or loss of
     vehicles.

           (b)    To the extent not expressly prohibited by law, Tenant agrees
     to hold Landlord and its beneficiaries, and their agents, servants, and
     employees, harmless and to indemnify each of them against claims and
     liabilities, including reasonable attorneys' fees, for injuries to all
     persons and damage to or theft or misappropriation or loss of property
     occurring in or about the Premises arising from Tenant's negligence or
     wrongful acts or from any breach or default on the part of Tenant in the
     performance of any covenant or agreement on the part of Tenant to be
     performed pursuant to the terms of this Lease or due to any other act or
     omission of the Tenant, its agents, or employees.

     15.   DAMAGE OR DESTRUCTION BY CASUALTY.

           (a)    If the Premises or any part of the Building shall be damaged
     by fire or other casualty and if such damage does not render all or a
     substantial portion of the Premises or the Building untenantable, then
     Landlord shall proceed to repair and restore the same to its prior existing
     condition with reasonable promptness, subject to reasonable delays for
     insurance adjustments and delays caused by matters beyond Landlord's
     control. If any such damage renders all or a substantial portion of the
     Premises or the Building untenantable, Landlord shall, with reasonable
     promptness after the occurrence of such damage and in good faith, estimate
     the length of time that will be required to substantially complete the
     repair and restoration of such damage and shall by notice advise Tenant of
     such estimate. If it is so estimated that the amount of time required to
     substantially complete such repair and restoration will exceed two hundred
     seventy (270) days from the date such damage occurred, then either Landlord
     or Tenant (but as to Tenant only if all or a substantial portion of the
     Premises are rendered untenantable and the estimated time to substantially
     complete the repair or restoration of the Premises will exceed such two
     hundred seventy (270) days from the date of the fire or other casualty)
     shall have the right to terminate this Lease as of the date of such damage
     upon giving notice to the other at any time within twenty (20) days after
     Landlord gives Tenant the notice containing said estimate (it being
     understood that Landlord may, if it elects to do so, also give such notice
     of termination together with the notice containing said estimate). Unless
     this Lease is terminated as provided in the preceding sentence, Landlord
     shall proceed with reasonable promptness and all due diligence to repair
     and restore the Premises to its prior existing condition, subject to
     reasonable delays for insurance adjustments and delays caused by matters
     beyond Landlord's control, and also subject to zoning laws and building
     codes then in effect. Landlord shall have no liability to Tenant, and
     Tenant shall not be entitled to terminate this Lease (except as hereinafter
     provided) if such repairs and restoration are not in fact completed within
     the time period estimated by Landlord, as aforesaid, or within said two
     hundred seventy (270) days, so long as

                                      21

     Landlord shall proceed with reasonable promptness and due diligence.
     Notwithstanding anything to the contrary herein set forth: (i) if any such
     damage rendering all or a substantial portion of the Premises or Building
     untenantable shall occur during the last three (3) years of the Term, then
     Landlord shall have the option to terminate this Lease by written notice to
     Tenant within thirty (30) days after the date such damage occurred, and if
     such option is so exercised, this Lease shall terminate as of the date of
     such damage; (ii) Landlord shall have no duty pursuant to this Section 15
     to repair or restore any portion of alterations, additions or improvements
     made by or on behalf of Tenant in the Premises or improvements which are
     not then building standard improvements; (iii) Landlord shall not be
     obligated (but may, at its option, so elect) to repair or restore the
     Premises or Building if any mortgagee applies proceeds of insurance to
     reduce its loan balance and the remaining proceeds, if any, available to
     Landlord are not sufficient to pay for such repair or restoration; and (iv)
     Tenant shall not have the right to terminate this Lease pursuant to this
     Section 15 if the damage or destruction was caused by the intentional or
     negligent act of Tenant, its agents or employees.

           (b)    In the event any such fire or casualty damage not caused by
     the intentional or negligent act of Tenant, its agents or employees,
     renders the Premises substantially untenantable and Tenant is not occupying
     the Premises and if this Lease shall not be terminated pursuant to the
     foregoing provisions of Section 15 by reason of such damage, then Rent
     shall abate during the period beginning with the date of such damage and
     ending with the date when Landlord substantially completes its repair and
     restoration work. Such abatement shall be in an amount bearing the same
     ratio to the total amount of Rent for such period as the portion of the
     Premises being repaired and restored by Landlord and not heretofore
     delivered to Tenant from time to time bears to the entire Premises. In the
     event of termination of this Lease pursuant to this Section 15, Rent shall
     be apportioned on a per diem basis and be paid to the date of such fire or
     other casualty.

           (c)    In the event of any such fire or other casualty, and if the
     lease is not terminated pursuant to the foregoing provisions of this Lease,
     Tenant shall repair and restore any portion of alterations, additions or
     improvements made by or on behalf of Tenant in the Premises, and during any
     such period of Tenant's repair and restoration following substantial
     completion of Landlord's repair and restoration work, Rent shall be payable
     as if said fire or other casualty had not occurred.

     16.   EMINENT DOMAIN. If all or a substantial part of the Building, or any
part thereof which includes all or a substantial part of the Premises, shall be
taken or condemned by any competent authority for any public or quasi-public use
or purpose, the Term of this Lease shall end upon and not before the date when
the possession of the part so taken shall be required for such use or purpose,
and without apportionment of the award to or for the benefit of Tenant. If any
condemnation proceeding shall be instituted in which it is sought to take or
damage any part of the Building, the taking of which would, in Landlord's
opinion, prevent the economical operation of the Building, or if the grade of
any street or alley adjacent to the Building is changed by any competent
authority, and such taking or damage or change of grade makes it necessary or
desirable to remodel the Building to conform to the taking or damage, Landlord
shall have the right to terminate this Lease upon not less than ninety (90)
days' notice prior to the date of termination designated in the notice. In
either of the events above referred to, Rent shall

                                      22

be apportioned as of the date of the termination. No money or other
consideration shall be payable by the Landlord to the Tenant for the right of
termination, and the Tenant shall have no right to share in the condemnation
award or in any judgment for damages caused by such taking or the change of
grade; provided, however, that Tenant shall have the right to pursue separately
against the condemning authority any award available separately to Tenant for
Tenant's moving and relocation expenses.

     17.   DEFAULT; LANDLORD'S RIGHTS AND REMEDIES.

           (a)    The occurrence of any one or more of the following matters
     constitutes a Default by Tenant under this Lease:

                  (i)    Failure by Tenant to pay Rent or any installment
           thereof when due;

                  (ii)   Failure by Tenant to pay when due any other moneys
           required to be paid by Tenant under this Lease;

                  (iii)  Failure by Tenant to observe or perform any of the
           covenants in respect of assignment and subletting set forth in
           Section 13;

                  (iv)   Failure by Tenant to cure forthwith, immediately
           after receipt of notice from Landlord, any hazardous condition which
           Tenant has created in violation of law or of this Lease;

                  (v)    Failure by Tenant to observe or perform any other
           covenant, agreement, condition or provision of this Lease, if such
           failure shall continue for thirty (30) days after notice thereof from
           Landlord to Tenant, provided, however, that Tenant shall not be in
           default with respect to matters which cannot reasonably be cured
           within thirty (30) days so long as within such thirty (30) day period
           Tenant commences such cure and diligently proceeds to complete the
           same at all times thereafter;

                  (vi)   The levy upon or under execution or the attachment by
           legal process of the leasehold interest of Tenant, or the filing or
           creation of a lien in respect of such leasehold interest, which lien
           shall not be released or discharged within thirty (30) days from the
           date of such filing;

                  (vii)  Tenant vacates or abandons the Premises or fails to
           take possession of the Premises when available for occupancy (the
           transfer of a substantial part of the operations, business and
           personnel of Tenant to some other location being deemed, without
           limiting the meaning of the term "vacates or abandons", to be a
           vacation or abandonment within the meaning of this clause (vii)),
           whether or not Tenant thereafter continues to pay Rent due under this
           Lease;

                  (viii) Tenant becomes insolvent or bankrupt or admits in
           writing its inability to pay its debts as they mature, or makes an
           assignment for the benefit of creditors, or applies for or consents
           to the appointment of a trustee or receiver for Tenant or for the
           major part of his property;

                                      23

                  (ix)   A trustee or receiver is appointed for the Tenant or
           for the major part of its property and is not discharged within
           thirty (30) days after such appointment; and

                  (x)    Bankruptcy, reorganization, arrangement, insolvency or
           liquidation proceedings, or other proceedings for relief under any
           bankruptcy law, or similar law for the relief of debtors, are
           instituted by or against Tenant, and, if instituted against Tenant,
           are allowed against it or are consented to by it or are not dismissed
           within sixty (60) days after such institution.

           (b)    If a Default occurs which has not been cured or remedied
     during the applicable grace period, Landlord shall have the rights and
     remedies hereinafter set forth, which shall be distinct, separate and
     cumulative and shall not operate to exclude or deprive Landlord of any
     other right or remedy allowed it by law:

                  (i)    Landlord may terminate this Lease by giving to Tenant
           written notice of the Landlord's election to do so, in which event
           the Term of this Lease shall end, and all right, title and interest
           of the Tenant hereunder shall expire, on the date stated in such
           notice;

                  (ii)   Landlord may terminate the right of the Tenant to
           possession of the Premises' without terminating this Lease by giving
           written notice to Tenant that Tenant's right of possession shall end
           on the date stated in such notice, whereupon the right of the Tenant
           to possession of the Premises or any part thereof shall cease on the
           date stated in such notice; and

                  (iii)  Landlord may enforce the provisions of this Lease and
           may enforce and protect the rights of the Landlord hereunder by a
           suit or suits in equity or at law for the specific performance of any
           covenant or agreement contained herein, or for the enforcement of any
           other appropriate legal or equitable remedy, including recovery of
           all moneys due or to become due from the Tenant under any of the
           provisions of this Lease.

           Any notice required to be given by Landlord pursuant to this Section
           17(b) may be given concurrently with a notice of default pursuant to
           Section 17(a).

           (c)    If Landlord exercises either the remedies provided for in
     subparagraphs (i) or (ii) of the foregoing Section 17(b), Tenant shall
     surrender possession and vacate the Premises immediately and deliver
     possession thereof to the Landlord, and Landlord may then or at any time
     thereafter re-enter and take complete and peaceful possession of the
     Premises, with or without process of law, full and complete license to do
     so being hereby granted to the Landlord, and Landlord may remove all
     occupants and property therefrom, using such force as may be necessary,
     without being deemed in any manner guilty of trespass, eviction or forcible
     entry and detainer and without relinquishing Landlord' s right to rent or
     any other right given to Landlord hereunder or by operation of law.

           (d)    If Landlord, pursuant to the provisions of Section 17(b)(ii)
     hereof, terminates the right of the Tenant to possession of the Premises
     without terminating this

                                      24

     Lease, such termination of possession shall not release Tenant, in whole or
     in part, from Tenant's obligation to pay the Rent hereunder for the full
     Term, and Landlord shall have the right to immediate recovery of all
     amounts then due hereunder. In addition, Landlord shall have the right,
     from time to time, to recover from the Tenant, and the Tenant shall remain
     liable for, all Rent and any other sums thereafter accruing as they become
     due under this Lease during the period from the date of such notice of
     termination of possession to the stated end of the Term. In any such case,
     the Landlord may, but shall be under no obligation to (except to the extent
     required by law), relet the Premises or any part thereof for the account of
     the Tenant for such rent, for such time (which may be for a term extending
     beyond the Term of this Lease) and upon such terms as the Landlord in the
     Landlord's sole discretion shall determine, and the Landlord shall not be
     required to accept any tenant offered by the Tenant or to observe any
     instructions given by the Tenant relative to such reletting. Landlord
     shall, however, cooperate with Tenant in order to relet the Premises and
     minimize Tenant's damages, but this obligation shall not require Landlord
     to divert any prospective tenants from any other portion of the Building.
     Also in any such case the Landlord may make repairs, alterations and
     additions in or to the Premises and redecorate the same to the extent
     deemed by the Landlord necessary or desirable and in connection therewith
     change the locks to the Premises, and the Tenant shall upon demand pay the
     cost thereof together with the Landlord's expenses of reletting. Landlord
     may collect the rents from any such reletting and apply the same first to
     the payment of the expenses of reentry, redecoration, repair and
     alterations and the expenses of reletting and second to the payment of Rent
     herein provided to be paid by the Tenant, and any excess or residue shall
     operate only as an offsetting credit against the amount of Rent as the same
     thereafter becomes due and payable hereunder, but the use of such
     offsetting credit to reduce the amount of Rent due Landlord, if any, shall
     not be deemed to give Tenant any right, title or interest in or to such
     excess or residue and any such excess or residue shall belong to Landlord
     solely; provided that in no event shall Tenant be entitled to a credit on
     its indebtedness to Landlord in excess of the aggregate sum (including Base
     Rent and Additional Rent) which would have been paid by Tenant for the
     period for which the credit to Tenant is being determined, had no Default
     occurred. No such re-entry or repossession, repairs, alterations and
     additions, or reletting shall be construed as an eviction or ouster of the
     Tenant or as an election on Landlord's part to terminate this Lease unless
     a written notice of such intention be given to Tenant or shall operate to
     release the Tenant in whole or in part from any of the Tenant's obligations
     hereunder, and the Landlord may, at any time and from time to time, sue and
     recover judgment for any deficiencies from time to time remaining after the
     application from time to time of the proceeds of any such reletting.

           (e)    In the event of the termination of this Lease by Landlord as
     provided for by subparagraph (i) of Section 17(b), Landlord shall be
     entitled to recover from Tenant all the fixed dollar amounts of Rent
     accrued and unpaid for the period up to and including such termination
     date, as well as all other additional sums payable by the Tenant, or for
     which Tenant is liable or in respect of which Tenant has agreed to
     indemnify Landlord under any of the provisions of this Lease which may be
     then owing and unpaid, and all costs and expenses, including court costs
     and attorneys' fees incurred by Landlord in the enforcement of its rights
     and remedies hereunder, and in addition Landlord shall be entitled to
     recover as damages for loss of the bargain and not as a penalty (x) the

                                      25

     unamortized cost to the Landlord, computed and determined in accordance
     with generally accepted accounting principles, of the tenant improvements
     and alterations, if any, paid for and installed by Landlord pursuant to
     this Lease, and (y) the aggregate sum which at the time of such termination
     represents the excess, if any, of the present value of the aggregate rents
     at the same annual rate for the remainder of the Term as then in effect
     pursuant to the applicable provisions of Sections 1 and 2 of this Lease,
     over the then present value of the then aggregate fair rental value of the
     Premises for the balance of the Term, such present worth to be computed in
     each case on the basis of a per annum discount at one-half (1/2) of the
     corporate base rate of interest then in effect at the First National Bank
     of Chicago from the respective dates upon which such rentals would have
     been payable hereunder had this Lease not been terminated, and (z) any
     damages in addition thereto, including reasonable attorneys' fees and court
     costs, which Landlord shall have sustained by reason of the breach of any
     of the covenants of this Lease other than for the payment of rent.

           (f)    All property removed from the Premises by Landlord pursuant to
     any provision of this Lease or of law may be handled, removed or stored by
     Landlord at the cost and expense of the Tenant, and the Landlord shall in
     no event be responsible for the value, preservation or safekeeping thereof.
     Tenant shall pay Landlord for all expenses incurred by Landlord in such
     removal and storage charges against such property so long as the same shall
     be in Landlord's possession or under Landlord's control. All property not
     removed from the Premises or not retaken from storage by Tenant within
     thirty (30) days after the end of the Term, however terminated, shall be
     conclusively deemed to have been conveyed by Tenant to Landlord as by bill
     of sale without further payment or credit by Landlord to Tenant.

           (g)    If any action for breach of or to enforce any provision of
     this Lease is commenced, the court in such action shall award to the party
     in whose favor judgment is entered, a reasonable sum as attorneys' fees,
     which attorneys' fees shall be paid by the losing party in such action.
     Tenant shall pay all of Landlord's costs, charges, and expenses, including
     court costs and reasonable attorneys' fees, incurred by Landlord in any
     litigation in which Tenant causes the Landlord, without Landlord's fault,
     to become involved or concerned.

           (h)    In the event that Tenant shall file for protection under any
     Chapter of the Bankruptcy Code now or hereafter in effect, Landlord and
     Tenant agree, to the extent permitted by law, to request that the
     debtor-in-possession or trustee-in-bankruptcy, if one is appointed, assume
     or reject this Lease within sixty (60) days thereafter.

     18.   SUBORDINATION.

           (a)    Landlord may have heretofore or may hereafter encumber with a
     mortgage or trust deed the Building, the Land, the Real Property or any
     interest therein, and may have heretofore and may hereafter sell and lease
     back the Land, or any part of the Real Property, and may have heretofore or
     may hereafter encumber the leasehold estate under such lease with a
     mortgage or trust deed (any such mortgage or trust deed is herein called a
     "Mortgage" and the holder of any such mortgage or the beneficiary under any
     such trust

                                      26

     deed is herein called a "Mortgagee". Any such lease of the underlying land
     is herein called a "Ground Lease", and the lessor under any such lease is
     herein called a "Ground Lessor". Any Mortgage which is a first lien against
     the Building, the Land, the Real Property, the leasehold estate under a
     Ground Lease or any interest therein is herein called a "First Mortgage"
     and the holder or beneficiary of any First Mortgage is herein called a
     "First Mortgagee"). If requested by the Mortgagee or Ground Lessor, Tenant
     will either (a) subordinate its interest in this Lease to said Mortgage,
     and to any and all advances thereunder and to the interest thereon, and all
     renewals, replacements, amendments, modifications, and extensions thereof,
     or to said Ground Lease, or to both, or (b) make Tenant's interest in this
     Lease or certain of Tenant's rights hereunder superior thereto; and Tenant
     will promptly execute and deliver such agreement or agreements as may be
     reasonably required by the Mortgagee or by any such Ground Lessor; provided
     that Tenant covenants it will not subordinate this Lease to any Mortgage
     other than a First Mortgage without the prior written consent of the First
     Mortgagee.

           (b)    It is further agreed that (a) if any Mortgage shall be
     foreclosed, or if any ground or underlying lease be terminated, (i) the
     liability of the mortgagee or trustee hereunder or purchaser at such
     foreclosure sale or the liability of a subsequent owner designated as
     Landlord under this Lease shall exist only so long as such trustee,
     mortgagee, purchaser, or owner is the owner of an interest in the Building
     or Land and such liability shall not continue or survive after further
     transfer of ownership; and (ii) upon request of the mortgagee or trustee,
     if any Mortgage shall be foreclosed, Tenant will attorn, as Tenant under
     this Lease, to the purchaser at any foreclosure sale under any Mortgage, or
     upon request of the Ground Lessor, if any Ground Lease shall be terminated,
     Tenant will attorn as Tenant under this Lease to the Ground Lessor, and
     Tenant will execute such instruments as may be necessary or appropriate to
     evidence such attornment; and (b) this Lease may not be modified or amended
     so as to reduce the rent or shorten the term provided hereunder, or so as
     to adversely affect in any other respect to any material extent the rights
     of the Landlord, nor shall this Lease be canceled or surrendered, without
     the prior written consent, in each instance, of the First Mortgagee and of
     any Ground Lessor.

           (c)    Should any prospective First Mortgagee or Ground Lessor
     require a modification or modifications of this Lease, which modification
     or modifications will not cause an increase in the Rent stipulated
     hereunder or in any other way materially and adversely change the rights
     and obligations of Tenant hereunder, then and in such event, Tenant agrees
     that this Lease may be so modified and agrees to execute whatever documents
     are required therefor and deliver the same to Landlord within ten (10) days
     following the request therefor. Should any Landlord or prospective
     Mortgagee or Ground Lessor require execution of a short form of lease for
     recording (containing the names of the parties, a description of the
     Premises, and the term of this Lease) or a certification from the Tenant
     concerning the lease in such form as may be required by a prospective
     mortgagee or ground lessor, Tenant agrees to execute such short form of
     lease or certificate and deliver the same to Landlord within ten (10) days
     following the request therefor.

                                      27

     19.   MORTGAGEE PROTECTION. Tenant agrees to give the First Mortgagee, by
registered or certified mail, a copy of any notice of default served upon the
Landlord by Tenant, provided that, prior to such notice, Tenant has been
notified in writing (by way of service on Tenant of a copy of assignment of
rents and leases, or otherwise) of the address of such First Mortgagee. Tenant
further agrees that if Landlord shall have failed to cure such default within
twenty (20) days after such notice to Landlord (or if such default cannot be
cured or corrected within that time, then such additional time as may be
necessary if Landlord has commenced within such twenty (20) days and is
diligently pursuing the remedies or steps necessary to cure or correct such
default), then the First Mortgagee shall have an additional thirty (30) days
within which to cure or correct such default (or if such default cannot be cured
or corrected within that time, then such additional time as may be necessary if
the First Mortgagee has commenced within such thirty (30) days and is diligently
pursuing the remedies or steps necessary to cure or correct such default). Until
the time allowed, as aforesaid, for the First Mortgagee to cure such default has
expired without cure, Tenant shall have no right to, and shall not, terminate
this Lease on account of Landlord's default.

     20.   DEFAULT UNDER OTHER LEASES. If the term of any lease, other than this
Lease, heretofore or hereafter made by Tenant for any space in the Building
shall be terminated or terminable after the making of this Lease because of any
default by Tenant under such other lease, such fact shall empower Landlord, at
Landlord's sole option, to terminate this Lease by notice to Tenant or to
exercise any of the rights or remedies set forth in Section 17.

     21.   SUBROGATION AND INSURANCE.

           (a)    Landlord and Tenant agree to have all physical damage or
     material damage insurance which may be carried by either of them, and
     Tenant agrees to have all business interruption insurance which it carries,
     endorsed to provide that any release from liability of, or waiver of claim
     for, recovery from the other party entered into in writing by the insured
     thereunder prior to any loss or damage shall not affect the validity of
     said policy or the right of the insured to recover thereunder and providing
     further that the insurer waives all rights of subrogation which such
     insurer might have against the other party. Without limiting any release or
     waiver of liability or recovery contained in any other section of this
     Lease, but rather in confirmation and furtherance thereof, each of the
     parties hereto waives all claims for recovery from the other party for any
     loss or damage to any of its property or damages as a result of business
     interruption. Notwithstanding the foregoing or anything contained in this
     Lease to the contrary, any release and any waiver of claims shall not be
     operative, nor shall the foregoing endorsements be required, in any case
     where the effect of such release and waiver is to invalidate insurance
     coverage or increase the cost thereof (provided that, in the case of
     increased cost, the other party shall have the right, within ten (10) days
     following written notice, to pay such increased cost keeping such release
     and waiver in full force and effect).

           (b)    Tenant shall carry insurance during the entire Term hereof
     insuring Tenant and Landlord and Landlord's agents and beneficiaries and
     mortgagees with terms, coverages, and in companies satisfactory to Landlord
     and with such commercially reasonable increases in limits as Landlord may
     from time to time request, but initially Tenant shall maintain the
     following coverages in the following amounts:

                                      28

                  (i)    Comprehensive general liability insurance, including
           contractual liability insuring the indemnification provisions
           contained in this Lease, in an amount not less than $2,000,000.00
           combined single limit per occurrence;

                  (ii)   "All risk" physical damage insurance, including
           sprinkler leakage, for the full replacement cost of all additions,
           improvements, and alterations to the Premises and of all office
           furniture, trade fixtures, office equipment, merchandise, and all
           other items of Tenant's property on the Premises; and

           The foregoing insurance may be provided by a company-wide blanket
           insurance policy or policies maintained by or on behalf of Tenant,
           provided that the same is reasonably satisfactory to Landlord.

           (c)    Tenant shall, prior to the commencement of the Term and
     thereafter during the Term, furnish to Landlord policies or certificates
     issued, by the respective carriers evidencing such coverage or replacements
     and renewals thereof, which policies or certificates shall state that such
     insurance coverage may not be changed or cancelled without at least thirty
     (30) days' prior written notice to Landlord and Tenant.

           (d)    Tenant shall comply with all applicable laws and ordinances,
     all orders and decrees of court and all requirements of other governmental
     authority and all requirements of Landlord's insurance companies, and shall
     not directly or indirectly make any use of the Premises which may thereby
     be prohibited or be dangerous to person or property or which may jeopardize
     any insurance coverage, or may increase the cost of insurance or require
     additional insurance coverage. In the event of such increase in the cost of
     insurance or such requirement for additional insurance coverage, Tenant
     shall reimburse Landlord for the cost thereof.

     22.   NONWAIVER. No waiver of any condition expressed in this Lease shall
be implied by any neglect of either party to enforce any remedy on account of
the violation of such condition whether or not such violation be continued or
repeated subsequently, and no express waiver shall affect any condition other
than the one specified in such waiver and that one only for the time and in the
manner specifically stated. Without limiting the provisions of Section 10, it is
agreed that no receipt of moneys by Landlord from Tenant after the termination
in any way of the Term or of Tenant's right of possession hereunder or after the
giving of any notice shall reinstate, continue or extend the Term or affect any
notice given to Tenant prior to the receipt of such moneys. It is also agreed
that after the service of notice or the commencement of a suit or after final
judgment for possession of the Premises, Landlord may receive and collect any
moneys due, and the payment of said moneys shall not waive or affect said
notice, suit or judgment.

     23.   ESTOPPEL CERTIFICATE. The Tenant agrees that from time to time upon
not less than ten (10) days' prior request by Landlord, or the holder of any
Mortgage or any ground lessor, the Tenant (or any permitted assignee, subtenant,
licensee, concessionaire, or other occupant of the Premises claiming by,
through, or under Tenant) will deliver to Landlord or to the holder of any
Mortgage or ground lessor, a statement in writing signed by Tenant certifying
(a) that this Lease is unmodified and in full force and effect (or if there have
been modifications,

                                      29

that the lease as modified is in full force and effect and identifying the
modifications); (b) the date upon which Tenant began paying Rent and the dates
to which the Rent and other charges have been paid, Cc) that the Landlord is not
in default under any provision of this Lease, or, if in default, the nature
thereof in detail; (d) that the Premises have been completed in accordance with
the terms hereof and Tenant is in occupancy and paying Rent on a current basis
with no rental offsets or claims; (e) that there has been no prepayment of Rent
other than that provided for in the Lease; (f) that there are no actions,
whether voluntary or otherwise, pending against Tenant under the bankruptcy laws
of the United States or any State thereof, and (g) such other matters as may be
required by Landlord, the holder of any Mortgage or ground lessor.

     24.   TENANT AUTHORITY TO EXECUTE LEASE. In case Tenant is a corporation,
Tenant (a) represents and warrants that this Lease has been duly authorized,
executed, and delivered by and on behalf of the Tenant and constitutes the valid
and binding agreement of the Tenant in accordance with the terms hereof, (b)
Tenant shall deliver to Landlord or its agent, concurrently with the delivery of
this Lease, executed by Tenant, certified resolutions of the board of directors
(and shareholders, if required) authorizing Tenant's execution and delivery of
this Lease and the performance of Tenant obligations hereunder; and (c) until
Landlord is notified in writing of a substitute therefor, Tenant's Authorized
Representative set forth in the Schedule shall have full power and authority to
take action on behalf of and to bind Tenant with respect to all matters relating
to this Lease and the Premises. In case Tenant is a partnership, Tenant
represents and warrants that all of the persons who are general or managing
partners in said partnership have executed this Lease on behalf of Tenant, or
that this Lease has been executed and delivered pursuant to and in conformity
with a valid and effective authorization therefor by all of the general or
managing partners of such partnership, and is and constitutes the valid and
binding agreement of the partnership and each and every partner therein in
accordance with its terms. It is agreed that each and every present and future
partner in Tenant shall be and remain at all times jointly and severally liable
hereunder and that the death, resignation, or withdrawal of any partner shall
not release the liability of such partner under the terms of this Lease unless
and until the Landlord shall have consented in writing to such release.

     25.   REAL ESTATE BROKERS. Tenant represents that Tenant has directly dealt
with and only with the real estate broker or brokers disclosed in the Schedule
(whose commission shall be paid by Landlord pursuant to a separate agreement
with each such broker), as broker, in connection with this Lease and agrees to
indemnify and hold Landlord harmless from all damages, liability, and expense
(including reasonable attorneys' fees) arising from any claims or demands of any
other broker or brokers or finders for any commission alleged to be due such
broker or brokers or finders in connection with its participating in the
negotiation with Tenant of this Lease.

     26.   NOTICES. In every instance where it shall be necessary or desirable
for Landlord to serve any notice or demand upon Tenant, it shall be sufficient
to send a written or printed copy of such notice or demand by United States
registered or certified mail, postage prepaid, addressed to Tenant at the
address set forth in the Schedule, in which event the notice or demand shall be
deemed to have been served at the time the same was posted plus two (2) business
days, or to serve any such notice or demand personally. Any such notice or
demand to be given by Tenant to Landlord shall, until further notice, be served
personally or sent by United States registered or certified mail, postage
prepaid, to One Overlook Point, Suite 100, Lincolnshire

                                      30

Corporate Center, Lincolnshire, Illinois. Mailed communications to Landlord
shall be deemed to have been served at the time the same were posted plus two
(2) business days. Notwithstanding the foregoing, notices served with respect to
emergency matters may be served personally or by telephone communication. Tenant
is advised and acknowledges that until further notice to Tenant, Van Vlissingen
& Co., the present agent of Landlord, has authority to execute and deliver
notices hereunder to Tenant on behalf of Landlord.

     27.   MISCELLANEOUS.

           (a)    Each provision of this Lease shall extend to and shall bind
     and inure to the benefit not only of Landlord and Tenant, but also their
     respective heirs, legal representatives, successors, and assigns, but this
     provision shall not operate to permit any transfer, assignment, mortgage,
     encumbrance, lien, charge, or subletting contrary to the provisions of
     Section 13.

           (b)    No modification, waiver, or amendment of this Lease or of any
     of its conditions or provisions shall be binding upon Landlord or Tenant
     unless in writing and signed by Landlord and Tenant.

           (c)    Submission of this instrument for examination shall not
     constitute a reservation of or option for the Premises or in any manner
     bind Landlord and no lease or obligation on Landlord shall arise until this
     instrument is signed and delivered by Landlord and Tenant; provided,
     however, the execution and delivery by Tenant of this Lease to Landlord or
     the agent of Landlord's beneficiary shall constitute an irrevocable offer
     by Tenant to lease the Premises on the terms and conditions herein
     contained, which offer may not be revoked for thirty (30) days after such
     delivery.

           (d)    The word "Tenant" whenever used herein shall be construed to
     mean Tenants or any one or more of them in all cases where there is more
     than one Tenant; and the necessary grammatical changes required to make the
     provisions hereof apply either to corporations or other organizations,
     partnerships, or other entities, or individuals, shall in all cases be
     assumed as though in each case fully expressed. In all cases where there is
     more than one Tenant, the liability of each shall be joint and several.

           (e)    Clauses, plats, and riders, if any, signed by Landlord and
     Tenant and endorsed on or affixed to this Lease are part hereof and in the
     event of variation or discrepancy the duplicate original hereof, including
     such clauses, plats, and riders, if any, held by Landlord shall control.

           (f)    The headings of Sections are for convenience only and do not
     limit, expand, or construe the contents of the Sections.

           (g)    Nothing contained in this Lease shall be deemed or construed
     by the parties hereto or by any third party to create the relationship of
     principal and agent, partnership, joint venturer, or any association
     between Landlord and Tenant, it being expressly understood and agreed that
     neither the method of computation of Rent nor any other provisions
     contained in this Lease nor any act of the parties hereto shall be deemed

                                      31

     to create any relationship between Landlord and Tenant other than the
     relationship of landlord and tenant..

           (h)    Time is of the essence of this Lease and of each and all
     provisions thereof.

           (i)    All amounts (including, without limitation, Base Rent and
     Additional Rent) owed by Tenant to Landlord pursuant to any provision of
     this Lease shall bear interest at the annual rate of the greater of (i)
     fifteen percent (15%) and (ii) four percent (4%) in excess of corporate
     base rate of interest then in effect at the First National Bank of Chicago
     from the date of the expiration of the applicable required notice period
     until paid, unless a lesser rate shall then be the maximum rate permissible
     by law with respect thereto, in which event said lesser rate shall be
     charged.

           (j)    The legal invalidity of any provision of this Lease shall not
     impair or affect in any manner the validity, enforceability, or effect of
     the rest of this Lease.

           (k)    All understandings and agreements, oral or written, heretofore
     made between the parties hereto are merged in this Lease, which alone fully
     and completely expresses the agreement between Landlord (and its
     beneficiary and their agents) and Tenant.

     28.   LANDLORD'S AUTHORITY AND QUIET ENJOYMENT. Landlord covenants and
represents that it has full and complete authority to enter into this Lease
under all of the terms, conditions, and provisions set forth herein, and,
subject to the terms, provisions, and conditions hereof, so long as Tenant keeps
and substantially performs each and every term, provision, and condition herein
contained on the part of Tenant to be kept and performed and so long as Tenant
is not in default hereunder, Tenant shall, during the Term hereof, peacefully
and quietly enjoy the Premises without hinderance or molestation by Landlord.

     29.   LANDLORD. The term "Landlord" as used in this Lease means only the
owner or owners at the time being of the Building so that in the event of any
assignment, conveyance, or sale, once or successively, of the Building, or any
assignment of this Lease by Landlord, said Landlord making such sale,
conveyance, or assignment shall be and hereby is entirely freed and relieved of
all covenants and obligations of Landlord hereunder accruing after such sale,
conveyance, or assignment, and Tenant agrees to look solely to such purchaser,
grantee, or assignee with respect thereto. This Lease shall not be affected by
any such assignment, conveyance, or sale, and Tenant agrees to attorn to the
purchaser, grantee, or assignee.

     30.   TITLE AND COVENANT AGAINST LIENS. The Landlord's title is and always
shall be paramount to the title of the Tenant and nothing in this Lease
contained shall empower the Tenant to do any act which can, shall, or may
encumber the title of the Landlord. Tenant covenants and agrees not to suffer or
permit any lien of mechanics or materialmen to be placed upon or against the
Real Property, the Land, the Building, or the Premises or against the Tenant's
leasehold interest in the Premises and, in case of any such lien attaching, to
immediately pay and remove same. Tenant has no authority or power to cause or
permit any lien or encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law, or otherwise, to attach to or be placed upon the Real
Property, Land, Building, or Premises, and any and all liens and

                                      32

encumbrances created by Tenant shall attach only to Tenant's interest in the
Premises. If any such liens so attach and Tenant fails to pay and remove same
within ten (10) days, Landlord, at its election, may pay and satisfy the same
and in such event the sums so paid by Landlord, with interest from the date of
payment at the rate set forth in Section 27(i) hereof for amounts owed Landlord
by Tenant. Such sums shall be deemed to be additional rent due and payable by
Tenant at once without notice or demand.

     31.   RELOCATION OF TENANT.  Intentionally Deleted.

     32.   PARKING. Tenant shall not use or permit its servants, employees,
customers, invitees and guests to use more than the number of parking spaces set
forth in the Schedule of Significant Terms. Tenant, its servants, employees,
customers, invitees, and guests shall, when using the parking facilities in and
around the Building, observe and obey all signs regarding fire lanes, no parking
zones, driving speed zones and designated reserved, visitor and handicapped
spaces, and when parking, always park between the designated lines. If required
by Landlord, Tenant shall cause its servants, employees, customers, invitees and
guests who utilize the Tenant's allotted parking spaces, to display stickers or
decals provided by Landlord in their vehicles. Landlord reserves the right to
tow away, at the expense of the owner, any vehicle which is improperly parked or
parked in a no parking zone, or designated visitor, reserved or handicapped
area, or any vehich1e that does not display a sticker or decal if required by
Landlord. If Tenant uses parking in excess of that provided for herein, and if
Tenant fails, after written notice from Landlord to reduce its excess use of the
parking areas, then such excess use shall constitute a default under this lease.
All vehicles shall be parked at the sole risk of the owner and Landlord assumes
no responsibility for any damage to or loss of vehicles.

     33.   SECURITY DEPOSIT. Tenant shall deposit with Landlord upon execution
of this Lease the Security Deposit stipulated in the Schedule (the "Deposit") as
security for performance of Tenant's duties and obligations hereunder. The
Deposit may be applied, in whole or in part, by Landlord to cure any default or
defaults of Tenant hereunder or to pay any amounts payable by Tenant hereunder,
without limiting, impairing, or being in lieu of any other remedy or remedies
Landlord may have on account of any default by Tenant hereunder. Upon any such
application, Tenant shall immediately, upon demand by Landlord, pay to Landlord
the amount so applied in order that Landlord shall have the full amount of the
Deposit on hand at all times during the Term after the same is deposited. The
Deposit shall in no event be deemed an advance payment of rental or a limitation
upon the damages recoverable by Landlord on account of any default by Tenant
hereunder. Provided that Tenant shall not be in default in the performance of
any of its obligations under this Lease, any balance of the Deposit remaining
unapplied at the termination or expiration of this Lease shall be repaid to
Tenant not later than 30 days after such termination or expiration and Tenant's
vacation of the Premises, without interest except to the extent required by
statute or ordinance. If the Building is conveyed or leased (whether or not
subject to this Lease) by Landlord, upon the transfer of the security deposit,
Landlord shall be released from all liability or obligation to Tenant for return
of the Deposit, and Tenant agrees to look solely to the transferee for return of
the Deposit. The preceding sentence shall apply to each subsequent conveyance or
lease of the Building. The Deposit shall not be assigned or encumbered by
Tenant, and any purported such assignment or encumbrance shall be void.

                                      33

     IN WITNESS WHEREOF, the parties the date first above written.

                                            LANDLORD:

ATTEST:                                     AMERICAN NATIONAL BANK AND TRUST
                                            COMPANY OF CHICAGO AS TRUSTEE UNDER
                                            TRUST NO. 113370-03

/s/                                         By:  /s/
- --------------------------                     --------------------------------

                                            TENTANT:
ATTEST:                                     ICON INFOSYSTEMS, INC.

/s/ Michelle Dorfman                        By:  /s/ Charles Dorfman
- --------------------------                     --------------------------------
2-3-98                                         February 3, 1998

                                      34

                                     RIDER B

                             CLEANING SPECIFICATIONS

Landlord agrees to perform the following services:

I.       GENERAL AND EXECUTIVE OFFICES, LOBBY, LOUNGE, PUBLIC AREAS, ETC.

         A.       NIGHTLY SCHEDULE (Daily, Monday through Friday except holidays
                  when building is normally in operation.

                  1.       Empty, clean and replace waste containers.
                  2.       Empty and damp clean ash trays.  Wash as required.
                  3.       Dust all furniture, including desks, chairs, tables.
                  4.       Dust all exposed filing cabinets, bookcases, shelves
                           and counter tops.
                  5.       Dust all telephones.
                  6.       Clean and sanitize drinking fountains.
                  7.       Spot clean desk tops.
                  S.       Spot clean reception lobby glass, including entrance
                           door.
                  9.       Client papers on desks, tables, filing cabinets,
                           etc., are not to be disturbed.
                  10.      Clean and service sand urns. Sand and screens to be
                           furnished by client.
                  11.      Spot clean and remove hand prints, ink marks and
                           coffee rings from all desks.
                  12.      Damp clean backboards, if required.
                  13.      Spot clean interior partitions, if needed.
                  14.      Remove fingermarks and smudges from surfaces such as
                           doors, walls, light switches, etc.
                  15.      Spot clean interior glass in partitions and doors.
                           Cleaning agent is not to remain on partitions and the
                           like.
                  16.      Dust base of all chairs, stands, coat racks, etc.

         B.       WEEKLY SCHEDULE

                  1.       Clean and sanitize telephones.
                  2.       Low dust all horizontal surfaces to hand height,
                           including sills, ledges, moldings, shelves, picture
                           frames, ducts, radiators.
                  3.       Clean entire desk tops.
                  4.       Clean and polish bright metal to hand heights.
                  5.       Remove dust and cobwebs from ceiling areas and
                           corners.

         C.       MONTHLY SCHEDULE

                  1.       High dust above hand height all horizontal surfaces,
                           including shelves, moldings, ledges, pipes, ducts,
                           heating outlets, venetian blinds, etc.
                  2.       Wash all wastebaskets if needed.
                  3.       Wash desk tops.

                  4.       Wash all interior partitions; both sides of glass.
                  5.       Wash and sanitize metal partitions.
                  6.       Wash chair mats.
                  7.       Vacuum diffuser outlets.

         D.       QUARTERLY SCHEDULE

                  1.       Clean and polish furniture including desks, chairs,
                           cabinets.

         E.       SEMI-ANNUAL SCHEDULE

                  1.       Oil all wood paneling.

II.      WASHROOMS

         A.       NIGHTLY SCHEDULE

                  1.       Clean, sanitize and polish all vitreous fixtures,
                           including toilet bowls, urinals, and hand basins.
                  2.       Clean and sanitize all flush rings, drain and
                           overflow outlets.
                  3.       Clean and polish all chrome fittings.
                  4.       Clean and sanitize toilet seats.
                  5.       Clean and polish all glass and mirrors.
                  6.       Empty all containers and disposals; insert liners as
                           required.
                  7.       Wash and sanitize exterior of all containers.
                  8.       Empty and sanitize interior of sanitary containers.
                  9.       Wipe toilet stall partitions.  Wash as required.
                  10.      Remove spots, stains, splashes from wall area
                           adjacent to hand basins and towel holders.
                  11.      Refill all dispensers to maximum limits -- napkin,
                           soap, tissue, towel, liners, seat holders, cups.
                           Refill with supplies.
                  12.      Remove fingermarks and smudges from surfaces such as
                           doors, walls, light switches, etc.
                  13.      Sweep and wet mop all floors with disinfectant.
                  14.      Dust and spot clean all chairs, tables and lamps.

         B.       WEEKLY SCHEDULE

                  1.       Spot clean metal partitions and remove all writing.
                  2.       Low dust all horizontal surfaces to hand height,
                           including sills, moldings, ledges, shelves, frames,
                           ducts, heating outlets.

         C.       MONTHLY SCHEDULE

                  1.       Sanitize metal partitions.
                  2.       High dust above hand height all horizontal surfaces,
                           including shelves, ledges, moldings, pipes, ducts,
                           heating outlets.

                                       2

                  3.       Machine scrub tile floors.
                  4.       Flush floor drains with disinfectant.

         D.       QUARTERLY SCHEDULE

                  1.       Flush soap dispensers.

III.     FLOORS - RESILIENT AND HARD

         A.       NIGHTLY SCHEDULE

                  1.       Dry dust with treated yarn mop and wet mop where
                           necessary.

         B.       WEEKLY SCHEDULE

                  1.       Wet mop and machine spray buff open areas, including
                           kneehole or desks.
                  2.       Scrub to remove scuff and heel marks.

         C.       MONTHLY SCHEDULE

                  1.       Refinish to maintain adequate protective coating;
                           removing black heel marks.

         D.       ANNUAL SCHEDULE

                  1.       Strip, clean, seal and refinish, plus machine polish.
                  2.       Clean, refinish and polish baseboards.

IV.      CARPET

         A.       NIGHTLY SCHEDULE

                  1.       Vacuum open areas.
                  2.       Spot vacuum non-traffic aisles.

         B.       WEEKLY SCHEDULE

                  1.       Thoroughly vacuum all areas.

         C.       AS REQUIRED

                  1.       Inspect for spots and stains.  Remove is possible.
                  2.       Inspect for rub marks on cove base moldings and
                           remove same.

                                       3

V.       LUNCHROOM

         A.       NIGHTLY SCHEDULE

                  1.       Wash and sanitize table tops, damp clean seats and
                           backs of chairs.
                  2.       Clean, polish and refill napkin holders (napkins
                           supplied by tenant).
                  3.       Empty and damp clean ash trays.  Wash as required.
                  4.       Empty all containers and disposals.  Sanitize
                           interior.
                  5.       Wash and sanitize exterior of all containers.
                  6.       Clean and sanitize drinking fountain.
                  7.       Dust mop tile floors, making sure that no paper or
                           dust is under any table base.
                  8.       Clean table bases as needed.
                  9.       Damp mop all tile floors with a disinfectant.
                  10.      Vacuum carpets.

         B.       WEEKLY SCHEDULE

                  1.       Wash and sanitize pedestals and legs.
                  2.       Remove fingerprints from doors, frames, light
                           switches, kick and push plates, and handles.
                  3.       Low dust all horizontal surfaces to hand height,
                           including sills, moldings, ledges, shelves, frames,
                           ducts, and heating outlets.
                  4.       Spot clean the outside glass on showcases.
                  5.       Wash and sanitize chairs.

         C.       MONTHLY SCHEDULE

                  1.       High dust above hand height all horizontal surfaces,
                           including shelves, ledges, moldings, pipes, ducts,
                           heating out lets.

         D.       AS REQUIRED

                  1.       Clean all plaques, pictures, etc., as needed, so
                           there are no fingermarks or dust build-up.

VI.      STAIRCASES

         A.       NIGHTLY SCHEDULE

                  1.       Dust and/or wash hand rails.
                  2.       Sweep stairs completely, making sure all corners are
                           clean. Wet mop when necessary.

                                       4

VII.     ELEVATORS

         A.       NIGHTLY SCHEDULE

                  1.       Keep wall around signal button clean.
                  2.       Dust and rub down elevator doors; inside and outside.
                  3.       Dust and rub down walls, metal work in elevator cabs;
                           polishing metal surfaces.
                  4.       Vacuum all elevator door tracks and keep surfaces
                           clean.
                  5.       Properly maintain floors of all elevator cabs.

VIII.    TRASH

         A.       NIGHTLY SCHEDULE.

                  1.       Remove all waste and transport to designated area.

IX.      GARAGE AREA, ELEVATOR LOBBY

         A.       NIGHTLY SCHEDULE

                  1.       Thoroughly vacuum carpet.
                  2.       Spot clean partition glass.

         B.       MONTHLY SCHEDULE

                  1.       Thoroughly clean partition glass.

X.       DOCK AREA

         A.       NIGHTLY SCHEDULE

                  1.       Police dock wells and floor.

         B.       WEEKLY SCHEDULE

                  1.       Sweep dock wells and floor

XI.      WINDOW CLEANING

         A.       All windows inside and outside shall be cleaned as follows:

                  1.       Exterior - All outside perimeter and vestibule
                           windows, inside and out, at least three (3) times
                           yearly.

                                       5

                  2.       Interior - All interior windows (including lobby
                           glass inside and outside) three (3) times yearly.

                                       6

                                    RIDER A"

                              RULES AND REGULATIONS

         (1) The sidewalks, walks, entries, corridors, concourses, ramps,
staircases, escalators, and elevators (other than Tenant's freight elevator)
shall not be obstructed or used by Tenant, or the employees, agents,
servants, visitors, or licensees of Tenant for any purpose other than ingress
and egress to and from the Premises. No bicycle or motorcycle shall be
brought into the Building or kept on the Premises without the consent of
Landlord.

         (2) No freight, furniture, or bulky matter of any description will
be received into the Building or carried into the elevators (other than
Tenant's freight elevator) except in such a manner, during such hours, and
using such elevators and passageways as may be approved by Landlord, and then
only upon having been scheduled in advance. Any hand trucks, carryalls, or
similar appliances used for the delivery or receipt of merchandise or
equipment shall be equipped with rubber tires, side guards, and such other
safeguards as Landlord shall require.

         (3) Tenant, or the employees, agents, servants, visitors, or
licensees of Tenant shall not at any time place, leave, or discard any
rubbish, paper, articles, or objects of any kind whatsoever outside the doors
of the Premises or in the corridors or passageways of the Building. No
animals or birds shall be brought or kept in or about the Building.

         (4) Landlord shall have the right to prohibit any advertising by
Tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability for offices, and, upon written notice from
Landlord, Tenant will refrain from or discontinue such advertising. In no
event shall Tenant, without the prior written consent of Landlord, use the
name of the Building or use pictures or illustrations of the Building.

         (5) Tenant shall not place, or cause or allow to be placed, any sign
or lettering whatsoever in the windows of the Premises. Unless Tenant leases
an entire floor, Tenant shall not place any sign or lettering in or about the
Premises except in and at such places as may be designated by Landlord and
consented to by Landlord in writing. All lettering and graphics on corridor
doors must be approved in writing by Landlord, such approval not to be
unreasonably withheld.

         (6) Canvassing, soliciting, or peddling in the Building is
prohibited and Tenant shall cooperate to prevent same.

         (7) Any person in the Building will be subject to identification by
employees and agents of Landlord. All persons in or entering Building shall
be required to comply with the security policies of the Building. Tenant
shall keep doors to unattended areas locked and shall otherwise exercise
reasonable precautions to protect property from theft, loss, or damage.

         (8) Except as otherwise explicitly permitted in its lease, Tenant
shall not do any cooking or conduct any restaurant, luncheonette, automat, or
cafeteria for the sale of or permit the delivery of any food or beverage
intended for resale to the Premises, except by such persons delivering the
same as shall be approved by Landlord and only under regulations fixed by
Landlord. Tenant may, however, operate a coffee bar by and for its employees.

         (9) Tenant shall not, without Landlord's prior written approval,
bring or permit to be brought or kept in or on the premises any inflammable,
combustible, corrosive, caustic, poisonous, or explosive substance, or cause
or permit any odors to permeate in or emanate from the Premises.

         (10) Tenant shall not mark, paint, drill into, or in any way deface
any part of the Building or Premises. No boring, driving of nails or screws,
cutting, or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall not
install any resilient tile or similar floor covering in the Premises except
with the prior approval of Landlord.

         (11) No additional locks, bolts or other security devices of any
kind shall be placed on any door in the Building or the Premises and no lock
on any door therein shall be changed or altered in any respect without the
consent of Landlord. Landlord shall furnish two keys for each lock on
exterior doors to the Premises and shall, on Tenant's request and at Tenant's
expense, provide additional duplicate keys. All keys and access cards shall
be returned to Landlord upon termination of this Lease. Landlord may at all
times keep a pass key to the Premises. All entrance doors to the Premises
shall be left closed at all times, and left locked when the Premises are not
in use. Tenant shall promptly advise Landlord of any lost keys or access
cards and of any keys or access cards retained by former employees of Tenant.

         (12) Tenant shall give immediate notice to Landlord in case of
theft, unauthorized solicitation, or accident in the Premises or in the
Building or of defects therein or in any fixtures or equipment, or of any
known emergency in the Building.

         (13) Tenant shall not advertise for laborers giving the Premises as
an address, nor pay such laborers at a location in the Premises.

         (14) The requirements of Tenant will be attended to only upon
application at the office of Landlord in the Building. Employees of Landlord
shall not perform any work or do anything outside of their regular duties,
unless under special instructions from the office of Landlord.

         (15) No awnings, draperies, shutters, or other interior or exterior
window coverings that are visible from the exterior of the Building or from
the exterior of the Premises within the Building may be installed by Tenant
except as otherwise provided for therein.

         (16) No portion of the Premises or any other part of the Building
shall at any time be used or occupied as sleeping or lodging quarters.

         (17) Tenant shall at all times keep the Premises neat and orderly.

         (18) Tenant shall not make excessive noises, cause disturbances or
vibrations or use or operate any electrical or mechanical devices that emit
excessive sound or other waves or disturbances or create obnoxious odors, any
of which may be offensive to the other tenants and occupants of the Building,
or that would interfere with the operation of any device, equipment, radio,
television broadcasting or reception from or within the Building or elsewhere
and shall not place or install any projections, antennas, aerials, or similar
devices inside or outside of the Premises or on the Building without
Landlord's prior written approval.

                                       2

         (19) The water and wash closets, drinking fountains, and other
plumbing fixtures shall not be used for any purpose other than those for
which they were constructed, and no sweepings, rubbish, rags, coffee grounds,
or other substances shall be thrown therein. All damages resulting from any
misuse of the fixtures shall be borne by the Tenant who, or whose servants,
employees, agents, visitors, or licensees, shall have caused the same. No
person shall waste water by interfering or tampering with the faucets or
otherwise.

         (20) Tenant shall not serve, nor permit the serving of alcoholic
beverages in the Premises unless Tenant shall have procured Host Liquor
Liability Insurance, issued by companies and in amounts reasonably
satisfactory to Landlord, naming Landlord, or its agents and mortgagees, as
an additional party insureds.

                                       3

                            FIRST AMENDMENT TO LEASE

         THIS AGREEMENT is made as of the 1st day of October, 1999, between
AMERICAN NATIONAL BANK AND TRUST COMPANY OP CHICAGO, not personally but
solely as Trustee under Trust Agreement dated January 1, 1991 and known as
Trust No. 113370-03 ("Landlord") and ICON INFOSYSTEMS, INC. ("Tenant").

                                   WITNESSETH:

         WHEREAS, Landlord and Tenant are parties to that certain Office
Lease dated February 11, 1998 (herein, the "Lease"), which Lease demised to
Tenant Suite 280 (the "Premises") in the building located 111 Barclay
Boulevard, Lincolnshire Corporate Center, Lincolnshire, Illinois (the
"Building"); and

         WHEREAS, Landlord and Tenant desire to expand the Premises, extend
the term of the Lease and to otherwise amend the Lease in certain respects,
all in accordance with the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the Lease is hereby amended as follows:

         1. DEFINED TERMS. The following terms shall have the respective
meanings set forth below:

First Additional Premises:                 Suite 110 consisting of approximately
                                           1,877 rentable square feet, as shown
                                           on EXHIBIT "A" attached hereto and
                                           made a part hereof.

First Additional Premises Commencement
Date ("FPCD"):                             The date upon which Landlord's Work
                                           is substantially completed.

All other capitalized terms used herein shall have the same meaning as
ascribed to them in the Lease, unless otherwise defined herein,

         2. FIRST ADDITIONAL PREMISES. Effective as of the First Additional
Premises Commencement Date and for a lease term expiring concurrently with
the Term (as extended hereby), the Premises shall include the First
Additional Premises.

         3. TERM EXTENSION. Under the existing terms of the Lease, the Lease
is scheduled to expire on February 28, 2001. The Term of the Lease is hereby
extended for a period commencing on the First Additional Premises
Commencement Date and continuing through the last day of the fourth (4th)
Lease Year (the "First Extended Term"), on all of the same terms and
conditions as are set forth in the Lease except as set forth in this
Agreement. The First Extended Term shall be added to and become part of the
Term for all purposes under the Lease and the last day of the First Extended
Term shall be the Expiration Date for the entire Premises,

         4. FIXED MINIMUM RENT. Commencing on the First Additional Premises
Commencement Date arid continuing through the First Extended Term, the annual
Base Rent and Monthly Base Rent payable pursuant to the Schedule of
Significant Terms for the entire Premises shall be as follows;

         PERIOD                           FIXED MINIMUM RENT                    MONTHLY FIXED RENT
                                                                       
         Lease Year l                         $90,733.85                             $7,561.15
         Lease Year 2                         $93,455.87                             $7,787.99
         Lease Year 3                         $96,259.54                             $8,021.63
         Lease Year 4                         $99,147.33                             $8,262.28

"Lease Year" shall mean the period commencing on the First Additional
Premises Commencement Date and ending on the last day of the twelfth (I 2's')
full calendar month following the First Additional Premises Commencement Date
and each succeeding twelve calendar month period. Upon commencement of the
First Extension Term and at the request of either party hereto, Landlord and
Tenant shall enter into a written supplement to the Lease confirming the
terms, conditions and provisions applicable to the First Extension Term as
determined in accordance with the provisions hereof.

         5. TENANT'S PROPORTIONATE SHARE. From the First Additional Premises
Commencement Date and continuing through the last day of the First Extended
Term, Tenant's Share shall be increased to 7.56%.

         6. SECURITY DEPOSIT. The Security Deposit, as set forth in the
Schedule of significant Terms of the Lease shall be increased
to(pound)11,610.19 upon execution of this Agreement.

         7. CONDITION OF THE PREMISES. Tenant agrees (a) to accept possession
of the First Additional Premises in the condition existing on the date hereof
"as is", subject to performance of Landlord's Work, (b) that neither Landlord
nor Landlord's agents have made any representations or warranties with
respect to the Premises or the Building except as expressly set forth herein,
and (c) Landlord has no obligation to perform any work, supply any materials,
incur any expense or make any alterations or improvements to the Premises
except as expressly set forth herein. Notwithstanding the foregoing, Landlord
shall perform the following work in the First Additional Premises
(collectively, "Land1ord's Works") at Landlord's sole cost and expense:
perform the work indicated in the Drawing dated September 28, 1999, a copy of
which is attached hereto as Exhibit A, using building standard materials and
finishes, the colors of the paint and carpeting to be selected by Tenant out
of choices given by Landlord. Tenant shall be responsible for doing all other
work in the First Additional Premises required for Tenant's occupancy
thereof, except for that work which is specifically identified as being
Landlord's Work pursuant to the terms hereof. Tenant's taking possession of
the First Additional Premises shall be conclusive evidence against Tenant
that the First Additional Premises were then in good order and satisfactory
condition.

         8. EXTERIOR PARKING SPACES (MAXIMUM). The Maximum Number of Exterior
Parking Spaces shall, effective as of the First Additional Premises
Commencement Date, be increased from 15 to 22.

                                       2

         9. OPTION TO EXTEND TERM. Section S.1 of the Supplemental Provisions
of the Lease is hereby deleted in its entirety.

         10. REAL ESTATE BROKERS. Landlord has retained Van Vlissingen and
Co. ("Landlord's Agent") as leasing agent in connection with this Amendment
and Landlord will he solely responsible for any fee that may be payable to
Landlord's Agent. Each of Landlord and Tenant represents and warrants to the
other that it has not dealt with any broker in connection with this Amendment
other than Landlord's Agent, and that to the best of its knowledge and
belief, no other broker, finder or like entity procured or negotiated this
Amendment or is entitled to any fee or commission in connection herewith. The
execution and delivery of this Amendment by each party shall he conclusive
evidence that each party has relied upon the foregoing representations and
warranties. Each of Landlord and Tenant shall indemnify, defend, protect and
hold the other party harmless from and against any and all costs expenses,
claims and liabilities (including reasonable attorneys' fees and
disbursements) which the indemnified party may incur by reason of any claim
of or liability to any broker, finder or like agent (other than Landlord's
Agent) arising out of any dealings claimed to have occurred between the
indemnifying party and the claimant in connection with this Amendment, and/or
the above representation being false. The provisions of this paragraph 10
shall survive the expiration or earlier termination of the Term of the Lease.

         11. BINDING EFFECT. The Lease, as amended hereby, shall continue in
full force and effect, subject to the terms and provisions thereof In the
event of any conflict between the terms of the Lease and the terms of this
Amendment, the terms of this Amendment shall control. This Amendment shall be
binding upon and inure to the benefit of Landlord, Tenant anti their
respective successors and permitted assigns.

         12. SUBMISSION. Submission of this Agreement by Landlord to Tenant
for examination and/or execution shall not in any manner bind Landlord and no
obligations on Landlord shall arise under this Amendment unless and until
this Amendment is fully signed and delivered by Landlord and Tenant,

         13. EXCULPATION. The liability of Landlord for Landlord's
obligations under the Lease, as amended by this Amendment (the "Amended
Lease"), shall be limited to Landlord's interest in the Building and the land
thereunder and Tenant shall not look to any other property or assets of
Landlord or the property or assets of any partner, shareholder, director,
officer, principal, employee or agent, directly and indirectly, of Landlord
(collectively, the "Parties") in seeking either to enforce Landlord's
obligations under the Amended Lease or to satisfy a judgment for Landlord's
failure to perform such obligations; and none of the Parties shall be
personally liable for the performance of Landlord's obligations under the
Amended Lease.

                                      3

         IN WITNESS WHEREOF, the parties have caused this First Amendment to
Lease to be executed as of the date first above written.

                                    LANDLORD:

                                    AMERICAN NATIONAL BANK AND TRUST COMPANY OF
                                    CHICAGO AS TRUSTEE UNDER TRUST NO. 113370-03

                                    By Van Vlissingen and Co.
                                    Duly Authorized Agent of Beneficiary

                                    By:  /s/ Charles Lamphere
                                       ----------------------------------------
                                         President

                                    TENTANT:

                                    ICON INFOSYSTEMS, INC.

                                    By:  /s/ Charles Dorfman
                                       ----------------------------------------
                                         Its:  President

Exhibit A - First Additional Premises
          - Drawing

                                       4

EXHIBIT "A"                                                  September 28, 1999

111 Barclay Boulevard, Suite 110
1,877 Rentable Sq. Ft.

                                    [diagram]

ASSUMPTIONS:

- - Install 12 can lights on dimmer in training room.
- - New paint and carpet
- - Install sink with 8 feet of upper and lower cabinets
- - Supply full height refrigerator
- - Vinyal tile floor in break room

                                       5

                            SECOND AMENDMENT TO LEASE

         THIS AGREEMENT is made as of the 23rd day of December, 1999, between
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally but
solely as Trustee under Trust Agreement dated January 1, 1991 and known as
Trust No. 113370-03 ("Landlord") and ICON IINFOSYS1'EMS, INC. ("Tenant").

                                   WITNESSETH:

         WHEREAS, Landlord and Tenant are parties to that certain Office
Lease dated February 11, 1998 as amended by that certain First Amendment to
Lease dated October 1, 1999 (as heretofore amended, the "Lease"), which Lease
demised to Tenant Suite 280 (the "Premises") in the building located 111
Barclay Boulevard, Lincolnshire Corporate Center, Lincolnshire, Illinois (the
"Building"); and

         WHEREAS, Landlord and Tenant desire to confirm certain dates set
forth in the Lease and to otherwise amend the Lease in certain respects, all
in accordance with the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the Lease is hereby amended as follows:

         1. DEFINED TERMS. All capitalized terms used herein shall have the
same meaning as ascribed to them in the Lease, unless otherwise defined
herein. The First Additional Premises Commencement Date shall be January 1,
2000 and the First Extended Term shall expire December 31, 2003, such date
being the Expiration Date.

         2. FIXED MINIMUM RENT. The annual Base Rent and Monthly Base Rent
payable pursuant to the Schedule of Significant Terms for the entire Premises
shall be as follows:

         PERIOD                           FIXED MINIMUM RENT                    MONTHLY FIXED RENT
                                                                         
         1/1/00--12/31/00                      $90,733.85                            $7,561.15
         1/1/01--12/31/01                      $93,455.87                            $7,787.99
         1/1/02--12/31/02                      $96,259.54                            $8,021.63
         1/1/03--12/31/03                      $99,147.33                            $8,262.28

         3. ESTOPPEL. Tenant represents and warrants that as of the date
hereof: (a) the Lease is in full force and effect, (b) the Lease has not been
assigned or encumbered, (c) Tenant knows of no defense or counterclaim to the
enforcement of the Lease, (d) Tenant is not entitled to any offset, abatement
or reduction of rent under the Lease, (e) Landlord has completed all work to
be performed by Landlord (including Landlord's Work) and paid all
contributions and other sums due to Tenant under the Lease, and (f) neither
Landlord nor Tenant is in default under any of its obligations under the
Lease.

         4. BINDING EFFECT. The Lease, as amended hereby, shall continue in
full force and effect, subject to the terms and provisions thereof. In the
event of any conflict between the terms of the Lease and the terms of this
Amendment, the terms of this Amendment shall control.

This Amendment shall be binding upon and inure to the benefit of Landlord,
Tenant and their respective successors and permitted assigns.

         5. SUBMISSION. Submission of this Agreement by Landlord to Tenant
for examination and/or execution shall not in any manner bind Landlord and no
obligations on Landlord shall arise under this Amendment unless and until
this Amendment is fully signed and delivered by Landlord and Tenant.

         6. EXCULPATION. The liability of Landlord for Landlord's obligations
under the Lease, as amended by this Amendment (the "Amended Lease"), shall be
limited to Landlord's interest in the Building and the land thereunder and
Tenant shall not look to any other property or assets of Landlord or the
property or assets of any partner, shareholder, director, officer, principal,
employee or agent, directly and indirectly, of Landlord (collectively, the
"Parties") in seeking either to enforce Landlord's obligations under the
Amended Lease or to satisfy a judgment for Landlord's failure to perform such
obligations; and none of the Parties shall be personally liable for the
performance of Landlord's obligations under the Amended Lease.

         IN WITNESS WHEREOF, the parties have caused this Second Amendment to
Lease to be executed as of the date first above written.

                                    LANDLORD:

                                    AMERICAN NATIONAL BANK AND TRUST COMPANY OF
                                    CHICAGO AS TRUSTEE UNDER TRUST NO. 113370-03

                                    By Van Vlissingen and Co.
                                    Duly Authorized Agent of Beneficiary

                                    By:  /s/ Charles Lamphere
                                       ----------------------------------------
                                         President

                                    TENTANT:

                                    ICON INFOSYSTEMS, INC.

                                    By:  /s/ Charles Dorfman
                                       ----------------------------------------
                                         Its:  President

                                       2

                                  TRAINING ROOM

                                    [diagram]

                                     ATRIUM

                                    [diagram]

                                    SUITE 280
              111 BARCLAY BOULEVARD - LINCOLNSHIRE CORPORATE CENTER
                           4,034 RENTABLE SQUARE FEET

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-64218 of BioSante Pharmaceuticals, Inc. on Form SB-2 of our
report dated February 16, 2001 (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to the developmental stage
nature of BioSante), appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

Chicago, Illinois
September 13, 2001

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-64218 of BioSante Pharmaceuticals, Inc. (formerly
Ben-Abraham Technologies Inc.) on Form SB-2 of our report dated February 19,
1999 (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the developmental stage nature of
BioSante), appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading "Experts"
in such Prospectus.

/s/ Deloitte & Touche LLP

Toronto, Ontario
September 13, 2001