Unassociated Document


    


    WAIVER
AND FORBEARANCE AGREEMENT

    


    


    THIS WAIVER AND FORBEARANCE
AGREEMENT (this “Agreement”) is
entered into as of January 10, 2011 by and among MANHATTAN PHARMACEUTICALS,
INC., a Delaware corporation with a principal address at 48 Wall Street,
New York, New York 10005 (the “Borrower” or the
“Company”), and
the other parties signatory hereto (each severally a “Lender” and
collectively the “Lenders”).

    


    RECITALS

    


    WHEREAS, in accordance with
that certain Securities Purchase Agreement dated as of November 19, 2008 by and
among the Borrower
and the Lenders (the “Securities Purchase
Agreement”), the Borrower executed and delivered to each Lender a 12%
Senior Secured Promissory Note, in various original principal amounts, and in an
aggregate original principal amount of $1,735,000 (each a “Note” and
collectively the “Notes”);
and

    


    WHEREAS, as collateral
security for the Borrower’s obligations under the Notes, the Borrower executed
and delivered in favor of the Lenders a security agreement of even date
therewith (the “Security Agreement”);
and

    


    WHEREAS, as further collateral
security for the Borrower’s obligations under the Notes, the Borrower executed
and delivered in favor of the Lenders a Default Agreement of even date therewith
(the “Default
Agreement”) whereby, inter alia, the Borrower
agreed to liquidate certain securities owned by the Borrower in the event of the
occurrence of an Event of Default as defined in the Security Agreement;
and

    


    WHEREAS, on November 19, 2010
(the “First Maturity
Date”), $1,035,000.00 of the Notes matured, whereupon, pursuant to
Section 7.2 of the Notes, the Requisite Holders (as defined in Section 6 of the
Notes) had the right, upon five (5) days’ notice or demand, to declare the Notes
to be due and payable; and

    


    WHEREAS, on December 22, 2010
(the “Second Maturity Date” and, together with the First Maturity Date, the
"Past Maturity
Dates"), $280,000.00 of the Notes matured, whereupon, pursuant to Section
7.2 of the Notes, the Requisite Holders (as defined in Section 6 of the Notes)
had the right, upon five (5) days’ notice or demand, to declare the Notes to be
due and payable (and the remaining Notes will mature in the near future);
and

    


    WHEREAS, the failure of the
Borrower to pay the Notes on the Past Maturity Dates
constitutes, and the failure of the Borrower to pay the Notes on future maturity
dates will constitute, an event of default (the “Designated Default”)
under the Notes, the Security Agreement, and the Default Agreement (collectively
the “Loan
Documents”); and

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    WHEREAS, the Borrower has
requested that the Lenders forbear from exercising their rights and remedies
under the Loan Documents and grant to Borrower an extension of the maturity
dates of each of the Notes, and the Lenders who are signatory hereto are
agreeable thereto, subject to a modification of the Notes and the warrants
previously issued by the Company to the holders of the Notes (the “Warrants”), and the
other terms, covenants and conditions hereinafter set forth; and

    


    


    WHEREAS, following the
effectiveness of the waiver and forbearance contained, herein the Company will
seek to reduce its outstanding indebtedness by offering the Lenders the ability
to convert the Notes at a conversion price of $0.01 per share, which shall
require the Company obtaining shareholder approval to increase the Company’s
authorized common stock (the foregoing actions, hereinafter the “Subsequent
Offering”); and

    


    WHEREAS, upon the reduction of
the conversion price of the Notes in the Subsequent Offering, as a result of the
full-ratchet anti-dilution provisions contained in certain warrants issued by
the Company on October 28, 2009, March 2, 2010 and April 8, 2010 (the “Equity Transaction
Warrants”), number of shares of the Company’s common stock into which the
Equity Transaction Warrants are exercisable will increase from 72,411,248 to
575,448,715, and the exercise price of the Equity Transaction Warrants will
decrease for $0.08 and $0.07 to $0.01;

     

    


    WHEREAS, the Borrower and
Nordic Biotech Venture Fund II K/S ("Nordic") have entered into a settlement and
release agreement whereby the Borrower's interest in H Pharmaceuticals K/S has
been reduced to fifteen percent (15%) (subject to further dilution for
subsequent H Pharmaceuticals K/S financings), the warrants for Borrower common
stock and call option to purchase shares of Borrower stock held by Nordic have
been cancelled, and the Borrower is to receive a payment of approximately
$500,000 from Nordic ($100,000 within 5 business days of entering into that
settlement and release agreement and the remainder after this Waiver and
Forbearance Agreement becomes effective);

    


    NOW, THEREFORE, for and in
consideration of the premises, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Borrower and the
Lenders agree as follows:

     

    1.           The
Borrower hereby acknowledges, confirms, represents and warrants to Lenders as of
the date hereof that: (i) the outstanding aggregate principal balance of the
Notes is $1,725,000; (ii) said balance, together with interest accrued thereon
from the issue date of the Notes through and including the date hereof at the
rate set forth in the Notes, remains due and owing to the Lenders without
offset, defense or counterclaim; and (iii) each of the Loan Documents remains in
full force and effect and is enforceable in accordance with its respective
terms.

     

    2.           The
undersigned Lenders and the Borrower hereby agree as follows (which agreement
shall take effect immediately upon the receipt by the Company of the signatures
of holders of Notes representing at least a majority of the aggregate principal
amount of all of the Notes pursuant to Section 8(a) of the Notes (such date, the
“Effective
Date”)):

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (a)           Lenders
agree that they shall not demand payment, exercise setoff rights or seek to
collect from the Borrower any obligations evidenced by the Note or join in any
petition or otherwise initiate any insolvency case, reorganization or any other
similar legal proceeding against the Borrower, and the Notes shall be deemed
modified such that the "Maturity Date," as such term is defined in each of the
Notes, shall be deemed to be December 31, 2011.  If requested by any
Lender, the Borrower shall promptly execute and deliver to said Lender an
amended and restated Note reflecting the terms of this Agreement.

     

    (b)           The
Lender’s Warrants will be modified upon obtaining the shareholder approval in
connection with the Subsequent Offering to include a full-ratchet anti-dilution
provision and a reduction in the cash exercise price thereof to $0.01 per
share.  Following the applicable date of the foregoing, Borrower shall
promptly execute and deliver to the Lenders an amended and restated Warrant
reflecting the foregoing terms.

     

    (c)           Promptly
following the Effective Date, the Company agrees to take prompt steps to
commence the Subsequent Offering.

     

    (d)           The
Designated Default is hereby waived.

     

    (e)           Subject
to Section 2(a) above, Lenders reserves the right, in their respective
discretion, to exercise any or all of its rights and remedies arising under the
Loan Documents, applicable law or otherwise, as a result of any Events of
Default occurring after the date hereof.  Subject to Section 2(a)
hereof, nothing contained herein shall be construed as a waiver of the failure
of the Borrower to comply with the terms of the Loan Documents after the date
hereof.

     

    3.           The
Borrower represents and warrants that it has the right, power and capacity and
is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement.

     

    4.           All
notices to be given pursuant to this Agreement shall be in writing and
sufficient if given in accordance with the provisions of the Security
Agreement.

     

    5.           This
Agreement and all substantive terms and provision hereof shall be governed by
and construed according to the laws of the State of New York without regard to
the conflicts of laws principles thereof.

     

    6.           THE
BORROWER AND THE LENDERS HEREBY AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN
RESPECT OF OR ARISING OUT OF THIS AGREEMENT SHALL BE INITIATED AND PROSECUTED IN
THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN THE COUNTY AND STATE
OF NEW YORK, AND CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION OVER THE
SUBJECT MATTER.  THE BORROWER AND EACH LENDER HEREBY WAIVE PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON THEM AND CONSENT THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO THE ADDRESS FOR
THE BORROWER OR SUCH LENDER, AS THE CASE MAY BE, SET FORTH IN THE SECURITY
AGREEMENT, AS SAID ADDRESS MAY BE CHANGED FROM TIME TO TIME IN ACCORDANCE WITH
THE PROVISIONS THEREOF.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    IN
ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT,
THE BORROWER AND THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE LOANS EVIDENCED BY THE NOTES, THE
OTHER LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF THE BORROWER, THE LENDERS, OR
ANY OF THEM, OR ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES, DIRECTORS,
MANAGERS, PARTNERS, TRUSTEES OR AGENTS IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE BORROWER AND
THE LENDERS, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE.

     

    7.           The
Borrower and the Lenders signatory hereto acknowledge and agree that, pursuant
to Section 8(a) of the Notes, this Agreement binds, and is intended to bind, all
Lenders when executed and delivered by the Borrower and the "Requisite Holders"
(as defined in the Notes).

     

    8.           Except
as herein specifically set forth, all terms, covenants and provisions contained
in the Loan Documents remain in full force and effect and are hereby ratified
and confirmed.

     

    9.           TIME IS OF THE ESSENCE WITH RESPECT
TO THE OBLIGATIONS OF THE BORROWER HEREUNDER.

     

    10.           This
Agreement may not be changed or terminated orally. The covenants contained in
this Agreement bind the Borrower, the Lenders, and their respective heirs,
personal representatives, successors and assigns, and shall inure to the benefit
of the Lenders, their respective personal representatives, successors and
assigns.

     

    11.           In
the event of any conflict between the terms, covenants and provisions hereof and
of any of the Loan Documents, the provisions hereof shall govern and
control.

     

    12.           Separate
counterparts of this Agreement may be executed, each of which shall be deemed an
original, and all of which, taken together, shall constitute but one and the
same Agreement.  Signatures delivered by telecopier or by .pdf email
attachment shall have the same force and effect as original
signatures.

     

    


    [signature
pages follow]

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    


    IN WITNESS WHEREOF, this
Agreement has been duly executed by the parties hereto the date first above
written.

    


    
      
        	 	THE BORROWER	 
	 	 	 	 
	 	
                MANHATTAN
      PHARMACEUTICALS, INC.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Michael
      McGuinness	 
	 	 	

                Name:
      Michael McGuinness

              	 
	 	 	

                Title:
      Chief Operating and Financial Officer

              	 


      

    

    :

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    


    
      
        
          	 	

                  THE
      LENDERS:

                	 
	 	 	 	 
	 	 	 	 
	 	 	 
	 	Neel
      B. Ackerman	 
	 	 	 
	 	 	 
	 	
                  Martha
      N. Ackerman

                	 
	 	 	 
	 	 	 
	 	 	 
	 	Stephen
      M. Burnich Revocable Trust u/a 10/08/04	 
	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	 	Stephen
      M. Burnich, Trustee	 
	 	 	 	 
	 	 	 	 
	 	 	 
	 	

                  Ennio
      De Pianto

                	 
	 	 	 
	 	 	 
	 	

                  Matthew
      Ernst

                	 
	 	 	 
	 	 	 
	 	

                  John
      M. Goodman Living Trust

                	 
	 	 	 
	 	By:	 	 
	 	 	John
      M. Goodman, Trustee	 
	 	 	 	 
	 	 	 	 
	 	 	 
	 	

                  Leon
      Kanner

                	 
	 	 	 
	 	 	 
	 	

                  Rosemary
      Kanner

                	 
	 	 	 
	 	 	 
	 	

                  Richard
      Kindt

                	 


        

         

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

        

      

       

      
        
          	 	 	 
	 	
                  Douglas
      E. Pritchett

                	 
	 	 	 
	 	 	 
	 	

                  Jerome
      A. Shinkay

                	 
	 	 	 
	 	 	 
	 	

                  Michael
      J. Spezia

                	 
	 	 	 
	 	 	 
	 	

                  George
      D. Wilson

                	 
	 	 	 
	 	 	 
	 	

                  Diane
      J. Wilson

                	 
	 	 	 
	 	 	 
	 	

                  Joseph
      L. Jerger

                	 
	 	 	 
	 	 	 
	 	

                  David
      Pudelsky

                	 
	 	 	 
	 	 	 
	 	

                  Nancy
      Pudelsky

                	 
	 	 	 
	 	 	 
	 	

                  James
      R. Buck

                	 
	 	 	 
	 	 	 
	 	

                  John  O.
      Dunkin

                	 


        

         

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

      

      
        
          	 	

                  

                    NFS/FMTC
      SEP IRA FBO Jay Jennings

                  

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	 	Jay
      Jennings	 
	 	 	 	 
	 	 	 	 
	 	

                  Landmark
      Community Bank

                  Collateral
      Account FBO

                  Estate
      of Catherine Nasser

                	 
	 	 	 	 
	 	 	 	 
	 	

                  By:
      

                	 	 
	 	 	William
      K. Nasser, Jr., attorney-in-fact	 
	 	 	 	 
	 	 	 	 
	 	

                  Nasser
      Family Trust

                	 
	 	 	 	 
	 	By:	 	 
	 	 	William
      K. Nasser, Trustee	 


        

         

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        


        
          	 	 	 
	 	

                  James
      R. Kahn

                	 
	 	 	 
	 	 	 
	 	

                  Debra
      A. Kahn

                	 
	 	 	 
	 	 	 
	 	

                  A.
      Starke Taylor, Jr.

                	 
	 	 	 
	 	 	 
	 	

                  Carolyn
      Taylor

                	 
	 	 	 
	 	 	 
	 	

                  Mark
      Vollmer

                	 
	 	 	 
	 	 	 
	 	

                  Robert
      J. Guercio

                	 
	 	 	 
	 	 	 
	 	

                  Ralph
      Hanby

                	 
	 	 	 
	 	 	 
	 	

                  Robert
      E. Jacobson

                	 
	 	 	 
	 	 	 
	 	

                  Saralee
      Jacobson

                	 
	 	 	 
	 	 	 
	 	

                  Michael
      Cushing

                	 
	 	 	 
	 	 	 
	 	

                  Raymond
      Yarusi, Jr.

                	 
	 	 	 	 


        

      

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      
        
          	 	 	 
	 	

                  James
      C. Orr

                	 
	 	 	 
	 	 	 
	 	

                  Vernon
      L. Simpson

                	 
	 	 	 
	 	 	 
	 	

                  Michael
      Yokoyama & Jaye Venuti Family Trust

                	 
	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	 	Michael
      Yokoyama, Trustee	 
	 	 	 	 
	 	 	 	 
	 	

                  By:
      

                	 	 
	 	 	Jaye
      Venuti, Trustee	 
	 	 	 	 
	 	 	 
	 	 	 
	 	

                  Frederick
      Peet

                	 
	 	 	 
	 	 	 
	 	

                  Ronald
      Rasmussen

                	 
	 	 	 
	 	 	 
	 	

                  Lewis
      R. Jacobson

                	 
	 	 	 
	 	 	 
	 	

                  Mark
      B. Ginsburg

                	 
	 	 	 
	 	 	 
	 	

                  Gregory
      Dovolis

                	 
	 	 	 
	 	 	 
	 	

                  William
      S. Silver

                	 
	 	 	 
	 	 	 
	 	

                  Praful
      Desai

                	 
	 	 	 
	 	 	 
	 	

                  Thomas
      Gemellaro

                	 
	 	 	 
	 	 	 
	 	

                  Howard
      Tanning Rollover IRA

                	 
	 	 	 
	 	

                  By:
      

                	 	 
	 	 	                               
      , Custodian	 


        

      

      


      
        
          
          

        

        
          -10-