Exhibit 10.1
 
MANHATTAN PHARMACEUTICALS, INC.
 
SUBSCRIPTION AGREEMENT
 
1.           General.  This Subscription Agreement sets forth the terms under
which the undersigned investor, Linden Growth Partners Master Fund LP (the
“Investor”), will purchase from Manhattan Pharmaceuticals, Inc. (the “Company”)
a 12% Original Issue Discount Subordinated Convertible Debenture (the
“Debenture”) with a stated value of Four Hundred Thousand Dollars ($400,000)
(the “Stated Value”) and a warrant to purchase up to Two Million Two Hundred
Twenty-Two Thousand Two Hundred Twenty-Two (2,222,222) shares of the Company’s
common stock, $.001 par value per share, subject to adjustment  as set forth
therein (the “Warrant” and together with the Debenture, the “Securities”) for a
purchase price of Two Hundred Thousand Dollars ($200,000) (the “Purchase
Price”).
 
This Subscription Agreement is submitted by the Investor to the Company to
induce the Company’s acceptance of this subscription in connection with the
Company’s proposed issuance of the Securities to the Investor.  The Investor
understands that the Company will rely upon the representations set forth herein
in issuing such Securities without registration under the Securities Act of
1933, as amended (the “Securities Act”), or the securities laws of any
state.  The Investor’s obligation to purchase the Securities and deliver the
Purchase Price is subject to the Company’s execution and delivery of the
Settlement Agreement and Mutual Release, dated October 27, 2009 (the “Settlement
Agreement”), between the Company and Swiss Pharma Contract LTD. (“Swiss
Pharma”), which, inter alia, provides that within one (1) business day of the
receipt of the payment provided for in therein, the Satisfaction of Judgment
attached as Exhibit B to the Settlement Agreement (the “Satisfaction of
Judgment”), be filed with the clerk of the appropriate court.  The Satisfaction
of Judgment shall provide that judgment described therein (as described in the
Company’s Form 10-Q for the quarter and six months ended June 30, 2009)  has
been satisfied by the Settlement Agreement.

2.           Restricted Securities.  The Investor understands that the sale or
re-sale of the Securities has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the Securities, as
applicable, may not be transferred unless:
 
 
(i)
they are sold pursuant to an effective registration statement under the
Securities Act; or

 
 
(ii)
they are being sold pursuant to a valid exemption from the registration
requirements of the Securities Act and, if required by the Company, the Investor
shall have delivered to the Company, at the Investor’s sole cost and expense, an
opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from the registration requirements of the Securities Act, which opinion shall be
acceptable to the Company; or

 
 
(iii)
they are sold or transferred to an “affiliate” (as defined in Rule 144,
promulgated under the Securities Act (or a successor rule (“Rule 144”)) of the
Investor who agrees to sell or otherwise transfer the Securities only in
accordance with this Section 2 and who is an accredited investor, or

 
 

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(iv)
they are sold pursuant to Rule 144.

 
The Investor understands that any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and other
than as expressly provided for in the Securities with respect to certain
piggyback registration rights, neither the Company nor any other  individual or
entity is under any obligation to register the Securities under the Securities
Act or any state securities laws.
 
3.           Receipt of Information.  The Investor has had an opportunity to
receive, and fully and carefully review, all information related to the Company
and the Securities requested by it and to ask questions of and receive answers
from the Company regarding the Company, its business and the terms and
conditions of the offering of the Securities.  The Investor acknowledges that it
has received, and fully and carefully reviewed and understands this Agreement,
the Debenture and the Warrant.  Investor acknowledges that it has received
(either in hard copy or electronically through the SEC’s EDGAR), and fully and
carefully reviewed and understands, the Company’s reports, schedules, financial
statements and other documents required to be filed by it with the Securities
and Exchange Commission (the “SEC”) pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) including
without limitation, the Company’s annual report on Form 10-K for the year ended
December 31, 2008, the Company’s quarterly reports on Form 10-Q for the quarters
ended March 31, 2009 and June 30, 2009, the Company’s preliminary proxy
statement on Schedule 14A  filed with the SEC on September 29, 2009 and the
Company’s current reports on Form 8-K (all of the foregoing filed with the SEC
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to herein as the “SEC Documents”).  The Investor
acknowledges that based upon its review of the SEC Documents, it understands the
Company, its business, the risks involved with an investment in the
Company.  The Investor understands that its investment in the Securities
involves a high degree of risk and that the net proceeds received from the sale
of the Securities will be utilized to satisfy the Company’s initial payment
obligations under its settlement agreement with Swiss Pharma Contract LTD.  The
Investor’s decision to enter into this Agreement to purchase the Securities has
been made based solely on the independent evaluation of the Company by the
Investor and its representatives.  The Investor has received such accounting,
tax and legal advice from persons (“Professional Advisors”) other than the
Company as it has considered necessary to make an informed investment decision
with respect to the acquisition of the Securities.  Specifically, the Investor
acknowledges that the Securities may be deemed to have been issued with original
issue discount (“OID”) for U.S. federal income tax purposes resulting in
material tax consequences to the Investor and, accordingly, the Investor has
reviewed the foregoing OID consequences with its Professional Advisors.  The
Investor acknowledges that the Company has neither prepared nor delivered to the
Investor or to any other party acting on the Investor’s behalf any offering
documents, such as a private placement memorandum, offering memorandum,
strategic plan or any similar documents and, to the extent the Investor has
reviewed other documents, other than the SEC Documents, relating to the Company
(whether or not prepared by the Company), including any business plan or
financial projections, such documents may not be complete and there may be
material information relating to the Company and/or an investment in the
Securities which is not set forth in such documents.
 
4.           Restrictions on Transferability.   The Investor understands and
agrees that the Securities and the Shares are restricted securities and,
therefore, may not be sold, pledged, hypothecated or otherwise transferred
unless they are registered under the Securities Act and applicable state
securities laws (or an exemption from such registration is available and the
compliance with such exemption is evidenced by an opinion of legal counsel to
the Investor, addressed to the Company, in form and substance acceptable to the
Company, that no violation of the Securities Act or any state securities law
would result from such sale or transfer).  The Investor understands that the
certificates or instruments evidencing the Securities and the shares Common
Stock issuable upon conversion or exercise of the Securities will bear a legend
substantially in the form set forth below (among other applicable legends), and
that the Company will make a notation on its transfer books to such effect:

 
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE  “SECURITIES ACT”), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES
LAWS.”

5.           Additional Representations of the Proposed Investor.  The Investor
hereby represents and warrants to the Company (with the intent that the Company
shall rely upon these in determining the Investor’s suitability to purchase the
Securities and the Shares) as follows:

(a)           The entering into of this Agreement and the transactions
contemplated hereby do not and will not result in the violation of any of the
terms and provisions of any law applicable to, or the charter or other
organizational documents, bylaws or other constating documents of, the Investor
or of any agreement, written or oral, to which the Investor may be a party or by
which the Investor is or may be bound.
 
(b)           The Investor has duly executed and delivered this Agreement, and
this Agreement constitutes a valid and binding agreement of the Investor
enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by general principals of equity, or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.
 
(c)           The Securities are being acquired for the Investor’s own account,
not as nominee or agent, for investment purposes only and not with a view to the
resale or distribution of any part thereof in violation of the Securities Act,
and such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of the
Securities Act, without prejudice, however, to the Investor’s right at all times
to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws.
 
(d)           The Investor is neither a registered representative under the
Financial Industry Regulatory Authority (“FINRA”), a member of FINRA or
associated or Affiliated with any member of FINRA, nor a broker-dealer
registered with the SEC under the Exchange Act or engaged in a business that
would require it to be so registered, nor is it an Affiliate of a such a
broker-dealer or any person engaged in a business that would require it to be
registered as a broker-dealer. In the event such Investor is a member of FINRA,
or associated or Affiliated with a member of FINRA, such Investor agrees, if
requested by FINRA, to sign a lock-up, the form of which shall be satisfactory
to FINRA with respect to the Warrants and the Warrant Shares.
 
 
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(e)           The Investor is not an underwriter of the Common Stock, nor is it
an affiliate of an underwriter of the Common Stock.
 
(f)           The Investor acknowledges that the purchase of the Securities is a
highly speculative investment and that it can bear the economic risk and
complete loss of its investment in the Securities and has such knowledge and
experience in financial and/or business matters that it is capable of evaluating
the merits and risks of the investment contemplated hereby.
 
(g)           The Investor is an accredited investor as defined in Rule 501(a)
of Regulation D, as amended, under the Securities Act.
 
(h)           The Investor did not learn of the investment in the Securities as
a result of any public advertising or general solicitation, and is not aware of
any public advertisement or general solicitation in respect of the Company or
its securities.
 
(i)           The Investor will not have, as a result of the transactions
contemplated hereby, any valid right, interest or claim against or upon the
Company for any commission, fee or other compensation pursuant to any agreement,
arrangement or understanding entered into by or on behalf of the Investor.
 
(j)           Other than with respect to the transactions contemplated herein,
since the earlier to occur of (i) the time that the Investor was first contacted
by the Company, or any other person regarding an investment in the Company and
(ii) the thirtieth (30th) day prior to the date hereof, neither the Investor nor
any affiliate of the Investor which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to the Investor’s
investments or trading or information concerning the Investor’s investments,
including in respect of the Securities, or (z) is subject to the Investor’s
review or input concerning such affiliate’s investments or trading decisions
(collectively, “Trading Affiliates”) has, directly or indirectly, nor has any
person acting on behalf of, or pursuant to, any understanding with the Investor
or Trading Affiliate effected or agreed to effect any transactions in the
securities of the Company or involving the Company’s securities (a “Prohibited
Transaction”).
 
(k)           The Investor is a resident of the jurisdiction set forth in the
signature page hereto.
 
(l)           The Investor understands that the Securities are being offered and
sold to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Investor’s compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.  All of the information which the Investor has provided to the
Company is true, correct and complete as of the date this Agreement is signed,
and if there should be any change in such information prior to the Closing, the
Investor will immediately provide the Company with such information.
 
(m)           The Investor understands that affiliates and/or employees of the
National Securities Corporation (the “Placement Agent”) (i) beneficially own
shares of Common Stock and (ii) will receive the compensation set forth in
Section 8 in connection with the sale of the Securities.
 
6.           Representations of the Company.  Except as set forth in the
Company’s disclosure schedule (the “Disclosure Schedule”), the Company hereby
represents and warrants to the Investor ( the disclosure in any section of the
Disclosure Schedule shall qualify the corresponding section of this Section 6,
provided, however, that any matter set forth in any section of the Disclosure
Schedule shall be deemed referred to and incorporated in all other sections of
the Disclosure Schedule to which such matter’s application or relevance is
readily apparent on its face) as follows:

 
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6.1         Organization; Execution, Delivery and Performance.
 
(a)           The Company and each subsidiary of which the Company owns,
directly  or indirectly, a controlling interest (a “Subsidiary”) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated or organized, with full power
and authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned, leased, used,
operated and conducted.  The Company is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes
such qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. For purposes of this
Agreement “Material Adverse Effect” shall mean a material adverse effect on (i)
the assets, liabilities, results of operations, condition (financial or
otherwise), business, or prospects of the Company taken as a whole; or (ii) the
ability of the Company to perform its obligations under the Transaction
Documents, but, to the extent applicable, shall exclude any circumstance, change
or effect to the extent resulting or arising from: (i) any change in general
economic conditions in the industries or markets in which the Company and its
Subsidiaries operates so long as the Company and its Subsidiaries are not
disproportionately (in a material manner) affected by such changes; (ii)
national or international political conditions, including any engagement in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack so long as the
Company and its Subsidiaries are not disproportionately (in a material manner)
affected by such changes; (iii) changes in United States generally accepted
accounting principles, or the interpretation thereof; or (iv) the entry into or
announcement of this Agreement, actions contemplated by this Agreement, or the
consummation of the transactions contemplated hereby.
 
(b)           The Company has no Subsidiaries other than those listed in
Schedule 6.1 of the Disclosure Schedule.  Except as disclosed in Schedule 6.1 of
the Disclosure Schedule or in the SEC Documents, the Company owns, directly or
indirectly, all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any and all liens, security interests, charges,
pledges or similar encumbrances (“Liens”) and all of the issued and outstanding
shares of capital stock or comparable equity interest of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive rights
of first refusal and other similar rights.  The Company has the unrestricted
right to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital stock or other equity securities of
its Subsidiaries that are owned by the Company.
 

 
(c)
(i)     The Company has all requisite corporate power and authority to enter
into and perform this Agreement, the Debenture and the Warrant (the “Transaction
Documents”) and to consummate the transactions contemplated hereby and thereby
and to issue the Securities in accordance with the terms hereof and thereof;

 
 
(ii)
the execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by the Company’s Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or its
stockholders, is required except as expressly contemplated by this Agreement;

 
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(iii)
each of the Transaction Documents has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative is
a true and official representative with authority to sign each such document and
the other documents or certificates executed in connection herewith and bind the
Company accordingly; and

 
 
(iv)
each of the Transaction Documents constitutes, and upon execution and delivery
thereof by the Company will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by general principals of equity, or to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

 
6.2         Warrants Shares and Debenture Shares Duly Authorized. The shares of
the Company’s common stock, $.001 par value per share (“Common Stock”) issuable
upon (i) exercise of the Warrant (the “Warrant Shares”) or (ii) conversion of
the Debenture (the “Debenture Shares”) will be duly authorized and reserved for
future issuance and, upon exercise of the Warrant  or conversion of the
Debenture, in each case  in accordance with their terms, will be duly and
validly issued, fully paid and non-assessable, and free from all taxes or Liens
with respect to the issue thereof and shall not be subject to preemptive rights,
rights of first refusal and/or other similar rights of stockholders of the
Company and/or any other individual or entity.
 
6.3         No Conflicts.
 
(a)           Except as disclosed in Schedule 6.3 of the Disclosure Schedule,
the execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Warrant Shares and the Debenture Shares) will not:
 
 
(i)
conflict with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or similar documents of the Company;

 
 
(ii)
violate or conflict with, or result in a breach of any provision of, or
constitutes a default and/or an event of default (or an event which with notice
or lapse of time or both could become a default and/or an event of default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company is a party, except for possible violations, conflicts or
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company; or

 
 
(iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and regulations of
any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or by which any property or asset of the
Company is bound or affected.

 
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(b)           The Company is not in violation of its Certificate of
Incorporation, By-laws or other organizational documents. The Company is not in
default (and no event has occurred which with notice or lapse of time or both
could put the Company in default), under, and the Company has not taken any
action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party or by which any property
or assets of the Company is bound or affected, except for possible defaults,
terminations, amendments, accelerations or cancellations which would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company are not being conducted in violation of any law, rule ordinance
or regulation of any governmental entity, except for possible violations which
would not, individually or in the aggregate, have a Material Adverse
Effect.  Based in part on the truth and accuracy of the Investor’s
representations set forth herein, except as required under the Securities Act of
1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or except as set forth on
Schedule 6.3 of the Disclosure Schedule, any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Debenture or the Warrant in accordance with the terms hereof or thereof or to
issue and sell the Debenture and Warrant in accordance with the terms hereof and
to issue the Warrant Shares upon exercise of the Warrants or the Debenture
Shares upon conversion of the Debenture.  All consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof or will be obtained or effected in a timely manner following the Closing
Date.
 
6.4         Capitalization.
 
(a)           As of September 15, 2009, the authorized capital stock of the
Company consists solely of 1,500,000 share of preferred stock, of which no
shares of preferred stock are issued and outstanding and 300,000,000 shares of
Common Stock, of which 70,624,232 shares of Common Stock are issued and
outstanding, 7,592,232 shares of Common Stock are reserved for issuance pursuant
to options granted under the Company’s stock option plan, and 86,060,096 shares
are reserved for issuance pursuant to securities (other than the Warrant and the
Debenture) exercisable for, or convertible into or exchangeable for shares of
Common Stock.
 
(b)           Except as described above, in the SEC Documents or Schedule 6.4(b)
annexed hereto, as of September 15, 2009:
 
 
(i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company, or arrangements by which the Company is or may become
bound to issue additional shares of capital stock of the Company;

 
 
(ii)
other than as set forth on Schedule 6.4(b) of the Disclosure Schedule, there are
no agreements or arrangements under which the Company is obligated to register
the sale of any of its securities under the Securities Act (except for the
registration rights provisions contained herein); and

 
 
(iii)
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of any of the Debenture, the
Warrant, the Warrant Shares and/or the Debenture Shares.  All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable.  No shares of capital
stock and/or other securities of the Company are subject to preemptive rights,
rights of first refusal and/or any other similar rights of the stockholders of
the Company and/or any other Person or any Lien imposed through the actions or
failure to act of the Company.

 
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6.5                 SEC Information.
 
(a)           Except as set forth in Schedule 6.5 of the Disclosure Schedule or
in the SEC Documents, since January 1, 2009, the Company has timely filed
(subject to 12b-25 filings with respect to certain periodic filings) all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange
Act.  The SEC Documents have been made available to the Investor via the SEC’s
EDGAR system.  Except as set forth on Schedule 6.5 of the Disclosure Schedule,
as of their respective dates the SEC Documents complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of the date
hereof, the SEC Documents when taken in their entirety, shall not contain any
untrue statements of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the date upon which they were made and the circumstances under which
they were made, not misleading.  As of their respective dates, the financial
statements of the Company included in the SEC Documents (“Company Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as in effect at the time of the filing.  The Company Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”), consistently applied, during the
periods involved (except:
 
 
(i)
as may be otherwise indicated in such financial statements or the notes thereto;
or

 
 
(ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries, if any, as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).

 
(b)           Except as expressly set forth in the Company Financial Statements,
in the SEC Documents or on Schedule 6.5, the Company has no liabilities,
contingent or otherwise, other than:
 
 
(i)
liabilities incurred in the ordinary course of business subsequent to December
31, 2008; and

 
 
(ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.

 
(c)           The shares of Common Stock are quoted on the OTCBB under the
symbol “MHAN.”  The Company has not received notice (written or oral) from the
OTCBB to the effect that the Company is not in compliance with the continuing
requirements of the OTCBB.  The Company is, and it has no reason to believe that
it will not in the foreseeable future continue to be, in compliance with all
such maintenance requirements.

 
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(d)           All information relating to or concerning the Company and its
officers, directors, employees, customers or clients (including, without
limitation, all information regarding the Company’s internal financial
accounting controls and procedures) set forth in the Transaction Documents and
the SEC Documents incorporated by reference therein, when taken together as a
whole, does not contain an untrue statement of material fact or omit to state
any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
 
6.6         Intellectual Property. Except as set forth in Schedule 6.6 or in the
SEC Documents, the Company or its Subsidiaries owns valid title, free and clear
of any Liens, or possesses the requisite valid and current licenses or rights,
free and clear of any Liens, to use all Intellectual Property in connection with
the conduct its business as now operated.  There is no pending claim or action
by any person pertaining to, or proceeding pending, or to the Company’s
knowledge threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated.  To the best of the Company’s knowledge,
the Company’s current products, services and processes do not infringe on any
Intellectual Property or other rights held by any person, and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing.  The Company has not received any written notice of infringement of,
or conflict with, the asserted rights of others with respect to its intellectual
property. The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of its intellectual property.
 
6.7         Permits; Compliance. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the “Company Permits”), except where such failure to posses would
not have a Material Adverse Effect, and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits. The Company is not in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.  Since December 31,
2008, the Company has received no notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
 
6.8         Absence of Litigation. Except as set forth in Schedule 6.8 of the
Disclosure Schedule or in the SEC Documents, there is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, or its
businesses, properties or assets or their officers or directors in their
capacity as such, that would have a Material Adverse Effect.
 
6.9         No Materially Adverse Contracts, etc.  Except as set forth in
Schedule 6.9 of the Disclosure Schedule, the Company is not subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company’s officers has or is
expected in the future to have a Material Adverse Effect.  The Company is not a
party to any contract or agreement which has or is reasonably expected to have a
Material Adverse Effect.
 
 
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6.10       No Material Changes.  Except as set forth in the SEC Documents, since
December 31, 2008, there has not been (i) any material adverse change in the
financial condition, operations or business of the Company from that shown on
the Company Financial Statements, or any material transaction or commitment
effected or entered into by the Company outside of the ordinary course of
business; (ii) to the Company’s knowledge, any effect, change or circumstance
which has had, or could reasonably be expected to have, a Material Adverse
Effect; or (iii) any incurrence of any material liability outside of the
ordinary course of business.
 
6.11       Labor Matters.
 
(a)           The Company is not a party to or bound by any collective
bargaining agreements or other agreements with labor organizations.  The Company
has not violated in any material respect any laws, regulations, orders or
contract terms, affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours.
 
(b)           The Company is, and at all times has been, in compliance in all
material respects with all applicable laws respecting employment (including laws
relating to classification of employees and independent contractors) and
employment practices, terms and conditions of employment, wages and hours, and
immigration and naturalization.
 
6.12       Environmental Matters.  To the Company’s knowledge, neither the
Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), owns or operates any real property contaminated with any substance that
is subject to any Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability or
claim has had or could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; and there is no pending or, to the Company’s
knowledge, threatened investigation that might lead to such a claim.
 
6.13       Tax Matters.  None of the Company and its Subsidiaries has made or
filed any federal, state and foreign income or any other tax returns, reports
and declarations required by any jurisdiction to which it is subject and none of
them has ever paid any taxes or other governmental assessments or charges that
are material in amount, nor is it aware of any that have been assessed or are
due.  There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.  Neither the Company nor any of its Subsidiaries have
executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax.
 
6.14       Certain Transactions. Except as set forth on Schedule 6.14 of the
Disclosure Schedule or in the SEC Documents, there are no loans, leases, royalty
agreements or other transactions between (i) the Company or any of its customers
or suppliers; and (ii) any officer, employee, consultant or director of the
Company or any person owning five (5%) percent or more of the capital stock of
the Company or five (5%) percent or more of the ownership interests of the
Company or any member of the immediate family of such officer, employee,
consultant, director, stockholder or owner or any corporation or other entity
controlled by such officer, employee, consultant, director, stockholder or
owner, or a member of the immediate family of such officer, employee,
consultant, director, stockholder or owner.
 
 
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6.15       Form D; Blue Sky Laws. The Company shall file a Form D with respect
to the Securities as required under Regulation D promulgated under the
Securities Act and to provide a copy thereof to the Placement Agent, promptly
after such filing.  The Company shall assist the legal counsel of the placement
agent of the Securities (the “Placement Agent”), on or before the date of the
closing of the sale of the Securities (the “Closing Date”), in qualifying the
Securities for sale to the Investor in the applicable closing pursuant to this
Agreement under applicable securities or “blue sky” laws of the states of the
United States (or to obtain an exemption from such qualification), and shall pay
all fees and expenses of such counsel in connection therewith, including, but
not limited to, all state filing fees and such counsel’s legal fees and
expenses.
 
6.16       Public Information.    At any time during the period commencing from
the six (6) month anniversary of the Closing Date and ending at such time that
all of the Warrant Shares and Debenture Shares can be sold either pursuant to a
registration statement, or if a registration statement is not available for the
resale of all of such securities, may be sold without the requirement for the
Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for
any reason or no reason to satisfy the current public information requirement
under Rule 144(c) (a “Public Information Failure”) then, as a remedy for the
damages to any holder of Securities by reason of any such delay in or reduction
of its ability to sell the Warrant Shares or Debenture Shares (which remedy
shall not be exclusive of any other remedies available), including, without
limitation, specific performance), the Company shall pay to each holder of
Warrant Shares or Debenture Shares who is not eligible to sell all of his, her
or its Warrant Shares or Debenture Shares pursuant to Rule 144 as a result of
such Public Information Failure an amount in cash, as liquidated damages and not
as a penalty equal to two (2%) percent of the Purchase Price of the
Investor’s Securities on the day of a Public Information Failure and on every
thirtieth (30th) day (pro rated for periods totaling less than thirty (30) days)
thereafter until the earlier of (i) the date such Public Information Failure is
cured and (ii) such time that such public information is no longer required
pursuant to Rule 144.  The payments to which a holder shall be entitled pursuant
to this Section 6.16 are referred to herein as “Public Information Failure
Payments.”  Public Information Failure Payments shall be paid on the earlier of
(I) the last day of the calendar month during which such Public Information
Failure Payments are incurred and (II) the fifth (5th) business day after the
event or failure giving rise to the Public Information Failure Payments is
cured. The parties agree that the maximum aggregate amount of Public Information
Failure Payments payable to the Investor by the Company shall be ten (10%)
percent of the aggregate Purchase Price of such Investor’s Securities.  In the
event the Company fails to make Public Information Failure Payments in a timely
manner, such Public Information Failure Payments shall bear interest at the rate
of two (2%) percent per month (prorated for partial months) until paid in full.
 
7.          Covenants of the Company.  In connection with any proposed sale of
shares of Common Stock issuable upon conversion of the Debentures and exercise
of the Warrants pursuant to Rule 144 (or any successor provision) by the
Investor, the Company covenants that it shall take such reasonable action as the
Investor may request (including, without limitation, promptly obtaining any
required legal opinions from Company counsel necessary to effect the sale of
such Common Stock under Rule 144 and paying all related fees and expenses of
such counsel in connection with such opinions), all to the extent required from
time to time to enable such Investor to sell such shares of Common Stock without
registration under the Securities Act pursuant to the provisions of Rule 144 (or
any successor provision). The Company further covenants to take such action and
to provide such legal opinions within three (3) business days after receipt from
such Investor (or its representative) of documentation reasonably required by
Company counsel to provide such opinion.

8.           Indemnification.  Each of the parties hereto hereby agrees to
indemnify and hold harmless the other party, and its officers, directors,
attorneys, agents, employees and affiliates, from and against any and all loss,
damage or liability directly or indirectly due to or arising out of a breach of
any representation, warranty or covenant of such party contained in this
Subscription Agreement.  Each of the parties hereto will notify the other
immediately of any material change in any statement made herein that occurs
prior to the closing of the sale of the Securities to the Investor.

 
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9.            Representative Capacity.  If an investment in the Company is being
made by a corporation, partnership, limited liability company, trust, estate or
other entity, I, the person signing on behalf of the Investor, personally hereby
represent that I have all right and authority, in my capacity as an officer,
general partner, trustee, executor or other representative of such corporation,
partnership, trust, estate or other entity, as the case may be, to make such
decision to invest in the Company and to execute and deliver this Subscription
Agreement on behalf of such corporation, partnership, trust, estate or other
entity as the case may be, enforceable in accordance with its terms.  I also
represent that any such corporation, partnership, trust, entity or other entity
was not formed for the purpose of buying the Securities hereby subscribed.

10.         Compensation of Placement Agent, Brokers, etc.  The Investor
acknowledges that it is fully aware that the Placement Agent will receive from
the Company, in consideration of its services as placement agent in respect of
the offer and sale of the Securities contemplated hereby:
 
(i) 
a fee of ten (10%) percent of the gross proceeds raised upon the sale of the
Securities;

 
(ii)
a warrant to purchase up to Two Hundred and Twenty-Two Thousand Two Hundred
Twenty-Two shares (222,222) of Common Stock, subject to adjustment for stock
splits, stock dividends, combinations, recapitalizations, which shall be in the
same for as the Warrant; and

 
(iii) 
reimbursement of up to $10,000 of legal expenses of the Placement Agent.

 
11.         Use of Proceeds.  The Company agrees, represents, warranties and
covenants that it shall use the net proceeds received from the sale of the
Securities to satisfy the Company’s initial payment obligation under the
Settlement Agreement.  The Company may, upon prior written notice to the
Investor,  direct the Investor to pay the Purchase Price by wire transfer of
immediately available funds directly to an account for the benefit of Swiss
Pharma or Swiss Pharma’s parent company, Covance Inc., as set forth in such
notice.

12.        Governing Law; Consent to Jurisdiction.  This Agreement shall be
governed by, and construed solely and exclusively in accordance with, the
internal laws of the State of New York without regard to the choice of law
principles thereof.  Each of the parties hereto irrevocably submits to the sole
and exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.

13.         Entire Agreement, Etc.  This Subscription Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and thereof and supersedes all other prior and contemporaneous
agreements, understandings, negotiations, transmission, and discussions, whether
oral or written, of the parties.  No supplement, modification, amendment, or
waiver of this Subscription Agreement shall be binding unless executed in
writing by the party to be bound thereby.  No waiver of any of the provisions of
this Subscription Agreement shall be deemed to or shall constitute a waiver of
any other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.  This
Subscription Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto, their respective successors, heirs, estates, representatives
and permitted assigns.  The invalidity of any portion hereof shall not affect
the validity, force or effect of the remaining portions hereof.  If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by law.

 
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14.   Notices.  All notices, requests, demands and other communications provided
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given at the time when hand delivered, delivered by express
courier, or sent by facsimile (with receipt confirmed by the sender’s
transmitting device) in accordance with the contact information provided below
or such other contact information as the parties may have duly provided by
notice.
 
The Company:
 
Manhattan Pharmaceuticals, Inc.
48 Wall Street, Suite 1100
New York, NY 10005
Facsimile:  (212) 582-3957
Attention: Mike McGuinness

With a copy to:
 
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068-1791
Facsimile: (973) 597-2445
Attention: Anthony Pergola, Esq.
 
The Investor:
 
As per the contact information provided on the signature page hereof.
 
15.         Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

16.         Headings; Counterparts.  Section headings are not to be considered
part of this Subscription Agreement and are included solely for convenience and
are not intended to be full or accurate descriptions of the contents
thereof.  This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

[Signature page follows]

 
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INVESTOR:
 
LINDEN GROWTH PARTNERS MASTER FUND LP
     
By:  /s/ Lara S. Coviello
 
      Name: Lara S. Coviello
 
      Title:  Analyst
     
Address:  200 Abington Executive Park, Suite 205
 
                Clarks Summit, PA 18411
     
Phone:_____________________________
Telecopier:__________________________

APPROVED THIS 28th DAY OF OCTOBER, 2009

MANHATTAN PHARMACEUTICALS, INC.

By:
/s/ Mike McGuinness
   
Name: Mike McGuinness
   
Title: Chief Financial Officer
 

 
 

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