UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): October 28, 2009
Manhattan
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-32639
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36-3898269
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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48
Wall Street, Suite 1110
New
York, New York 10005
(Address
of principal executive offices) (Zip Code)
(212)
582-3950
(Registrant's
telephone number, including area code)
Not
applicable
(Former
name or former address, if changed since last report)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
3.02 Unregistered Sales of Equity Securities
On
October 28, 2009, Manhattan Pharmaceuticals, Inc. (the “Company”) entered
into a Subscription Agreement (the “Subscription
Agreement”) pursuant to which it sold a 12% Original Issue Discount
Senior Subordinated Convertible Debenture with a stated value of $400,000 (the
“Debenture”)
and a warrant (the “Warrant” and,
together with the Debenture, the “Securities”) to
purchase 2,222,222 shares of the Company’s common stock, par value $.001 par
value per share (“Common
Stock”). The Debenture is convertible into shares of Common
Stock at an initial conversion price of $0.09 per share, subject to adjustment,
or, in the event the Company issues new securities in connection with a
financing the Debenture may be converted into such new securities at a
conversion price equal to the purchase price paid by the purchasers of such new
securities. The Company may also, in its sole discretion, elect to
pay interest due under the Debenture quarterly in shares of Common Stock
provided such shares are subject to an effective registration
statement. The Debenture is subordinated to the Company’s outstanding
12% Senior Secured Promissory Notes in the principal amount of
$1,725,000. The Warrant is exercisable at an exercise price of $0.11
per share, subject to adjustment, prior to October 28, 2014. A copy
of the Subscription Agreement, Debenture and Warrant are filed herewith as
Exhibits 10.1, 10.2 and 10.3, respectively.
The
purchaser of the Securities represented that it was an “accredited investor,” as
that term is defined in Rule 501(a) of Regulation D under the Securities Act,
and the sale of the Securities was made in reliance on exemptions provided by
Regulation D and Section 4(2) of the Securities Act of 1933, as
amended.
In
connection with the issuance of the Securities, the Company issued warrants
to purchase an aggregrate of 222,222 shares of Common Stock at
an exercise price of $0.11 per share to National Securities
Corporation, its placement agent, and certain of its designees (each of
whom represented that he, she or it was an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D of the Securities Act) (each
a “Placement Agent
Warrant”) as compensation for its services. The form of Placement Agent
Warrant is filed herewith as Exhibit 10.4.
The
Company did not use any form of advertising or general solicitation in
connection with the sale of the Securities. The Securities and shares of Common
Stock issuable upon exercise or conversion thereof are non-transferable in the
absence of an effective registration statement under the Securities Act of 1933,
as amended, or an available exemption therefrom, and all certificates are
imprinted with a restrictive legend to that effect.
Item
8.01 Other Events.
As
previously disclosed in the Company’s Form 8-K filed with the Commission on
September 9, 2008, the Company has been involved in an
arbitration proceeding with Swiss Pharma Contract LTD (“Swiss Pharma”), a
clinical site that the Company used in one of its obesity trials. On September
5, 2008, the sole arbitrator in Switzerland rendered an award in favor of
Swiss Pharma, awarding to Swiss Pharma a total of approximately
$646,000. On October 27, 2009, the Company entered into a Settlement
Agreement and Mutual Release with Swiss Pharma pursuant to which it agreed to
pay Swiss Pharma $200,000 and issue Swiss Pharma an interest free promissory
note in the principal amount of $250,000 in full satisfaction of such
arbitration award.
Item
9.01 Financial Statements and Exhibits.
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Exhibits
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10.1
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Subscription
Agreement, dated October 28, 2009
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10.2
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12%
Original Issue Discount Senior Subordinated Convertible Debenture, dated
October 28, 2009
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10.3
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Warrant,
dated October 28, 2009
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10.4
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Form
of Placement Agent Warrant
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Forward
Looking Statements
This
Current Report on Form 8-K contains forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements typically are identified by use of terms such
as "may," "will," "should," "plan," "expect," "anticipate," "estimate" and
similar words, although some forward-looking statements are expressed
differently. Forward-looking statements represent our management's judgment
regarding future events. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, the Company can
give no assurance that such expectations will prove to be correct. All
statements other than statements of historical fact included in this Current
Report on Form 8-K are forward-looking statements. The Company cannot guarantee
the accuracy of the forward-looking statements, and you should be aware that the
Company's actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including the statements
under "Risk Factors" contained in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2008 filed with the Securities and Exchange
Commission.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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MANHATTAN
PHARMACEUTICALS, INC.
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Date: November 3,
2009
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By:
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/s/
Michael G. McGuinness
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Michael
G. McGuinness
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Chief
Financial
Officer
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Exhibit
10.1
MANHATTAN
PHARMACEUTICALS, INC.
SUBSCRIPTION
AGREEMENT
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 EDGAR), 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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-7-
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 EDGAR 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.
-8-
(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 successors,
heirs, estates, 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 Wall
Street, Suite 1100
New York,
NY 10005
Facsimile: (212)
582-3957
Attention:
Mike McGuinness
With a
copy to:
Lowenstein
Sandler PC
65
Livingston Avenue
Roseland,
NJ 07068-1791
Facsimile:
(973) 597-2445
Attention:
Anthony Pergola, 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/
Lara S. Coviello
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Name:
Lara S. Coviello
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Title: Analyst
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Address: 200
Abington Executive Park, Suite 205
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Clarks
Summit, PA 18411
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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/ Mike McGuinness
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Name:
Mike McGuinness
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Title:
Chief Financial Officer
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Exhibit
10.2
THIS
SENIOR SECURED PROMISSORY DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL
(i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”)
SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
THIS LEGEND SHALL BE ENDORSED UPON ANY DEBENTURE ISSUED IN EXCHANGE FOR THIS
DEBENTURE.
MANHATTAN
PHARMACEUTICALS, INC.
12% Original Issue Discount
Senior Subordinated Convertible Debenture
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Debenture
No.: 1
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$400,000
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FOR VALUE
RECEIVED, Manhattan Pharmaceuticals, Inc., a Delaware corporation (the “Company”)
with its principal executive office at 48 Wall Street, Suite 1100, New York, New
York 10005, promises to pay to the order of Linden Growth Partners Master Fund
LP or its registered assigns (the “Holder”)
on the Maturity Date (as defined in Section 2 below), the
principal amount of Four Hundred Thousand Dollars ($400,000) (the “Stated
Value”), in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts. Interest on this Debenture shall accrue on the Stated Value outstanding
from time to time at a rate per annum computed in accordance with Section 3
hereof.
The
Company (i) waives presentment, demand, protest or notice of any kind in
connection with this Debenture and (ii) agrees, in the event of an Event of
Default (as defined in Section 9 below), to
pay to the holder of this Debenture, on demand, all costs and expenses
(including reasonable legal fees and expenses as and when incurred), incurred in
connection with the enforcement and/or collection of this
Debenture.
This
Debenture is issued pursuant to that certain Subscription Agreement, dated as of
the date hereof, by and between the Company and the Holder (the “Subscription
Agreement”).
1. Prepayment. This Debenture shall be
payable at any time and from time to time, in whole or in part, at the election
of the Company upon at least twenty (20) days prior written notice to the
Holder. Any prepayments of this Debenture prior to the Maturity Date
shall be applied first to the payment of any fees and expenses then owed to the
Holder, second, to accrued and unpaid Interest (defined below) and third, to the
payment of the Stated Value then outstanding.
2. Maturity
Date. The entire
unpaid Stated Value of this Debenture, together with all fees and expenses (if
any), and accrued, but unpaid, Interest thereon, shall be immediately due and
payable at 12:01 a.m. on the earlier of (i) October 28, 2011 or
(ii) the consummation by the Company of one or a series
of debt or equity financings (excluding commercial bank debt
transactions) resulting in gross proceeds to the Company of Ten Million Dollars
($10,000,000) (such date, the “Maturity
Date”). In the event that the Maturity Date falls on a Saturday, Sunday
or a holiday on which banks in the State of New York are closed, the Maturity
Date shall be the first business day occurring immediately after such
date.
3. Interest;
Etc.
(a) Interest
Rate. This
Debenture shall bear interest (the “Interest”)
on the outstanding Stated Value at the rate of twelve (12%) percent per annum.
Interest on this Debenture shall commence accruing on the date hereof and shall
be computed on the basis of a year of 360 days for the actual number of days
elapsed. Interest shall be compounded quarterly and shall be payable on the
Maturity Date as set forth in Section 4
below. The Company may, in its sole discretion elect to pay
Interest quarterly in cash or in shares of its common stock, $.001 par value per
share, the resale of which is subject to an effective registration statement
under the Securities Act of 1933, as amended (“Registered
Common Stock”), if available. In the event Interest is paid in
Registered Common Stock, the Registered Common Stock shall be valued at a twenty
percent (20%) discount to the volume weighted average price per share as quoted
on Bloomberg, LP for the twenty (20) day period prior to the payment date of
such Interest.
(b) Maximum
Rate. In the event that under the laws relating to usury applicable to
the Company or the indebtedness evidenced by this Debenture (“Applicable
Usury Laws”), the interest charges and fees payable by the Company in
connection herewith or in connection with any other document or instrument
executed and delivered in connection herewith cause the effective interest rate
applicable to the indebtedness evidenced by this Debenture to exceed the maximum
rate allowed by law (the “Maximum
Rate”), then such interest shall be recalculated for the period in
question and any excess over the Maximum Rate paid with respect to such period
shall be credited, without further agreement or notice, to the Stated Value
outstanding hereunder to reduce said balance by such amount with the same force
and effect as though the Company had specifically designated such extra sums to
be so applied to principal and the Holder had agreed to accept such extra
payment(s) as a premium-free prepayment. All such deemed prepayments shall be
applied to the principal balance payable at maturity. In no event shall any
agreed-to or actual exaction as consideration for this Debenture exceed the
limits imposed or provided by Applicable Usury Laws in the jurisdiction in which
the Company is resident applicable to the use or detention of money or to
forbearance in seeking its collection in the jurisdiction in which the Company
is resident.
4. Manner of
Payment. Except
as otherwise provided in Section 3, the Stated
Value, Interest, and all other amounts due under this Debenture shall be due and
payable on the Maturity Date, in lawful money of the United States of America,
to the Holder at such address as designated from time to time by the Holder in
writing to the Company or by electronic wire funds transfer of immediately
available funds pursuant to written instructions provided to the Company by the
Holder. All amounts due from the Company to the Holder under this Debenture
shall be made without benefit of any setoff, counterclaim or other defense. All
payments on this Debenture shall be applied first to the payment of fees and
expenses, if any, then to accrued but unpaid Interest and then to the payment of
the Stated Value.
-2-
5. Conversion.
(a) Optional
Conversion. The Holder shall have the right, at its option, to
convert all or a portion of this Debenture (including any accrued but unpaid
Interest) into shares of the Company’s common stock, $.001 par value per share
(“Common
Stock”) at a conversion price equal to $0.09 per share, subject to
adjustment as set forth in Section 6 (the “Conversion
Price”). The Holder shall exercise its right to convert this
Debenture by delivering to the Company a written notice setting forth its
election to convert (a “Written
Election to Convert”) in the form attached hereto as Exhibit A and
surrendering this Debenture. Upon receipt of the Written Election to
Convert and the surrender of this Debenture, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of the
Holder, and in such name or names as the Holder may designate, a certificate or
certificates for the full number of shares of Common Stock so purchased upon
conversion of this Debenture. Such certificate or certificates shall
be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such securities as of the
date of delivery of the Election to Convert, notwithstanding that the
certificate or certificates representing such securities shall not actually have
been delivered or that the stock transfer books of the Company shall then be
closed. In the event that the Stated Value of this Debenture exceeds
the amount being converted, the Company shall, upon such conversion execute and
deliver to the Holder a new Debenture for the Stated Value of this Debenture
surrendered which is not to be converted.
(b) New Securities
Conversion. In the event the Company proposes to issue new
securities in connection with a financing (the “New Securities”), it shall
provide no less than thirty (30) days prior written notice to the Holder
describing the New Securities to be issued. The Holder shall have the
right, at its option, to convert all or a portion of this Debenture (including
any accrued but unpaid Interest) into such New Securities at a conversion price
equal to the purchase price paid by the purchasers of such New
Securities. The Holder shall exercise its right to convert this
Debenture by delivering to the Company a Written Election to Convert and
surrendering this Debenture. Upon receipt of the Written Election to
Convert, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the Holder, and in such name or names
as the Holder may designate, a certificate or certificates evidencing the New
Securities so purchased upon conversion of this Debenture at the closing of such
financing in which the New Securities are sold. In the event that the
Stated Value of this Debenture exceeds the amount being converted, the Company
shall, upon such conversion execute and deliver to the Holder a new Debenture
for the Stated Value of this Debenture surrendered which is not to be
converted.
-3-
6. Adjustments.
(a) Stock Dividends and
Splits. If the Company, at any time while this Debenture is outstanding:
(A) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock, (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event and the number of shares issuable
upon conversion of this Debenture shall be proportionately
adjusted. Any adjustment made pursuant to this Section 6(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) Additional Issuances of
Equity Securities. If the Company, at any time while this
Debenture is outstanding, shall issue or sell any Equity Securities (as defined
below) at an effective price per share less than the then effective Conversion
Price (such lower price, the “Base
Share Price” and such issuances collectively, a “Dilutive
Issuance”), as adjusted hereunder (if the holder of the Equity Securities
so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the then effective
Conversion Price, such issuance shall be deemed to have occurred for less than
the then effective Conversion Price on such date of the Dilutive Issuance),
then, the Conversion Price shall be reduced and only reduced to equal the Base
Share Price. Notwithstanding the foregoing, no adjustments shall be
made, paid or issued under this Section 6(b) in
respect of Exempt Issuances (as defined below). The Company shall
notify the Holder in writing as promptly as reasonably possible following the
issuance of any Equity Securities subject to this section, indicating therein
the applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to this Section 6(b), upon
the occurrence of any Dilutive Issuance while this Debenture is outstanding,
after the date of such Dilutive Issuance the Holder is entitled to the Base
Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Written Election to Convert.
For purposes of this Section 6(b), the
following definitions shall apply:
“Common
Stock Equivalents” means any securities of the Company or its
subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
“Equity
Securities” means (i) Common Stock and (ii) Common Stock
Equivalents.
-4-
“Exempt
Issuance” means (i) any Equity Securities issued or issuable pursuant to
options, warrants or other rights issued or issuable to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to equity incentive plans or other employee benefit arrangements; (ii)
any Equity Securities issued or issuable pursuant to any rights or agreements,
options, warrants or convertible securities outstanding as of the issuance date
of this Debenture; (iii) any Equity Securities issued or issuable for
consideration other than cash pursuant to a merger, consolidation, strategic
alliance, acquisition or similar business combination; (iv) any Equity
Securities issued or issuable in connection with any stock split, stock
dividend, distribution or recapitalization by the Company; (v) any Equity
Securities issued or issuable pursuant to any equipment loan or leasing
arrangement, real property leasing arrangement, or debt financing from a bank or
similar financial or lending institution; (vi) any Equity Securities issued or
issuable to the Placement Agent or its affiliates in connection with this
Debenture issuance; and (v) any Equity Securities issued to the Holder pursuant
to the Subscription Agreement, dated as of the date hereof, between the Company
and the Holder.
(e) Mergers, Consolidations,
Etc. In the event of any consolidation or merger of Company with or into
another corporation or the conveyance of all or substantially all of the assets
of Company to another corporation or entity, this Debenture shall thereafter be
convertible into the number of shares of capital stock or other securities or
property to which a holder of the number of Common Stock deliverable upon
conversion hereof would have been entitled upon such consolidation, merger or
conveyance; and, in any such case, appropriate adjustment shall be made in the
application of the provisions herein set forth with respect to the rights and
interest of Holder thereafter, to the end that the provisions set forth herein
(including provisions with respect to adjustments in the Conversion Price) shall
thereafter be applicable, as nearly as may be practicable, in relation to any
shares of stock or other property thereafter deliverable upon the conversion
hereof.
(f) Calculations. All
calculations under this Section 6 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 6, the number
of shares of Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
(g) Voluntary Adjustment By
Company. The provisions of this Section 6 shall
similarly apply to successive, stock dividends, stock spits or combinations,
reclassifications, exchanges, substitutions, Dilutive Issuances or other
events.
7. Redemption. If
at any time prior to the Maturity Date, the resale of the Common Stock issuable
upon conversion of this Debenture is subject to an effective registration
statement under the Securities Act of 1933, as amended, the Company may, in it
sole discretion, upon at least thirty (30) days prior written notice to the
Holder, elect to redeem the Debenture in cash for an amount equal to 120% of the
Stated Value plus any accrued and unpaid Interest.
-5-
8.
Senior
Subordinated Instrument; Subordination.
(a) The indebtedness
evidenced by this Debenture and the payment of the principal and interest
thereof shall be Senior (as hereinafter defined) to, and have priority in right
of payment over, all indebtedness of Company, now outstanding or hereinafter
incurred, except for the Senior Claim (as defined below). “Senior” as
used herein shall be deemed to mean that, in the event of any default in the
payment of the obligations represented by this Debenture (after giving effect to
"cure" provisions, if any) or of any liquidation, insolvency, bankruptcy,
reorganization, or similar proceedings relating to the Company, all sums payable
on this Debenture shall first be paid in full, with interest, if any, before any
payment is made upon any other indebtedness, now outstanding or hereinafter
incurred, except for the Senior Claim, and, in any such event, any payment or
distribution of any character which shall be made in respect of any other
indebtedness of the Company, other than the Senior Claim, shall be paid over to
the Holder of this Debenture for application to the payment hereof, unless and
until the obligations under this Debenture (which shall mean the principal and
other obligations arising out of, premium, if any, interest on, and any costs
and expenses payable under, this Debenture) shall have been paid and satisfied
in full.
(b) The Company covenants
that so long as any of its obligations under this Debenture are outstanding it
shall not create, incur, assume or suffer to exist any indebtedness for borrowed
money that is senior in right of payment to this Debenture other than any Senior
Claim.
(c)
The Holder and any subsequent holder of this Debenture, by his, her or its
acceptance of this Debenture, agrees, that the obligation of the Company to make
any payment hereunder is irrevocably subordinate, to the extent and in the
manner hereinafter set forth, in right of payment to the prior payment in full
of any Senior Claim. “Senior Claim” shall mean all
liabilities, obligations and indebtedness of any and every kind and nature, of
the Company to the holders of the Company’s 12% Senior Secured Promissory Notes
in the aggregate principal amount of $1,725,000 issued pursuant to that certain
Securities Purchase Agreement, dated as of November 25, 2008, whether
heretofore, now or hereafter owing, arising, due or payable, and howsoever
evidenced, created, incurred, acquired or owing. The Company will not
make any payment hereunder until the Senior Claim shall have been paid and
discharged in its entirety or at any time during which there shall have occurred
and be continuing a default with respect to the payment of any principal of, or
interest on, the Senior Claim, which has not been waived, in each case pursuant
to the terms of the Senior Claim.
(d) Upon
any distribution of the assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings) or upon any assignment
for the benefit of creditors or any other marshalling of the assets and
liabilities of the Company or otherwise:
(i) the
holder of the Senior Claim shall be entitled to receive payment in full of the
Senior Claim (including interest accruing from and after the commencement of any
such proceeding at the rate specified in the Senior Claim except to the extent
prohibited by mandatory provisions of law) before the Holder shall be entitled
to receive any payment hereunder; and
(ii) in
the event that, notwithstanding the foregoing, any such payment or distribution
of assets shall be received by the Holder before the Senior Claim shall have
been paid in full, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holder of the Senior
Claim, for application in payment thereof in accordance with the provisions of
subsection (b) of this Section
8.
-6-
(c) If
any payment is made to the holder of the Senior Claim which, but for the
provisions of this Section 8, would have
been made to the Holder, when the indebtedness to the holder of the Senior Claim
is paid in full, the Holder will be subrogated to the claim of the holder of the
Senior Claim against the Company to the extent of the amount of the Senior Claim
which was paid out of sums which otherwise would have been payable to the
Holder, and no such payment or distribution for the account of the holder of the
Senior Claim shall, for the purposes of this Section 8, be deemed
to be a payment or distribution by the Company on account of the Senior
Claim.
(e) Nothing
contained in this Section 8 or
elsewhere in this Debenture is intended to or shall impair, as between the
Company and the Holder, the obligation of the Company to pay to the Holder all
or a portion of the principal and interest of this Debenture as and when the
same shall become due and payable in accordance with the terms hereof, or is
intended to or shall affect the relative rights of the Holder and creditors of
the Company other than the holder of the Senior Claim.
9. Events of Defaults and
Remedies.
9.1 Event of
Default. An “Event of
Default” shall exist if any one or more of the following shall
occur:
(a) failure
by the Company to pay any of its obligations under this Debenture when due,
whether on the date fixed for payment or by acceleration or otherwise;
or
(b) if
any representation or warranty made by the Company in any of the Subscription
Agreement, this Debenture or in any certificate, financial or other statement
furnished at the time of closing or pursuant to the Subscription Agreement shall
prove to have been untrue or misleading in any material respect at the time made
which shall not have been cured within ten (10) days of the Company’s receipt of
the Holder’s written notice to the Company; or
(c) default
by the Company in the performance or observance of any covenant or agreement
contained in this Debenture and/or the Subscription Agreement which is not cured
within any applicable grace period for therein, if any; or
(d) a
final judgment for the payment of money in excess of $50,000 shall be rendered
against the Company, and such judgment shall remain undischarged for a period of
sixty (60) days from the date of entry thereof unless within such sixty (60) day
period such judgment shall be stayed, and appeal taken therefrom and the
execution thereon stayed during such appeal, other than the judgment confirming
the arbitration award in favor of Swiss Pharma Contract LTD (“Swiss
Pharma”) (as described in the Company’s Form 10-Q for the quarter and six
months ended June 30, 2009) that was presented to the NYS Supreme Court
for entry on August 10, 2009; provided, however, that any
material breach of the Settlement Agreement and Mutual Release, dated October
27, 2009, between the Company and Swiss Pharma which shall not have
been cured within the time period provided in the Settlement Agreement shall
constitute an Event of Default hereunder; or
(e) The
Company shall:
-7-
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(i)
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apply
for, consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any of its
properties, or make a general assignment for the benefit of
creditors;
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(ii)
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in
the absence of such application, consent or acquiesce in, permit or suffer
to exist the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or for any part of its properties, and such
trustee, receiver, sequestrator or other custodian shall not be discharged
within thirty (30) days;
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(iii)
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permit
or suffer to exist the commencement of any bankruptcy, reorganization,
debt arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation proceeding,
in respect of the Company, and, if such case or proceeding is not
commenced by the Company or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by the Company or shall
result in the entry of an order for relief or shall remain for sixty (60)
days undismissed; or
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(iv)
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take
any corporate action authorizing, or in furtherance of, any of the
foregoing;
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9.2 Remedies. Upon the
occurrence of an Event of Default, specified in Section 9.1(e) above,
the outstanding Stated Value of this Debenture and all other obligations
hereunder shall automatically be and become immediately due and payable, without
notice or demand. Upon the occurrence of an Event of Default other
than those specified in Section 9.1(e), the
Holder may declare, at its option, so long as the Event of Default is continuing
at the time notice thereof is given, upon five (5) days’ notice or demand, this
Debenture to be immediately due and payable. In any case, this Debenture shall
become due and payable without presentment, demand or protest, all of which are
hereby expressly waived. Upon the occurrence of an Event of Default
and after the expiration of any grace period therefor specified herein, the
Holder shall thereupon have, in addition to any rights it may have to proceed
directly against the Company as a result of such default, the rights, benefits,
and remedies afforded to it under any of this Debenture or the Subscription
Agreement. The Company agrees that the Holder may or may not proceed, as each
determines in its sole discretion, with any or all other rights, benefits, and
remedies which they may have against the Company. The rights afforded to the
Holder under all of the foregoing shall be cumulative. The
Company shall give the Holder prompt written notice of any material breach of
the Settlement Agreement which shall not have been cured within the time period
provided in the Settlement Agreement.
-8-
10. Piggyback
Registration Rights. If at any time
the Company shall determine to file with the Securities and Exchange Commission
a registration statement (“Registration
Statement”) relating to an offering for its own account or the account of
others under the Securities Act of 1933 Act, as amended (other than on Form S-4
or Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other bona fide, employee
benefit plans), the Company shall send to the Holder, written notice of such
determination and, if within thirty (30) days after the effective date of such
notice, such Holder shall so request in writing, the Company shall include in
such Registration Statement all or any part of the shares such Holder requests
to be registered which have been issued or are issuable pursuant to this
Debenture, which may include the Common Stock into which this Debenture is
convertible, the shares of Common Stock issuable as Interest payments and the
shares of Common Stock underlying any New Securities into which this Debenture
may be converted pursuant to Section 5(b) (“Registration
Shares”), except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registration
Shares with respect to which such Holder has requested inclusion hereunder as
the underwriter shall permit and shall be subject to any senior registration
rights existing on the date hereof. Any exclusion of Registration Shares shall
be made pro rata among the Holder and its registered assigns, if any, seeking to
include shares in proportion to the number of equity securities sought to be
included by such Holder and its registered assigns. Notwithstanding
the foregoing, this Section 10 shall not
apply to any registration statement filed pursuant to the Registration Rights
Agreement, dated February 25, 2008, by and among the Company and Nordic Biotech
Venture Fund II K/S, as amended from time to time.
11. Amendments and
Waivers.
(a)
The provisions of this Debenture may from time to time
be amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to in writing by the Company and the Holder.
(b) No
failure or delay on the part of the Holder to exercise any right, power or
privilege under this Debenture and no course of dealing between the Company and
the Holder shall impair such right, power or privilege or operate as a waiver of
any default or an acquiescence therein, nor shall any single or partial exercise
of any such right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. No
notice to or demand on the Company in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval by the Holder
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
(c) To
the extent that the Company makes a payment or payments to the Holder, and such
payment or payments or any part thereof are subsequently for any reason
invalidated, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.
-9-
(d) After
any waiver, amendment or supplement under this section becomes effective, the
Company shall mail to the Holder a copy thereof.
12. Miscellaneous.
(a) Parties in Interest.
All covenants, agreements and undertakings in this Debenture binding upon the
Company or the Holder shall bind and inure to the benefit of the successors and
permitted assigns of the Company and the Holder, respectively, whether so
expressed or not.
(b) Notices. Except as may be
otherwise provided herein, all notices, requests, waivers and other
communications made pursuant to this Debenture shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the other
party; (b) when received when sent by facsimile at the address and number set
forth below; (c) three (3) business days after deposit in the U.S. mail with
first class or certified mail, return receipt requested, postage prepaid, and
addressed to the other party as set forth below; or (d) the next business day
after deposit with a national overnight delivery service, postage prepaid,
addressed to the parties as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery service provider.
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To
Holder:
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To the
Company:
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Manhattan
Pharmaceuticals, Inc.
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48
Wall Street, Suite 1100
New
York, New York 10005
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Attn:
Douglas Abel
Chief Executive Officer
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Fax
Number:
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Fax
Number: (212) 582-3957
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(c) Notice of Certain
Transactions. In case at any time:
(i) There shall be
any capital reorganization of the Company, or a sale of all or substantially all
of the assets of the Company, or a consolidation or merger of the Company with
another corporation (other than a merger with a wholly owned subsidiary of the
Company in which merger the Company is the continuing corporation and which does
not result in any reclassification); or
(ii) There shall be a
voluntary or involuntary dissolution; liquidation or winding-up of the Company;
or
(iii) The occurrence of an Event
of Default, a default and/or breach of any provision of this Debenture and/or
the Subscription Agreement and/or any event occurs that with the passage of time
or otherwise could result in an Event of Default;
-10-
then, in
any one or more of said cases, the Company shall cause to be mailed to the
Holder at the earliest practicable time (and, in any event not less than twenty
(20) days before any record date or other date set for definitive action, if any
need be taken), written notice of the date on which the books of the Company
shall close for such reorganization, reclassification, sale, consolidation,
merger or dissolution, liquidation or winding-up shall take place, as the case
may be. Such notice shall also set forth such facts as shall indicate the effect
of such action (to the extent such effect may be known at the date of such
notice) on this Debenture.
Nothing
herein shall be construed as the consent of the Holder to any action otherwise
prohibited by the terms of this Debenture or as a waiver of any such
prohibition.
(d) Expenses. The Company agrees to
pay all costs and expenses, including, but not limited to, reasonable attorneys’
fees and costs of suit and preparation therefor (as and when incurred), incurred
in connection with the collection and enforcement of this
Debenture.
(e) Assignment. The
rights, interests and obligations hereunder may not be assigned, by operation of
law or otherwise, in whole or in part, by the Company without the prior written
consent of the Holder. The Holder is entitled to assign its rights
hereunder, subject to compliance with applicable securities laws.
(f)
Partial
Invalidity. In case any one or more of the provisions of this
Debenture shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Debenture shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Debenture.
(g) Governing Law; Venue; Waiver
Of Jury Trial. This Debenture shall be governed by and construed
exclusively in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties hereto
hereby expressly and irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to, arising out of or under this Debenture,
shall be brought solely and exclusively in a federal or state court located in
the City, County and State of New York. By its execution hereof, the parties
hereby expressly covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or proceeding
(including, but not limited to, any motions made), the party prevailing therein
shall be entitled to payment from the other party hereto of its reasonable
counsel fees and disbursements. The Company and Holder hereby waive all rights
to a trial by jury.
(h) Titles and
Subtitles. The titles of the paragraphs and subparagraphs of
this Debenture are for convenience of reference only and are not to be
considered in construing this Debenture.
-11-
[Signature Page Follows]
-12-
IN WITNESS WHEREOF, this
Debenture has been executed and delivered on the date specified above by the
duly authorized representative of the Company.
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Manhattan
Pharmaceuticals, Inc.
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||
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By:
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/s/ Michael McGuinness
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Name: Michael McGuinness
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Title: Chief Financial
Officer
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||
-13-
FORM OF WRITTEN ELECTION TO
CONVERT
(To
be executed by the Holder to exercise the right to convert the foregoing
Debenture into
shares
of Common Stock or New Securities)
To: MANHATTAN
PHARMACEUTICALS, INC.
The
undersigned is the Holder of Debenture No. _______ (the “Debenture”) issued by
Manhattan Pharmaceuticals, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Debenture.
1. The
undersigned Holder hereby exercises its right to convert $__________ of the
Stated Value of the Debenture and $___________ of accrued interest into
_________________ [shares of Common Stock/New Securities] of the
Company (the “Conversion
Shares”) pursuant to the Debenture.
2. Following
this conversion, the Stated Value of the Debenture shall be $__________ and the
interest accrued thereon shall be equal to $_______________.
3. The
Holder represents that, as of the date of exercise:
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(i)
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the
Debenture Shares being issued pursuant to this Written Election to Convert
are being acquired solely for the Holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale; and
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(ii)
|
the
Holder is an “accredited
investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities
Act.
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If the
Holder cannot make the representations required in Section 3(ii), above,
because it is factually incorrect, it shall be a condition to the conversion of
the Debenture that the Company receive such other representations as the Company
considers necessary, acting reasonably, to assure the Company that the issuance
of securities upon conversion of this Debenture shall not violate any United
States or other applicable securities laws.
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Dated: ,
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Name
of Holder:
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(Print)
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By:
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Name:
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Title:
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(Signature
must conform in all respects to name of
holder
as specified on the face of the
Debenture)
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Exhibit
10.3
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT.
MANHATTAN
PHARMACEUTICALS, INC.
WARRANT
Dated:
October 28, 2009
Manhattan
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for value received, Linden Growth Partners Master Fund LP or its Permitted
Transferees (as hereinafter defined) (the “Holder”), is entitled to
purchase from the Company up to a total of 2,222,222 shares of common stock,
$0.001 par value per share (the “Common Stock”), of the Company
(each such share, a “Warrant
Share” and all such shares issuable under the warrants, the “Warrant Shares”) at an
exercise price of $0.11 (as adjusted from time to time as provided in Section 9, the “Exercise Price”), at any time
and from the date hereof and through October 28, 2014 (the “Expiration Date”), and subject
to the following terms and conditions. This Warrant (“Warrant”) is issued pursuant
to that certain Subscription Agreement, dated as of the date hereof, by and
between the Company and the Holder (the “Subscription
Agreement”).
1. Definitions. In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein have the meanings given to such terms in the
Subscription Agreement.
2. Registration of
Warrant. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
3. Registration of
Transfers. The Company shall register the transfer and/or
assignment of any portion of this Warrant (a “Permitted Transferee”) in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Company’s transfer agent or to
the Company at its address specified herein. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the Permitted
Transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the Permitted Transferee
thereof shall be deemed the acceptance by such Permitted Transferee of all of
the rights and obligations of a holder of a Warrant.
4. Exercise and Duration of
Warrants.
(a) This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the date hereof to and including the Expiration
Date. At 5:00 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value and this Warrant shall be terminated and no longer be
outstanding.
(b) The
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a “Cashless Exercise” if so indicated in the
Exercise Notice pursuant to Section 10 below),
and the date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an “Exercise Date.”
(c) Exercise
Disputes. In the case of any dispute with respect to the
number of shares to be issued upon exercise of this Warrant, the Company shall
promptly issue such number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
Holder via fax (or, it the Holder has not provided the Company with a fax
number, by overnight courier) within five (5) Business Days of receipt of the
Holder’s election to purchase Warrant Shares. If the Holder and the
Company are unable to agree as to the determination of the Exercise Price within
five (5) Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall in accordance with this
Section, submit via facsimile the disputed determination to its independent
auditor. The Company shall cause its independent auditor to perform
the determinations or calculations and notify the Company and the Holder of the
results promptly, in writing and in sufficient detail to give the Holder and the
Company a clear understanding of the issue. The determination by the
Company’s independent auditor shall be binding upon all parties absent manifest
error. The Company shall then on the next Business Day instruct its
transfer agent to issue certificate(s) representing the appropriate number of
Warrant Shares of Common Stock in accordance with the independent auditor’s
determination and this Section. The prevailing party shall be
entitled to reimbursement of all fees and expenses of such determination and
calculation.
2
5. Delivery of Warrant
Shares.
(a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later than
five (5) Trading Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
to which the Holder is entitled upon such exercise, free of restrictive legends
unless a registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder is not then effective and
the Warrant Shares are not freely transferable pursuant to Rule 144 under the
Securities Act. To the extent the Warrant Shares may be issued free
of restrictive legends as set forth above, upon request of the Holder, the
Company shall use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. For the purposes
hereof, the term “Trading
Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary trading market and/or quotation system, as the case
may be, (b) if the Common Stock is not then listed or quoted and traded on
any trading market, then a day on which trading occurs on the Nasdaq Global
Market (or any successor thereto), or (c) if trading ceases to occur on the
Nasdaq Global Market (or any successor thereto), any Business Day.
(b) This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
(c) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant
Shares. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
6. Charges, Taxes and
Expenses. Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder. The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
7. Replacement of
Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.
3
8. Reservation of Warrant
Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (after giving effect
to the adjustments and restrictions of Section 9, if any). The
Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.
9. Certain
Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
(a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
(b) Additional Issuances of
Equity Securities. If the Company, at any time while this
Warrant is outstanding, shall issue or sell any Equity Securities (as defined
below) at an effective price per share less than the then effective Exercise
Price (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”), as
adjusted hereunder (if the holder of the Equity Securities so issued shall at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the then effective Exercise Price, such
issuance shall be deemed to have occurred for less than the then effective
Exercise Price on such date of the Dilutive Issuance), then, the Exercise Price
shall be reduced and only reduced to equal the Base Share
Price. Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 9(b) in
respect of Exempt Issuances (as defined below). The Company shall
notify the Holder in writing as promptly as reasonably possible following the
issuance of any Equity Securities subject to this section, indicating therein
the applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms (such notice the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 9(b), upon
the occurrence of any Dilutive Issuance while this Warrant is outstanding, after
the date of such Dilutive Issuance the Holder is entitled to the Base Share
Price regardless of whether the Holder accurately refers to the Base Share Price
in the Exercise Notice.
4
For purposes of this Section 9(b), the
following definitions shall apply:
“Common Stock Equivalents”
means any securities of the Company or its subsidiaries which would entitle the
holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Equity Securities” means
(i) Common Stock and (ii) Common Stock Equivalents.
“Exempt Issuance” means (i) any
Equity Securities issued or issuable pursuant to options, warrants or other
rights issued or issuable to employees, officers or directors of, or consultants
or advisors to the Company or any subsidiary, pursuant to equity incentive plans
or other employee benefit arrangements; (ii) any Equity Securities issued or
issuable pursuant to any rights or agreements, options, warrants or convertible
securities outstanding as of the issuance date of this Warrant; (iii) any Equity
Securities issued or issuable for consideration other than cash pursuant to a
merger, consolidation, strategic alliance, acquisition or similar business
combination; (iv) any Equity Securities issued or issuable in connection with
any stock split, stock dividend, distribution or recapitalization by the
Company; (v) any Equity Securities issued or issuable pursuant to any equipment
loan or leasing arrangement, real property leasing arrangement, or debt
financing from a bank or similar financial or lending institution; (vi) any
Equity Securities issued or issuable to the Placement Agent or its affiliates in
connection with the Subscription Agreement, dated as of the date hereof, between
the Company and the Holder (the “Subscription Agreement”); and
(v) any Equity Securities issued to the Holder pursuant to the Subscription
Agreement.
5
(c) Fundamental
Transactions. If at any time during the term of this Warrant
the Company proposes to engage in a “Fundamental Transaction” (as hereinafter
defined) then, and in any one or more of such cases, the Company will give to
the Holder at least 10 days’ prior written notice of the date on which the books
of the Company will close or a record will be taken for determining rights to
vote with respect to such Fundamental Transaction. Such notice will
describe the nature of the Fundamental Transaction, the date on which the
holders of the Common Shares will be entitled thereto, and such notice will also
specify the date on which the holders of the Common Shares will be entitled to
exchange the Common Shares for securities or other property deliverable upon the
consummation of the Fundamental Transaction. A “Fundamental Transaction” is
any (i) merger or consolidation of the Company with or into (whether or not the
Company is the surviving corporation) another Person, (ii) any sale, assignment,
transfer, conveyance or other disposition by the Company of all or substantially
all of its assets in one or a series of related transactions; provided, however, that for
avoidance of doubt, the granting of a lien on all or substantially all of the
Company’s assets as collateral shall not be deemed a Fundamental Transaction
hereunder, (iii) purchase, tender or exchange offer by the Company (or to which
the Company is a party) that will be for more than 50% of the outstanding shares
of Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer, (iv) business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) requiring shareholder approval with another Person
whereby such other Person acquires more than the 50% of the outstanding shares
of Common Stock (not including any shares of Common Stock held by the other
Person or other Persons making or party to, or associated or affiliated with the
other Persons making or party to, such stock purchase agreement or other
business combination), or (v) reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (other than
as a result of a subdivision or combination of shares of Common Stock covered by
Section 9(a)
above).
(d) The
Company will not by reorganization, transfer of assets, consolidation, merger,
dissolution, or otherwise, avoid or seek to avoid observance or performance of
any of the terms of this Section 9, but will at
all times in good faith assist in the carrying out and performance of all
provisions of this Section 9 in order to protect
the rights of the Holder against impairment.
(e) Number of Warrant
Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to paragraph (a) or (b) of this Section, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, as applicable, so that after such adjustment the
aggregate Exercise Price payable hereunder for the increased or decreased, as
applicable, number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.
(f) Calculations. All
calculations under this Section 9 shall be made to
the nearest cent or the nearest share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(g) Notice of
Adjustments. Upon the occurrence of each adjustment pursuant
to this Section
9, the
Company at its expense will promptly compute such adjustment in accordance with
the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is
based. Upon written request, the Company will promptly deliver a copy
of each such certificate to the Holder and to the Company’s Transfer
Agent.
6
(h) Notice of Corporate
Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least ten calendar days prior to
the applicable record or effective date on which a Person would need to hold
Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the
failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such
notice.
10. Payment of Exercise
Price. The Holder shall pay the Exercise Price in immediately
available funds (a “Cash
Exercise”); or the Holder may satisfy its obligation to pay the Exercise
Price through a “Cashless
Exercise,” in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
|
X =
Y [(A-B)/A]
|
|
|
where:
|
|
|
X =
the number of Warrant Shares to be issued to the
Holder.
|
|
|
Y =
the number of Warrant Shares with respect to which this Warrant is being
exercised (prior to cashless exercise).
|
|
|
A =
the average of the Closing Prices for the five (5) Trading Days
immediately prior to (but not including) the Exercise
Date.
|
|
|
B =
the Exercise Price.
|
For
purposes of this Section 10, “Closing Prices” for any date,
shall mean the closing price per share of the Common Stock for such date (or the
nearest preceding date) on the primary trading market on which the Common Stock
is then listed or quoted.
For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued to the Holder (provided the
Securities and Exchange Commission continues to take the position that such
treatment is proper at the time of such exercise).
7
11. Limitation on
Exercise. Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder
upon any exercise of this Warrant (or otherwise in respect hereof) shall be
limited to the extent necessary to insure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does not
exceed 4.999% (the “Maximum
Percentage”) of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise). For such purposes, “beneficial ownership” shall
be determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. The Company’s obligation to
issue shares of Common Stock in excess of the limitation referred to in this
Section shall be suspended (and shall not terminate or expire notwithstanding
any contrary provisions hereof) until such time, if any, as such shares of
Common Stock may be issued in compliance with such limitation, but in no event
later than the Expiration Date. By written notice to the Company, the
Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company.
12. Fractional
Shares. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this
Warrant. In lieu of any fractional shares which would, otherwise be
issuable, subject to Section 11, the
Company shall pay the Holder entitled to such fractional Warrant Share a sum in
cash equal to such fraction (calculated to the nearest 1/100th of a
Warrant Share) multiplied by the then effective Exercise Price.
13. Notices. Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in the Subscription Agreement prior to 5:00 p.m. (New York City time)
on a Trading Day, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in the Subscription Agreement on a day that is not a Trading Day or
later than 5:00 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices or communications
shall be as set forth in the Subscription Agreement.
14. Warrant
Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days’ notice to the Holder, the Company may
appoint a new warrant agent. Any corporation and/or other entity into
which the Company or any new warrant agent may be merged or any corporation
resulting from any consolidation to which the Company or any new warrant agent
shall be a party shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder’s last address as shown on
the Warrant Register.
8
15. Piggyback Registration
Rights. If at any time the Company shall determine to file
with the Securities and Exchange Commission a registration statement (“Registration
Statement”) relating to an offering for its own account or the account of
others under the Securities Act of 1933 Act, as amended (other than on Form S-4
or Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other bona fide, employee
benefit plans), the Company shall send to the Holder of this Warrant, written
notice of such determination and, if within thirty (30) days after the effective
date of such notice, such Holder shall so request in writing, the Company shall
include in such Registration Statement all or any part of the shares such Holder
requests to be registered which are issuable upon exercise of this Warrant
(“Registration
Shares”), except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registration
Shares with respect to which such Holder has requested inclusion hereunder as
the underwriter shall permit and shall be subject to any senior registration
rights existing on the date hereof. Any exclusion of Registration Shares shall
be made pro rata among the Holder and its registered assigns, if any, seeking to
include shares in proportion to the number of equity securities sought to be
included by such Holder and its registered assigns. Notwithstanding
the foregoing, this Section 15 shall not
apply to any registration statement filed pursuant to the Registration Rights
Agreement, dated February 25, 2008, by and among the Company and Nordic Biotech
Venture Fund II K/S, as amended from time to time.
16. Miscellaneous.
(a) Subject
to the restrictions on transfer set forth on the first page hereof, this Warrant
may be transferred or assigned by the Holder to a Permitted Transferee pursuant
to Section 3 provided, that, among other things, the Permitted Transferee
covenants to be bound by the terms hereof. This Warrant may not be
assigned by the Company, except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant
shall be construed to give to any Person other than the Company and the Holder
any legal or equitable right, remedy or cause of action under this
Warrant.
(b) The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, seek to call or redeem this
Warrant or avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Warrant Shares
above the amount payable therefor on such exercise, (ii) will take all such
action as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares, free
from all taxes, liens, security interests, encumbrances, preemptive or similar
rights and charges of stockholders (other than those imposed by the Holder), on
the exercise of the Warrant, and (iii) will not close its stockholder books or
records in any manner which interferes with the timely exercise of this
Warrant.
9
(c) Remedies; Specific
Performance. The Company acknowledges and agrees that there
would be no adequate remedy at law to the Holder of this Warrant in the event of
any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or
omission by the Holder hereof in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach. No remedy shall be exclusive of
any other remedy. All available remedies shall be
cumulative.
(d) Amendments and
Waivers. The Company may, without the consent of the Holder
(but with prior written notice to the Holder), by supplemental agreement or
otherwise, (i) make any changes or corrections in this Agreement that are
required to cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or (ii)
add to the covenants and agreements of the Company for the benefit of the Holder
(including, without limitation, reduce the Exercise Price or extend the
Expiration Date), or surrender any rights or power reserved to or conferred upon
the Company in this Agreement; provided that, in the case of (i) or (ii), such
changes or corrections shall not adversely affect the interests of Holder in any
material respect. This Warrant may also be amended or waived with the
consent of the Company and the Holder. If a new warrant agent is
appointed by the Company, it shall at the request of the Company, and without
need of independent inquiry as to whether such supplemental agreement is
permitted by the terms of this Section 16(d), join
with the Company in the execution and delivery of any such supplemental
agreements, but shall not be required to join in such execution and delivery for
such supplemental agreement to become effective.
(e) Governing Law; Venue; Waiver
Of Jury Trial. This Warrant shall be governed by and construed
exclusively in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties hereto
hereby expressly and irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to, arising out of or under this Warrant,
shall be brought solely and exclusively in a federal or state court located in
the City, County and State of New York. By its execution hereof, the parties
hereby expressly covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or proceeding
(including, but not limited to, any motions made), the party prevailing therein
shall be entitled to payment from the other party hereto of its reasonable
counsel fees and disbursements. The Company and Holder hereby waive all rights
to a trial by jury.
10
(f) Headings The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(g) Partial
Invalidity. In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
11
IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed by its authorized officer as
of the date first indicated above.
|
MANHATTAN
PHARMACEUTICALS, INC.
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By:
/s/ Michael McGuinness
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|
Name:
Michael McGuinness
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Title: Chief
Financial Officer
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12
FORM OF EXERCISE
NOTICE
(To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)
To: MANHATTAN
PHARMACEUTICALS, INC.
The
undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by Manhattan
Pharmaceuticals, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
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|
(a)
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The
Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
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(b)
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The
undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the
Warrant.
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(c)
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The
holder shall make payment of the Exercise Price as follows (check
one):
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_______________
“Cash Exercise” under Section 10
_______________
“Cashless Exercise” under Section 10
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(d)
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If
the holder is making a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the
Warrant.
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(e)
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Pursuant
to this exercise, the Company shall deliver to the holder ______________
Warrant Shares in accordance with the terms of the
Warrant.
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|
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(f)
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Following
this exercise, the Warrant shall be exercisable to purchase a total of
______________ Warrant Shares.
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(g)
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Notwithstanding
anything to the contrary contained herein, this Exercise Notice shall
constitute a representation by the Holder that, after giving effect to the
exercise provided for in this Exercise Notice, the Holder (together with
its affiliates) will not have beneficial ownership (together with the
beneficial ownership of such Person’s affiliates) of a number of shares of
Common Stock which exceeds the Maximum Percentage of the total outstanding
shares of Common Stock as determined pursuant to the provisions of Section 11 of
the Warrant.
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13
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(h)
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The
Holder represents that, as of the date of
exercise:
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i.
|
the
Warrant Shares being purchased pursuant to this Exercise Notice are being
acquired solely for the Holder’s own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or
resale; and
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|
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ii.
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the
Holder is an “accredited
investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities
Act.
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(i)
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If
the Holder cannot make the representations required in Section
(f)(ii), above, because it is factually incorrect, it shall be a
condition to the exercise of the Warrant that the Company receive such
other representations as the Company considers necessary, acting
reasonably, to assure the Company that the issuance of securities upon
exercise of this Warrant shall not violate any United States or other
applicable securities laws.
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Dated: ,
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Name of Holder:
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(Print)
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By:
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|||
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Name:
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|||
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Title:
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|||
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(Signature
must conform in all respects to name of holder as specified on the face of
the
Warrant)
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|||
14
FORM OF
ASSIGNMENT
[To be
completed and signed only upon transfer of Warrant]
FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of Manhattan Pharmaceuticals, Inc.
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Manhattan Pharmaceuticals, Inc. with full
power of substitution in the premises.
The
undersigned transferee agrees to be bound by the covenants of the Warrant Holder
during the term of the Warrant.
The
undersigned transferee agrees represents and warrants that:
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i.
|
the
Warrant Shares being purchased pursuant to this Assignment are being
acquired solely for the transferee’s own account and not as a nominee for
any other party, for investment, and not with a view toward distribution
or resale; and
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|
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ii.
|
the
undersigned transferee is an “accredited investor” as
such term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities
Act.
|
If the
undersigned transferee cannot make the representations required in clause (ii)
above, above, because it is factually incorrect, it shall be a condition to the
transfer of the Warrant that the Company receive such other representations as
the Company considers necessary, acting reasonably, to assure the Company that
the transfer this Warrant shall not violate any United States or other
applicable securities laws.
|
Dated: ,
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||
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(Signature
must conform in all respects to name of holder as specified on the face of
the Warrant)
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||
|
Address
of Transferee
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||
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In
the presence of:
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||
|
Signature
of Transferee
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||
Exhibit
10.4
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT.
MANHATTAN
PHARMACEUTICALS, INC.
FORM OF
WARRANT
Dated:
October 28, 2009
Manhattan
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for value received, ________________ or its Permitted Transferees (as
hereinafter defined) (the “Holder”), is entitled to
purchase from the Company up to a total of _________ shares of common stock,
$0.001 par value per share (the “Common Stock”), of the Company
(each such share, a “Warrant
Share” and all such shares issuable under the warrants, the “Warrant Shares”) at an
exercise price of $0.11 (as adjusted from time to time as provided in Section 9, the “Exercise Price”), at any time
and from the date hereof and through October 28, 2014 (the “Expiration Date”), and subject
to the following terms and conditions. This Warrant (“Warrant”) is issued pursuant
to that certain Placement Agent Letter, dated as of the date hereof, by and
between the Company and the Holder (the “Placement Agent
Letter”).
1. Definitions. In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein have the meanings given to such terms in the
Subscription Agreement, dated as of the date hereof (the “Subscription Agreement”),
between the Company and Linden Growth Partners Master Fund (the “Investor”).
2. Registration of
Warrant. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
3. Registration of
Transfers. The Company shall register the transfer and/or
assignment of any portion of this Warrant (a “Permitted Transferee”) in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Company’s transfer agent or to
the Company at its address specified herein. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the Permitted
Transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the Permitted Transferee
thereof shall be deemed the acceptance by such Permitted Transferee of all of
the rights and obligations of a holder of a Warrant.
4. Exercise and Duration of
Warrants.
(a) This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the date hereof to and including the Expiration
Date. At 5:00 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value and this Warrant shall be terminated and no longer be
outstanding.
(b) The
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a “Cashless Exercise” if so indicated in the
Exercise Notice pursuant to Section 10 below),
and the date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an “Exercise Date.”
(c) Exercise
Disputes. In the case of any dispute with respect to the
number of shares to be issued upon exercise of this Warrant, the Company shall
promptly issue such number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
Holder via fax (or, it the Holder has not provided the Company with a fax
number, by overnight courier) within five (5) Business Days of receipt of the
Holder’s election to purchase Warrant Shares. If the Holder and the
Company are unable to agree as to the determination of the Exercise Price within
five (5) Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall in accordance with this
Section, submit via facsimile the disputed determination to its independent
auditor. The Company shall cause its independent auditor to perform
the determinations or calculations and notify the Company and the Holder of the
results promptly, in writing and in sufficient detail to give the Holder and the
Company a clear understanding of the issue. The determination by the
Company’s independent auditor shall be binding upon all parties absent manifest
error. The Company shall then on the next Business Day instruct its
transfer agent to issue certificate(s) representing the appropriate number of
Warrant Shares of Common Stock in accordance with the independent auditor’s
determination and this Section. The prevailing party shall be
entitled to reimbursement of all fees and expenses of such determination and
calculation.
2
5. Delivery of Warrant
Shares.
(a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later than
five (5) Trading Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
to which the Holder is entitled upon such exercise, free of restrictive legends
unless a registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder is not then effective and
the Warrant Shares are not freely transferable pursuant to Rule 144 under the
Securities Act. To the extent the Warrant Shares may be issued free
of restrictive legends as set forth above, upon request of the Holder, the
Company shall use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. For the purposes
hereof, the term “Trading
Day” means (a) any day
on which the Common Stock is listed or quoted and traded on its primary trading
market and/or quotation system, as the case may be, (b) if the Common Stock
is not then listed or quoted and traded on any trading market, then a day on
which trading occurs on the Nasdaq Global Market (or any successor thereto), or
(c) if trading ceases to occur on the Nasdaq Global Market (or any
successor thereto), any Business Day.
(b) This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
(c) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant
Shares. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
6. Charges, Taxes and
Expenses. Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder. The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
7. Replacement of
Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.
3
8. Reservation of Warrant
Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (after giving effect
to the adjustments and restrictions of Section 9, if any). The
Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.
9. Certain
Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
(a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
(b) Additional Issuances of
Equity Securities. If the Company, at any time while this
Warrant is outstanding, shall
issue or sell any Equity Securities (as defined below)
at an effective price per share less than the then effective Exercise
Price (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”), as
adjusted hereunder (if the holder of the Equity Securities so issued shall at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the then effective Exercise Price, such
issuance shall be deemed to have occurred for less than the then effective
Exercise Price on such date of the Dilutive Issuance), then, the Exercise Price
shall be reduced and only reduced to equal the Base Share
Price. Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 9(b) in
respect of Exempt Issuances (as defined below). The Company shall
notify the Holder in writing as promptly as reasonably possible following the
issuance of any Equity Securities subject to this section, indicating therein
the applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms (such notice the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 9(b), upon
the occurrence of any Dilutive Issuance while this Warrant is outstanding, after
the date of such Dilutive Issuance the Holder is entitled to the Base Share
Price regardless of whether the Holder accurately refers to the Base Share Price
in the Exercise Notice.
4
For
purposes of this Section 9(b), the
following definitions shall apply:
“Common Stock Equivalents”
means any securities of the Company or its subsidiaries which would entitle the
holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Equity Securities” means
(i) Common Stock and (ii) Common Stock Equivalents.
“Exempt Issuance” means (i) any
Equity Securities issued or issuable pursuant to options, warrants or other
rights issued or issuable to employees, officers or directors of, or consultants
or advisors to the Company or any subsidiary, pursuant to equity incentive plans
or other employee benefit arrangements; (ii) any Equity Securities issued or
issuable pursuant to any rights or agreements, options, warrants or convertible
securities outstanding as of the issuance date of this Warrant; (iii) any Equity
Securities issued or issuable for consideration other than cash pursuant to a
merger, consolidation, strategic alliance, acquisition or similar business
combination; (iv) any Equity Securities issued or issuable in connection with
any stock split, stock dividend, distribution or recapitalization by the
Company; (v) any Equity Securities issued or issuable pursuant to any equipment
loan or leasing arrangement, real property leasing arrangement, or debt
financing from a bank or similar financial or lending institution; (vi) any
Equity Securities issued or issuable to the Investor or its affiliates in
connection with the Subscription Agreement; and (v) any Equity Securities issued
to the Holder or its affiliates pursuant to the Placement Agent
Letter.
5
(c) Fundamental
Transactions. If at any time during the term of this Warrant
the Company proposes to engage in a “Fundamental Transaction” (as hereinafter
defined) then, and in any one or more of such cases, the Company will give to
the Holder at least 10 days’ prior written notice of the date on which the books
of the Company will close or a record will be taken for determining rights to
vote with respect to such Fundamental Transaction. Such notice will
describe the nature of the Fundamental Transaction, the date on which the
holders of the Common Shares will be entitled thereto, and such notice will also
specify the date on which the holders of the Common Shares will be entitled to
exchange the Common Shares for securities or other property deliverable upon the
consummation of the Fundamental Transaction. A “Fundamental Transaction” is
any (i) merger or consolidation of the Company with or into (whether or not the
Company is the surviving corporation) another Person, (ii) any sale, assignment,
transfer, conveyance or other disposition by the Company of all or substantially
all of its assets in one or a series of related transactions; provided, however, that for
avoidance of doubt, the granting of a lien on all or substantially all of the
Company’s assets as collateral shall not be deemed a Fundamental Transaction
hereunder, (iii) purchase, tender or exchange offer by the Company (or to which
the Company is a party) that will be for more than 50% of the outstanding shares
of Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer, (iv) business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) requiring shareholder approval with another Person
whereby such other Person acquires more than the 50% of the outstanding shares
of Common Stock (not including any shares of Common Stock held by the other
Person or other Persons making or party to, or associated or affiliated with the
other Persons making or party to, such stock purchase agreement or other
business combination), or (v) reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (other than
as a result of a subdivision or combination of shares of Common Stock covered by
Section 9(a)
above).
(d) The
Company will not by reorganization, transfer of assets, consolidation, merger,
dissolution, or otherwise, avoid or seek to avoid observance or performance of
any of the terms of this Section 9, but will at
all times in good faith assist in the carrying out and performance of all
provisions of this Section 9 in order to
protect the rights of the Holder against impairment.
(e) Number of Warrant
Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to paragraph (a) or (b) of this Section, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, as applicable, so that after such adjustment the
aggregate Exercise Price payable hereunder for the increased or decreased, as
applicable, number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.
(f) Calculations. All
calculations under this Section 9 shall be made
to the nearest cent or the nearest share, as applicable. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(g) Notice of
Adjustments. Upon the occurrence of each adjustment pursuant
to this Section
9, the Company at
its expense will promptly compute such adjustment in accordance with the terms
of this Warrant and prepare a certificate setting forth such adjustment,
including a statement of the adjusted Exercise Price and adjusted number or type
of Warrant Shares or other securities issuable upon exercise of this Warrant (as
applicable), describing the transactions giving rise to such adjustments and
showing in detail the facts upon which such adjustment is based. Upon
written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Company’s Transfer Agent.
6
(h) Notice of Corporate
Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least ten calendar days prior to
the applicable record or effective date on which a Person would need to hold
Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the
failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such
notice.
10. Payment of Exercise
Price. The Holder shall pay the Exercise Price in immediately
available funds (a “Cash
Exercise”); or the Holder may satisfy its obligation to pay the Exercise
Price through a “Cashless
Exercise,” in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
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X =
Y [(A-B)/A]
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where:
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|
X =
the number of Warrant Shares to be issued to the
Holder.
|
|
|
Y =
the number of Warrant Shares with respect to which this Warrant is being
exercised (prior to cashless exercise).
|
|
|
A =
the average of the Closing Prices for the five (5) Trading Days
immediately prior to (but not including) the Exercise
Date.
|
|
|
B =
the Exercise Price.
|
For purposes of this Section
10, “Closing
Prices” for any
date, shall mean the closing price per share of the Common Stock for such date
(or the nearest preceding date) on the primary trading market on which the
Common Stock is then listed or quoted.
For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued to the Holder (provided the
Securities and Exchange Commission continues to take the position that such
treatment is proper at the time of such exercise).
7
11. Limitation on
Exercise. Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder
upon any exercise of this Warrant (or otherwise in respect hereof) shall be
limited to the extent necessary to insure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does not
exceed 4.999% (the “Maximum
Percentage”) of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise). For such purposes, “beneficial ownership” shall
be determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. The Company’s obligation to
issue shares of Common Stock in excess of the limitation referred to in this
Section shall be suspended (and shall not terminate or expire notwithstanding
any contrary provisions hereof) until such time, if any, as such shares of
Common Stock may be issued in compliance with such limitation, but in no event
later than the Expiration Date. By written notice to the Company, the
Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company.
12. Fractional
Shares. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this
Warrant. In lieu of any fractional shares which would, otherwise be
issuable, subject to Section 11, the
Company shall pay the Holder entitled to such fractional Warrant Share a sum in
cash equal to such fraction (calculated to the nearest 1/100th of a
Warrant Share) multiplied by the then effective Exercise Price.
13. Notices. Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified on the signature page of the Placement Agent Letter prior to 5:00 p.m.
(New York City time) on a Trading Day, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified on the signature page of the Placement Agent
Letter on a day that is not a Trading Day or later than 5:00 p.m. (New York City
time) on any Trading Day, (iii) the Trading Day following the date of mailing if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The
address for such notices or communications shall be as set forth on the
signature page of the Placement Agent Letter.
14. Warrant
Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days’ notice to the Holder, the Company may
appoint a new warrant agent. Any corporation and/or other entity into
which the Company or any new warrant agent may be merged or any corporation
resulting from any consolidation to which the Company or any new warrant agent
shall be a party shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder’s last address as shown on
the Warrant Register.
8
15. Piggyback Registration
Rights. If at any time the Company shall determine to file
with the Securities and Exchange Commission a registration statement (“Registration
Statement”) relating to an offering for its own account or the account of
others under the Securities Act of 1933 Act, as amended (other than on Form S-4
or Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other bona fide, employee
benefit plans), the Company shall send to the Holder of this Warrant, written
notice of such determination and, if within thirty (30) days after the effective
date of such notice, such Holder shall so request in writing, the Company shall
include in such Registration Statement all or any part of the shares such Holder
requests to be registered which are issuable upon exercise of this Warrant
(“Registration
Shares”), except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registration
Shares with respect to which such Holder has requested inclusion hereunder as
the underwriter shall permit and shall be subject to any senior registration
rights existing on the date hereof. Any exclusion of Registration Shares shall
be made pro rata among the Holder and its registered assigns, if any, seeking to
include shares in proportion to the number of equity securities sought to be
included by such Holder and its registered assigns. Notwithstanding
the foregoing, this Section 15 shall not
apply to any registration statement filed pursuant to the Registration Rights
Agreement, dated February 25, 2008, by and among the Company and Nordic Biotech
Venture Fund II K/S, as amended from time to time.
16. Miscellaneous.
(a) Subject
to the restrictions on transfer set forth on the first page hereof, this Warrant
may be transferred or assigned by the Holder to a Permitted Transferee pursuant
to Section 3 provided, that, among other things, the Permitted Transferee
covenants to be bound by the terms hereof. This Warrant may not be
assigned by the Company, except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant
shall be construed to give to any Person other than the Company and the Holder
any legal or equitable right, remedy or cause of action under this
Warrant.
(b) The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, seek to call or redeem this
Warrant or avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Warrant Shares
above the amount payable therefor on such exercise, (ii) will take all such
action as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares, free
from all taxes, liens, security interests, encumbrances, preemptive or similar
rights and charges of stockholders (other than those imposed by the Holder), on
the exercise of the Warrant, and (iii) will not close its stockholder books or
records in any manner which interferes with the timely exercise of this
Warrant.
9
(c) Remedies; Specific
Performance. The Company acknowledges and agrees that there
would be no adequate remedy at law to the Holder of this Warrant in the event of
any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or
omission by the Holder hereof in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach. No remedy shall be exclusive of
any other remedy. All available remedies shall be
cumulative.
(d) Amendments and
Waivers. The Company may, without the consent of the Holder
(but with prior written notice to the Holder), by supplemental agreement or
otherwise, (i) make any changes or corrections in this Agreement that are
required to cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or (ii)
add to the covenants and agreements of the Company for the benefit of the Holder
(including, without limitation, reduce the Exercise Price or extend the
Expiration Date), or surrender any rights or power reserved to or conferred upon
the Company in this Agreement; provided that, in the case of (i) or (ii), such
changes or corrections shall not adversely affect the interests of Holder in any
material respect. This Warrant may also be amended or waived with the
consent of the Company and the Holder. If a new warrant agent is
appointed by the Company, it shall at the request of the Company, and without
need of independent inquiry as to whether such supplemental agreement is
permitted by the terms of this Section 16(d), join
with the Company in the execution and delivery of any such supplemental
agreements, but shall not be required to join in such execution and delivery for
such supplemental agreement to become effective.
(e) Governing Law; Venue; Waiver
Of Jury Trial. This Warrant shall be governed by and construed
exclusively in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties hereto
hereby expressly and irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to, arising out of or under this Warrant,
shall be brought solely and exclusively in a federal or state court located in
the City, County and State of New York. By its execution hereof, the parties
hereby expressly covenant and irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam
jurisdiction with respect thereto. In the event of any such action or proceeding
(including, but not limited to, any motions made), the party prevailing therein
shall be entitled to payment from the other party hereto of its reasonable
counsel fees and disbursements. The Company and Holder hereby waive all rights
to a trial by jury.
10
(f) Headings The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(g) Partial
Invalidity. In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
11
IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed by its authorized officer as
of the date first indicated above.
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MANHATTAN
PHARMACEUTICALS, INC.
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By:
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Name:
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Michael
McGuinness
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Title:
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Chief
Financial Officer
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12
FORM OF EXERCISE
NOTICE
(To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)
To: MANHATTAN
PHARMACEUTICALS, INC.
The
undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by Manhattan
Pharmaceuticals, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
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(a)
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The
Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
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(b)
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The
undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the
Warrant.
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(c)
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The
holder shall make payment of the Exercise Price as follows (check
one):
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_______________
“Cash Exercise” under Section 10
_______________
“Cashless Exercise” under Section 10
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(d)
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If
the holder is making a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the
Warrant.
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(e)
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Pursuant
to this exercise, the Company shall deliver to the holder ______________
Warrant Shares in accordance with the terms of the
Warrant.
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(f)
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Following
this exercise, the Warrant shall be exercisable to purchase a total of
______________ Warrant Shares.
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(g)
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Notwithstanding
anything to the contrary contained herein, this Exercise Notice shall
constitute a representation by the Holder that, after giving effect to the
exercise provided for in this Exercise Notice, the Holder (together with
its affiliates) will not have beneficial ownership (together with the
beneficial ownership of such Person’s affiliates) of a number of shares of
Common Stock which exceeds the Maximum Percentage of the total outstanding
shares of Common Stock as determined pursuant to the provisions of Section 11 of
the Warrant.
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(h)
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The
Holder represents that, as of the date of
exercise:
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i.
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the
Warrant Shares being purchased pursuant to this Exercise Notice are being
acquired solely for the Holder’s own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or
resale; and
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ii.
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the
Holder is an “accredited
investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities
Act.
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(i)
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If
the Holder cannot make the representations required in Section
(f)(ii), above, because it is factually incorrect, it shall be a
condition to the exercise of the Warrant that the Company receive such
other representations as the Company considers necessary, acting
reasonably, to assure the Company that the issuance of securities upon
exercise of this Warrant shall not violate any United States or other
applicable securities laws.
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Dated:
_____________________, _______
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Name
of Holder: ____________________________________
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(Print)
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By:
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Name:
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Title:
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(Signature
must conform in all respects to name of holder as specified on the face of
the Warrant)
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14
FORM OF
ASSIGNMENT
[To be
completed and signed only upon transfer of Warrant]
FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of Manhattan
Pharmaceuticals, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Manhattan
Pharmaceuticals, Inc. with full power of substitution in the
premises.
The
undersigned transferee agrees to be bound by the covenants of the Warrant Holder
during the term of the Warrant.
The
undersigned transferee agrees represents and warrants that:
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i.
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the
Warrant Shares being purchased pursuant to this Assignment are being
acquired solely for the transferee’s own account and not as a nominee for
any other party, for investment, and not with a view toward distribution
or resale; and
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ii.
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the
undersigned transferee is an “accredited investor” as
such term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities
Act.
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If the
undersigned transferee cannot make the representations required in clause (ii)
above, above, because it is factually incorrect, it shall be a condition to the
transfer of the Warrant that the Company receive such other representations as
the Company considers necessary, acting reasonably, to assure the Company that
the transfer this Warrant shall not violate any United States or other
applicable securities laws.
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Dated: ,
_______
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(Signature
must conform in all respects to name of holder as specified on the face of
the Warrant)
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Address
of Transferee
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In
the presence of:
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Signature
of Transferee
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