CONVERTIBLE NOTE PURCHASE AGREEMENT

 

This Convertible Note Purchase Agreement (the “Agreement”) is made as of _______
_____, 2019 by and among Protagenic Therapeutics, Inc., a Delaware corporation
(the “Company”) and the undersigned person or entity set forth on the signature
page to this Agreement (the “Purchaser”).

 

RECITALS

 

A. The Company desires to issue and sell (the “Offering”) up to an aggregate of
$2,000,000 principal amount of convertible promissory notes in substantially the
form attached to this Agreement as Exhibit A (each a “Note” and, collectively,
the “Notes”).

 

B. The Offering is being conducted pursuant to the exemptions from the
registration provisions of the Securities Act of 1933, as amended (the
“Securities Act”) provided by Section 4(a)(2) of the Securities Act and Rule
506(b) (“Rule 506”) of Regulation D thereunder.

 

C. The Purchaser (the Purchaser, together with the other purchasers of the
Notes, are sometimes referred to collectively as the “Purchasers”) desires to
purchase a Note.

 

AGREEMENT

 

In consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:

 

1. Purchase and Sale of Notes.

 

a. Sale and Issuance of Notes. Subject to the terms and conditions of this
Agreement, the Purchaser agrees to purchase at the Closing (as defined below)
and the Company agrees to sell and issue to the Purchaser at the Closing, Notes
in the aggregate principal amount set forth opposite the Purchaser’s name on the
Purchaser signature page to this Agreement.

 

b. Closing; Delivery.

 

i. The purchase and sale of the Notes (the “Closing”) shall take place at the
offices of Meister Seelig & Fein LLP, 125 Park Avenue, 7th Floor, New York, NY
10017, as soon as practicable after such date that each of the conditions set
forth in Sections 4 and 5 hereof is satisfied or waived, or on such other date
and at such other place as the Company and the Placement Agent (as defined
below) may agree upon in writing (the date on which the Closing occurs is
referred to herein as the “Closing Date”). The parties acknowledge that there
may be more than one Closing during the course of the Offering.

 

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ii. At the Closing, the Company shall deliver or caused to be delivered to the
Purchaser (which delivery shall be deemed accomplished by delivery to Katalyst
Securities LLC, as placement agent (the “Placement Agent”) for the Offering):

 

1. the Note executed by the Company;

 

2. a guaranty (the “Guaranty”), substantially in the form of Exhibit B hereto,
executed by Protagenic Therapeutics Canada (2006) Inc., a corporation formed in
2006 under the laws of the Province of Ontario, Canada (“Protagenic Canada”);

 

3. a certificate of the Executive Chairman of the Company certifying the
accuracy of the Company’s representations and warranties as of the Closing; and

 

4. a certificate of the Chief Financial Officer of the Company certifying the
authority of the officer executing this Agreement and all agreements and other
documents ancillary hereto and contemplated hereby, including the Note
(collectively, the “Loan Documents”).

 

iii. At the Closing, the Purchaser shall pay the Purchase Price for the Notes by
wire transfer in immediately available funds in accordance with the wire
transfer instructions attached hereto as Exhibit C.

 

2. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchaser that, except as set forth in either the schedules
delivered herewith (collectively, the “Disclosure Schedules”) or the SEC Reports
(as such term is defined below):

 

a. Organization, Good Standing and Qualification. Each of the Company and its
Subsidiary (as defined below) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own or lease its properties. Each of the Company and its
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property makes such qualification or leasing necessary
unless the failure to be in good standing or so qualify has not had and could
not reasonably be expected to have a Material Adverse Effect. The Company’s only
Subsidiary is Protagenic Canada.

 

For purposes of this Agreement, the following terms have the meanings set forth
below:

 

“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiary taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Loan
Documents.

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Subsidiary” of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first Person.

 

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b. Authorization. The Company has all corporate power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Loan Documents, (ii) the authorization of the performance of all obligations
of the Company hereunder or thereunder, and (iii) the authorization, issuance
(or reservation for issuance) and delivery of the Notes and the shares of common
stock, $0.0001 par value per share (the “Common Stock”) of the Company issuable
upon conversion thereof (the “Conversion Shares” and, together with the Notes,
the “Securities”). The Loan Documents, upon execution and delivery thereof by
the Company, will constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally and to general equitable principles.

 

c. Capitalization. The Company’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2019 (the “June 10-Q”) sets forth as of its date: (i) the
authorized and outstanding capital stock of the Company; (ii) the number of
shares of capital stock issuable pursuant to the Company’s stock plans; and
(iii) the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Notes) exercisable for, or convertible
into or exchangeable for any shares of capital stock of the Company. All of the
issued and outstanding shares of the Company’s capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights and were issued in full compliance with applicable state and
federal securities law and any rights of third parties. All of the issued and
outstanding shares of capital stock of the Subsidiary have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights, were issued in full compliance with applicable state and federal
securities law and any rights of third parties and are owned by the Company,
beneficially and of record, subject to no Lien (as defined below). No Person is
entitled to pre-emptive or similar statutory or contractual rights with respect
to any securities of the Company. Except as contemplated by the Loan Documents
and except as disclosed in the SEC Reports, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of
any character under which the Company or its Subsidiary is or may be obligated
to issue any equity securities of any kind. Except as disclosed in the SEC
Reports and except for the Loan Documents, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the securityholders of the
Company relating to the securities of the Company held by them. Except as
disclosed in the SEC Reports, no Person has the right to require the Company to
register any securities of the Company under the Securities Act, whether on a
demand basis or in connection with the registration of securities of the Company
for its own account or for the account of any other Person.

 

For purposes of this Agreement, “Lien” shall mean, with respect to any asset,
(a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security
interest of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.

 

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d. Governmental Approval. No action, consent or approval of, registration or
filing with or any other action by any federal, state, local or foreign court or
governmental agency, authority, instrumentality or regulatory body
(collectively, “Governmental Authority”) is or will be required in connection
with the transactions contemplated hereby, except for such as have been made or
obtained and are in full force and effect and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods.

 

e. Accuracy of Filings. Neither the Company’s most recent Annual Report on Form
10-K for the fiscal year ended December 31, 2018 (the “10-K”) nor any of the
Company’ s reports, schedules, forms, statements and other documents filed with
the Securities and Exchange Commission (the “SEC”) since the filing of the 10-K
(collectively, the “SEC Reports”), including, without limitation, the Company’s
Quarterly Reports on Forms 10-Q, at the time of filing contained any untrue
statement of a material fact or omitted to state a material fact required to
make the statements contained therein, in light of the circumstances in which
they were made, not misleading, except to the extent that such statements have
been modified or superseded by later SEC Reports filed on a non-confidential
basis filed prior to the date hereof.

 

f. No Material Adverse Effect. Since December 31, 2018, except as identified and
described in the SEC Reports or as described in Section 2(f) of the Disclosure
Schedules, no Material Adverse Effect has occurred with respect to the business,
assets, liabilities, operations, condition (financial or otherwise), or
operating results of the Company or the Subsidiary, taken as a whole.

 

g. Title to Properties. The Company and each Subsidiary has good and marketable
title to all real properties and all other properties and assets owned by it, in
each case free from Liens that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; the Company and the Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them.

 

h. Intellectual Property.

 

i. All Intellectual Property (as defined below) of the Company and its
Subsidiary necessary for the operation of the business as currently conducted or
as presently proposed to be conducted is currently in material compliance with
all legal requirements (including timely filings, proofs and payments of fees)
and is valid and enforceable. No Intellectual Property of the Company or its
Subsidiary which is necessary for the conduct of Company’s and the Subsidiary’s
respective businesses as currently conducted or as currently proposed to be
conducted has been or is now involved in any cancellation, dispute or
litigation, and, to the Company’s knowledge, no such action is threatened. No
patent of the Company or its Subsidiary has been or is now involved in any
interference, reissue, re-examination or opposition proceeding.

 

For purposes of this Agreement, “Intellectual Property” means all of the
following: (A) patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice); (B)
trademarks, service marks, trade dress, trade names, corporate names, logos,
slogans and Internet domain names, together with all goodwill associated with
each of the foregoing; (C) copyrights and copyrightable works; (D)
registrations, applications and renewals for any of the foregoing; and (E)
proprietary computer software (including but not limited to data, data bases and
documentation).

 

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ii. All of the licenses and sublicenses and consent, royalty or other agreements
concerning Intellectual Property which are necessary for the conduct of the
Company’s and the Subsidiary’s respective businesses as currently conducted or
as currently proposed to be conducted to which the Company or the Subsidiary is
a party or by which any of their assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License Agreements”) are valid and binding obligations of the
Company or its Subsidiary and, to the Company’s knowledge, the other parties
thereto, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and, to the Company’s knowledge,
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or its Subsidiary under any such License Agreement.

 

iii. The Company and its Subsidiary own or have the valid right to use all of
the Intellectual Property that is necessary for the conduct of the Company’s and
its Subsidiary’s respective businesses as currently conducted or as currently
proposed to be conducted and for the ownership, maintenance and operation of the
Company’s and its Subsidiary’s properties and assets, free and clear of all
Liens, adverse claims or obligations to license all such owned Intellectual
Property and trade secrets, confidential information and know-how (including but
not limited to ideas, formulae, compositions, processes, procedures and
techniques, research and development information, computer program code,
performance specifications, support documentation, drawings, specifications,
designs, business and marketing plans, and customer and supplier lists and
related information) (collectively, “Confidential Information”), other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiary’s businesses. The Company and its Subsidiary have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company and
its Subsidiary

 

iv. To the knowledge of the Company, the conduct of the Company’s and its
Subsidiary’s businesses as currently conducted does not infringe or otherwise
impair or conflict with (collectively, “Infringe”) any Intellectual Property
rights of any third party or any confidentiality obligation owed to a third
party, and, to the Company’s knowledge, the Intellectual Property and
Confidential Information of the Company and its Subsidiary which are necessary
for the conduct of Company’s and its Subsidiary’s respective businesses as
currently conducted or as currently proposed to be conducted are not being
Infringed by any third party. There is no litigation or order pending or
outstanding or, to the Company’s knowledge, threatened, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any
Intellectual Property or Confidential Information of the Company and its
Subsidiary and the Company’s and its Subsidiary’s use of any Intellectual
Property or Confidential Information owned by a third party, and, to the
Company’s knowledge, there is no valid basis for the same.

 

v. The consummation of the transactions contemplated hereby and by the other
Loan Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s or its Subsidiary’s ownership or right to use any
of the Intellectual Property or Confidential Information which is necessary for
the conduct of Company’s and its Subsidiary’s respective businesses as currently
conducted or as currently proposed to be conducted.

 

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vi. The Company and its Subsidiary have taken reasonable steps to protect the
Company’s and its Subsidiary’s rights in their Intellectual Property and
Confidential Information. Each employee, consultant and contractor who has had
access to Confidential Information which is necessary for the conduct of
Company’s and its Subsidiary’s respective businesses as currently conducted or
as currently proposed to be conducted has executed an agreement to maintain the
confidentiality of such Confidential Information and has executed appropriate
agreements that are substantially consistent with the Company’s standard forms
thereof. Except under confidentiality obligations, there has been no material
disclosure of any of the Company’s or its Subsidiary’s Confidential Information
to any third party.

 

i. Compliance with Laws. Except as described in the SEC Reports or as set forth
on Section 2(i) of the Disclosure Schedules, there are no actions, suits or
proceedings at law or in equity or by or before any Governmental Authority now
pending or, to the knowledge of the Company, threatened against or affecting the
Company or its Subsidiary or any business, property or rights of any of the
foregoing (i) that involve this Agreement or any Loan Document or (ii) as to
which, if adversely determined, could reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect in the Company or its
Subsidiary. Neither the Company nor its Subsidiary or any of their respective
properties or assets is in violation of, nor will the continued operation of
their properties and assets as currently conducted violate, any law, rule or
regulation (including any applicable environmental law, ordinance, code or
approval) or any restrictions of record or agreements affecting the properties,
or is in default with respect to any judgment, writ, injunction, decree or order
of any Governmental Authority, where such violation or default could reasonably
be expected to result in a Material Adverse Effect in the Company or its
Subsidiary. The Company and its Subsidiary possess adequate certificates,
authorities or permits issued by appropriate Governmental Authorities necessary
to conduct the business now operated by it, except where such failure has not
had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate, and neither the Company nor its Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or such Subsidiary, could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate.

 

j. Tax Returns. The Company and its Subsidiary have timely prepared and filed
(or timely filed for an extension for) all tax returns required to have been
filed by the Company or such Subsidiary with all appropriate Governmental
Authorities and timely paid all taxes shown thereon or otherwise owed by it,
other than taxes being contested in good faith and for which adequate reserves
have been made on the Company’s financial statements included in the SEC
Reports. The charges, accruals and reserves on the books of the Company in
respect of taxes for all fiscal periods are adequate in all material respects,
and there are no material unpaid assessments against the Company or its
Subsidiary nor, to the Company’s knowledge, any basis for the assessment of any
additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except for any assessment which is not
material to the Company and its Subsidiary, taken as a whole. All taxes and
other assessments and levies that the Company or its Subsidiary is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper Governmental Authority or third party when due, other than
taxes being contested in good faith and for which adequate reserves have been
made on the Company’s financial statements included in the SEC Reports. There
are no tax Liens or claims pending or, to the Company’s knowledge, threatened
against the Company or its Subsidiary or any of their respective assets or
property.

 

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k. Solvency. Immediately after the consummation of the transactions to occur on
the Closing Date and immediately following the purchase of the Notes and after
giving effect to the application of the proceeds thereof as of the date thereof:
(i) the fair value of the assets of the Company and its Subsidiary, at a fair
valuation, will exceed its debts and liabilities, subordinated, contingent or
otherwise; (ii) the present fair saleable value of the property of the Company
and its Subsidiary will be greater than the amount that will be required to pay
the current probable liability of its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; and (iii) in the reasonable judgment of the Company, each of the
Company and its Subsidiary will be able to pay its debts and liabilities
then-outstanding at such time.

 

l. Rule 506 Compliance. To the Company’s knowledge, neither the Company nor any
director, executive officer, other officer of the Company participating in the
offering, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, and any
promoter connected with the Company in any capacity on the date hereof (each, an
“Insider”) is subject to any of the “Bad Actor” disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2)(i) or
(d)(3) of the Securities Act. The Company is not disqualified from relying on
Rule 506 for any of the reasons stated in Rule 506(d) in connection with the
issuance and sale of the Securities to the Purchaser pursuant to this Agreement.
The Company has exercised reasonable care, including without limitation,
conducting a factual inquiry that is appropriate in light of the circumstances,
into whether any such disqualification under Rule 506(d) exists. The Company has
furnished to the Purchaser, a reasonable time prior to the date hereof, a
description in writing of any matters relating to the Company and the Insiders
that would have triggered disqualification under Rule 506(d) but which occurred
before September 23, 2013, in each case, in compliance with the disclosure
requirements of Rule 506(e).

 

3. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company that:

 

a. Organization and Existence. Such Purchaser, if such Purchaser is an entity,
is a validly existing corporation, limited partnership or limited liability
company and has all requisite corporate, partnership or limited liability
company power and authority, and if such Purchaser is a natural person, all
requisite power and authority, to invest in the Securities pursuant to this
Agreement.

 

b. Authorization. The execution, delivery and performance by such Purchaser of
the Loan Documents to which such Purchaser is a party have been duly authorized
and each will constitute the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally.

 

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c. Purchase Entirely for Own Account. The Securities to be received by such
Purchaser hereunder will be acquired for such Purchaser’s own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and such Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same.

 

d. Investment Experience. Such Purchaser acknowledges that it can bear the
economic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated hereby.

 

e. Disclosure of Information. Such Purchaser has had an opportunity to receive
all information related to the Company 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. Such Purchaser
acknowledges that Purchaser has had the opportunity to review the SEC Reports
and, without limiting the generality of the foregoing, that Purchaser has
received copies of the 10-K, the June 10-Q and the Company’s Proxy Statement for
the 2019 Annual Meeting of Stockholders.

 

f. Restricted Securities. Such Purchaser understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.

 

g. Legends. It is understood that, except as provided below, certificates
evidencing the Securities may bear the following or any similar legend:

 

i. “The securities represented hereby have not been registered with the
Securities and Exchange Commission or the securities commission of any state in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended, and, accordingly, may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities Act
of 1933, as amended.”

 

ii. If required by the authorities of any state in connection with the issuance
of sale of the Securities, the legend required by such state authority.

 

h. Accredited Investor. Such Purchaser is an accredited investor as defined in
Rule 501(a) of Regulation D under the Securities Act.

 

i. Rule 506 Compliance. Neither such Purchaser nor any of its directors,
executive officers, other officers that may serve as a director or officer of
any company in which it invests, general partners or managing members is subject
to any Disqualification Event (as defined above), except for Disqualification
Events covered by Rule 506(d)(2)(ii) or (iii) under the Securities Act and
disclosed in writing in reasonable detail to the Company.

 

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4. Conditions of the Purchaser’s Obligations at Closing. The obligations of the
Purchaser to the Company under this Agreement are subject to the fulfillment of
each of the following conditions, unless otherwise waived:

 

a. Representations and Warranties. The representations and warranties made by
the Company in Section 2 hereof qualified as to materiality shall be true and
correct at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct as of such
earlier date, and, the representations and warranties made by the Company in
Section 2 hereof not qualified as to materiality shall be true and correct in
all respects at all times prior to and on the Closing Date, except to the extent
any such representation or warranty expressly speaks as of an earlier date, in
which case such representation or warranty shall be true and correct in all
respects as of such earlier date. The Company shall have performed in all
respects all obligations and covenants herein required to be performed by it on
or prior to the Closing Date.

 

b. Qualifications. All authorizations, approvals or permits, if any, of any
Governmental Authority that are required in connection with the lawful issuance
and sale of the Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.

 

c. Deliveries. The Company shall have executed the Note and shall have made all
deliveries required pursuant to Section 1(b)(ii).

 

5. Conditions of the Company’s Obligations at Closing. The obligations of the
Company to the Purchaser under this Agreement are subject to the fulfillment of
each of the following conditions, unless otherwise waived:

 

a. Representations and Warranties. The representations and warranties made by
the Purchasers in Section 3 hereof, other than the representations and
warranties contained in Sections 3(c), (d), (e), (f), (g) and (h) (the
“Investment Representations”), shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of said date. The Investment Representations shall be true and correct in all
respects when made, and shall be true and correct in all respects on the Closing
Date with the same force and effect as if they had been made on and as of said
date. The Purchaser shall have performed in all material respects all
obligations and covenants herein required to be performed by them on or prior to
the Closing Date.

 

b. Deliveries. The Purchaser shall delivered the Purchase Price for the Note to
the Company, in accordance with Section 1(b)(iii).

 

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6. Covenants of the Company. The Company covenants and agrees with the Purchaser
that, so long as this Agreement shall remain in effect and until all Liabilities
under the Notes (as defined therein) have been satisfied by the Company, unless
the holders of a majority of the principal amount of the Notes then outstanding
(a “Holder Majority”) shall otherwise consent in writing:

 

a. Existence; Compliance with Laws. The Company and its Subsidiary shall (i) do
or cause to be done all things reasonably necessary to preserve, renew and keep
in full force and effect its legal existence; (ii) do or cause to be done all
things reasonably necessary to obtain, preserve, renew, extend and keep in full
force and effect the rights, licenses, permits, franchises, authorizations,
patents, copyrights, trademarks and trade names material to the conduct of its
business; maintain and operate such business in substantially the manner in
which it is presently conducted and operated other than any change thereof that
would not result in a Material Adverse Effect; comply in all material respects
with all applicable laws, rules, regulations and decrees and orders of any
Governmental Authority, whether now in effect or hereafter enacted; and at all
times maintain and preserve all property material to the conduct of such
business and keep such property in good repair, working order and condition;
(iii) keep its insurable properties adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance, to such
extent and against such risks, including fire and other risks insured against by
extended coverage, as is customary with competitors in the same industry
operating in similar locations, including public liability insurance against
claims for personal injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned, occupied or controlled by
it; and maintain such other insurance as may be required by law; (iv) pay and
discharge promptly when due (or otherwise escrow, bond or insure) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise that, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided , however , that such payment and
discharge (or escrow, bonding or insurance) shall not be required with respect
to any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Company shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles and such
contest operates to suspend collection of the contested obligation, tax,
assessment or charge and enforcement of a Lien and there is no risk of
forfeiture of such property; (v) solely in the case of the Company, timely and
accurately file, report and otherwise disclose all matters required by any
Governmental Authority, including, without limitation, all reports and forms
required pursuant to rules promulgated by the SEC.

 

b. Notices. The Company shall furnish to the Purchaser prompt written notice of
the following: (i) any Event of Default or Default (each as defined in the
Note), specifying the nature and extent thereof and the corrective action (if
any) taken or proposed to be taken with respect thereto; (ii) the filing or
commencement of, or any threat or notice of intention of any person or entity to
file or commence, any action, suit or proceeding, whether at law or in equity or
by or before any Governmental Authority, against the Company or its Subsidiary
that could reasonably be expected to result in a Material Adverse Effect; (iii)
any loss, damage, or destruction to the real or personal properties (or any
other assets) of the Company or the Subsidiary in the amount of $150,000 or
more, whether or not covered by insurance; (iv) any notices received by the
Company regarding any (A) alleged material default, (B) termination of a
material lease or eviction from any leased premises or (C) failure to pay rent
or any other material monetary obligation, each with respect to any leased
property; and (v) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.

 

c. Transactions with Affiliates. The Company and the Subsidiary shall not,
except for transactions between the Company and the Subsidiary, sell or transfer
any property or assets to, or purchase or acquire any property or assets from,
or otherwise engage in any other transactions with, any of its affiliates,
except that the Company or the Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Company or such Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties.

 

10

 

 

7. Miscellaneous.

 

a. Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto and the other
Purchasers in the Offering or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Neither party may
assign this Agreement without the prior written consent of the other party.

 

b. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed 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 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. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

c. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.

 

d. Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient (i) upon receipt, when delivered
personally or by courier, (ii) the next business day after sent, when sent by
overnight delivery service, (iii) upon delivery if given by electronic mail
during normal business hours of the recipient, and if not sent during normal
business hours, then on the recipient’s next business day, or (iv) three (3)
business days after being deposited in the U.S. mail as certified or registered
mail, return receipt requested, with postage prepaid, if in each instance such
notice is addressed to the party to be notified at such party’s address as set
forth below or as subsequently modified by written notice.

 

If to the Company, addressed to:

 

Protagenic Therapeutics, Inc.

149 Fifth Avenue, Suite 500

New York, NY 10010

Attention: Alexander K. Arrow

E-mail: alex.arrow@protagenic.com

 

11

 

 

If to Purchaser, addressed to Purchaser at the address set forth on the
Purchaser signature page of this Agreement.

 

e. Amendments and Waivers. Any term of this Agreement may be amended or waived
only with the written consent of the Company and a Holder Majority.

 

f. Confidentiality. Each party hereto agrees that, except with the prior written
permission of the other party or otherwise required by law, it shall at all
times keep confidential and not divulge, furnish or make accessible to anyone
any confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other party (or its affiliates) to which
such party has been or shall become privy by reason of this Agreement or any
other Loan Document, discussions or negotiations relating to this Agreement or
any other Loan Document, or the performance of its obligations hereunder or
thereunder. This Section does not apply to information that is entirely in the
public domain, previously known to the recipient of the information (as
evidenced by written, dated business records of such recipient), received
lawfully from a third party, or independently developed without access to such
information. Notwithstanding the foregoing, the parties agree that the Company
shall file a Current Report on Form 8-K describing the transactions contemplated
under the Loan Documents. In addition, the Company will make such other filings
and notices in the manner and time required by the SEC.

 

g. Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. Any amendments of any such provisions may only be effected in the
manner set forth in Section 7(e) above. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.

 

h. Expenses. The parties hereto shall pay their own costs and expenses related
to the transactions contemplated by this Agreement.

 

i. Headings. The headings in this Agreement are used for convenience only and
are not to be considered in construing or interpreting any provision of this
Agreement.

 

j. Entire Agreement. This Agreement and the Loan Documents constitute the entire
agreement between the parties hereto pertaining to the purchase of the Note.

 

[Remainder of page intentionally blank; signature pages follow]

 

12

 

 

IN WITNESS WHEREOF, the parties have executed this Convertible Note Purchase
Agreement as of the date first written above.

 

COMPANY:

 

PROTAGENIC THERAPEUTICS, INC.

 

By:     Name: Garo H. Armen   Title: Executive Chairman  

 

13

 

 

[PURCHASER SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the parties have executed this Convertible Note Purchase
Agreement as of the date first written above.

 

FOR INDIVIDUALS:   FOR ENTITIES:             Print Name   Print Name of Entity  
          Signature   Signature of Authorized Signatory            

 

  Print Name of Authorized Signatory            

 

  Print Title of Authorized Signatory             Home Address                  
    Email Address               Business Address Social Security No.            
  Email Address                 Taxpayer Identification Number       Principal
amount of Notes subscribed for:   $

 

14

 

 

Exhibit A

 

Form of Note

 

15

 

 

Exhibit B

 

Guaranty

 

16

 

 

Exhibit C

 

Wire Transfer Instructions

 

Protagenic Therapeutics, Inc.

 

Description: Description: Macintosh HD:Users:alexarrow:Dropbox:Protagenic
Therapeutics:PTI Operations:PTI Logo.jpg [ex10-1_001.jpg]

 

Wire Instructions

 

149 Fifth Ave, Suite 500   New York, NY 10010 www.protagenic.com   213-260-4342

 

Bank Information & Contacts:

 

Bank of America

8813 Villa La Jolla Drive

La Jolla, CA 92037

858-812-9837

Customer Service: 800-432-1000

 

German Carrasco

Vice President, Small Business Officer

San Diego Market

Bank of America

CA0-122-01-01, 7680 Girard Ave, La Jolla, CA 92037

T 619-990-2202 F 972-725-6796

g.carrasco@BankofAmerica.com

 

Bank Routing & Account Number:

 

Account name: XXXXXX

Account Number: XXXXXX

Routing Number: XXXXXX

Routing Number: XXXXXX

 

Swift Code: XXXXXX   XXXXXX

 

Account Address: Protagenic Therapeutics, Inc., 149 Fifth Ave, Suite 500, New
York, NY 10010

 

Officer Authorization:

 

Alexander K. Arrow, MD, CFA

Chief Financial Officer

 

17