Document:

mhtx_ex41.htm

EXHIBIT 4.1

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2 AND SECTION 4 OF THIS NOTE.

SENIOR SCIENTIFIC, LLC

CONVERTIBLE PROMISSORY NOTE

 

	$ _________.00	Los Angeles, California 

April 3, 2013

 

Senior Scientific, LLC, a New Mexico limited liability company (the “Company”), for value received hereby, promises to pay to ____________, or registered assigns (the “Holder”), the sum of ___________ ($_________), or such other amount as shall then equal the outstanding principal amount disclosed on Exhibit B hereof, in accordance with the terms of this convertible promissory note (the “Note”). Payment for all amounts due hereunder shall be made by wire transfer of immediately available funds, in lawful tender of the United States, to an account designated in writing by the Holder. This Note is being issued in connection with and pursuant to that certain Convertible Note Purchase Agreement (the “Agreement”) and is substantially similar to other notes issued pursuant to the Agreement.

 

The following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees:

 

1. Definitions. As used in this Note, the following terms, unless the context otherwise requires, have the following meanings:

 

(i) “Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States, or any day on which banking institutions in New York City are authorized or required by law or other governmental action to close.

 

(ii) “Common Stock” means the Common Stock of Parent.

 

(iii) “Conversion Shares” means shares of Common Stock or the Units into which this Note may be converted pursuant to Section 4.1.

 

(iv)  “Holder” when the context refers to a holder of this Note, shall mean any person who shall at the time be the registered holder of this Note.

 

(v) “Issuance Date” means the date of this Note.

 

  

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(vi) “Parent” means Manhattan Scientific, Inc., a Delaware corporation, and the parent entity of the Company.

 

(vii) “Units” means the membership interests of the Company.

 

2. Subsequent Funding. Pursuant to the Subsequent Closing Schedule attached as Exhibit E to that certain Convertible Note Purchase Agreement by and among, inter alia, the Company, the Parent, the Holder and the other holders party thereto, of even date herewith, on each Subsequent Closing Date, the Holder shall advance the amount to be funded by the Holder in accordance with such Exhibit E for the applicable Subsequent Closing to the Company by wire transfer of immediately available funds, in lawful tender of the United States, to an account designated in writing by the Holder (the "Subsequent Funding"). Any Subsequent Funding by the Holder shall increase the principal amount outstanding under this Note and shall be recorded on Exhibit B.

 

3. Interest; Repayment of the Note.

 

3.1 This Note shall accrue simple interest, from the date hereof until such principal is paid or converted as provided in Section 5, on any unpaid principal balance at the rate of eight percent (8.0%) per annum; provided that, commencing upon the occurrence of any Event of Default and so long as any Event of Default exists, interest on this Note shall accrue at the rate of ten percent (10%) per annum; provided further that the interest rate shall not exceed the maximum amount of interest permitted to be charged under applicable law. Upon conversion of this Note, accrued but unpaid interest shall be paid in cash or, at the election of the Holder, converted into Conversion Shares.

 

3.2 The Company shall pay all accrued interest on this Note on the first day of each calendar quarter, commencing on July 1, 2013. All principal amounts advanced hereunder shall mature on March __, 2017, at which time all principal and other amounts outstanding under this Note shall be due and payable. In addition, all amounts outstanding hereunder shall be due and payable on the date upon which the repayment of this Note is accelerated upon an Event of Default pursuant to Section 10. All payments hereunder shall be made in lawful money of the United States of America and will be credited first to interest, fees, costs and expenses then due and the remainder to the principal amount of this Note.

 

3.3 The Company shall not have the right to prepay this Note at any time.

 

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

 

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended and may not be sold, transferred, pledged, hypothecated or otherwise disposed of in the absence of (i) an effective registration statement for such securities under said act or (ii) an opinion of company counsel that such registration is not required.

 

  

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5. Conversion.

 

5.1 Voluntary Conversion. The Holder of this Note has the right, at Holder’s option, at any time upon ten (10) days written notice to the Company, to convert this Note, in whole or in part and on one or multiple occasions, into either (Sections 4.1.1 and 4.1.2, as applicable, the “Conversion Ratio”):

5.1.1 Fully paid and nonassessable shares of Common Units of the Company. The number of Units of the Company into which this Note may be converted pursuant to this Section 4.1.1 shall be equal to the quotient of the principal due hereunder divided by $2,500,000, multiplied by eighteen percent (18%) of the total equity of Subsidiary outstanding as of the date hereof.

 

5.1.2 Fully paid and nonassessable shares of Common Stock of Parent. The number of shares of Common Stock of Parent into which this Note may be converted pursuant to this Section 4.1.2 shall be equal to the quotient of the principal and interest payable hereunder divided by a conversion price of $0.055 per share.

 

5.2 Conversion Procedure.

 

5.2.1 Notice of Conversion. Before the Holder shall be entitled to convert this Note pursuant to Section 5.1, it shall surrender this Note at the office of the Company and shall give written notice, in the form of the Notice of Conversion attached hereto as Exhibit A, to the Company of the election to convert the same pursuant to Section 5.1, and shall state therein the name or names in which the Conversion Shares shall be issued. At its expense, the Company shall deliver or cause to be delivered to the Holder the applicable number of Conversion Shares in certificate form (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company). Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of this Note and receipt of the Conversion Notice.

 

5.2.2 Conversion Record. Conversions pursuant to this Section 5 shall be recorded on Exhibit B.

 

5.3 Split, Subdivision or Combination of Shares. If the Company or Parent, as applicable, shall at any time while this Note remains outstanding and unpaid, split, subdivide or combine its equity securities, as applicable, into a different number of securities of the same class or otherwise, the Conversion Ratio for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination and the number of such securities shall be proportionately increased in the case of a split or subdivision or proportionately decreased in the case of a combination.

 

5.4 No Fractional Conversion Shares. No fractional shares of Conversion Shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the number of shares issued upon the conversion of this Note shall be rounded up to the nearest whole share.

 

  

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6. Pari Passu. This Note is hereby deemed pari passu to any other note issued pursuant to the Agreement, the date of issuance of such note(s) notwithstanding.

 

7. Events of Default. Each of the following events shall constitute a default under this Note (each an “Event of Default”):

 

(a)           failure by the Company to pay the principal amount of this Note on the date the same becomes due and payable under this Note or the Agreement or any interest or other amounts due under this Note within five (5) days of the date the same becomes due and payable under this Note or the Agreement;

(b)           failure by the Company or the Parent, or the transfer agent of the Company or the Parent, as the case may be, to issue the Conversion Shares upon conversion of this Note to the Holder within five (5) calendar days after the delivery of a Notice of Conversion and delivery by the Holder of this Note to the Company or the Parent, or the transfer agent of the Company or the Parent, as the case may be;

(c)           the Company or the Parent shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (3) commence a voluntary action for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such applicable law; (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction; (7) be unable, or admit in writing its inability, to pay its debts as they mature; or (8) take any action for the purpose of effecting any of the foregoing;

(d)           any case, proceeding or other action shall be commenced against the Company of the Parent for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 7(c) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company or the Parent, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company or the Parent, and any of the foregoing shall continue unstayed and in effect for any period of at least sixty (60) days from the date of commencement;

(e)           default shall occur with respect to any indebtedness for borrowed money of the Company of the Parent or under any formal debt agreement under which such indebtedness may be issued by the Company of the Parent, and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of such indebtedness for which such default shall have occurred exceeds $50,000;

  

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(f)           default shall occur with respect to any contractual obligation of the Company or the Parent under or pursuant to any contract or lease to which the Company or the Parent is a party and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of the contractual liability arising out of such default exceeds or is reasonably estimated to exceed $50,000;

(g)           default by the Company or the Parent shall occur under any agreement, note, mortgage, security agreement or other instrument evidencing or securing indebtedness that ranks senior in priority to, or pari passu with, the obligations under this Note, the Agreement or any other Transaction Document, and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of such indebtedness for which such default shall have occurred exceeds $50,000; or

(h)           any material breach by the Company or the Parent of any covenant, warranty, representation or other term or condition of this Note, the Agreement or any other Transaction Document at any time which is not cured within the time periods permitted therein or, if no cure period is provided therein, within thirty (30) calendar days after the occurrence thereof;

 

(i)            the Company shall cease to be a wholly owned subsidiary of Parent (except in the case of the conversion of any Note issued pursuant to the Agreement); or

 

(j)            the Company shall liquidate, dissolve or have its existence terminated.

 

8. Remedies. If any Event of Default occurs under Section 7(c) or 7(d) hereof, then the full principal amount of this Note, together with any other amounts outstanding under this Note or any other Transaction Document, shall become immediately due and payable in cash without any action on the part of the Holder, and if any other Event of Default occurs, the full principal amount of this Note, together with any other amounts outstanding under this Note or any other Transaction Document, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash. All Notes for which the full amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment under this Section 11 shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. In addition to the foregoing remedies, upon the occurrence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

 

  

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9. Assignment. Subject to securities laws, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors and assigns of the parties; provided that the Company shall not assign its rights or obligations under this Note without the prior written consent of the Holder.

 

10. Waiver and Amendment. Any provision of this Note may be amended, waived, or modified upon the written consent of the Company and Holder.

 

11. Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if faxed with confirmation of receipt by the sending device or if delivered by internationally recognized overnight courier such as FedEx or DHL, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when delivered or faxed in the manner set forth above and shall be deemed to have been received when delivered.

 

12. No Stockholder Rights. For so long as the Notes remain unconverted, nothing contained in this Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Note or the Conversion Shares obtainable hereunder until, and only to the extent that, this Note shall have been converted.

 

13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, excluding that body of law relating to conflict of laws.

 

14. Waiver. The Company hereby waives demand, notice, presentment, protest, and notice of dishonor.

 

[SIGNATURE PAGE FOLLOWS]

 

  

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IN WITNESS WHEREOF, the Company has caused this Note to be issued this 3rd day of April 2013.

 

	 	SENIOR SCIENTIFIC, LLC	 
	 	a New Mexico limited liability company	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 

 

Name of Holder: _____________________

Address: __________________________

__________________________________

  

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EXHIBIT A

 

NOTICE OF CONVERSION

 

(To Be Signed Only Upon Voluntary Conversion of Note)

 

TO: Senior Scientific, LLC c/o Manhattan Scientifics, Inc.

 

The undersigned, the holder of the foregoing Note, hereby surrenders such Note for conversion into

 

_______________units of Senior Scientific, LLC to the extent of $__________________ unpaid principal amount of such Note, and requests that the certificates for such units be issued in the name of, and delivered to ____________________, whose address is ______________________ .

 

_______________shares of Common Stock of Manhattan Scientifics, Inc. to the extent of $__________________ unpaid principal amount of such Note, and requests that the certificates for such shares be issued in the name of, and delivered to ____________________, whose address is ______________________ .

 

	Dated: _____________________	 	 	 
	 	 	 	 
	 	 	(Signature must conform in all respects to name of the registered holder of the Note)	 
	 	 	 	 
	 	 	 	 
	 	 	
(Address)

	 

 

  

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EXHIBIT B

 

PRINCIPAL BALANCE

 

	
DATE

	
FUNDING

	
REPAYMENT/ CONVERSION

	
OUTSTANDING PRINCIPAL BALANCE

	
March __, 2013

	
$

	
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$

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

 

 

 

 

9mhtx_ex101.htm

EXHIBIT 10.1

 

CONVERTIBLE NOTE

PURCHASE AGREEMENT

 

This CONVERTIBLE NOTE PURCHASE AGREEMENT (this “Agreement”), is entered into as of April 3, 2013, by and among Senior Scientific, LLC, a New Mexico limited liability company (the “Company”), Manhattan Scientifics, Inc., a Delaware corporation and the parent entity of the Company (the “Parent”) and the investors listed on the Investor Signature Pages attached hereto as Exhibit A (collectively, the “Investors”). Each party to this Agreement is referred to herein as a “Party,” and they are referred to collectively as the “Parties.”

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to sell to the Investors, and the Investors desire to purchase from the Company in accordance with Exhibit E hereof, Convertible Notes for a cash purchase price of up to an aggregate principal amount of $2,500,000; and

 

NOW, THEREFORE, in consideration of the mutual representations, warranties, and covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings:

 

“Closing” means the closing of the transactions contemplated herein, which shall take place in accordance with the terms of Section 2 of this Agreement.

 

“Note” means each Convertible Promissory Note in the form attached hereto as Exhibit B.

 

“Subscription Amount” means such amount as each Investor is determining to invest on a particular Closing Date hereunder.

 

“Transaction Documents” means this Agreement, the Investor Signature Pages attached hereto as Exhibit A, the Note, the Leak Out Agreement (the “Leak Out Agreement”) in the form attached hereto as Exhibit C, the Guaranty and Security Agreement (the “Guaranty and Security Agreement”) attached hereto as Exhibit D, and all other certificates, documents, agreements, and instruments delivered to the Investor under or in connection with this Agreement.

 

  

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2. SALE AND ISSUANCE OF NOTES; CLOSING; COVENANTS.

 

2.1 Sale and Issuance of Notes. Subject to the terms and conditions of this Agreement and upon receipt of the Subscription Amount, each of the Investors agree to purchase at the Closings, and the Company agrees to sell and issue to each of the Investors at the Closings, its portion of the Notes (in the aggregate principal amount of up to $2,500,000) as set forth in Exhibit E.

 

2.2 The Closing. The purchase and sale of the Notes shall be consummated at the multiple Closings at set forth on Exhibit E hereto, which are to take place at 1100 Glendon Avenue, Suite 850, Los Angeles, CA 90024, or at such other place as the Parties shall mutually agree, upon the satisfaction of all the conditions to Closing set forth in this Agreement; provided, however, that the final closing shall occur on or before December 1, 2013 (the “Final Closing Date”), unless extended by mutual agreement of the Parties. The “Closing Date” shall be the date that the Investor’s funds—such representing the amount due to the Company for the Subscription Amount—are transmitted by wire transfer to or for the benefit of the Company.

 

2.3 Deliveries.

 

2.3.1. Items to be delivered to the Investor at the Closing by the Company. Each Investor’s obligations under this Agreement at each Closing, as applicable and to the extent not previously delivered, are conditioned upon the following closing conditions and deliveries:

 

2.3.1.1 The Company and the Parent shall deliver or cause to be delivered to each Investor this Agreement duly executed by the Company and the Parent;

 

2.3.1.2 The Company shall deliver or cause to be delivered to each Investor the applicable Note(s);

 

2.3.1.3 The Parent shall deliver or cause to be delivered to each Investor the Guaranty and the Security Agreement duly executed by the Parent;

 

2.3.1.4 The representations and warranties of the Company and the Parent set forth in Section 3 of this Agreement shall be true and correct in all material respects as of the relevant Closing Date, and all obligations, covenants, and agreements of the Company required to be performed at or prior to the relevant Closing Date shall have been performed.

 

2.3.2 Items to be delivered to the Company at the Closing by the Investors. The Company’s obligations under this Agreement and at each Closing, as applicable and to the extent not previously delivered, are conditioned on the following closing conditions and deliveries:

 

2.3.2.1 Each Investor shall deliver or cause to be delivered to the Company and the Parent the Investor Signature Page duly executed by the Investor;

 

  

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2.3.2.2 Each Investor shall deliver or cause to be delivered the Subscription Amount via wire transfer to the Company;

 

2.3.2.3 Each Investor shall deliver or cause to be delivered the Guaranty and Security Agreement duly executed by the Investor; and

 

2.3.2.5 Each Investor’s representations and warranties set forth in Section 4 of this Agreement shall be true and correct in all material respects as of the relevant Closing Date, and all obligations, covenants, and agreements of such Investor required to be performed at or prior to the relevant Closing Date shall have been performed.

 

2.4 Covenants.

 

2.4.1 Affirmative Covenants.

 

2.4.1.1 Within 45 days of the end of each fiscal quarter, the Company and the Parent shall deliver to the Investors (under appropriate confidentiality restrictions) unaudited quarterly financial reports (balance sheet, income statement and statement of cash flows). In addition, the Company and the Parent shall permit each Investor to inspect the books and records of the Company and the Parent on reasonable prior written notice.

 

2.4.1.2 Prior to the initial Closing Date and prior to the commencement of each fiscal year, the Company shall deliver to the Investors a business plan and budget approved by its board of directors. The Company shall operate in accordance with such business plan and shall not materially deviate from such business plan and budget .

 

  

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2.4.1.3 The Company shall preserve and maintain in good standing its existence as a limited liability company under the laws of the State of New Mexico and to comply in all material respects with all applicable federal, state, and local laws and regulations.

 

2.4.1.4 The Company shall as soon as practicable provide notice to the Investors or any fact, event, matter or circumstance that could be expected to have a Material Adverse Effect.

 

2.4.1.5 The Company shall use the proceeds from the Subscription Amount for the payment of expenses related to the Company’s cancer detection technologies and the Company’s general corporate purposes.

 

2.4.2 Negative Covenants.

 

2.4.2.1 The Company shall not incur or agree to incur any indebtedness for borrowed money or financed equipment, or any sort of trade debt, other than subordinated indebtedness on terms satisfactory to the Investors which does not exceed $50,000 in the aggregate from a single transaction or a series of related transactions and which does not exceed $250,000 in the aggregate in any 12-month period, without first obtaining the written approval of the Investors, nor shall the Company voluntarily incur or permit to exist any lien, security interest or other encumbrance on any of the Company’s assets without first obtaining the written approval of the Investors.

 

2.4.2.2 The Company shall not without the prior written consent of the Investors (i) pay any dividend or make any distribution on, or purchase, redeem, or retire, any Units (as defined herein) or any warrants, options, or other rights to reacquire any such Units; (ii) dispose of any assets other than in the ordinary course of business; (iii) issue additional equity or (iv) make any capital expenditure or other investments in assets which are not specifically referenced in the business plan.

 

  

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2.4.2.3 As long as any Note(s) remain outstanding, unless the Investors shall otherwise consent in writing, the Company shall not, directly or indirectly (a) amend its charter documents in any manner that adversely affects any rights of the Investors; or (b) pay dividends on any equity securities of the Company.

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY AND THE PARENT. Each of the Company and the Parent hereby represents and warrants to the Investor and agrees as follows:

 

3.1 Organization and Qualification. The Company is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of New Mexico and the Parent is a corporation duly formed, validly existing, and in good standing under the laws of the State of Delaware, each with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor the Parent is in violation or in default of any of the provisions of its organizational or charter documents. Each of the Company and the Parent is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity, or enforceability of this Agreement or any other Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects, or condition (financial or otherwise) of the Company, taken as a whole , or (iii) a material adverse effect on the ability of the Company and the Parent to perform in any material respect on a timely basis its obligations under this Agreement or any other Transaction Document, and no legal proceeding has been instituted; or, to its knowledge, threatened, in any such jurisdiction revoking, limiting, or curtailing or seeking to revoke, limit, or curtail such power and authority or qualification (a “Material Adverse Effect”).

 

3.2 Authorization; Enforcement. Each of the Company and the Parent has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement or the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the other Transaction Documents to which it is party by the Company and the Parent and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and the Parent and no further action is required by the Company and the Parent. Upon delivery to the Investors, this Agreement and the other Transaction Documents to which the Company or the Parent is a party will have been duly executed by the Company or the Parent and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company or the Parent enforceable against the Company or the Parent in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

  

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3.3 Capitalization. The authorized securities of the Company currently consist of 1,000,000 Common Membership Units (“Units”) of which 820,000 Units are issued and outstanding. All outstanding Units have been duly authorized, validly issued, and are fully paid and non assessable.

 

3.3.1 Except as otherwise set forth in Parent’s consolidated financial statements, as filed with the Securities and Exchange Commission from time to time, there are no outstanding options, rights, warrants, debentures, instruments, convertible securities or other agreements or commitments obligating the Company to issue any additional Units.3.3.2Except as otherwise set forth in Parent’s consolidated financial statements, as filed with the Securities and Exchange Commission from time to time, there are no (i) outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or by which the Company is or may become bound; (ii) financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company; (iii) agreements or arrangements under which the Company is obligated to register the sale of any of its securities under any law; (iv) there are no outstanding securities or instruments of the Company which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company.

 

3.4 No Conflicts. The execution and delivery of this Agreement and the other Transaction Documents to which the Company is party does not, and the performance by the Company or the Parent of its obligations under this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby do not and will not, conflict with or result in a violation or breach of any term or provision of any contract, law, order, permit, statute, rule, or regulation applicable to the Company, the Parent or any of its affiliates.

 

3.5 Issuance of the Notes. The Notes are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid, and nonassessable.

 

  

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3.6 Private Placement. Assuming the accuracy of the Investor’s representations and warranties set forth in Section 4, no registration under the Securities Act is required for the offer and sale of the Notes by the Company to the Investors as contemplated hereby.

 

3.7 No General Solicitation. Neither the Company, the Parent nor any person acting on behalf of the Company or the Parent has offered or sold the Notes by any form of general solicitation or general advertising. The Company has offered the Notes for sale only to the Investors.

 

3.8 Consents. No consent or approval of any person, regulatory authority, governmental organization, or third party, and no approval, order, license, permit, franchise, declaration, or filing of any nature (with the exception of required Regulation D and “blue sky” filings with the appropriate federal and state securities agencies), is required as a result of or in connection with the execution, delivery, and performance of the obligations of the Company or the Parent under this Agreement or any other Transaction Document.

 

3.9 Real Property. Real property and facilities held under lease by the Company are held under valid and subsisting leases of which the Company is in compliance.

 

3.10 Litigation. No actions (including, without limitation, derivative actions), suits, proceedings or investigations are pending or, to the knowledge of the Company, threatened against or affecting the Company or the Parent at law or in equity in any court or before any other governmental authority that if adversely determined (a) would (alone or in the aggregate) reasonably be expected to have a Material Adverse Effect or (b) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by the Company or the Parent of this Agreement or the Transaction Documents or the transactions contemplated hereby or thereby.

 

3.11 Patents and Trademarks; Assets. The Company owns, or possesses adequate rights or licenses to use, all trademarks, trade names, service marks, service mark registrations, service names, patents, patent applications, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to conduct the Company’s business as now conducted or as proposed to be conducted. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company regarding its Intellectual Property Rights. The Company has good and valid title to, or otherwise has the right to use pursuant to a valid and enforceable lease, license or similar contractual arrangement, all of the assets necessary to conduct the Company’s business as now conducted or as proposed to be conducted.

 

3.12 Financial Condition. As of the Closing Date, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known and contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted, including its capital needs, projected capital requirements and capital availability thereof; (iii) the current cash flow of the Company would receive were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debts when such amounts are required to be paid, and (iv) the Company has not incurred indebtedness beyond its ability to pay such debts as they become due. For the avoidance of doubt, any reference to the Company in this Section 3.12 shall be deemed to also include Parent.

 

  

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4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby represents and warrants to the Company as follows:

 

4.1 Due Authorization. The Investor has all requisite capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement constitutes the legal, valid, and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

4.2 Own Account. The Investor understands that the Notes are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Note(s) as a principal for his own account and not with a view to or for distributing or reselling the Note(s) or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing the Note(s) 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 the Note(s) in violation of the Securities Act or any applicable state securities law.

 

4.3 Investor Status. At the time the Investor was offered the Note(s), he was, and as of the date hereof he is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. The Investor is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.

 

4.4 Experience of the Investor. The Investor, either alone or together with his 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 investment in the Note(s), and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Note(s) and, at the present time, is able to afford a complete loss of such investment.

 

4.5 General Solicitation. The Investor is not purchasing the Note(s) as a result of any advertisement, article, notice, or other communication regarding the Note(s) published in any newspaper, magazine, or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

4.6 Access to Documents and Information. The Investor has (i) received and reviewed all information that it considers necessary or appropriate for deciding whether to purchase the Notes; (ii) had an opportunity, with his professional advisor, if any, to ask questions and receive answers from the Company regarding this Agreement and regarding the business, financial condition, and other aspects of the Company, and all such questions have been answered to the Investor’s full satisfaction; and (iii) had the opportunity to obtain all information (to the extent that the Company possesses or can acquire such information without unreasonable effort or expense) that the Investor deems necessary to evaluate the investment and to verify the accuracy of information otherwise provided to the Investor.

 

  

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4.7 Reliance on Information. The Investor has not relied on any information or representations with respect to the Company or the Note(s), other than as expressly set forth herein and in the other Transaction Documents. The Investor understands that no person has been authorized to give any information or to make any representations other than those expressly contained herein and in the other Transaction Documents. To the extent the Investor has determined it necessary to protect his interest in connection with the investment in the Note(s), the Investor has relied on his own analysis and investigation and that of his advisors in determining whether to invest in the Note(s).

 

4.8 Tax Advice. The Investor represents that he has consulted with his tax, investment, and legal advisors with respect to the federal, state, local, and foreign tax consequences arising from the purchase and ownership of the Note(s).

 

4.9 Government Approval. The Investor is aware and understands that no federal or state agency has made any recommendation or endorsement of the Note(s) as an investment, nor has any such governmental agency reviewed or passed upon the adequacy of information disclosed to the Investor.

 

4.10 No Registration. The Investor understands that the Note(s) have not been, and other than expressly set forth in the Transaction Documents, the Investor has no rights to require that the Note(s) or the shares of common stock of the Parent or Units into which such Note(s) is/are convertible be, registered or qualified under the Securities Act; that there is not now any public market for the Note(s) or the Units into which such Note(s) is/are convertible and none is anticipated; that neither the Note(s) nor the Units into which such Note(s) is/are convertible will be readily accepted as collateral for a loan; and that it may be extremely difficult to sell the Note(s), or the Units into which such Note(s) is/are convertible in the event of a financial emergency. As a consequence, the Investor understands that he must bear the economic risks of the investment in the Note(s) for an indefinite period of time.

 

5. ADDITIONAL INVESTOR RIGHTS

 

5.1 Participation Right. The Investor shall have the pro rata right, relative to the Company’s members and/or Parent’s stockholders (calculated as if such Investor’s Notes were fully converted), as applicable, to participate in any subsequent debt or equity financings (the “Qualified Financings”) conducted during the term of its Note (the “Participation Right”). The Company and/or Parent will provide notice to all Investors of any such Participation Right by way of writing at least ten (10) business days prior to the intended closing of the Qualified Financing, indicating the terms and conditions of any Qualified Financings (the “Financing Notice”). Each Investor electing to exercise its Participation Right shall notify the Company and/or Parent, as applicable, in writing, of such election at least five (5) business days prior to the anticipated closing date set forth in the Financing Notice (the “Participation Notice”). In the event the Investor does not return a Participation Notice to the Company, the Participation Right granted hereunder shall terminate and be of no further force and effect in respect of that particular Qualified Financing only.

 

  

9

  

 

5.2 Piggyback Registration Rights. If the Company or the Parent at any time proposes to register any of its securities under the Securities Act, including under an S-1 Registration Statement or otherwise, it will give written notice to the Investor, or assigns, of its intention so to do. Upon the written request of the Investor, or assigns, given within thirty (30) days after receipt of any such notice, each of the Company and the Parent will use its best efforts to cause all shares underlying the conversion of the applicable Note to be registered under the Securities Act (with the securities which the Company or the Parent at the time propose to register). All expenses incurred by the Company and the Parent in complying with this Section, including without limitation all registration and filing fees, listing fees, printing expenses, fees and disbursements of all independent accountants, or counsel for the Company and the Parent and the expense of any special audits incident to or required by any such registration and the expenses of complying with the securities or blue sky laws of any jurisdiction shall be paid by the Company or the Parent.

 

6. GENERAL PROVISIONS

 

6.1 Amendment. No provision of this Agreement may be modified, supplemented, or amended except in a written instrument signed by each of the Investors and the Company.

 

6.2 Further Assurances. The Parties hereto will, upon reasonable request, execute, and deliver all such further assignments, endorsements, agreements, and documents, and take such other action as may be necessary in order to consummate or evidence the transactions contemplated hereby.

 

6.3 Notice. All notices, requests, payments, instructions or other documents to be given hereunder will be in writing and will be deemed to have been duly given if (i) delivered personally (effective upon delivery), (ii) mailed by certified mail, return receipt requested, postage prepaid (effective five business days after dispatch), (iii) sent by a reputable, established courier service that provides evidence of delivery and guarantees next business day delivery (effective the next business day), or (iv) sent by facsimile followed by confirmation, addressed as follows (or to such other address as the recipient party may have furnished to the sending party for the purpose pursuant to this Section 6.3):

 

(a) If to the Company:

 

Senior Scientific, LLC

800 Bradbury SE, Suite 213

Albuquerque, NM 87106

Attn.: V. Gerald Grafe

 

With a copy to (which shall not constitute notice):

 

Richardson & Patel LLP

Attn: Nimish Patel, Esq.

1100 Glendon Avenue, Suite 850

Los Angeles, CA 90024

Fax: (310) 208-1154

npatel@richardsonpatel.com

 

  

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(b) If to the Investor, to the address of the Investor as set forth on the Investor Signature Page.

 

6.4 Successors and Assigns. This Agreement shall be binding upon, enforceable against, and inure to the benefit of, the Parties hereto and their respective heirs, administrators, executors, personal representatives, successors, and assigns, and nothing herein is intended to confer any right, remedy, or benefit upon any other person. This Agreement may not be assigned by the Investors or the Company except with the prior written consent of the other Party, provided that, the Investors shall be permitted to assign this Agreement to entities controlled by the Investors or, as applicable, their immediate family; to trusts established for the benefit of the Investors or their immediate family; or otherwise for bona fide estate planning purposes.

 

6.5 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principals of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and Federal courts sitting in the State of Delaware 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 or that such suit, action or proceeding is improper. 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 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 manner permitted by law.

 

6.6 Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be determined to be invalid, illegal, or unenforceable under present or future laws, then, and in that event: (1) the performance of the offending term or provision (but only to the extent its application is invalid, illegal, or unenforceable) shall be excused as if it had never been incorporated into this Agreement, and, in lieu of such excused provision, there shall be added a provision as similar in terms and amount to such excused provision as may be possible and be legal, valid, and enforceable; and (2) the remaining part of this Agreement (including the application of the offending term or provision to persons or circumstances other than those as to which it is held invalid, illegal, or unenforceable) shall not be affected thereby, and shall continue in full force and effect to the fullest extent provided by law.

 

6.7 Counterparts. This Agreement may be executed in counterparts and each counterpart shall have the same force and effect as an original and constitute an effective, binding agreement on the part of each of the undersigned. This Agreement may be transmitted by facsimile or otherwise.

 

  

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6.8 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits, and schedules.

 

6.9 Construction. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine, and neuter forms. The words “include”, “includes”, and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, restated, supplemented, or otherwise modified (subject to any restrictions on such amendments, restatements, supplements, or modifications set forth herein), (ii) the words “herein”, “hereof”, and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (iii) all references herein to Sections, clauses, and Exhibits shall be construed to refer to Sections and clauses of, and Exhibits to, this Agreement.

 

6.10 Fees and Expenses. The Company shall be responsible for its own expenses and for the legal expenses incurred by the Investors in connection with the execution of this Agreement, up to an aggregate of $10,000.

 

 

[Signature Pages Follow]

 

  

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.

 

	 	SENIOR SCIENTIFIC, LLC, a New Mexico limited liability company	 
	 	 	 	 
	 	
By: 

	/s/ V. Gerald Graffe	 
	 	Name: 	V. Gerald Graffe	 
	 	Title: 	Manager	 
	 	 	 	 
	 	MANHATTAN SCIENTIFICS, INC., a Delaware corporation	 
	 	 	 	 
	 	
By: 

	/s/ E. Tsoupanarias	 
	 	Name: 	E. Tsoupanarias	 
	 	Title: 	C.E.O.	 

 

  

13

  

EXHIBIT A

 

INVESTOR SIGNATURE PAGE

 

The undersigned Investor has read the Convertible Note Purchase Agreement dated as of April 3, 2013 and acknowledges that execution of this Investor Signature Page shall constitute the undersigned’s execution of such agreement.

I hereby subscribe for an aggregate of $________ in principal amount of the Note.

 

	I am a resident of the State of 	 
	 	 

 

Please print above the exact name(s) in which the Note is to be held

 

	My address is:	 	 
	 	 	 

 

I acknowledge that the offering of the Note is subject to the Federal securities laws of the United States and state securities laws of those states in which the Note is offered, and that, pursuant to the United States Federal securities laws and state securities laws, the Notes may be purchased by persons who come within the definition of an “Accredited Investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act (“Regulation D”).

 

By initialing one of the categories below, I represent and warrant that I come within the category so initialed and have truthfully set forth the factual basis or reason I come within that category. All information in response to this paragraph will be kept strictly confidential. I agree to furnish any additional information that the Company deems necessary in order to verify the answers set forth below.

NOTE: You must initial at least ONE category.

 

Individual Investor:

(An Investor who is an individual may initial either Category I, II, or III)

 

	
Category I

	
_____I am a director or executive officer of the Company.

 

	
Category II

	
_____I am an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with my spouse, excluding the value of my personal residence, presently exceeds $1,000,000.

Explanation. In calculation of net worth, you may include equity in personal property and real estate (excluding your principal residence), cash, short term investments, stocks, and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.

 

  

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Category III

	
_____I am an individual (not a partnership, corporation, etc.) who had an individual income in excess of $200,000 during the most recent two calendar years, or joint income with my spouse in excess of $300,000 during the most recent two calendar years, and I have a reasonable expectation of reaching the same income level in 2013.

 

Entity Investors:

 

(An Investor which is a corporation, limited liability company, partnership, trust, or other entity may initial either Category IV, V, VI or VII)

 

	
Category IV

	
The Investor is an entity in which all of the equity owners are “Accredited Investors” as defined in Rule 501(a) of Regulation D. If relying upon this category alone, each equity owner must complete a separate copy of this Agreement.

 

(describe entity)

 

	
Category V

	
_____The Investor is a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Note being offered, whose purchase is directed by a “Sophisticated Person” as described in Rule 506(b)(2)(ii) of Regulation D.

 

	
Category VI

	
_____The Investor is an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Note being offered, with total assets in excess of $5,000,000.

 

(describe entity)

 

	
Category VII

	
_____The Investor is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

 

(describe entity)

 

Executed this 3rd day of April, 2013 at ____________________, ________________.

 

  

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SIGNATURES

 

	INDIVIDUAL	 	 
	 	 	 
	 	 	 
	Signature (Individual)	 	 
	 	 	 
	(Print Name)	 	 
	 	 	 
	Residence Address:	 	 
	 	 	 
	 	 	 
	 	 	 
	Mailing Address:	 	 
	 	 	 
	 	 	 

 

	Tax Identification No.: 	 	 

 

	Telephone No.: 	 	 
	 	 	 

 

	Facsimile No.: 	 	 
	 	 	 
	E-Mail Address:	 	 
	 	 

 

  

16

  

EXHIBIT B

 

FORM OF CONVERTIBLE PROMISSORY NOTE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

17

  

EXHIBIT C

 

FORM OF LEAK OUT AGREEMENT 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

18

  

EXHIBIT D

 

GUARANTY AND SECURITY AGREEMENT 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

19

  

EXHIBIT E

 

SUBSEQUENT CLOSING SCHEDULE

 

April 3, 2013. $1,000,000. Instrument design and initial component orders.

 

October 1, 2013. $500,000. Instrument assembly and prove-ins.

 

April 1, 2014. $500,000. Validation in cell studies.

 

October 1, 2014. $500,000. Validation in animal studies, and at MDA.

 

Each Investor shall fund the following amounts on each Closing Date:

 

	
Initial Closing Date:

	
Raymond A. Mason

	 	$	333,334	 
	  	
William B. Jones

	 	$	333,333	 
	  	
Ferdinand J. Crovato

	 	$	333,333	 
	TOTAL	  	 	$	1,000,000	 

	
October 2013 Closing Date:

	
Raymond A. Mason

	 	$	166,666	 
	  	
William B. Jones

	 	$	166,667	 
	  	
Ferdinand J. Crovato

	 	$	166,667	 
	TOTAL	  	 	$	500,000	 
	  	  	 	 	 	 
	
April 2014 Closing Date:

	
Raymond A. Mason

	 	$	166,667	 
	  	
William B. Jones

	 	$	166,667	 
	  	
Ferdinand J. Crovato

	 	$	166,666	 
	TOTAL	  	 	$	500,000	 
	  	  	 	 	 	 
	
October 2014 Closing Date:

	
Raymond A. Mason

	 	$	166,667	 
	  	
William Jones

	 	$	166,666	 
	  	
Ferdinand J. Crovato

	 	$	166,667	 
	TOTAL	  	 	$	500,000	 

 

 

20

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