MANHATTAN PHARMACEUTICALS, INC. SUBSCRIPTION AGREEMENT
Exhibit
10.1
MANHATTAN
PHARMACEUTICALS, INC.
1. General. This Subscription
Agreement sets forth the terms under which the undersigned investor, Linden
Growth Partners Master Fund LP (the “Investor”), will purchase from
Manhattan Pharmaceuticals, Inc. (the “Company”) a 12% Original Issue
Discount Subordinated Convertible Debenture (the “Debenture”) with a stated
value of Four Hundred Thousand Dollars ($400,000) (the “Stated Value”) and a warrant
to purchase up to Two Million Two Hundred Twenty-Two Thousand Two Hundred
Twenty-Two (2,222,222) shares of the Company’s common stock, $.001 par value per
share, subject to adjustment as set forth therein (the “Warrant” and together with the
Debenture, the “Securities”) for a purchase
price of Two Hundred Thousand Dollars ($200,000) (the “Purchase Price”).
This
Subscription Agreement is submitted by the Investor to the Company to induce the
Company’s acceptance of this subscription in connection with the Company’s
proposed issuance of the Securities to the Investor. The Investor
understands that the Company will rely upon the representations set forth herein
in issuing such Securities without registration under the Securities Act of
1933, as amended (the “Securities Act”), or the
securities laws of any state. The Investor’s obligation to purchase
the Securities and deliver the Purchase Price is subject to the Company’s
execution and delivery of the Settlement Agreement and Mutual Release, dated
October 27, 2009 (the “Settlement Agreement”),
between the Company and Swiss Pharma Contract LTD. (“Swiss Pharma”), which, inter
alia, provides that within one (1) business day of the receipt of the payment
provided for in therein, the Satisfaction of Judgment attached as Exhibit B to
the Settlement Agreement (the “Satisfaction of Judgment”), be
filed with the clerk of the appropriate court. The Satisfaction of
Judgment shall provide that judgment described therein (as described in the
Company’s Form 10-Q for the quarter and six months ended June 30,
2009) has been satisfied by the Settlement Agreement.
2. Restricted
Securities. The Investor
understands that the sale or re-sale of the Securities has not been and is not
being registered under the Securities Act or any applicable state securities
laws, and the Securities, as applicable, may not be transferred
unless:
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(i)
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they
are sold pursuant to an effective registration statement under the
Securities Act; or
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(ii)
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they
are being sold pursuant to a valid exemption from the registration
requirements of the Securities Act and, if required by the Company, the
Investor shall have delivered to the Company, at the Investor’s sole cost
and expense, an opinion of counsel that shall be in form, substance and
scope customary for opinions of counsel in comparable transactions to the
effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from the registration requirements of
the Securities Act, which opinion shall be acceptable to the Company;
or
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(iii)
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they
are sold or transferred to an “affiliate” (as defined in Rule 144,
promulgated under the Securities Act (or a successor rule (“Rule 144”)) of the
Investor who agrees to sell or otherwise transfer the Securities only in
accordance with this Section 2 and
who is an accredited investor,
or
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(iv)
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they
are sold pursuant to Rule 144.
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The
Investor understands that any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and other than as
expressly provided for in the Securities with respect to certain piggyback
registration rights, neither the Company nor any other individual or
entity is under any obligation to register the Securities under the Securities
Act or any state securities laws.
3. Receipt
of Information. The Investor has
had an opportunity to receive, and fully and carefully review, all information
related to the Company and the Securities requested by it and to ask questions
of and receive answers from the Company regarding the Company, its business and
the terms and conditions of the offering of the Securities. The
Investor acknowledges that it has received, and fully and carefully reviewed and
understands this Agreement, the Debenture and the Warrant. Investor
acknowledges that it has received (either in hard copy or electronically through
the SEC’s XXXXX), and fully and carefully reviewed and understands, the
Company’s reports, schedules, financial statements and other documents required
to be filed by it with the Securities and Exchange Commission (the “SEC”) pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)
including without limitation, the Company’s annual report on Form 10-K for the
year ended December 31, 2008, the Company’s quarterly reports on Form 10-Q for
the quarters ended March 31, 2009 and June 30, 2009, the Company’s preliminary
proxy statement on Schedule 14A filed with the SEC on September 29,
2009 and the Company’s current reports on Form 8-K (all of the foregoing filed
with the SEC prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to herein as the “SEC
Documents”). The Investor acknowledges that based upon its
review of the SEC Documents, it understands the Company, its business, the risks
involved with an investment in the Company. The Investor understands
that its investment in the Securities involves a high degree of risk and that
the net proceeds received from the sale of the Securities will be utilized to
satisfy the Company’s initial payment obligations under its settlement agreement
with Swiss Pharma Contract LTD. The Investor’s decision to enter into
this Agreement to purchase the Securities has been made based solely on the
independent evaluation of the Company by the Investor and its
representatives. The Investor has received such accounting, tax and
legal advice from persons (“Professional Advisors”) other
than the Company as it has considered necessary to make an informed investment
decision with respect to the acquisition of the
Securities. Specifically, the Investor acknowledges that the
Securities may be deemed to have been issued with original issue discount
(“OID”) for U.S. federal
income tax purposes resulting in material tax consequences to the Investor and,
accordingly, the Investor has reviewed the foregoing OID consequences with its
Professional Advisors. The Investor acknowledges that the Company has
neither prepared nor delivered to the Investor or to any other party acting on
the Investor’s behalf any offering documents, such as a private placement
memorandum, offering memorandum, strategic plan or any similar documents and, to
the extent the Investor has reviewed other documents, other than the SEC
Documents, relating to the Company (whether or not prepared by the Company),
including any business plan or financial projections, such documents may not be
complete and there may be material information relating to the Company and/or an
investment in the Securities which is not set forth in such
documents.
4. Restrictions
on Transferability. The
Investor understands and agrees that the Securities and the Shares are
restricted securities and, therefore, may not be sold, pledged, hypothecated or
otherwise transferred unless they are registered under the Securities Act and
applicable state securities laws (or an exemption from such registration is
available and the compliance with such exemption is evidenced by an opinion of
legal counsel to the Investor, addressed to the Company, in form and substance
acceptable to the Company, that no violation of the Securities Act or any state
securities law would result from such sale or transfer). The Investor
understands that the certificates or instruments evidencing the Securities and
the shares Common Stock issuable upon conversion or exercise of the Securities
will bear a legend substantially in the form set forth below (among other
applicable legends), and that the Company will make a notation on its transfer
books to such effect:
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“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER
OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES
LAWS.”
5. Additional
Representations of the Proposed Investor. The Investor hereby
represents and warrants to the Company (with the intent that the Company shall
rely upon these in determining the Investor’s suitability to purchase the
Securities and the Shares) as follows:
(a) The
entering into of this Agreement and the transactions contemplated hereby do not
and will not result in the violation of any of the terms and provisions of any
law applicable to, or the charter or other organizational documents, bylaws or
other constating documents of, the Investor or of any agreement, written or
oral, to which the Investor may be a party or by which the Investor is or may be
bound.
(b) The
Investor has duly executed and delivered this Agreement, and this Agreement
constitutes a valid and binding agreement of the Investor enforceable against
the Investor in accordance with its terms, except as such enforceability may be
limited by general principals of equity, or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.
(c) The
Securities are being acquired for the Investor’s own account, not as nominee or
agent, for investment purposes only and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same in violation of the Securities Act, without prejudice, however, to the Investor’s right at
all times to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities
laws.
(d) The Investor is
neither a registered representative under the Financial Industry Regulatory
Authority (“FINRA”), a
member of FINRA or associated or Affiliated with any member of FINRA, nor a
broker-dealer registered with the SEC under the Exchange Act or engaged in a
business that would require it to be so registered, nor is it an Affiliate of a
such a broker-dealer or any person engaged in a business that would require it
to be registered as a broker-dealer. In the event such Investor is a member of
FINRA, or associated or Affiliated with a member of FINRA, such Investor agrees,
if requested by FINRA, to sign a lock-up, the form of which shall be
satisfactory to FINRA with respect to the Warrants and the Warrant
Shares.
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(e) The Investor is not an
underwriter of the Common Stock, nor is it an affiliate of an underwriter of the
Common Stock.
(f) The Investor acknowledges
that the purchase of the Securities is a highly speculative investment and that
it can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial and/or business
matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby.
(g) The
Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as
amended, under the Securities Act.
(h) The
Investor did not learn of the investment in the Securities as a result of any
public advertising or general solicitation, and is not aware of any public
advertisement or general solicitation in respect of the Company or its
securities.
(i) The
Investor will not have, as a result of the transactions contemplated hereby, any
valid right, interest or claim against or upon the Company for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investor.
(j) Other
than with respect to the transactions contemplated herein, since the earlier to
occur of (i) the time that the Investor was first contacted by the Company, or
any other person regarding an investment in the Company and (ii) the thirtieth
(30th) day
prior to the date hereof, neither the Investor nor any affiliate of the Investor
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to the Investor’s investments or trading or
information concerning the Investor’s investments, including in respect of the
Securities, or (z) is subject to the Investor’s review or input concerning such
affiliate’s investments or trading decisions (collectively, “Trading Affiliates”) has,
directly or indirectly, nor has any person acting on behalf of, or pursuant to,
any understanding with the Investor or Trading Affiliate effected or agreed to
effect any transactions in the securities of the Company or involving the
Company’s securities (a “Prohibited
Transaction”).
(k) The
Investor is a resident of the jurisdiction set forth in the signature page
hereto.
(l) The
Investor understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of the Investor to acquire the
Securities. All of the information which the Investor has provided to
the Company is true, correct and complete as of the date this Agreement is
signed, and if there should be any change in such information prior to the
Closing, the Investor will immediately provide the Company with such
information.
(m) The
Investor understands that affiliates and/or employees of the National Securities
Corporation (the “Placement
Agent”) (i) beneficially own shares of Common Stock and (ii) will receive
the compensation set forth in Section 8 in
connection with the sale of the Securities.
6. Representations
of the Company. Except as set forth in the Company’s
disclosure schedule (the “Disclosure Schedule”), the
Company hereby represents and warrants to the Investor ( the disclosure in any
section of the Disclosure Schedule shall qualify the corresponding section of
this Section 6,
provided, however, that any matter set forth in any section of the Disclosure
Schedule shall be deemed referred to and incorporated in all other sections of
the Disclosure Schedule to which such matter’s application or relevance is
readily apparent on its face) as follows:
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6.1 Organization; Execution, Delivery
and Performance.
(a) The
Company and each subsidiary of which the Company owns, directly or
indirectly, a controlling interest (a “Subsidiary”) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, with full power and
authority (corporate and other) to own, lease, use and operate its properties
and to carry on its business as and where now owned, leased, used, operated and
conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which its ownership
or use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. For purposes of this
Agreement “Material Adverse
Effect” shall mean a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company taken as a whole; or (ii) the ability of
the Company to perform its obligations under the Transaction Documents, but, to
the extent applicable, shall exclude any circumstance, change or effect to the
extent resulting or arising from: (i) any change in general economic conditions
in the industries or markets in which the Company and its Subsidiaries operates
so long as the Company and its Subsidiaries are not disproportionately (in a
material manner) affected by such changes; (ii) national or international
political conditions, including any engagement in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack so long as the Company and its Subsidiaries are
not disproportionately (in a material manner) affected by such changes; (iii)
changes in United States generally accepted accounting principles, or the
interpretation thereof; or (iv) the entry into or announcement of this
Agreement, actions contemplated by this Agreement, or the consummation of the
transactions contemplated hereby.
(b) The
Company has no Subsidiaries other than those listed in Schedule 6.1 of the
Disclosure Schedule. Except as disclosed in Schedule 6.1 of the
Disclosure Schedule or in the SEC Documents, the Company owns, directly or
indirectly, all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any and all liens, security interests, charges,
pledges or similar encumbrances (“Liens”) and all of the issued
and outstanding shares of capital stock or comparable equity interest of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive rights of first refusal and other similar rights. The
Company has the unrestricted right to vote, and (subject to limitations imposed
by applicable law) to receive dividends and distributions on, all capital stock
or other equity securities of its Subsidiaries that are owned by the
Company.
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(c)
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(i)
The
Company has all requisite corporate power and authority to enter into and
perform this Agreement, the Debenture and the Warrant (the “Transaction
Documents”) and to consummate the transactions contemplated hereby
and thereby and to issue the Securities in accordance with the terms
hereof and thereof;
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(ii)
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the
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby have been duly authorized by the Company’s Board of Directors and
no further consent or authorization of the Company, its Board of
Directors, or its stockholders, is required except as expressly
contemplated by this Agreement;
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(iii)
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each
of the Transaction Documents has been duly executed and delivered by the
Company by its authorized representative, and such authorized
representative is a true and official representative with authority to
sign each such document and the other documents or certificates executed
in connection herewith and bind the Company accordingly;
and
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(iv)
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each
of the Transaction Documents constitutes, and upon execution and delivery
thereof by the Company will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by general
principals of equity, or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating
to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.
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6.2 Warrants Shares and Debenture Shares
Duly Authorized. The shares of the
Company’s common stock, $.001 par value per share (“Common Stock”) issuable upon
(i) exercise of the Warrant (the “Warrant Shares”) or (ii)
conversion of the Debenture (the “Debenture Shares”) will be
duly authorized and reserved for future issuance and, upon exercise of the
Warrant or conversion of the Debenture, in each case in
accordance with their terms, will be duly and validly issued, fully paid and
non-assessable, and free from all taxes or Liens with respect to the issue
thereof and shall not be subject to preemptive rights, rights of first refusal
and/or other similar rights of stockholders of the Company and/or any other
individual or entity.
6.3 No Conflicts.
(a) Except
as disclosed in Schedule 6.3 of the
Disclosure Schedule, the execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Warrant Shares and the Debenture Shares) will
not:
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(i)
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conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or similar documents of the
Company;
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(ii)
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violate
or conflict with, or result in a breach of any provision of, or
constitutes a default and/or an event of default (or an event which with
notice or lapse of time or both could become a default and/or an event of
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company is a party, except for possible
violations, conflicts or defaults as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company;
or
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(iii)
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result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or by which any
property or asset of the Company is bound or
affected.
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(b) The
Company is not in violation of its Certificate of Incorporation, By-laws or
other organizational documents. The Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default), under, and the Company has not taken any action or failed to take any
action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party or by which any property or assets of the Company is
bound or affected, except for possible defaults, terminations, amendments,
accelerations or cancellations which would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the Company are not
being conducted in violation of any law, rule ordinance or regulation of any
governmental entity, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse
Effect. Based in part on the truth and accuracy of the Investor’s
representations set forth herein, except as required under the Securities Act of
1933, as amended (the “Securities Act”), the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or except as set forth on
Schedule 6.3 of
the Disclosure Schedule, any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Debenture or the
Warrant in accordance with the terms hereof or thereof or to issue and sell the
Debenture and Warrant in accordance with the terms hereof and to issue the
Warrant Shares upon exercise of the Warrants or the Debenture Shares upon
conversion of the Debenture. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof or will be obtained or effected in a timely manner following the Closing
Date.
6.4 Capitalization.
(a)
As of September 15, 2009, the authorized capital stock of the Company
consists solely of 1,500,000 share of preferred stock, of which no shares of
preferred stock are issued and outstanding and 300,000,000 shares of Common
Stock, of which 70,624,232 shares of Common Stock are
issued and outstanding, 7,592,232 shares of Common Stock are reserved for
issuance pursuant to options granted under the Company’s stock option plan, and
86,060,096 shares are reserved for issuance pursuant to securities (other than
the Warrant and the Debenture) exercisable for, or convertible into or
exchangeable for shares of Common Stock.
(b) Except
as described above, in the SEC Documents or Schedule 6.4(b)
annexed hereto, as of September 15, 2009:
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(i)
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there
are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims
or other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of
capital stock of the Company, or arrangements by which the Company is or
may become bound to issue additional shares of capital stock of the
Company;
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(ii)
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other
than as set forth on Schedule 6.4(b)
of the Disclosure Schedule, there are no agreements or arrangements under
which the Company is obligated to register the sale of any of its
securities under the Securities Act (except for the registration rights
provisions contained herein); and
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(iii)
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there
are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to
security holders) that will be triggered by the issuance of any of the
Debenture, the Warrant, the Warrant Shares and/or the Debenture
Shares. All of such outstanding shares of capital stock are, or
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock and/or other
securities of the Company are subject to preemptive rights, rights of
first refusal and/or any other similar rights of the stockholders of the
Company and/or any other Person or any Lien imposed through the actions or
failure to act of the Company.
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6.5 SEC Information.
(a) Except
as set forth in Schedule 6.5 of the
Disclosure Schedule or in the SEC Documents, since January 1, 2009, the Company
has timely filed (subject to 12b-25 filings with respect to certain periodic
filings) all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act. The SEC Documents have been made available to the
Investor via the SEC’s XXXXX system. Except as set forth on Schedule 6.5 of the
Disclosure Schedule, as of their respective dates the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of the date hereof, the SEC Documents when taken in their
entirety, shall not contain any untrue statements of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the date upon which they were made and
the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents (“Company
Financial Statements”) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as in effect at the time of the
filing. The Company Financial Statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”), consistently applied,
during the periods involved (except:
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(i)
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as
may be otherwise indicated in such financial statements or the notes
thereto; or
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(ii)
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in
the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries, if any, as of the dates
thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit
adjustments).
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(b) Except
as expressly set forth in the Company Financial Statements, in the SEC Documents
or on Schedule
6.5, the Company has no liabilities, contingent or otherwise, other
than:
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(i)
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liabilities
incurred in the ordinary course of business subsequent to December 31,
2008; and
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(ii)
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obligations
under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which, individually or in the aggregate, are not material to
the financial condition or operating results of the
Company.
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(c) The
shares of Common Stock are quoted on the OTCBB under the symbol
“MHAN.” The Company has not received notice (written or oral) from
the OTCBB to the effect that the Company is not in compliance with the
continuing requirements of the OTCBB. The Company is, and it has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such maintenance requirements.
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(d) All
information relating to or concerning the Company and its officers, directors,
employees, customers or clients (including, without limitation, all information
regarding the Company’s internal financial accounting controls and procedures)
set forth in the Transaction Documents and the SEC Documents incorporated by
reference therein, when taken together as a whole, does not contain an untrue
statement of material fact or omit to state any material fact necessary in order
to make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.
6.6 Intellectual Property. Except
as set forth in Schedule 6.6 or in
the SEC Documents, the Company or its Subsidiaries owns valid title, free and
clear of any Liens, or possesses the requisite valid and current licenses or
rights, free and clear of any Liens, to use all Intellectual Property in
connection with the conduct its business as now operated. There is no
pending claim or action by any person pertaining to, or proceeding pending, or
to the Company’s knowledge threatened, which challenges the right of the Company
or of a Subsidiary with respect to any Intellectual Property necessary to enable
it to conduct its business as now operated. To the best of the
Company’s knowledge, the Company’s current products, services and processes do
not infringe on any Intellectual Property or other rights held by any person,
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company has not received any written
notice of infringement of, or conflict with, the asserted rights of others with
respect to its intellectual property. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of its intellectual
property.
6.7 Permits; Compliance. The
Company is in possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the “Company Permits”), except where such
failure to posses would not have a Material Adverse Effect, and there is no
action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Since December 31, 2008, the Company has received no
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
6.8 Absence of Litigation. Except
as set forth in Schedule 6.8 of the
Disclosure Schedule or in the SEC Documents, there is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, or its
businesses, properties or assets or their officers or directors in their
capacity as such, that would have a Material Adverse Effect.
6.9 No Materially Adverse Contracts,
etc. Except as set forth in Schedule 6.9 of the
Disclosure Schedule, the Company is not subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a Material Adverse Effect. The Company is not a party to any
contract or agreement which has or is reasonably expected to have a Material
Adverse Effect.
-9-
6.10 No Material
Changes. Except as set forth in the SEC Documents, since
December 31, 2008, there has not been (i) any material adverse change in the
financial condition, operations or business of the Company from that shown on
the Company Financial Statements, or any material transaction or commitment
effected or entered into by the Company outside of the ordinary course of
business; (ii) to the Company’s knowledge, any effect, change or circumstance
which has had, or could reasonably be expected to have, a Material Adverse
Effect; or (iii) any incurrence of any material liability outside of the
ordinary course of business.
6.11 Labor Matters.
(a) The Company is not a party to or bound by any collective
bargaining agreements or other agreements with labor
organizations. The Company has not violated in any material respect
any laws, regulations, orders or contract terms, affecting the collective
bargaining rights of employees, labor organizations or any laws, regulations or
orders affecting employment discrimination, equal opportunity employment, or
employees’ health, safety, welfare, wages and hours.
(b) The Company is, and at all times has been, in compliance
in all material respects with all applicable laws respecting employment
(including laws relating to classification of employees and independent
contractors) and employment practices, terms and conditions of employment, wages
and hours, and immigration and naturalization.
6.12 Environmental
Matters. To the Company’s knowledge, neither the Company nor
any Subsidiary is in violation of any statute, rule, regulation, decision or
order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “Environmental Laws”), owns or
operates any real property contaminated with any substance that is subject to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s knowledge,
threatened investigation that might lead to such a claim.
6.13 Tax Matters. None
of the Company and its Subsidiaries has made or filed any federal, state and
foreign income or any other tax returns, reports and declarations required by
any jurisdiction to which it is subject and none of them has ever paid any taxes
or other governmental assessments or charges that are material in amount, nor is
it aware of any that have been assessed or are due. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. Neither the Company nor any of its Subsidiaries have executed
a waiver with respect to the statute of limitations relating to the assessment
or collection of any foreign, federal, state or local tax.
6.14 Certain Transactions. Except
as set forth on Schedule 6.14 of the
Disclosure Schedule or in the SEC Documents, there are no loans, leases, royalty
agreements or other transactions between (i) the Company or any of its customers
or suppliers; and (ii) any officer, employee, consultant or director of the
Company or any person owning five (5%) percent or more of the capital stock of
the Company or five (5%) percent or more of the ownership interests of the
Company or any member of the immediate family of such officer, employee,
consultant, director, stockholder or owner or any corporation or other entity
controlled by such officer, employee, consultant, director, stockholder or
owner, or a member of the immediate family of such officer, employee,
consultant, director, stockholder or owner.
-10-
6.15 Form D; Blue Sky Laws. The
Company shall file a Form D with respect to the Securities as required under
Regulation D promulgated under the Securities Act and to provide a copy thereof
to the Placement Agent, promptly after such filing. The Company shall
assist the legal counsel of the placement agent of the Securities (the “Placement Agent”), on or
before the date of the closing of the sale of the Securities (the “Closing Date”), in qualifying
the Securities for sale to the Investor in the applicable closing pursuant to
this Agreement under applicable securities or “blue sky” laws of the states of
the United States (or to obtain an exemption from such qualification), and shall
pay all fees and expenses of such counsel in connection therewith, including,
but not limited to, all state filing fees and such counsel’s legal fees and
expenses.
6.16 Public
Information. At any time during the period
commencing from the six (6) month anniversary of the Closing Date and ending at
such time that all of the Warrant Shares and Debenture Shares can be sold either
pursuant to a registration statement, or if a registration statement is not
available for the resale of all of such securities, may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144, if the Company
shall fail for any reason or no reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information Failure”)
then, as a remedy for the damages to any holder of Securities by reason of any
such delay in or reduction of its ability to sell the Warrant Shares or
Debenture Shares (which remedy shall not be exclusive of any other remedies
available), including, without limitation, specific performance), the Company
shall pay to each holder of Warrant Shares or Debenture Shares who is not
eligible to sell all of his, her or its Warrant Shares or Debenture Shares
pursuant to Rule 144 as a result of such Public Information Failure an amount in
cash, as liquidated damages and not as a penalty equal to two (2%) percent of
the Purchase Price of the Investor’s Securities on the day of a Public
Information Failure and on every thirtieth (30th) day (pro rated for periods
totaling less than thirty (30) days) thereafter until the earlier of (i) the
date such Public Information Failure is cured and (ii) such time that such
public information is no longer required pursuant to Rule 144. The
payments to which a holder shall be entitled pursuant to this Section 6.16 are
referred to herein as “Public
Information Failure Payments.” Public Information Failure
Payments shall be paid on the earlier of (I) the last day of the calendar month
during which such Public Information Failure Payments are incurred and (II) the
fifth (5th) business day after the event or failure giving rise to the Public
Information Failure Payments is cured. The parties agree that the maximum
aggregate amount of Public Information Failure Payments payable to the Investor
by the Company shall be ten (10%) percent of the aggregate Purchase Price of
such Investor’s Securities. In the event the Company fails to make
Public Information Failure Payments in a timely manner, such Public Information
Failure Payments shall bear interest at the rate of two (2%) percent per month
(prorated for partial months) until paid in full.
7. Covenants
of the Company. In connection with any proposed sale of shares
of Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants pursuant to Rule 144 (or any successor provision) by the Investor, the
Company covenants that it shall take such reasonable action as the Investor may
request (including, without limitation, promptly obtaining any required legal
opinions from Company counsel necessary to effect the sale of such Common Stock
under Rule 144 and paying all related fees and expenses of such counsel in
connection with such opinions), all to the extent required from time to time to
enable such Investor to sell such shares of Common Stock without registration
under the Securities Act pursuant to the provisions of Rule 144 (or any
successor provision). The Company further covenants to take such action and to
provide such legal opinions within three (3) business days after receipt from
such Investor (or its representative) of documentation reasonably required by
Company counsel to provide such opinion.
8. Indemnification. Each of the
parties hereto hereby agrees to indemnify and hold harmless the other party, and
its officers, directors, attorneys, agents, employees and affiliates, from and
against any and all loss, damage or liability directly or indirectly due to or
arising out of a breach of any representation, warranty or covenant of such
party contained in this Subscription Agreement. Each of the parties
hereto will notify the other immediately of any material change in any statement
made herein that occurs prior to the closing of the sale of the Securities to
the Investor.
-11-
9.
Representative
Capacity. If an investment
in the Company is being made by a corporation, partnership, limited liability
company, trust, estate or other entity, I, the person signing on behalf of the
Investor, personally hereby represent that I have all right and authority, in my
capacity as an officer, general partner, trustee, executor or other
representative of such corporation, partnership, trust, estate or other entity,
as the case may be, to make such decision to invest in the Company and to
execute and deliver this Subscription Agreement on behalf of such corporation,
partnership, trust, estate or other entity as the case may be, enforceable in
accordance with its terms. I also represent that any such
corporation, partnership, trust, entity or other entity was not formed for the
purpose of buying the Securities hereby subscribed.
10.
Compensation
of Placement Agent, Brokers, etc. The Investor acknowledges
that it is fully aware that the Placement Agent will receive from the Company,
in consideration of its services as placement agent in respect of the offer and
sale of the Securities contemplated hereby:
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(i)
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a
fee of ten (10%) percent of the gross proceeds raised upon the sale of the
Securities;
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(ii)
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a
warrant to purchase up to Two Hundred and Twenty-Two Thousand Two Hundred
Twenty-Two shares (222,222) of Common Stock, subject to adjustment for
stock splits, stock dividends, combinations, recapitalizations, which
shall be in the same for as the Warrant;
and
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(iii)
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reimbursement
of up to $10,000 of legal expenses of the Placement
Agent.
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11. Use of
Proceeds. The Company agrees, represents, warranties and
covenants that it shall use the net proceeds received from the sale of the
Securities to satisfy the Company’s initial payment obligation under the
Settlement Agreement. The Company may, upon prior written notice to
the Investor, direct the Investor to pay the Purchase Price by wire
transfer of immediately available funds directly to an account for the benefit
of Swiss Pharma or Swiss Pharma’s parent company, Covance Inc., as set forth in
such notice.
12. Governing
Law; Consent to Jurisdiction. This Agreement shall be governed
by, and construed solely and exclusively in accordance with, the internal laws
of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the sole
and exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated
hereby.
13. Entire
Agreement, Etc. This Subscription Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and thereof and supersedes all other prior and contemporaneous
agreements, understandings, negotiations, transmission, and discussions, whether
oral or written, of the parties. No supplement, modification,
amendment, or waiver of this Subscription Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of
any of the provisions of this Subscription Agreement shall be deemed to or shall
constitute a waiver of any other provisions hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided. This Subscription Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto, their respective suxxxxxxxx,
xxxxx, xxxxxxx, representatives and permitted assigns. The invalidity
of any portion hereof shall not affect the validity, force or effect of the
remaining portions hereof. If it is ever held that any restriction
hereunder is too broad to permit enforcement of such restriction to its fullest
extent, such restriction shall be enforced to the maximum extent permitted by
law.
-12-
14. Notices. All
notices, requests, demands and other communications provided in connection with
this Agreement shall be in writing and shall be deemed to have been duly given
at the time when hand delivered, delivered by express courier, or sent by
facsimile (with receipt confirmed by the sender’s transmitting device) in
accordance with the contact information provided below or such other contact
information as the parties may have duly provided by notice.
The
Company:
Manhattan
Pharmaceuticals, Inc.
48 Xxxx
Xxxxxx, Xxxxx 0000
Xxx Xxxx,
XX 00000
Facsimile: (000)
000-0000
Attention:
Xxxx XxXxxxxxxx
With a
copy to:
Xxxxxxxxxx
Xxxxxxx PC
65
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx Xxxxxxx, Esq.
The
Investor:
As per
the contact information provided on the signature page hereof.
15.
Third
Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.
16. Headings;
Counterparts. Section headings are not to be considered part
of this Subscription Agreement and are included solely for convenience and are
not intended to be full or accurate descriptions of the contents
thereof. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[Signature
page follows]
-13-
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INVESTOR:
LINDEN
GROWTH PARTNERS MASTER FUND LP
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By: /s/
Xxxx X. Xxxxxxxx
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Name:
Xxxx X. Xxxxxxxx
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Title: Analyst
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Address: 200
Xxxxxxxx Xxxxxxxxx Xxxx, Xxxxx 000
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Xxxxxx
Xxxxxx, XX 00000
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Phone:_____________________________
Telecopier:__________________________
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APPROVED
THIS 28th DAY OF
OCTOBER, 2009
MANHATTAN
PHARMACEUTICALS, INC.
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By:
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/s/ Xxxx XxXxxxxxxx
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Name:
Xxxx XxXxxxxxxx
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Title:
Chief Financial Officer
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