Exhibit 10.36

 

FORM OF NOTE PURCHASE AGREEMENT

 

This NOTE PURCHASE AGREEMENT (as amended, supplemented or otherwise modified
from time to time, this “Agreement”) is made as of the last date set forth on
the signature page hereof between FORTRESS BIOTECH, INC., a Delaware corporation
having its principal place of business at 2 Gansevoort St., 9th Floor, New York,
NY 10014 (the “Company”), and the undersigned (together with its successors and
permitted assigns, the “Subscriber”).

 

WITNESSETH:

 

WHEREAS, the Company has retained National Securities Corp. (together with its
successors and permitted assigns, the “Placement Agent”) to act as its exclusive
placement agent, on a “best efforts” basis, in a private offering (the
“Offering”) of up to an aggregate principal amount of $40,000,000 (the
“Principal Loan Amount”), plus an over-subscription option of up to $10,000,000,
in promissory notes in substantially the form attached hereto as Exhibit A (as
amended, supplemented or otherwise modified from time to time, the “Notes”);

 

WHEREAS, the terms of the Offering are summarized in that certain Offering Term
Sheet attached hereto as Exhibit B (the “Term Sheet”); and

 

WHEREAS, the Company desires to enter into this Agreement to issue and sell the
Notes and the Subscriber desires to purchase the principal amount of Notes set
forth on the signature page hereto on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the promises and the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:

 

I.           SUBSCRIPTION FOR NOTES AND REPRESENTATIONS BY SUBSCRIBER

 

1.1           Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby irrevocably subscribes for and agrees to purchase from the
Company, and the Company hereby irrevocably agrees to issue and sell to the
Subscriber, that portion of the aggregate principal amount of the Principal Loan
Amount authorized to be issued by the Company set forth on the signature page
hereto (the “Subscriber Loan Amount”) in immediately available U.S. dollars in
the amount of such Subscription Loan Amount delivered by wire transfer to:

 

  Bank: [_____]   ABA Number: [_____]   Further Credit to Account Name: [_____]
  Account #: [_____]   Reference: [_____]   Attention: [_____]

 

Upon acceptance by the Placement Agent and the Company of subscriptions of at
least an aggregate principal amount of $3,000,000, the Placement Agent and the
Company shall have the right at any time thereafter to effect an initial closing
with respect to the Offering (the “Initial Closing”). Thereafter, the Placement
Agent and the Company shall continue to accept additional subscriptions for, and
continue to have closings (together with the Initial Closing, each a “Closing”
and the date thereof the “Closing Date”), with respect to subscriptions for
Notes from new or existing investors from time to time up to the Principal Loan
Amount.

 

 

 

 

The Subscriber understands that the Company’s and the Placement Agent’s
respective officers, directors, employees and/or affiliates may purchase Notes
in this Offering. In addition, certain employees of the Placement Agent and its
affiliates are current stockholders of the Company. Finally, the Placement Agent
is an indirect majority owned subsidiary of the Company.

 

1.2           The Subscriber recognizes that the purchase of the Notes involves
a high degree of risk including, but not limited to, the following: (a) the
Company proposes to use a portion of the net proceeds from the sale of Notes to
repay related-party debt; (b) the Company remains a development stage business
and requires substantial funds in addition to the proceeds of the Offering; (c)
an investment in the Company is highly speculative, and only investors who can
afford the loss of their entire investment should consider investing in the
Company and the Notes; (d) the Subscriber may not be able to liquidate its
investment; (e) transferability of the Notes and the PIK Shares (as defined in
the Notes) is limited; and (f) in the event of a disposition of the Notes, the
Subscriber could sustain the loss of its entire investment. Without limiting the
generality of the representations set forth in Section 1.5 below, the Subscriber
represents that the Subscriber has carefully reviewed the “Introduction and
Overview – Use of Proceeds,” “Conflicts of Interest” and “Risk Factors” sections
of the accompanying Confidential Private Placement Memorandum (including any
amendment or supplement thereto), as well as the section of the Company’s
filings with the United States Securities and Exchange Commission (“the SEC”)
(such filings, the “SEC Filings”) captioned “Risk Factors.”

 

1.3           The Subscriber represents that the Subscriber is an “accredited
investor” as such term is defined in Rule 501 of Regulation D (“Regulation D”)
promulgated under the Securities Act of 1933, as amended (the “Securities Act”),
as indicated by the Subscriber’s responses to the questions contained in Article
VII hereof, and that the Subscriber is able to bear the economic risk of an
investment in the Notes. If the Subscriber is a natural person, the Subscriber
has reached the age of majority in the state or other jurisdiction in which the
Subscriber resides, has adequate means of providing for the Subscriber’s current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Notes for an indefinite period of time, has no
need for liquidity in such investment and, at the present time, could afford a
complete loss of such investment.

 

1.4           The Subscriber hereby acknowledges and represents that (a) the
Subscriber has sufficient knowledge and experience in business and financial
matters, prior investment experience, including investment in securities that
are non-listed, unregistered and/or not traded on a national securities
exchange, or the Subscriber has employed the services of a “purchaser
representative” (as defined in Rule 501 of Regulation D), attorney and/or
accountant to read all of the documents furnished or made available by the
Company both to the Subscriber and to all other prospective investors in the
Notes in order to evaluate the merits and risks of such an investment on the
Subscriber’s behalf; (b) the Subscriber recognizes the highly speculative nature
of this investment; and (c) the Subscriber is able to bear the economic risk
that the Subscriber hereby assumes.

 

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1.5           The Subscriber hereby acknowledges receipt and careful review of
this Agreement, the Notes, the Private Placement Memorandum of the Company dated
March 24, 2017 and the SEC Filings (which includes the Risk Factors), including
all exhibits thereto (collectively referred to as the “Offering Materials”) and
hereby represents that the Subscriber has been furnished by the Company during
the course of the Offering with all information regarding the Company, the terms
and conditions of the Offering and any additional information that the
Subscriber, its purchaser representative, attorney and/or accountant has
requested or desired to know, and has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the Company and the terms and
conditions of the Offering.

 

1.6           (a)          In making the decision to invest in the Notes, the
Subscriber has relied solely upon the information provided by the Company in the
Offering Materials. To the extent necessary, the Subscriber has retained, at its
own expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Notes hereunder. The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in the course of
Subscriber’s consideration of an investment in the Notes other than the Offering
Materials. The Subscriber acknowledges and agrees that (i) the Company has
prepared the Offering Materials and that no other person, including without
limitation, the Placement Agent, has supplied any information for inclusion in
the Offering Materials other than information furnished in writing to the
Company by the Placement Agent specifically for inclusion in those parts of the
Offering Materials relating specifically to the Placement Agent, (ii) the
Placement Agent has no responsibility for the accuracy or completeness of the
Offering Materials and (iii) the Subscriber has not relied upon the independent
investigation or verification, if any, that may have been undertaken by the
Placement Agent.

 

(b)          The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Notes by the Company or the Placement Agent (or an
authorized agent or representative of the Company or the Placement Agent) with
whom the Subscriber had a prior substantial pre-existing relationship and (ii)
no Notes were offered or sold to it by means of any form of general solicitation
or general advertising, and in connection therewith, the Subscriber did not (A)
receive or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over
television or radio, whether closed circuit, or generally available; or (B)
attend any seminar meeting or industry investor conference whose attendees were
invited by any general solicitation or general advertising.

 

1.7           The Subscriber hereby represents that the Subscriber, either by
reason of the Subscriber’s business or financial experience or the business or
financial experience of the Subscriber’s professional advisors (who are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company, including the Placement Agent, directly or indirectly),
has the capacity to protect the Subscriber’s own interests in connection with
the transaction contemplated hereby.

 

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1.8           The Subscriber hereby acknowledges that the Offering has not been
reviewed by the SEC nor any state regulatory authority since the Offering is
intended to be exempt from the registration requirements of Section 5 of the
Securities Act pursuant to Regulation D promulgated thereunder. The Subscriber
understands that the Notes and PIK Shares have not been registered under the
Securities Act or under any state securities or “blue sky” laws and agrees not
to sell, pledge, assign or otherwise transfer or dispose of the Notes or PIK
Shares unless they are registered under the Securities Act and under any
applicable state securities or “blue sky” laws or unless an exemption from such
registration is available.

 

1.9           The Subscriber understands that the Notes and PIK Shares have not
been registered under the Securities Act or any state securities laws by reason
of a claimed exemption under the provisions of the Securities Act and such state
securities laws that depends, in part, upon the Subscriber’s investment
intention. The Subscriber hereby represents that the Subscriber is purchasing
the Notes for the Subscriber’s own account for investment and not with a view
toward the resale or distribution to others.

 

1.10         The Subscriber understands that there is no public market for the
Notes and that no market may develop for any of such Notes. The Subscriber
understands that even if a public market develops for such Notes, Rule 144
(“Rule 144”) promulgated under the Securities Act requires for non- affiliates,
among other conditions, a six month holding period prior to the resale of
securities acquired in a non-public offering without having to satisfy the
registration requirements under the Securities Act. The Subscriber understands
and hereby acknowledges that the Company is under no obligation to register any
of the Notes under the Securities Act or any state securities or “blue sky”
laws.

 

1.11         The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Notes that such Notes and PIK
Shares have not been registered under the Securities Act or any state securities
or “blue sky” laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Subscriber is
aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of such Notes and, if
applicable, any PIK Shares. The legend to be placed on each certificate shall be
in form substantially similar to the following:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR
“BLUE SKY LAWS”, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

1.12         The Subscriber hereby represents that the address of the Subscriber
furnished by Subscriber on the signature page hereof is the Subscriber’s
principal residence if Subscriber is an individual or its principal business
address if it is a corporation or other entity.

 

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1.13         The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Notes. This Agreement constitutes the legal, valid
and binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy.

 

1.14         If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, Keogh
Plan, or other tax-exempt entity, (a) it is authorized and qualified to purchase
the Notes and the person signing this Agreement on behalf of such entity has
been duly authorized by such entity to do so and (b) it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization.

 

1.15         The Subscriber acknowledges that if he or she is a Registered
Representative of a Financial Industry Regulatory Authority (“FINRA”) member
firm, he or she must give such firm the notice required by NASD Rule 3050,
receipt of which must be acknowledged by such firm in Section 7.3 below.

 

1.16         (a)          The Subscriber agrees not to issue any public
statement with respect to the Subscriber’s purchase of the Notes or the terms of
any agreement or covenant between them and the Company with respect to the Notes
or this Agreement without the Company’s prior written consent (such consent not
to be unreasonably withheld, conditioned or delayed), except such disclosures as
may be required under applicable law or under any applicable order, rule or
regulation.

 

(b)          The Company agrees not to disclose the names, addresses or any
other information about the Subscribers, except as required by law.

 

1.17         The Subscriber represents and warrants that it has not engaged,
consented to or authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
hereby agrees to indemnify and hold harmless the Company from and against all
fees, commissions or other payments owing to any such person or firm acting on
behalf of such Subscriber hereunder, except to the extent that such liability
arises from the Company’s gross negligence, willful fraud or willful misconduct.

 

1.18         The Subscriber agrees to hold the Company and its directors,
officers, employees, affiliates, controlling persons and agents (including the
Placement Agent and its officers, directors, employees, counsel, controlling
persons and agents) and their respective heirs, representatives, successors and
assigns (each such person, an “Indemnified Party”) harmless and to indemnify
them against all liabilities, costs and expenses incurred by them as a result of
(a) any sale or distribution of the Notes by the Subscriber in violation of the
Securities Act or any applicable state or foreign securities or “blue sky” laws;
or (b) any false representation or warranty or any breach or failure by the
Subscriber to comply with any covenant made by the Subscriber in this Agreement
(including the Confidential Investor Questionnaire contained in Article VII
herein) or any other document furnished by the Subscriber to any of the
foregoing in connection with this Agreement and the transactions contemplated
hereby, except to the extent that such liability arises from any Indemnified
Party’s gross negligence, willful fraud or willful misconduct; provided,
however, that in no event shall any indemnity under this Subsection 1.18 exceed
the aggregate principal amount of the Notes subscribed for by the Subscriber
pursuant to this Agreement, except in the case of willful fraud by the
Subscriber.

 

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1.19         The Subscriber understands, acknowledges and agrees with the
Company that this subscription may be rejected, in whole or in part, by the
Company, in the sole and absolute discretion of the Company, at any time before
the Closing Date notwithstanding prior receipt by the Subscriber of notice of
acceptance of the Subscriber’s subscription.

 

1.20         The Subscriber acknowledges that the information contained in the
Offering Materials or otherwise made available to the Subscriber (other than the
SEC Filings) is confidential and non-public and agrees that all such information
shall be kept in confidence by the Subscriber and neither used by the Subscriber
for the Subscriber’s personal benefit (other than in connection with this
subscription) nor disclosed to any third party for any reason, notwithstanding
that a Subscriber’s subscription may not be accepted by the Company; provided,
however, that (a) the Subscriber may disclose such information to its attorneys
and advisors who may have a need for such information in connection with
providing advice to the Subscriber with respect to its investment in the
Company, so long as such affiliates and advisors have an obligation of
confidentiality, and (b) this obligation shall not apply to any such information
that (i) is part of the public knowledge or literature and readily accessible at
the date hereof, (ii) becomes part of the public knowledge or literature and
readily accessible by publication (except as a result of a breach of this
provision), (iii) is received from third parties without an obligation of
confidentiality (except third parties who disclose such information in violation
of any confidentiality agreements or obligations, including, without limitation,
any subscription or other similar agreement entered into with the Company), (iv)
is required or requested by any federal or state regulatory authority or
examiner, or any insurance industry association, or as reasonably believed by
the Subscriber to be compelled by any court decree, subpoena or legal or
administrative order or process, (v) is, on the advice of the Subscriber’s
counsel, is required by law, (vi) is in connection with the exercise of any
right or remedy under this Agreement, the Notes or any other document in
connection herewith or in connection with any litigation to which the Subscriber
is a party, or (vii) ceases to be confidential through no fault of the
Subscriber.

 

1.21         The Subscriber represents that no authorization, approval, consent
or license of any person is required to be obtained for the purchase of the
Notes by the Subscriber, other than as have been obtained and are in full force
and effect or any authorization, approval, consent or license which could
reasonably be expected to have a material adverse effect on the Subscriber’s
ability to purchase the Notes.

 

1.22         The Subscriber represents that the representations, warranties and
agreements of the Subscriber contained herein and in any other writing delivered
in connection with the transactions contemplated hereby shall be true and
correct in all material respects on the date hereof and as of the Closing Date
on which the Subscriber purchases Notes (except to the extent stated to relate
to a specific earlier date, in which case such representations, warranties and
agreements shall be true and correct in all material respects as of such earlier
date) as if made on and as of such date and shall survive the execution and
delivery of this Agreement and the purchase of the Notes. The Subscriber agrees
that the Company and the Placement Agent shall be entitled to rely on the
representations, warranties and agreements of the Subscriber contained herein.

 

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1.23         The Subscriber understands, acknowledges and agrees with the
Company that, except as otherwise set forth herein, the subscription hereunder
is irrevocable by the Subscriber, that, except as required by law, the
Subscriber is not entitled to cancel, terminate or revoke this Agreement or any
agreements of the Subscriber hereunder and that this Agreement and such other
agreements shall survive the death or disability of the Subscriber and shall be
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and permitted assigns. If the
Subscriber is more than one person, the obligations of the Subscriber hereunder
shall be joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his/her heirs, executors, administrators, successors,
legal representatives and permitted assigns.

 

1.24         The Subscriber understands, acknowledges and agrees with the
Company that the Offering is intended to be exempt from registration under the
Securities Act by virtue of the provisions of Regulation D thereunder, which is
in part dependent upon the truth, completeness and accuracy of the
representations and covenants made by the Subscriber in this Agreement.

 

1.25         (a)          Any Subscriber subject to jurisdiction in the European
Economic Area (“EEA”) either (i) is a qualified investor for the purposes of
Directive 2003/71/EC of the European Parliament and the Council (a “Qualified
Investor”); that is, a person falling within Article 2.1(e)(i), (ii) or (iii) of
such directive or a person authorized by any such jurisdiction to be considered
as a qualified investor for the purposes of such directive, or (ii) it has
notified the Placement Agent in writing that it is not a Qualified Investor;

 

(b)          Any EEA Subscriber entering into this Agreement and acquiring Notes
is either (i) acting on its own account and not for the account of or otherwise
on behalf any other person or persons or (ii) if a Qualified Investor in the
United Kingdom, it is acting as an agent in the circumstances contemplated in
section 86(2) of the United Kingdom Financial Services and Markets Act 2000;

 

(c)          Any Subscriber, if in the United Kingdom, is (a) a person falling
within Article 19(5) of the United Kingdom Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (“FPO”) or (b) a person falling within
Article 49(2)(a) to (d) of the FPO;

 

(d)          Each Subscriber acknowledges that neither the Placement Agent nor
any person acting on its behalf is making any recommendations to it or advising
it regarding the suitability or merits of purchasing Notes or any transaction it
may enter into in connection with the offering of the Notes, and acknowledges
that its participation in the offering of Notes is on the basis that it is not
and will not be a client or customer of the Placement Agent and that neither the
Placement Agent nor any person acting on its behalf has any duties or
responsibilities to it for providing the protections afforded to their clients
or customers or for providing advice in relation to the offering of the Notes.

 

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II.            REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

 

The Company hereby represents and warrants to the Subscriber that:

 

2.1           Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to conduct
its business as currently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the property owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except to the extent that the failure
to be so qualified or in good standing would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
operations, conditions (financial or otherwise), properties, assets or results
of operations of the Company (a “Material Adverse Effect”).

 

2.2           Capitalization and Voting Rights. The authorized, issued and
outstanding shares of the capital stock of the Company is as set forth in the
SEC Filings and all issued and outstanding shares of the Company are validly
issued, fully paid and nonassessable. Except as set forth in the SEC Filings,
there are no outstanding options, warrants, agreements, convertible securities,
preemptive rights or other rights to subscribe for or to purchase any shares of
capital stock of the Company. Except as set forth in the Offering Materials and
as otherwise required by law, there are no restrictions upon the voting or
transfer of any of the shares of capital stock of the Company pursuant to the
Company’s certificate of incorporation, as amended (the “Certificate of
Incorporation”), by-laws or other governing documents or any agreement or other
instruments to which the Company is a party or by which the Company is bound.

 

2.3           Authorization; Enforceability. The Company has all corporate
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the (i) authorization,
execution, delivery and performance of this Agreement by the Company; and (ii)
authorization, sale, issuance and delivery of the Notes contemplated hereby and
the performance of the Company’s obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The Notes, when issued and fully paid for
in accordance with the terms of this Agreement, will be validly issued. The
issuance and sale of the Notes contemplated hereby will not give rise to any
preemptive rights or rights of first refusal on behalf of any person which have
not been waived in connection with this Offering.

 

2.4           No Conflict; Governmental Consents; Compliance with Laws.

 

(a)           The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of Incorporation or
by-laws of the Company, and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of the Company.

 

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(b)          No consent, approval, authorization or other order of any
governmental authority or other third party is required to be obtained by the
Company in connection with the authorization, execution and delivery of this
Agreement or with the authorization, issue and sale of the Notes, except as have
been obtained or such filings as may be required to be made with the SEC and
with any state or foreign blue sky or securities regulatory authority relating
to an exemption from registration thereunder.

 

(c)          The Company is in compliance, with all laws, rules, regulations,
orders and decrees which are applicable to the Company or to any of its
properties, except which the failure to comply with could, individually or in
the aggregate, have a Material Adverse Effect.

 

2.5           Licenses. Except as would not reasonably be expected to have a
Material Adverse Effect, the Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or ownership of properties and is complying therewith.

 

2.6           Litigation. The Company knows of no pending or threatened legal or
governmental proceedings against the Company which (i) questions the validity of
this Agreement or any agreements related to the transactions contemplated hereby
or the right of the Company to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby or (ii) could, if
there were an unfavorable decision, have a Material Adverse Effect. There is no
action, suit, proceeding or investigation by the Company currently pending in
any court or before any arbitrator or that the Company intends to initiate.

 

2.7           Investment Company. The Company is not an “investment company”, or
a company “controlled” by an “investment company”, within the meaning of such
term under the Investment Company Act of 1940, as amended, and the rules and
regulations of the SEC thereunder.

 

2.8           Placement Agent. The Company has engaged, consented to and
authorized the Placement Agent to act as agent of the Company in connection with
the transactions contemplated by this Agreement, in accordance with the
Placement Agency Agreement (as outlined in the Term Sheet). The Company will pay
the Placement Agent a commission in the form of cash, and the Company agrees to
indemnify and hold harmless the Subscribers from and against all fees,
commissions or other payments owing by the Company to the Placement Agent or any
other person or firm acting on behalf of the Company hereunder.

 

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2.9           Financial Statements. The financial statements of the Company
included in the SEC Filings (the “Financial Statements”) fairly present in all
material respects the financial condition and results of operations of the
Company at the dates and for the periods indicated and have been prepared in
conformity with generally accepted accounting principles in the United States
(“GAAP”) consistently applied throughout the periods covered thereby, except as
may be otherwise specified in such Financial Statements or the notes thereto,
and except that unaudited financial statements do not contain all footnotes and
do not contain the cash flow statement required by GAAP, and fairly present in
all material respects the financial condition of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments. Said Financial Statements and related notes disclose all
liabilities, actual or contingent, of the Company as of the respective dates
thereof and for the respective periods indicated, when read in conjunction with
the SEC Filings. Since the date of the most recent balance sheet included as
part of the Financial Statements, there has not been to the Company’s knowledge:
(i) any change in the assets, liabilities, financial condition or operations of
the Company from that reflected in the Financial Statements, other than changes
in the ordinary course of business, none of which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect; or
(ii) any other event or condition of any character that, either individually or
cumulatively, would reasonably be expected to have a Material Adverse Effect,
except for the expenses incurred in connection with the transactions
contemplated by this Agreement. None of the SEC Filings, including any financial
statements, schedules or exhibits included or incorporated by reference therein
at the time they were filed (or, if amended or superseded by a subsequent
filing, as of the date of the last such amendment or superseding filing prior to
the date hereof), 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.

 

2.10         Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) the equity
securities of the Placement Agent owned by the Company that are subject to a
security interest in favor of Opus Point Healthcare Innovations Fund, LP and
liens in favor of Israel Discount Bank pursuant to a Pledge Agreement dated
February 13, 2014; (b) those resulting from taxes which have not yet become
delinquent; (c) liens and encumbrances which do not materially detract from the
value of the property subject thereto or materially impair the operations of the
Company; and (d) those that have otherwise arisen in the ordinary course of
business. The Company is in compliance with all material terms of each lease to
which it is a party or is otherwise bound.

 

2.11         Patents and Trademarks. Except as would not reasonably be expected
to have a Material Adverse Effect or as disclosed in the SEC Filings, to the
Company’s knowledge, (i) the Company owns or possesses adequate licenses or
other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets, licenses, customer lists and
know how (collectively, “Intellectual Property”), (ii) the Company has not
received any communications alleging that the Company has violated or, by
conducting its business as conducted, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights or processes of any other person or entity, nor is the
Company aware of any basis therefor and (iii) no claim is pending or, to the
Company’s knowledge after due inquiry, threatened to the effect that any
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company.

 

 10 

 

 

2.12         Obligations to Related Parties. Except as disclosed in the SEC
Filings, there are no obligations of the Company to officers, directors,
stockholders, or employees of the Company other than (a) for payment of salary
or other compensation for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company, (c) standard indemnification
provisions in the certificate of incorporation and by-laws, and (d) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company). Except as may be disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation other than its subsidiaries.

 

2.13         Employee Relations; Employee Benefit Plans. The Company is not a
party to any collective bargaining agreement or a union contract. The Company
believes that its relations with its employees are good. No executive officer
(as defined in Rule 501(f) of the Securities Act) of the Company has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer’s employment with the Company. The Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in the SEC Filings, the
Company does not maintain any compensation or benefit plan, agreement,
arrangement or commitment (including, but not limited to, “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) for any present or former employees, officers
or directors of the Company or with respect to which the Company has liability
or makes or has an obligation to make contributions, other than any such plans,
agreements, arrangements or commitments made generally available to the
Company’s employees.

 

2.14         Regulatory Compliance. As to each product subject to the U.S.
Federal Food, Drug, and Cosmetic Act, as amended (the “FD&C Act”), and the
regulations of the FDA promulgated thereunder or similar laws in any foreign
jurisdiction that is or has been developed, manufactured and/or tested,
distributed or sold, by or on behalf of the Company (each such product, a
“Drug”), each such Drug is being or has been developed, manufactured, labeled,
stored, researched, distributed and/or tested in compliance with all applicable
requirements under the FD&C Act, the regulations of the FDA promulgated
thereunder, the Public Health Service Act, their applicable implementing
regulations and similar foreign, state and local laws and regulations, including
those relating to investigational use, good manufacturing practices, good
clinical practices, good laboratory practices, labeling, record keeping and
filing of required reports. The Company has not received any notice or other
communication from the FDA or any other authority (a) withdrawing the new drug
application of any drug product of the Company, (b) withdrawing the
investigational new drug application (“IND”) of any product candidate of the
Company, (c) placing any IND of the Company on “clinical hold”, or (iv)
otherwise alleging any violation by the Company of any laws or judgments
applicable to any Drug. All applicable approvals, clearances, authorizations,
licenses, drug listings, permits and registrations required by the FDA or any
other authority to permit any manufacturing, labeling, storing, testing,
distribution, sale, research and development of a Drug as previously conducted
or currently being conducted by or on behalf of the Company have been obtained.
The Company is in compliance with all reporting and recordkeeping requirements
related to the foregoing approvals, clearances, authorizations, licenses, drug
listings, permits and registrations.

 

 11 

 

 

2.15         Tax Status. The Company (i) has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the Company knows of no basis for any such claim.

 

2.16         Absence of Certain Changes. Since the date of the SEC Filings,
there has been no change in the business, operations, conditions (financial or
otherwise), prospects, assets or results of operations of the Company or any of
its subsidiaries that could reasonably be expected to have a Material Adverse
Effect.

 

2.17         Disclosure. The information set forth in the Offering Materials as
of the date hereof, this Agreement, the Notes and any other document or
certificate or written statement furnished to the Subscriber by or on behalf of
the Company for use in connection with the transactions contemplated by this
Agreement contains no untrue statement of a material fact nor omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.

 

2.18         Indemnification. The Company agrees to hold the Subscriber and its
directors, officers, employees, affiliates, controlling persons and agents and
their respective heirs, representatives, successors and assigns (including any
future holder of Notes) harmless and to indemnify them against all liabilities,
costs and expenses incurred by them as a result of (a) any sale or distribution
of the Notes by the Company in violation of the Securities Act or any applicable
state or foreign securities or “blue sky” laws; or (b) any false representation
or warranty or any breach or failure by the Company to comply with any covenant
made by the Company in this Agreement or any other document furnished by the
Company to any of the foregoing in connection with this transaction; provided,
however, that in no event shall any indemnity under this Subsection 2.18 exceed
the aggregate principal amount of the Notes subscribed for by the Subscriber
pursuant to this Agreement, except in the case of willful fraud by the Company.
The obligation of the Company under this Section 2.18 shall survive the payment
or transfer of the Notes, except as otherwise provided.

 

2.19         Fund Investors. In the event Subscriber is a Fund, (i) the Fund
investors shall be permitted to rely on the representations and warranties of
the Company set forth in this Section 2 in connection with such investors’
investment in the Fund, (ii) the Company consents to the use of the SEC Filings
by Fund investors in connection with their investment in the Fund and (iii) the
Fund investors shall be permitted to rely on the opinions of Company counsel
delivered herewith. “Fund” means an entity whose sole business is the purchase
of the Notes.

 

 12 

 

 

2.20         Solvency. Based on the financial condition of the Company as of the
Closing Date, after giving effect to the receipt by the Company of the proceeds
from the sale of the Notes hereunder: (i) the fair saleable value of the
Company’s assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature, (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof, and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its liabilities when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money and other amounts
owed in excess of $50,000 (other than trade accounts payable incurred in the
ordinary course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(z) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. The Company is not in
default with respect to any Indebtedness.

 

2.21         Sarbanes-Oxley; Internal Accounting Controls. The Company is in
compliance with any and all applicable requirements of the Sarbanes-Oxley Act of
2002 that are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the Commission thereunder that are effective as
of the date hereof and as of the Closing Date. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of
the Company as of the end of the period covered by the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
internal control over financial reporting (as such term is defined in the
Exchange Act) that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of the Company.

 

 13 

 

 

III.           TERMS OF SUBSCRIPTION

 

3.1           The minimum purchase that may be made by any prospective investor
shall be $50,000 aggregate principal amount of Notes. Subscriptions for
investment below the minimum investment may be accepted at the discretion of the
Placement Agent and the Company. The Company and the Placement Agent reserve the
right to reject any subscription made hereby, in whole or in part, in their sole
discretion. The Company’s agreement with each Subscriber is a separate agreement
and the sale of the Notes to each Subscriber is a separate sale.

 

3.2           At any time after the Company has received subscriptions and
related funds of at least a principal amount of $3,000,000, the Company may
conduct a Closing and may conduct subsequent Closings on an interim basis until
the Principal Loan Amount has been obtained.

 

3.4           The Note purchased by the Subscriber pursuant to this Agreement
will be prepared for delivery to the Subscriber promptly following the Closing
at which such purchase takes place. The Subscriber hereby authorizes and directs
the Company to deliver the Note purchased by the Subscriber pursuant to this
Agreement to the residential or business address indicated on the signature page
hereto.

 

IV.            CONDITIONS TO OBLIGATIONS OF THE PARTIES

 

4.1           In addition to the Company’s right to reject, in whole or in part,
any subscription at any time before the Closing Date, the Company’s obligation
to issue the Notes at each Closing to the applicable Subscriber is subject to
the fulfillment on or prior to such Closing of the following conditions, which
conditions may be waived at the option of the Company to the extent permitted by
law:

 

(a)          The representations and warranties made by each Subscriber in
Article I hereof shall be true and correct in all material respects.

 

(b)          All covenants, agreements and conditions contained in this
Agreement to be performed by such Subscriber on or prior to the date of such
Closing shall have been performed or complied with in all material respects.

 

(c)          There shall not then be in effect any legal or other order
enjoining or restraining the transactions contemplated by this Agreement.

 

 14 

 

 

(d)          There shall not be in effect any law, rule or regulation
prohibiting or restricting such sale or requiring any consent or approval of any
person, which shall not have been obtained, to issue the Notes (except as
otherwise provided in this Agreement).

 

4.2           The Subscriber’s obligation to purchase the Notes at the Closing
at which such purchase is to be consummated is subject to the fulfillment on or
prior to such Closing of the following conditions, which conditions may be
waived at the option of each Subscriber to the extent permitted by law:

 

(a)          The representations and warranties made by the Company in Article
II hereof shall be true and correct in all material respects.

 

(b)          All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the date of such Closing
shall have been performed or complied with in all material respects.

 

(c)          There shall not then be in effect any legal or other order
enjoining or restraining the transactions contemplated by this Agreement.

 

(d)          There shall not be in effect any law, rule or regulation
prohibiting or restricting such sale or requiring any consent or approval of any
person, which shall not have been obtained, to issue the Notes (except as
otherwise provided in this Agreement).

 

(e)          The Placement Agent shall have received an opinion of counsel to
the Company addressed to the Subscribers (which the Placement Agent may be
permitted to rely on as if it were addressed to it) containing certain opinions
to be substantially as set forth in Exhibit C, which opinion will be subject to
standard qualifications and assumptions to be reasonably acceptable to the
Subscribers.

 

(f)          The Placement Agent shall have received an Officer’s Certificate
addressed to the Subscribers, signed by the authorized officer of the Company
and dated as of the Closing. The certificate shall state, among other things,
that the representations and warranties contained herein and in the Offering
Materials are true and accurate in all material respects at such Closing Date
with the same effect as though expressly made at such Closing Date and the
Placement Agent shall be entitled to rely on such representations of the Company
in the Offering Materials as if they were made directly to the Placement Agent.

 

V.            RESERVED.

 

VI.           MISCELLANEOUS

 

6.1           Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed as follows:

 

 15 

 

 

if to the Company, to it at:

 

Fortress Biotech, Inc.

2 Gansevoort Street, 9th Floor

New York, NY 10014

Attn: Chief Executive Officer

 

With a copy to:

 

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, NC 27607-7506

Facsimile: (919) 781-4865

Attn: W. David Mannheim, Esq.

 

if to the Subscriber, to the Subscriber’s address indicated on the signature
page of this Agreement.

 

Notices shall be deemed to have been given or delivered on the date of mailing,
except notices of change of address, which shall be deemed to have been given or
delivered when received.

 

6.2           Except as otherwise expressly provided herein, any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely) with
the written consent of the Company and subscribers holding Notes evidencing at
least sixty six and two-thirds percent (66 2/3%) of the then outstanding
Principal Loan Amount of the Notes issued pursuant to this Agreement and
substantially similar agreements; provided that no such agreement shall (a)
increase a Subscriber’s Subscriber Loan Amount without the written consent of
such Subscriber, (b) reduce or forgive the principal amount of any Note or
reduce the rate of interest thereon, or reduce or forgive any interest or fees
payable hereunder, without the written consent of each Subscriber directly
affected thereby, (c) postpone any scheduled date of payment of the principal
amount of any Note, or any date for the payment of any interest, fees or other
obligations payable hereunder, or reduce the amount of, waive or excuse any such
payment without the written consent of each Subscriber directly affected
thereby, or (d) change any of the provisions of this Section 6.2 without the
written consent of each Subscriber. Any amendment or waiver effected in
accordance with this Section 6.2 shall be binding upon the Subscriber and the
Company (even if the Subscriber does not consent to such amendment or waiver),
and upon the effectuation of each such amendment or waiver, the Company shall
promptly give written notice thereof to the Subscriber if the Subscriber has not
previously consented thereto in writing.

 

6.3           This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them.

 

6.4           Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Notes as herein provided, subject, however, to
the right hereby reserved by the Company to enter into the same agreements with
other subscribers and to add and/or delete other persons as subscribers.

 

 16 

 

 

6.5           NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH
STATE’S PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING
IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING
TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS SITTING IN THE BOROUGH OF
MANHATTAN, COUNTY OF NEW YORK. THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE
JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OR OTHER AGENT (INCLUDING ANY
ATTORNEY) OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

 

6.6           The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.

 

6.7           It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.

 

6.8           The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.

 

 17 

 

 

6.9           This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy, emailed pdf. or any other electronic means
that reproduces an image of the actual executed signature page shall be
effective as delivery of a manually executed counterpart of this Agreement.

 

6.10         Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except that the
Placement Agent may rely upon the representations and acknowledgements of the
Subscriber in Articles I and VII hereof and the representations and warranties
of the Company in Article II hereof.

 

6.11         At the Initial Closing, the Company shall pay the fees and expenses
specified in the Placement Agent Agreement with National Securities Corp., such
fees and expenses not to exceed $54,000.

 

6.12         The Company agrees to and shall pay on demand (a) all costs and
expenses of the Subscriber (including recording and other similar taxes, costs
of appraisals, UCC searches, certified corporate documents, intellectual
property searches and filings, attorneys’ fees, costs and expenses and other
professional fees) in connection with the preparation, negotiation, execution,
delivery, closing and administration (including perfection and protection of any
collateral) of this Agreement, the Notes and all other documents provided for
herein or therein or delivered or to be delivered hereunder or thereunder or in
connection herewith or therewith (such documents, collectively, the “Loan
Documents”) (including any amendment, supplement or waiver to any Loan Document)
and the issuance of the Notes, whether or not the transactions contemplated
hereby or thereby shall be consummated, and all reasonable out-of-pocket costs
and expenses (including recording and other similar taxes, costs of appraisals,
attorneys’ fees, costs and expenses and other professional fees) incurred by the
Subscriber after the occurrence of an Event of Default (as defined in the
Notes), in protecting, preserving or maintaining any collateral or collecting
the obligations due and owing under any of the Loan Documents or enforcing this
Agreement, the other Loan Documents or any such other documents or during any
workout, restructuring or negotiations in respect thereof, (b) any and all any
placement fees, including to the Placement Agent, incurred in connection with
the offering of interests in the Subscriber, and (c) all other organizational,
operational and other expenses incurred by the Subscriber throughout its term.
The Company agrees to and shall reimburse the Subscriber and its manager and
their respective affiliates for any such expenses advanced by any such party.
All obligations provided for in this Section 6.12 shall survive repayment of the
Notes and termination of this Agreement for a period of one (1) year.

 

Remainder of Page Intentionally Left Blank.

 

 18 

 

 

VII.         CONFIDENTIAL INVESTOR QUESTIONNAIRE

 

7.1           ALL INVESTORS - The undersigned represents and warrants as
indicated below by the undersigned’s mark:

 

A.Individual investors: (Please mark one or more of the following statements)

 

1. ________   I certify that I am an accredited investor because I have had
individual income (exclusive of any income earned by my spouse) of more than
$200,000 in each of the most recent two years and I reasonably expect to have an
individual income in excess of $200,000 for the current year.         2.
________   I certify that I am an accredited investor because I have had joint
income with my spouse in excess of $300,000 in each of the most recent two years
and reasonably expect to have joint income with my spouse in excess of $300,000
for the current year.         3. ________   I certify that I am an accredited
investor because I have an individual net worth, or my spouse and I have a joint
net worth, in excess of $1,000,000 (exclusive of my personal residence).        
4. ________   I am a director or executive officer of Fortress Biotech, Inc.

 

B.Partnerships, corporations, trusts or other entities: (Please mark one of the
following seven statements). The undersigned hereby certifies that it is an
accredited investor because it is:

 

1.                   an employee benefit plan whose total assets exceed
$5,000,000;

 

2.                    an employee benefit plan whose investments decisions are
made by a plan fiduciary which is either a bank, savings and loan association or
an insurance company (as defined in Section 3(a) of the Securities Act) or an
investment adviser registered as such under the Investment Advisers Act of 1940;

 

3.                    a self-directed employee benefit plan, including an
Individual Retirement Account, with investment decisions made solely by persons
that are accredited investors;

 

4.                    an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, not formed for the specific purpose
of acquiring the Notes or PIK Shares, with total assets in excess of $5,000,000;

 

5.                    a corporation, partnership, limited liability company,
limited liability partnership, other entity or similar business trust, not
formed for the specific purpose of acquiring the Notes or PIK Shares, with total
assets excess of $5,000,000;

 

 19 

 

 

6.                    a trust, not formed for the specific purpose of acquiring
the Notes or PIK Shares, with total assets exceed $5,000,000, whose purchase is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in the Notes; or

 

7.                     an entity (including a revocable grantor trust but other
than a conventional trust) in which each of the equity owners qualifies as an
accredited investor.

 

7.2           EUROPEAN ECONOMIC AREA (“EEA”) INVESTORS - The undersigned further
represents and warrants as indicated below by the undersigned’s mark:

 

A.Please mark one of the following statements:

 

either

 

1.                    The undersigned hereby certifies that it is a Qualified
Investor for the purposes of Directive 2003/71/EC because it is a person falling
within Article 2.1(e)(i), (ii) or (iii) of such directive or a person authorized
by a jurisdiction in the EEA to be considered as a qualified investor for the
purposes of such directive;

 

or

 

2.                    The undersigned hereby certifies that it is not a
Qualified Investor for the purposes of Directive 2003/71/EC.

 

B.Please mark one of the following statements.

 

1.                    The undersigned hereby certifies that it is acting on its
own account and not for the account of or otherwise on behalf of any person or
persons; or

 

2.                     The undersigned is in the United Kingdom and is a
Qualified Investor for the purposes of Directive 2003/71/EC and is acting as an
agent in the circumstances contemplated in section 86(2) of the United Kingdom
Financial Services and Markets Act 2000.

 

C.Please mark the following statement:

 

1.                    The undersigned hereby certifies that it has not received
any recommendation from the Placement Agent nor any person acting on their
behalf in relation to the purchase of the Notes.

 

D.Please mark one of the following statements:

 

1.                    The undersigned hereby certifies that it is not in the
United Kingdom.

 

2.                    The undersigned hereby certifies that it is a person
falling within Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (“FPO”).

 

 20 

 

 

3.                    The undersigned hereby certifies that it is a person
falling within Article 49(2)(a) to the (d) of the FPO.

 

7.3           ALL INVESTORS - The undersigned further represents and warrants as
indicated below by the undersigned’s mark:

 

FINRA AFFILIATION.

 

Are you affiliated or associated with an FINRA member firm:

 

Yes     No    

 

If Yes, please describe:

_________________________________________________________

_________________________________________________________

_________________________________________________________

 

*If subscriber is a Registered Representative with an FINRA member firm, have
the following acknowledgment signed by the appropriate party:

 

The undersigned FINRA member firm acknowledges receipt of the notice required by
NASD Rule 3050.

 

    Name of FINRA Member Firm         By:       Authorized Officer         Date:
   

 

7.4

ALL INVESTORS - Indicate manner in which title is to be held (circle one) 

        (a) Individual Ownership   (b) Community Property   (c) Joint Tenant
with Right of     Survivorship (both parties     must sign)   (d) Partnership  
(e) Tenants in Common   (f) Corporation   (g) Limited Liability Company   (h)
Trust   (i) Other

 

The undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Article VII and such answers have been provided under the
assumption that the Company will rely on them.

 

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AGGREGATE PRINCIPAL AMOUNT OF NOTES = $               (TOTAL INVESTMENT)        
          Signature   Signature (if purchasing jointly)                   Name
Typed or Printed   Name Typed or Printed                   Entity Name   Entity
Name                   Address   Address                   City, State and Zip
Code   City, State and Zip Code                   Telephone-Business  
Telephone-Business                   Telephone-Residence   Telephone-Residence  
                Facsimile-Business   Facsimile-Business                  
Facsimile-Residence   Facsimile-Residence                   Tax ID # or Social
Security #     Tax ID # or Social Security #           Name in which securities
should be issued:           Dated:                                 , 201_    

 

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This Note Purchase Agreement is agreed to and accepted as of
____________________.

 

  FORTRESS BIOTECH, INC.         By:     Name:     Title:

 

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Annex A

 

CERTIFICATE OF SIGNATORY

 

(To be completed if Notes are

being subscribed for by an entity)

 

I,____________________________, am the____________________________ of
__________________________________________ (the “Entity”).

 

I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Note Purchase Agreement and to purchase and hold the
Notes, and certify further that the Note Purchase Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand this ________ day of _________________,
201_

 

        (Signature)  

 

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EXHIBIT A

 

Form of Note

 

[filed separately with SEC]

 

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EXHIBIT B

 

Term Sheet

 

FORTRESS BIOTECH, Inc.

 

Q4 2016

_______________________________

 

The following summarizes the principal terms of a proposed note offering of
Fortress Biotech, Inc. (“Fortress”). This term sheet is qualified in its
entirety by the actual terms of the financing documents for this transaction.
This Term Sheet will not be binding upon any party hereto and is intended to be
a summary of terms contained in any such financing documents; except that the
terms under the heading “Confidentiality” will be binding on each signatory
hereto. In the event of any conflict or inconsistency between this Term Sheet
and the financing documents, the terms of the investment documents will govern.

 

Securities Offered Subordinated promissory notes (the “Notes”) of Fortress. The
Notes will be offered only to persons reasonably believed to qualify as
“accredited investors” as that term is defined in Regulation D of the Securities
Act.     Offering Between $3,000,000 and $40,000,000 offered on a “best efforts”
basis by National Securities Corp. (“National Securities”) as the placement
agent. Should demand exist in excess of $40,000,000, Fortress may, in its sole
discretion, agree to accept up to an additional $10,000,000.     Interest Rate
Eight percent (8%) per year of the outstanding principal amount of the Notes, on
a quarterly basis. Interest shall commence accruing on the issuance date, be
computed on the basis of a 365-day year, and be paid in arrears for each quarter
on January 1, April 1, July 1 and October 1 of each year, (each date that
interest is payable is an “Interest Date”), with the first Interest Date being
April 1, 2017. Interest shall be payable on each Interest Date, to the record
holder of such Note on the applicable Interest Date in cash (the “Interest”).  
  PIK Interest Rate Seven percent (7%) per year of the outstanding principal
amount of the Notes paid in PIK Shares on a quarterly basis.  “PIK Shares” shall
mean shares of Fortress Common Stock and/or shares of common stock of Fortress
Companies that are publicly-traded on either NASDAQ or the NYSE AMEX, in good
standing in regards to both corporate and financial reporting, have minimum
share prices of at least $1, market capitalizations of at least $50 million and
average daily trading volume of at least 20,000 shares at the time of the
calculation. If the PIK Shares shall be payable in any security other than
Fortress Common Stock, the Company shall provide investors with ten (10) days’
advance notice of which securities and in what amounts the PIK shares shall
comprise. The value of the PIK Shares shall be determined based on a ten percent
(10%) discount to the 10-day VWAP for such PIK Shares.     Maturity 3 years with
two (2) one-year extensions, at Fortress’s discretion; provided that Fortress
may pre-pay any Note in full without penalty after the expiration of the first
twelve (12) months. If Fortress elects to extend, it will provide investors with
ninety (90) days’ advance notice of such extension, and each requested extension
shall result in the Interest Rate being adjusted upward by one percent (1%),
resulting in an annualized Interest Rate of nine percent (9%) in year 4 and ten
percent (10%) in year 5, if elected.

 

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Transfer The Notes may be offered, sold, assigned or transferred by the holder
without the consent of Fortress, subject to the terms and conditions of the note
purchase agreement.     Amendment The prior written consent of the holders of at
least sixty six and two-thirds percent (66 2/3%) of the total principal
outstanding under the Notes shall be required for any change or amendment to the
Notes.     Placement Agent Fees and Expenses National Securities will act as
placement agent in the sale of the Notes. National Securities will receive a
placement fee equal to ten percent (10%) of the principal amount of the Notes
sold. National Securities shall also receive 5-year cash-only placement agent
warrants equal to ten percent (10%) of the principal amount of the Notes sold
divided by the closing share price of Fortress on the date of closing and
exercisable at the closing share price. Fortress also hereby agrees to reimburse
National Securities’ capped legal fees of $40,000, escrow fees of $4,000 and
capped offering expenses for printing, shipping, meetings, etc. of $10,000.    
Confidentiality This Term Sheet and all information pertaining to Fortress
provided by Fortress pursuant to this offering shall be maintained as
confidential and may not be disclosed publicly or privately except with the
written consent of Fortress.

 

The following parties agree to the terms in this Term Sheet.

 

  FORTRESS BIOTECH, INC.         By:     Name:     Title:           NATIONAL
SECURITIES CORPORATION         By:     Name:     Title:  

 

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EXHIBIT C

 

Legal Opinion

 

1.          The Company (a) is a corporation validly existing in good standing
under the laws of the State of Delaware and New York and (b) has the corporate
power to own its property, to execute, deliver and perform its obligations under
the Transaction Documents and to own, lease and operate its properties and
conduct the business in which it is engaged as described in the SEC Filings, to
execute and deliver each of the Transaction Documents to which it is a party and
to perform its obligations thereunder.

 

2.          The Company has duly authorized, executed and delivered each of the
Transaction Documents and each such Transaction Document constitutes the legal,
valid and binding obligation of the Company and is enforceable against the
Company in accordance with its terms.

 

3.          The Notes being issued pursuant to the Note Purchase Agreements have
been duly authorized and, when delivered and paid for pursuant to the Note
Purchase Agreements, will be validly issued, and to our knowledge the issuance
thereof will not violate any preemptive rights under Delaware law, the Company’s
Certificate of Incorporation or the Company’s bylaws.

 

4.          No approval, authorization, waiver, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required for the execution and
delivery of the Note Purchase Agreements or the consummation of the transactions
contemplated thereby, except such as we understand will be timely filed under
Regulation D of the Securities Act of 1933, as amended (the “Securities Act”),
and such as may be required under applicable “Blue Sky” laws in connection with
the issuance of the Notes.

 

5.          The execution, delivery and performance of the Transaction Documents
by the Company and the issuance and sale of the Notes does not and will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under (i) the Company’s Certificate of
Incorporation or bylaws, (ii) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its respective assets or properties, or
(iii) any of the agreements and instruments described in the SEC Filings.

 

6.          Except as described in the SEC Filings, to our knowledge, there are
no pending actions, suits or proceedings against or affecting the Company.

 

7.          Assuming the accuracy of the representations of each party in the
Note Purchase Agreements and the Placement Agreement, the initial sale of the
Notes as contemplated by the Note Purchase Agreements is exempt from the
registration and prospectus delivery requirements of the Securities Act.

 

8.          To our knowledge, the SEC Filings, as of their respective dates, do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement therein,
in light of the circumstances under which they were made, not misleading with
respect to the Company.

 

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