EXHIBIT 10.59
SECURITIES SUBSCRIPTION AGREEMENT
CORTEX PHARMACEUTICALS, INC.
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
BECAUSE THEY ARE EXEMPT FROM REGISTRATION UNDER VARIOUS REGULATIONS
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS
SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
This Securities Subscription Agreement (the "Agreement") is executed by
the undersigned (the "Subscriber") in connection with the irrevocable offer
and the subscription of the undersigned to purchase an aggregate of up to 400
shares of Series D Convertible Preferred Stock, par value $.001 per share
(the "Shares"), of Cortex Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), at a price of US $10,000 per share, which Shares are convertible
into shares of common stock, par value $.001 per share (the "Common Stock"
and together with the Shares, the "Securities"), of the Company. The terms
and provisions of the Shares are set forth in a Certificate of Designation
attached hereto as Exhibit A. This Agreement and the offer and sale of the
Securities contemplated hereby are being made in reliance upon an exemption
from the registration provisions under Section 4(2) of the Securities Act of
1933, as amended (the "Act") and Regulation D promulgated thereunder. The
Subscriber, in order to induce the Company to enter into the transaction
contemplated hereby and acknowledging that the Company will rely thereon
represents, warrants and agrees as follows:
1. OFFER TO SUBSCRIBE; PURCHASE PRICE.
(a) The Subscriber hereby irrevocably offers to purchase and
subscribes for an aggregate of 100 Shares for an aggregate price of
$1,000,000 at the time of the Closing (as hereinafter defined). The closing
of the transactions contemplated by this Section 1(a) hereby (the "Closing")
shall be deemed to occur when this Agreement has been executed and delivered
by both Subscriber and Company. Payment shall be made at the Closing by
delivering immediately available funds in United States dollars by wire
transfer for simultaneous closing by delivery of securities versus payment.
The Company agrees to deliver certificates representing the Shares subscribed
for at the Closing. The date on which the Closing occurs is hereafter
referred to as the Closing Date.
(b) In the event that the Company effects the registration of the
Registration Shares (as hereinafter defined) as contemplated by Section 4(c)
of this Agreement, the Subscriber irrevocably offers to purchase and
subscribes for an aggregate of 150 additional Shares (the "Second Tranche
Shares") for an aggregate price of $1,500,000 on the fifteenth calendar day
following the Effective Date (as hereinafter defined) or, if such fifteenth
calendar day is not a business day, on the next succeeding business day (the
"Second Tranche Closing Date"). Payment for the Second Tranche Shares shall
be made on the Second Tranche Closing Date by delivering immediately
available funds in United States dollars by wire transfer for simultaneous
closing by delivery of securities versus payment. The Company agrees to
deliver certificates representing the Second Tranche Shares subscribed for on
the Second Tranche Closing Date.
The date on which the registration of the Registration Shares is declared
effective by the Securities and Exchange Commission (the "Commission") is
herein referred to as the Effective Date.
(c) Additionally, the Subscriber irrevocably offers to purchase and
subscribes for an aggregate of 150 additional Shares (the "Third Tranche
Shares") for an aggregate price of $1,500,000 on the seventy-fifth calendar
day following the Effective Date or, if such seventy-fifth calendar day is
not a business day, on the next succeeding business day (the "Third Tranche
Closing Date"). Payment for the Third Tranche Shares shall be made on the
Third Tranche Closing Date by delivering immediately available funds in
United States dollars by wire transfer for simultaneous closing by delivery
of securities versus payment. The Company agrees to deliver certificates
representing the Third Tranche Shares subscribed for on the Third Tranche
Closing Date.
(d) Notwithstanding anything to the contrary in Sections l(b) and
l(c), in the event that (i) the average closing bid price of the Common Stock
of the Company over the five consecutive trading days immediately preceding
the Second Tranche Closing Date or the Third Tranche Closing Date, as the
case may be, falls below $2.00 per share; (ii) the average daily trading
volume over the thirty trading days immediately preceding the Second Tranche
Closing Date or the Third Tranche Closing Date, as the case may be, is less
than 25,000 shares per day, as reported by Bloomberg, L.P.; (iii) the Company
is in material default in the performance of any of its obligations under the
Agreement as of the Second Tranche Closing Date or the Third Tranche Closing
Date, as the case may be; (iv) any representation or warranty made by the
Company in this Agreement shall have been false in any material respect when
made; (v) the Company is involved in any material litigation on the Second
Tranche Closing Date or the Third Tranche Closing Date, as the case may be,
which has or is likely to have a material and adverse effect on the business
or financial condition of the Company; (vi) the Company has incurred
substantial liabilities as of the Second Tranche Closing Date or the Third
Tranche Closing Date, as the case may be, which has or is likely to have a
material and adverse effect on the business or financial condition of the
Company or (vii) the effectiveness of the registration statement referred to
herein has been suspended or terminated as of the Second Tranche Closing Date
or the Third Tranche Closing Date, as the case may be, then in any such case
the Subscriber shall be relieved of its obligation to purchase the Second
Tranche Shares or the Third Tranche Shares, as the case may be.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION
(a) ACCREDITED INVESTOR STATUS. Subscriber represents and warrants
to the Company that Subscriber is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D ("Regulation D") promulgated under the
Act.
(b) ACCESS TO INFORMATION. The Subscriber or his professional
advisor has been granted the opportunity to conduct a full and fair
examination of the records, documents and files of the Company, to ask
questions of and receive answers from representatives of the Company, its
officers, directors, employees and agents concerning the terms and conditions
of this offering, the Company and its business prospects, and to obtain any
additional information which the Subscriber or his advisor deems necessary to
verify the accuracy of the information received.
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(c) RELIANCE ON OWN ADVISORS. The Subscriber has relied completely
on the advice of, or has consulted with, its own tax, investment, legal and
other advisors and has not relied on the Company or any of its affiliates,
officers, directors, attorneys, accountants or any affiliates of any thereof
and each other person, if any, who controls any thereof, within the meaning
of Section 15 of the Securities Act for any tax or legal advice.
(d) CAPABILITY TO EVALUATE. The Subscriber has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks, which are substantial, of the prospective investment.
(e) INVESTMENT EXPERIENCE. Subscriber is an investor in securities
of companies in the development stage and has made investments in securities
other than those of the Company. Subscriber acknowledges that it is able to
fend for itself in the transaction contemplated by this Agreement, that it
has the ability to bear the economic risk of its investment pursuant to this
Agreement and that it is an "Accredited Investor" by virtue of the fact that
it meets the qualification standards set forth above. Subscriber has not
been organized for the purpose of investing in securities of the Company,
although such investment is consistent with its purposes.
(f) FEND FOR SELF. The Subscriber has either a pre-existing
personal or business relationship with the Company and its officers,
directors and controlling persons or by reason of its business or financial
expertise has the capacity to protect its own interest in connection with
this transaction.
(g) INVESTMENT; NO DISTRIBUTION. The Subscriber is acquiring the
Shares solely for the Subscriber's own account for investment purposes as a
principal and not with a view to immediate resale or distribution of all or
any part thereof. The Subscriber is aware that there are legal and practical
limits on the Subscriber's ability to sell or dispose of the Shares and the
shares of Common Stock issuable upon conversion thereof, and therefore, that
the Subscriber must bear the economic risk of the investment for an
indefinite period of time and has adequate means of providing for the
Subscriber's current needs and possible personal contingencies and has need
for only limited liquidity of this investment. The Subscriber's commitment
to illiquid investments is reasonable in relation to the Subscriber's net
worth.
(h) NO GENERAL SOLICITATION. The Shares were not offered to the
Subscriber through, and the Subscriber is not aware of, any form of general
solicitation or general advertising, including, without limitation, (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
and (ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(i) BENEFICIAL OWNER. Subscriber is purchasing the Shares, and
upon conversion thereof will be purchasing the shares of Common Stock
issuable thereupon, for its own account.
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(j) INDEPENDENT INVESTIGATION. Subscriber in electing to subscribe
for the Shares hereunder, has relied solely upon the representations and
warranties of the Company set forth in this Agreement and on independent
investigation made by it and its representatives, if any, and Subscriber has
been given no oral or written representations or assurance from the Company
or any representation of the Company other than as set forth in this
Agreement or in a document executed by a duly authorized representative of
the Company making reference to this Agreement.
(k) NO GOVERNMENT RECOMMENDATION OR APPROVAL. Subscriber
understands that no United States federal or state agency, or similar agency
of any other country, has passed upon or made any recommendation or
endorsement of the Company, this transaction or the purchase of the
Securities.
3. THE COMPANY REPRESENTS, COVENANTS AND WARRANTS THE FOLLOWING:
(a) CONCERNING THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a material
adverse effect on the Company and its subsidiaries taken as a whole. The
Company has registered its Common Stock pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and trades on the NASDAQ Small Cap Market. The
Company has filed all material required to be filed pursuant to all
applicable reporting obligations under either Section 13(a) or 15(d) of the
Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the Shares. The Company meets the eligibility
requirements of the Commission with respect to the use of Form SB-2 for the
filing of a registration statement with the Commission.
(b) CONCERNING THE SECURITIES. The issuance, sale and delivery of
the Shares and the shares of Common Stock issuable upon the conversion
thereof are within the Company's corporate powers and have been duly
authorized by all required corporate action on the part of the Company and
its stockholders and when such securities are issued, sold and delivered in
accordance with the terms hereof and the Shares for the consideration
expressed herein and in the Certificate of Designation, such securities will
be duly and validly issued, fully paid and nonassessable. There are no
preemptive rights of any shareholders of the Company.
(c) SUBSCRIPTION AGREEMENT. This Agreement has been duly
authorized, validly executed and delivered on behalf of the Company and is a
valid and binding agreement enforceable against the Company in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the issuance of the Shares and the
transactions contemplated by this Agreement and the Certificate of
Designation do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under,
the Restated Certificate of Incorporation or Bylaws of the Company, or any
indenture, mortgage, deed of trust, or other material agreement or instrument
to which the Company is a party or by which it or any of its properties or
assets are bound. In addition, it is understood that the execution and
delivery of the Agreement does not violate the terms of any existing
applicable law, rule or
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regulation of the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental
body having jurisdiction over the Company or any of its properties or assets.
(e) LITIGATION. There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now pending
or, to the knowledge of the Company, threatened, against or affecting the
Company, or any of its properties, which might result in any material adverse
change in the condition (financial or otherwise) or in the earnings of the
Company, or which might materially and adversely affect the properties or
assets thereof.
(f) NO SUBSTANTIAL LIABILITIES. The Company has not incurred any
liabilities which, to the knowledge of the Company, might result in any
material adverse change in the condition (financial or otherwise) or in the
earnings of the Company, or which might materially and adversely affect the
properties or assets thereof.
(g) NO DEFAULT. The Company is not in default in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property
may be bound; except that certain dividends on the 9% Cumulative Convertible
Preferred Stock of the Company have accrued and remain unpaid as of the
Closing Date.
(h) SEC FILINGS. None of the Company's filings with the Commission
since January 1, 1995 contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statement therein in light of the circumstances under which they
were made, not misleading at the time such filings were made. With the
exception of the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1996, which was to be filed with the Commission on or before
September 30, 1996 and with respect to which the Company has filed a
Notification of Late Filing on Form 12b-25, the Company has since January 1,
1995 timely filed all requisite forms, reports and exhibits thereto with the
Commission.
4. COVENANTS OF THE COMPANY. For so long as any Shares held by the
Subscriber remain outstanding, the Company covenants and agrees with the
Subscriber that:
(a) It will maintain the listing of its Common Stock on the NASDAQ
Small Cap Market.
(b) Except as otherwise expressly provided in Section 6 below, it
will not issue stop transfer instructions to its transfer agent with respect
to and will not place a restrictive legend on the certificates representing
the Shares or the shares of Common Stock issuable upon the conversion thereof.
(c) It will effect the registration under the Act and the rules and
regulations of the Commission of the resale of all shares of Common Stock
issuable upon the conversion of the Shares (the "Registration Shares") and,
in connection therewith, it will:
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(i) prepare and file with the Commission within thirty days of
the date hereof a registration statement on Form SB-2 (the "Registration
Statement") with respect to Two Hundred percent (200%) of the number of
Registration Shares as would be issuable on the date of filing of the
registration statement if all of the Shares were converted on that date,
pursuant to the rules and regulations of the Commission and cause the
Registration Statement to become and remain effective for a period of not
less than six months;
(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective for a period of not less than six months and comply with the
applicable provisions of the rules and regulations of the Commission;
(iii) furnish to the Subscriber such number of copies of
each prospectus included in the Registration Statement for the Registration
Shares as reasonably requested by the Subscriber, including each preliminary
prospectus, each of which shall be in conformity with the requirements of the
rules and regulations of the Commission;
(iv) notify the Subscriber at any time when a prospectus
relating to such Registration Shares is required to be delivered under rules
and regulations of the Commission within the appropriate period mentioned in
clause (ii) preceding, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of circumstances then existing, and at
the Subscriber's request, prepare and furnish to it a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registration Shares, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(v) cause all of the Registration Shares to be listed on the
NASDAQ Small Cap Market; and
(vi) in instances where an exemption from such qualification is
not available, register or qualify the Registration Shares under the
securities or Blue Sky laws of such jurisdictions as the Subscriber shall
reasonably request; provided, that the Company shall not be required to
register or qualify under the Blue Sky laws in states where the Company is
already cleared.
(d) It will permit the Subscriber to exercise its right to convert
the Shares by telecopying an executed and completed Notice of Conversion to
the Company and delivering, within three business days thereafter, the
original Notice of Conversion and the certificate representing the Shares to
the Company by express courier. Each date on which a Notice of Conversion is
telecopied to and received by the Company in accordance with the provisions
hereof shall be deemed a conversion date. The Company will transmit the
certificates representing shares of Common Stock issuable upon conversion of
any Shares (together with the certificates representing the Shares not so
converted) to the Subscriber via express courier, by electronic transfer or
otherwise, within three business days after receipt by the Company of the
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original Notice of Conversion and the certificate representing the Shares to
be converted (the "Delivery Date"). If, after three business days after the
Delivery Date, the Company has not delivered such shares of Common Stock in
accordance with the provisions of this Section 4(d), the Subscriber shall be
entitled to receive a penalty in an amount in cash equal to $30.00 per day
for each $50,000 face amount of Shares being so converted until the earlier
of the date of delivery of such shares of Common Stock or the revocation of
the Notice of Conversion as set forth below. In addition to any other
remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of such shares of Common
Stock within five business days after the Delivery Date, the Subscriber will
be entitled to revoke the relevant Notice of Conversion by delivering a
notice to such effect to the Company whereupon the Company and the Subscriber
shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion.
(e) It will, on the Second Tranche Closing Date and the Third
Tranche Closing Date, deliver to the Subscriber a certificate duly executed
by the President or Chief Financial Officer of the Company certifying to the
Subscriber that (i) the representations and warranties set forth herein made
by the Company on the Closing Date remain true and correct as of the Second
Tranche Closing Date or Third Tranche Closing Date, as the case may be, and
(ii) the Company has fully performed all of the covenants set forth herein as
of the Second Tranche Closing Date or Third Tranche Closing Date, as the case
may be.
5. RESTRICTIONS ON CONVERSION OF SHARES. The Subscriber or any
subsequent holder of the Shares (the "Holder") shall be prohibited from
converting any portion of the Shares which would result in the Subscriber or
the Holder being deemed the beneficial owner, in accordance with the
provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
of five percent (5%) or more of the then issued and outstanding Common Stock
of the Company.
6. RESTRICTIVE LEGENDS.
(a) All Shares and shares of Common Stock issuable upon the
conversion thereof will bear a restrictive legend in customary form for
securities issued pursuant to Regulation D. Such legend shall be removed (i)
in the absence of an effective registration statement covering such shares,
upon the receipt by the Company of a legal opinion from counsel to the
Subscriber reasonably acceptable to the Company to the effect that such
removal is permitted under the Act, and (ii) if there is an effective
registration statement covering such shares, upon a sale pursuant to such
effective registration statement.
(b) The shares of Common Stock issuable upon conversion of the
Shares will be subject to stop transfer instructions issued to the Company's
transfer agent which will prohibit the transfer of such shares in the absence
of an effective registration statement covering such shares or a legal
opinion from counsel to the Subscriber reasonably acceptable to the Company
to the effect that such transfers may be effected without violation of the
Act.
7. RELIANCE ON REPRESENTATIONS. The Subscriber understands that the
offer and sale of the Shares and the shares issuable upon conversion thereof
are not being registered under the Act. The Company and the Subscriber are
relying on the rules governing offers and sales made pursuant to Regulation D.
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8. RESALES. Subscriber acknowledges and agrees that the Securities may
only be resold (a) pursuant to an effective registration statement under the
Act; or (b) pursuant to an exemption from registration under the Act.
9. CONFIDENTIALITY. Each of the Company and the Subscriber agrees to
keep confidential and not to disclose to or use for the benefit of any third
party the terms of this Agreement or any other information which at any time
is communicated by the other party as being confidential without the prior
written approval of the other party; provided, however, that this provision
shall not apply to information which, at the time of disclosure, is already
part of the public domain (except by breach of this Agreement) and
information which is required or appropriate to be disclosed by the Company
under applicable securities law.
10. INDEMNIFICATION.
(a)(i) In anticipation of the registration of the Registration
Shares under the Act and the rules and regulations promulgated thereunder
pursuant to this Agreement, the Company will: (i) indemnify and hold
harmless the Subscriber and each other person, if any, who controls the
Subscriber within the meaning of the Act (each such party, an "Indemnified
Party"), to the fullest extent permitted by law, against any losses, claims,
damages or liabilities, joint or several, to which any such Indemnified Party
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which the
Registration Shares were registered under the Act and the rules and
regulations promulgated thereunder, any preliminary prospectus or final
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (ii) reimburse each Indemnified Party for any legal or
any other expenses reasonably incurred thereby in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, said
preliminary prospectus, said prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Indemnified Party specifically for use in the preparation
thereof.
(ii) The Subscriber will (a) indemnify and hold harmless the
Company and each other person, if any, who controls the Company within the
meaning of the Act, to the fullest extent permitted by law, against any
losses, claims, damages or liabilities, joint or several, to which the
Company or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement under which the Registration Shares were registered under the Act
and the rules and regulations promulgated thereunder, any preliminary
prospectus or final prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or any action or inaction of the
Subscriber in connection
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with the resale of the Securities, and (b) reimburse the Company and each
other person, if any, who controls the Company within the meaning of the Act
for any legal or any other expenses reasonably incurred thereby in connection
with investigating or defending any such loss, claim, damage, liability or
action; in each case to the extent and only to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus or said prospectus
or said amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by the Subscriber specifically
for use in the preparation thereof, provided, however, that the aggregate
liability of the Subscriber to the Company or such controlling person shall
be limited to the net proceeds received by the Subscriber from the sale of
Registration Shares covered by such registration statement.
(b) In addition to the indemnification provided in clause (a) of
this Section 10 and the remedies provided for in Section 11 below, each of
the Company and the Subscriber agrees to indemnify the other and hold the
other harmless from and against any and all losses, damages, liabilities,
costs and expenses (including reasonable attorneys' fees) which the other
party may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this
Agreement.
11. FAILURE TO EFFECT REQUIRED REGISTRATION.
(a) In the event that the Company has not effected the registration
of the Registration Shares under the Act and relevant blue sky laws within 90
days of the Closing Date, the Company shall pay to the Subscriber by wire
transfer, as liquidated damages (the "Liquidated Damages Amount") for such
failure and not as a penalty, 2% of the liquidation face amount of the Shares
purchased by the Subscriber on the Closing Date for the initial period of 30
days or portion thereof following the expiration of such 90-day period during
which such registration of the Registration Shares has not been effected and
3% of such liquidation face amount of Shares for any period of 30 days or
portion thereof following the first period of 30 days during which such
registration of the Registration of the Registration Shares has not been
effected. Such amount shall be due and payable in cash in advance on the
first business day of each such 30-day period, commencing on the 91st day
after the Closing Date.
(b) In the event that the Company has not effected the registration
of the Registration Shares under the Act and the relevant blue sky laws
within 180 days of the date hereof, then, in addition to the Liquidated
Damages Amounts payable pursuant to clause (a) above, the Company covenants
and agrees that (i) the Subscriber may immediately convert all of the Shares
purchased by the Subscriber on the Closing Date into shares of Common Stock
of the Company in accordance with the terms of the Certificate of
Designation, (ii) if the Subscriber sells the shares of Common Stock issuable
upon conversion of the Shares without registration under the Act pursuant to
the provisions of Section 4(1) of the Act, the Company will provide the
Subscriber with all reasonable assistance in consummating any such sales as
the Subscriber shall reasonably request, including, but not limited to,
removing the restrictive legend set forth on such shares, and (iii) the
Subscriber shall be relieved of any obligation to purchase additional Shares
of the Company. Until such time as the Subscriber converted the Shares and
received unlegended and freely traceable shares of Common Stock, nothing
contained herein shall be deemed to alter,
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suspend or terminate the obligation of the Company to pay the Liquidated
Damage Amount to the Subscriber as provided in Section 11(a) above.
12. NOTICES. Any notice to be given or to be served upon any party to
this Agreement in connection with this Agreement must be in writing and will
be deemed to have been given and received upon confirmed receipt, if sent by
facsimile, or two (2) days after it has been submitted for delivery by
Federal Express or an equivalent carrier, charges prepaid and addressed to
the following addresses with a confirmation of delivery:
If to the Company, to:
Cortex Pharmaceuticals, Inc.
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Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇
Chief Financial Officer
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Subscriber, to:
▇▇▇▇▇▇▇ Ltd.
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Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
13. MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original but all of which
will constitute one in the same instrument. However, in enforcing any
party's rights under this Agreement it will be necessary to produce only one
copy of this Agreement signed by the party to be charged.
14. CERTAIN AGREEMENTS. The Company covenants and agrees that it will
not enter into any subsequent Regulation D or Regulation S transaction with
any third party for a period of 60 days from the Closing Date; provided,
however, that the Company may issue equity securities in connection with any
corporate partnering transaction. Thereafter, the Company covenants and
agrees that it will not enter into any subsequent Regulation D or Regulation
S transaction with any third party for a period of 30 days commencing on the
61st day following the Closing Date without first offering the Subscriber the
opportunity (which shall remain open for a period of five business days from
the date the Subscriber receives notice thereof) to purchase up to all of
such additional Regulation D or Regulation S securities (in the discretion of
the Subscriber) on the terms and provisions on which the Company proposes to
offer such additional Regulation D or Regulation S securities to such third
parties. In the event that the Subscriber declines to participate in any
such investment, the Company shall provide the Subscriber with prompt written
notice of the consummation of any such transaction with a third party,
specifying the material
10
terms thereof. In addition, the Company covenants and agrees that
the securities to be offered in any such subsequent Regulation D or
Regulation S transaction with any third party will not be added to the
Registration Statement referred to herein. In the event that the Subscriber
does not purchase the Second Tranche Shares, the Company shall be relieved of
its obligations under the provisions of this Section 14.
15. GOVERNING LAW. This Agreement will be construed and enforced in
accordance with and governed by the laws of the State of New York except for
matters arising under the Act, without reference to principles of conflicts
of law. Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the State of New York or the
state courts of the State of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on FORUM NON CONVENIENS, to
the bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that if another party to this Agreement obtains a judgment against it
in such a proceeding, the party which obtained such judgment may enforce same
by summary judgment in the courts of any country having jurisdiction over the
party against whom such judgment was obtained, and each party hereby waives
any defenses available to it under local law and agrees to the enforcement of
such a judgment. Each party to this Agreement irrevocably consents to the
service of process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address
set forth herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
16. MANDATORY CONVERSION. The parties hereto acknowledge that the
Shares are subject to mandatory conversion as set forth in the Certificate of
Designation.
17. LIQUIDATED DAMAGES. In the event that the Company fails for any
reason to effect delivery of the shares of Common Stock issuable upon
conversion within 10 calendar days of the required time period set forth in
Section 4 hereof, the parties agree that the amount of damages sustained by
Subscriber would be substantial but would be difficult to determine
precisely. Accordingly, the Subscriber will be entitled to receive, as
liquidated damages for such failure and not as a penalty, an amount in cash
equal to the number of shares of Common Stock to which the Subscriber would
have been entitled on the date of the Conversion Notice multiplied by the
closing bid price for the Common Stock of the Company on the third day
following such date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
The Subscriber acknowledges that this Agreement shall not be effective
unless and until accepted by the Company as indicated below.
Dated this 15th day of October, 1996.
▇▇▇▇▇▇▇ LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 15th DAY OF OCTOBER,
1996.
CORTEX PHARMACEUTICALS, INC.
By: /s/ D. ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: D. ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President and
Chief Financial Officer
12
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
CORTEX PHARMACEUTICALS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
___________________________
CORTEX PHARMACEUTICALS, INC., a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by a duly
authorized committee of the Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board") by
the provisions of the Restated Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), there hereby is
created, out of the 5,000,000 shares of Preferred Stock, par value
$.001 per share, of the Corporation authorized in Article FOURTH of
the Restated Certificate of Incorporation (the "Preferred Stock"), a
series of the Preferred Stock of the Corporation consisting of 500
shares, which series shall have the following powers, designations,
preferences and relative, participating, optional and other rights,
and the following qualifications, limitations and restrictions:
a. DESIGNATION. The designation of the series of Preferred Stock fixed
by this resolution shall be "Series D Convertible Preferred Stock" (hereinafter
referred to as the "Series D Preferred Stock").
b. CONVERSION RIGHTS.
i. RIGHT TO CONVERT. The total number of original shares of Series
D Preferred Stock acquired by any holder may be converted, at the option of
the holder thereof, at any time after the earlier to occur of (i) date that
the Registration Statement (referred to in and defined in Section 4(c) of
the Securities Subscription Agreement, dated October 15, 1996, between
the Corporation and the initial holder of the Series D Preferred Stock) is
declared effective by the Securities and Exchange Commission or (ii)
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180 days from the date of original issuance of the Series D Preferred Stock,
without the payment of any additional consideration therefor, into that
number of fully paid and nonassessable shares of common stock, $.001 par
value per share, of the Corporation (the "Common Stock") determined as
follows. The number of shares issuable upon conversion of one share of
Series D Preferred Stock shall be:
X = ((0.06)(N/365)($10,000) + $10,000)/Conversion Price
where N is the number of calendar days between the applicable closing date and
the applicable conversion date. The "Conversion Price" shall be equal to the
lower of (i) 110% of the five day average closing bid price of the Common Stock
for the five trading days immediately preceding the date of original issuance of
Series D Preferred Stock or (ii) eighty-two percent (82%) of the average closing
bid price of a share of Common Stock as reported on the NASDAQ Small Cap Market
(or, in the event that such security is not traded on the NASDAQ Small Cap
Market, such other national or regional securities exchange or automated
quotations system upon which the Common Stock is listed and principally traded
or, in the event that the Common Stock is not listed on any exchange or quoted
on the NASDAQ Stock Market, any trading market in which quotes can be obtained)
over the five consecutive trading days immediately preceding the date of the
Conversion Notice (as defined in Section 2(b) hereof).
ii. MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Series D Preferred Stock. If upon
conversion of shares of Series D Preferred Stock held by a registered
holder which are being converted, such registered holder would, but for the
provisions of this Section 2(b), receive a fraction of a share of Common
Stock thereon, then in lieu of any such fractional share to which such
holder would otherwise be entitled, the Corporation shall pay cash equal to
such fraction multiplied by the then effective Conversion Price. Before
any holder of Series D
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Preferred Stock shall be entitled to convert the same into full shares
of Common Stock, such holder shall surrender the certificate or
certificates therefor,duly endorsed, at the office of the Corporation
or of any transfer agent for the Series D Preferred Stock, and shall
give written notice (the "Conversion Notice") to the Corporation at
such office that such holder elects to convert the same and shall state
therein such holder's name or the name or names of its nominees in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued. The Corporation shall, as soon as practicable
thereafter, but in any event within three business days of the date of its
receipt of the original Conversion Notice and the certificate or
certificates representing the shares of Series D Preferred Stock to be
converted, issue and deliver or cause to be issued and delivered to such
holder of Series D Preferred Stock or to its nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled, together with cash in lieu of any
fraction of a share. Such conversion shall be deemed to have been made on
the date that the Corporation first receives the Conversion Notice, by
telecopier or otherwise, and the person or persons entitled to receive the
shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on
such date. Upon the conversion of any shares of Series D Preferred Stock,
such shares shall be restored to the status of authorized but unissued
shares of Series D Preferred Stock and may be reissued by the Corporation
at any time.
iii. NOTICES OF RECORD DATE. In the event of (i) any declaration by
the Corporation of a record date of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution or (ii) any capital
reorganization of the Corporation, any reclassification or
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recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or
substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the Corporation shall mail to each holder of Series D Preferred Stock at
least twenty (20) days prior to the record date specified therein, a
notice specifying (A) the date on which any such record is to be declared
for the purpose of such dividend or distribution and a description of
such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective
and (C) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution or winding
up.
iv. STOCK DIVIDENDS: STOCK SPLITS; ETC. In the event that the
Corporation shall (i) take a record of holders of shares of the Common
Stock for the purpose of determining the holders entitled to receive a
dividend payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, (iii) combine the outstanding shares of Common
Stock into a smaller number of shares or (iv) issue, by reclassification of
the Common Stock any other securities of the Corporation, then, in each
such case, the Conversion Price then in effect shall be adjusted so that
upon the conversion of each share of Series D Preferred Stock then
outstanding the number of shares of Common Stock into which such shares of
Series D Preferred Stock are convertible immediately after the happening of
any of the events described in clauses (i)
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through (iv) above shall be the number of such shares of Common Stock that
would have been held by the holder had such shares of Series D Preferred
Stock been converted immediately prior to the happening of such event or
any record date with respect thereto.
v. MANDATORY CONVERSION. If not sooner converted, all outstanding
shares of Series D Preferred Stock shall be subject to mandatory conversion
on the second anniversary of the date of original issuance thereof. For
purposes of clause (b) above, such second anniversary date shall be deemed
to be the date on which the Corporation receives a Conversion Notice with
respect to the then outstanding shares of Series D Preferred Stock.
vi. COMMON STOCK RESERVED. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of all of the then outstanding shares of Series D Preferred
Stock.
c. VOTING RIGHTS OF SERIES D PREFERRED STOCK. Except as otherwise
required by law, the holders of outstanding shares of Series D Preferred Stock
shall not be entitled to vote on any matters submitted to the stockholders of
the Corporation.
d. PREFERENCE ON LIQUIDATION. Subject to the liquidation preferences of
any series of Preferred Stock other than the Series D Preferred Stock,
including, without limitation, any liquidation preferences that provides for
payments to any series of Preferred Stock or the Common Stock prior to or on a
parity with any payment to holders of the Series D Preferred Stock provided for
below (including any preferences that provide for additional parity or
non-parity payments to the holders of the Series D Preferred Stock), in the
event of any liquidation, dissolution or winding up of the Corporation,
distributions to holders of Series D Preferred Stock, and holders of Common
Stock shall be made in the following manner:
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i. The holders of Series D Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets
of the Corporation to the holders of the Common Stock by reason of their
ownership of such stock, the amount of $10,000 plus (0.06)(N/365)($10,000),
where N is the number of calendar days since the issuance of such share of
Series D Preferred Stock, per share of each share of Series D Preferred
Stock then held by them, adjusted for any stock split, stock combination,
stock distribution or stock dividend with respect to such shares. The
Series D Preferred Stock shall rank junior to the 9% Cumulative Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock of the
Corporation, but senior to any other series of preferred stock hereinafter
designated by the Corporation, as to the distribution of assets and funds
upon dissolution, liquidation or winding up of the Corporation.
ii. After payment in full to (i) the holders of Series D Preferred
Stock of all amounts exclusively payable on or with respect to said shares
pursuant to Section 5(a) above, the holders of the Common Stock shall be
entitled to receive the remaining assets of the Corporation available for
distribution to the stockholders upon the dissolution, liquidation or
winding up of the Corporation. If the assets and funds available for
distribution among the holders of the Common Stock or of any other series
of Preferred Stock ranking on a parity with the Common Stock with respect
to this Section 5(b) as to the distribution of assets upon such
dissolution, liquidation or winding up shall be insufficient to permit the
payment to such holders of their full liquidation payments, then the entire
remaining assets and funds of the Corporation legally available for such
distribution shall be distributed ratably among such holders in proportion
to their aggregate preferential amounts.
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iii. A consolidation or merger of the Corporation with or into another
corporation or entity in a transaction involving the disposition of more
than fifty percent (50%) of other voting power of the Corporation, or a
sale of all or substantially all of the assets of the Corporation (a "Sale
of the Corporation") shall be regarded as a dissolution, liquidation or
winding up of the Corporation within the meaning of this Section 5. The
Corporation shall not consummate a Sale of the Corporation before the
expiration of ten (10) days after mailing written notice of the proposed
Sale of the CorporatiOn to the holders of record of the Series D Preferred
Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its Vice President and Chief Financial Officer, this
15th day of October, 1996.
CORTEX PHARMACEUTICALS, INC.
By: /s/ D. ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: D. ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President and
Chief Financial Officer
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