EXHIBIT 10.3


 


CONVERSION AGREEMENT


 


This CONVERSION AGREEMENT (this “Agreement”),
is entered into as of October 29, 2013, by and among ARNO THERAPEUTICS, INC., a Delaware corporation (the “Company”),
and the undersigned holders (each, a “Holder,” and collectively, the “Holders”) of the Company’s
8% Senior Convertible Debentures due 2015.


 


WHEREAS, the Company and the Holders are
parties to that certain Securities Purchase Agreement dated November 26, 2012, as previously amended on December 13, 2012, and
March 25, 2013 (the “Purchase Agreement”);


 


WHEREAS, pursuant to
the Purchase Agreement, the Company issued and sold to the Holders the Debentures (as defined in the Purchase Agreement) in the
aggregate principal amount of $14,857,200, of which $14,824,905.90 in principal remains outstanding under the Debentures in the
respective amounts set forth next to each Holder’s name on Schedule A attached hereto (the “Principal Amount”);


 


WHEREAS, in addition to the Debentures,
the Company also issued and sold to the Holders those certain Series B Warrants (as defined in the Purchase Agreement) entitling
the Holders to purchase an aggregate of 49,524,003 shares of the Company’s common stock, par value $0.0001 per share (the
“Common Stock”), on or prior to the 18-month anniversary of such warrants;


 


WHEREAS, concurrently with this
Agreement, the Company is entering into a Securities Purchase Agreement (the “2013 Purchase Agreement”)
pursuant to which the Company will sell to certain investors and certain investors will purchase from the Company shares of
Common Stock and additional warrants to purchase Common Stock for an aggregate purchase price of at least $15 million (the
“New Investment”), on the terms set forth in the 2013 Purchase Agreement;


 


WHEREAS, it is a condition to the investors’
obligation to make the New Investment that the Principal Amount and all accrued and unpaid interest owing under the Debentures
be converted into shares of Common Stock; and


 


WHEREAS, as an inducement for the Holders
to convert the Principal Amount and all accrued and unpaid interest into shares of Common Stock, the Company desires to (i) provide
each Holder with one additional year of accrued interest on such Holder’s respective Principal Amount, the amounts of which
are identified next to each Holder’s name on Annex A (the “Additional Interest”) (the Principal
Amount, the accrued and unpaid interest thereon and Additional Interest are collectively referred to in this Agreement as the “Outstanding
Debt”), and (ii) extend the termination date of the Series B Warrants (as defined in the Purchase Agreement) held by
each Holder to October 31, 2014; and


 


WHEREAS, the Company and the Holders believe
it is in their mutual best interest to effect the conversion of the Debentures and the extension of the term of the Series B Warrants
on the terms and subject to the conditions set forth in this Agreement.


 




    	 



    	 



    

 


NOW, THEREFORE, in consideration of the
covenants and agreements set forth herein, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged
and intending to be legally bound hereby the parties agree as follows:


 


1.           Conversion;
Warrant Amendment.


 


(a)          Conversion
of Debentures. On the Closing Date (as defined in Section 2 below), the entire amount of each Holder’s respective Outstanding
Debt shall automatically convert into a number of shares of Common Stock determined by dividing such Holder’s amount of Outstanding
Debt by $2.40 (after giving effect to the 1-for-8 reverse split of the Common Stock to be effected as of October 29, 2013) (the
“Conversion Shares”), as listed on Annex A attached hereto; provided, however, that the Company shall
pay cash in lieu of any fractional Conversion Shares that would otherwise be issuable upon such conversion. Upon such conversion,
the Outstanding Debt and all other obligations of the Company under the Debentures shall be deemed satisfied and discharged in
full, and all of the Holders’ rights under the Debentures shall be terminated in their entirety.


 


(b)          Amendment
of Series B Warrants. Effective upon the Closing, and without further action by the Company or any Holder, the Termination
Date (as such term is defined in the Series B Warrants) shall be extended until October 31, 2014.


 


2.           Closing.
Subject to the satisfaction or waiver of the conditions set forth in Section 6 hereof, the conversion of the Debentures and the
amendment of the Series B Warrant, as described in Section 1 of this Agreement, shall be effected (the “Closing”)
at the offices of Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota 55402, or such other
place to be specified by the Company and the Holders, on the date of, and simultaneously with, the closing of the New Investment
(the “Closing Date”). At the Closing:


 


(a)          The
Company shall deliver to each Holder and to the transfer agent and registrar for the Common Stock irrevocable instructions to issue
the Conversion Shares in the form attached hereto as Annex B (the “Instruction Letter”); and


 


(b)          Each
Holder shall surrender to the Company for cancellation its original Debenture(s).


 


3.           Liens;
Security Interest. The parties acknowledge that the Outstanding Debt is not secured by any security interest in or other lien
or encumbrance on any assets of the Company. To the extent that any security interest, lien, or other encumbrance is deemed to
have arisen as a result of the Outstanding Debt, the parties agree that upon conversion of the Outstanding Debt that any such security
interest, lien, or other encumbrance will automatically terminate and all rights will revert to the Company. The Holders hereby
authorize the Company to file any documents or instruments requested by the Company in order to terminate any security interest,
lien, or other encumbrance arising out of the Outstanding Debt and the Holders will execute and deliver to the Company such documents
or instruments as the Company reasonably requests to evidence such termination.


 




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4.           Representations
and Warranties of the Company. The Company hereby represents and warrants to the Holders as follows:


 


(a)          Due
Authorization. The Company has all requisite power and authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly authorized and validly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the Holders, constitutes the legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as rights to indemnity and contribution may be limited by state or federal securities
laws or the public policy underlying such laws, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity
or at law).


 


(b)          Issuance
of Conversion Shares. The Conversion Shares are duly authorized and, when issued and paid for in accordance with this Agreement,
will be duly and validly issued, fully paid and non-assessable, free and clear of all liens and shall not be subject to preemptive
or similar rights of stockholders other than those which have been exercised or waived prior to the Closing Date. Assuming the
accuracy of the representations and warranties of the Holders in this Agreement, the Conversion Shares will be issued in compliance
with all applicable federal and state securities laws.


 


(c)          Non-Contravention.
The execution and delivery of this Agreement, the issuance and sale of the Conversion Shares by the Company under this Agreement
and the consummation of the transactions contemplated hereby will not (A) conflict with or constitute a violation of, or default
(with the passage of time or otherwise) under (i) any bond, debenture, note or other evidence of indebtedness, or any material
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the
Company is a party or by which the Company or any of its property is bound, where such conflict, violation or default is likely
to result in a Material Adverse Effect, (ii) the charter, by-laws or other organizational documents of the Company, or (iii) any
law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority binding
upon the Company or any of its property, where such conflict, violation or default is likely to result in a Material Adverse Effect,
or (B) result in the creation or imposition of any lien upon any of the material properties or assets of the Company or an acceleration
of indebtedness pursuant to any obligation, agreement or condition contained in any bond, debenture, note or any other evidence
of indebtedness or any indenture, mortgage, deed of trust or any other agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the property or assets of the Company is subject. No consent, approval, authorization
or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental
body in the United States is required for the execution, delivery and performance of this Agreement, the valid issuance and sale
of the Conversion Shares, other than such as have been made or obtained. “Material Adverse Effect” shall mean
any of (a) a material and adverse effect on the legality, validity or enforceability of this Agreement and any other documents
or agreements executed in connection with the transactions contemplated hereunder, (b) a material and adverse effect on the results
of operations, assets, business or financial condition of the Company, or (c) any adverse impairment to the Company’s ability
to perform in any material respect on a timely basis its obligations under this Agreement.


 




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5.           Representations
and Warranties of the Holders. Each of the Holders, severally and not jointly, hereby represents and warrants to the Company
as follows:


 


(a)          Organization;
Authority. If not a natural person, the Holder is an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution
and delivery of this Agreement and performance by the Holder of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of the Holder. This Agreement has been duly executed by the
Holder, and when delivered by the Holder in accordance with the terms hereof, will constitute the valid and legally binding obligation
of the Holder, enforceable against it in accordance with its terms, except as rights to indemnity and contribution may be limited
by state or federal securities laws or the public policy underlying such laws, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).


 


(b)          Own
Account. The Holder understands that the Conversion Shares are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law. The Holder represents that it is converting the Outstanding Debt
into Conversion Shares as principal for its own account and not with a view to or for distributing or reselling such Conversion
Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention
of distributing any of such Conversion Shares in violation of the Securities Act or any applicable state securities law and has
no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such
Conversion Shares (this representation and warranty not limiting the Holder’s right to sell the Conversion Shares pursuant
to any registration statement or otherwise in compliance with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. The Holder is acquiring the Conversion Shares hereunder in the ordinary
course of its business.


 


(c)          Investor
Status. The Holder is either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7)
or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. The Holder is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.


 


(d)          Experience
of the Holder. The Holder, either alone or together with its representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits and risks of the prospective conversion of the Outstanding
Debt into Conversion Shares, and has so evaluated the merits and risks of such investment. The Holder is able to bear the economic
risk of an investment in the Conversion Shares and, at the present time, is able to afford a complete loss of such investment.


 




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6.           Conditions
to the Holders’ Conversion Obligation. The obligation of the Holders hereunder to consummate the Conversion at the Closing
is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions
are for the Holders’ sole benefit and may be waived by the Holders at any time in their sole discretion by providing the
Company with prior written notice thereof:


 


(a)          Issuance
of Securities. The Company shall have delivered to the Holders the Instruction Letter.


 


(b)          2013
Purchase Agreement. The Company shall have delivered, or cause to be delivered, to the Holders a certificate executed by its
Chief Executive Officer that the 2013 Purchase Agreement has been duly executed and delivered by all parties thereto and that the
New Investment has been consummated.


 


(c)          Representations
and Warranties. The representations and warranties of the Company set forth in Section 4 of this Agreement shall be true and
correct in all material respects (except for those representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing Date.


 


(d)          Performance.
The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by it at or prior to the Closing.


 


7.           Transfer
Restrictions.


 


(a)          Compliance
with Laws. Notwithstanding any other provision of this Agreement, the Holders covenant that the Conversion Shares may be disposed
of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act of
1933, as amended (the “Securities Act”), or pursuant to an available exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act, and in compliance with any applicable state, federal or foreign
securities laws. In connection with any transfer of the Conversion Shares other than (i) pursuant to an effective registration
statement, (ii) to the Company, or (iii) pursuant to Rule 144 (provided that the Holders provide the Company with reasonable assurances
(in the form of seller and broker representation letters) that the Conversion Shares may be sold pursuant to such rule), the Company
may require the transferor thereof to provide to the Company, at the transferor’s expense, an opinion of counsel selected
by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory
to the Company, to the effect that such transfer does not require registration of such transferred Conversion Shares under the
Securities Act.


 




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(b)          Legends.
Certificates evidencing the Conversion Shares shall bear any legend as required by the “blue sky” laws of any state
and a restrictive legend in substantially the following form, until such time as they are not required under applicable law:


 


THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NO REPRESENTATION IS MADE BY THE ISSUER AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR
RESALES OF THESE SECURITIES.


 


8.           Notices.
All notices, requests, consents and other communications hereunder shall be in writing and delivered personally, by facsimile,
pdf or sent by a nationally recognized overnight courier service. Any notices, requests, consents and other communications or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile or by email transmission prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading
Day after the date of transmission, if such notice or communication is delivered via facsimile on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via email transmission on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (iv) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (v) upon actual receipt by the party to whom such notice is required to be given. Notices, requests,
consents and other communications hereunder shall be addressed to the party and delivered to the respective addresses contained
in the Purchase Agreement. For purposes of this Agreement, “Trading Day” shall mean a day on which the principal Trading
Market is open for trading and “Trading Market” shall mean any of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Markets, Inc. or the OTC Bulletin Board (or any successors
to any of the foregoing).


 


9.           Legal
Fees and Expenses. The parties shall pay their own fees and expenses in connection with this Agreement and the transactions
contemplated hereby.


 




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10.         Amendments.
No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case
of an amendment, by the Company and the Holders holding at least two-thirds of the total Outstanding Debt as of the date of this
Agreement or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver
of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall
any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.


 


11.         Further
Assurances. Each of the parties hereto shall use its reasonable best efforts to do all things necessary and advisable to make
effective the transaction contemplated hereby and shall cooperate and take such action as may be reasonably requested by the other
party in order in carry out fully the provisions and purposes of this Agreement and the transactions contemplated thereby.


 


12.         Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.


 


13.         Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either
party shall commence an action, suit or proceeding to enforce any provisions of the Agreement, then, the prevailing party in such
action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such action or proceeding.


 


[Signature page follows]


 




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IN WITNESS WHEREOF, the Company and the
Holders have executed this Conversion Agreement to be duly executed by their respective authorized signatures as of the date first
indicated above.


 


	ARNO THERAPEUTICS, INC.	 
	 	 
	 	 	 
	By:	/s/ Glenn. R. Mattes	 
	 	Name:  Glenn R. Mattes	 
	 	Title:    President & Chief Executive Officer	 
	 	 	 
	Address for Notice:	 
	 	Arno Therapeutics, Inc.	 
	 	200 Route 31 North, Suite 104	 
	 	Flemington, NJ 08822	 
	 	Attn: Chief Executive Officer	 
	 	Fax: (973) 267-0101	 
	 	 	 
	With a copy to (which shall not constitute notice):	 
	 	Fredrikson & Byron P.A.	 
	 	200 South 6th Street, Suite 4000	 
	 	Minneapolis, MN  55402	 
	 	Attn: Christopher J. Melsha, Esq.	 
	 	Fax: (612) 492-7077	 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR HOLDER FOLLOWS]


 




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[HOLDER SIGNATURE PAGES TO


ARNO THERAPEUTICS, INC. CONVERSION AGREEMENT]


 


IN WITNESS WHEREOF,
the undersigned have caused this Conversion Agreement to be duly executed by their respective authorized signatories as of the
date first indicated above.


 


Name of Holder: ________________________________________________________


 


Signature of Authorized Signatory of
Holder: __________________________________


 


Name of Authorized Signatory: ____________________________________________________


 


Title of Authorized Signatory: _____________________________________________________


 


Email Address of Authorized Signatory:
_____________________________________________


 


Facsimile Number of Authorized Signatory:
__________________________________________


 


Address for Notice to Holder:


 


Address for Delivery of Securities to Holder
(if not same as address for notice):


 


Conversion Amount (Outstanding Debt): _____________


 


Number of Shares to be acquired: _________________


 


EIN Number: _______________________


 


[SIGNATURE PAGES CONTINUE]


 




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