Circumventing nausea and vomiting. According to a survey of over 500 respondents conducted by the National Headache Foundation in 2008, 90% of migraineurs have experienced nausea with a migraine and 59% of migraineurs have experienced vomiting with a migraine. In this survey, 48% of respondents who ever experienced nausea or vomiting with a migraine reported that the nausea or vomiting had a moderate to major impact on when or how they take migraine medications. The American Academy of Neurology guidelines recommend non-oral therapies for migraineurs who experience nausea or vomiting as significant migraine symptoms. Because Zelrix is administered transdermally, we believe

EX-10.6 14 w78367a1exv10w6.htm EX-10.6 exv10w6

Exhibit 10.6

SECURED SUBORDINATED CONVERTIBLE NOTE AND WARRANT

PURCHASE AGREEMENT

NUPATHE INC.

April 9, 2010

SCHEDULES AND EXHIBITS
TO
SECURED SUBORDINATED CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT


Schedules:
	3.3	Capitalization; Voting Rights
	3.5	Financial Statements
	3.6	Liabilities


Exhibits:
Exhibit A		Schedule of Purchasers
Exhibit B		Form of Secured Subordinated Convertible Promissory Note
Exhibit C		Form of Warrant
Exhibit D		Knowledge Persons
Exhibit E-1 and E-2		Capitalization

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NUPATHE INC.

SECURED SUBORDINATED CONVERTIBLE NOTE AND WARRANT

PURCHASE AGREEMENT

THIS SECURED SUBORDINATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT (the “Agreement”) is entered into on April 9, 2010 by and among NuPathe Inc., a Delaware corporation (the “Company”), and the purchasers identified on Exhibit A on the date hereof (the “Purchasers”).

BACKGROUND

A. The Company currently is in the business of developing therapeutic products for the treatment of neurological and psychiatric disorders (such products developed, manufactured or distributed by the Company, the “Products,” and the development, manufacture or distribution of the Products being the “Business”).

B. The Company has authorized the sale and issuance of secured subordinated convertible promissory notes substantially in the form attached hereto as Exhibit B (each, as executed by the Company, a “Note” and collectively, the “Notes”) having an aggregate principal amount of up to $10,062,500.

C. As an inducement to each Purchaser to purchase a Note (or Notes), the Company has authorized the issuance of a warrant to each Purchaser to purchase stock in substantially the form attached hereto as Exhibit C (each, as executed by the Company, a “Warrant” and collectively, the “Warrants”).

D. Each Purchaser desires to purchase the Notes and the Warrants on the terms and conditions set forth herein.

E. The Company desires to issue and sell the Notes and the Warrants to each Purchaser on the terms and conditions set forth herein.

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

1. AGREEMENT TO SELL AND PURCHASE.

1.1. Authorization of Notes, Shares and Conversion Shares. The Company has authorized (i) the sale and issuance to the Purchasers of the Notes, (ii) the reservation of shares (the "Shares”) of the Company’s Series B Preferred Stock, $0.001 par value per share (“Series B Preferred Stock”), issuable upon conversion of the Notes and (iii) the reservation of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), issuable upon conversion of the Shares (the “Conversion Shares”). The Shares and the Conversion Shares shall have the rights, preferences, privileges and restrictions set forth in the Third Amended and Restated Certificate of Incorporation of the Company, as amended (the “Certificate”).

1.2. Authorization of Warrants and Warrant Shares. The Company has authorized (i) the issuance to the Purchasers of the Warrants, (ii) the reservation of shares of Series B Preferred Stock (the “Warrant Shares”), issuable upon exercise of the Warrants and (iii) the reservation of shares of Common Stock issuable upon exercise of the Warrants, and/or conversion of the Warrant Shares, as applicable (the “Warrant Conversion Shares”). The Warrant Shares and the Warrant Conversion Shares will have the rights, preferences, privileges and restrictions set forth in the Certificate. The Company, on the one hand, and each Purchaser, on the other hand, having adverse interests and as a result of arm’s length bargaining, agree that: (a) neither the Purchaser nor any individual or entity affiliated with the Purchaser has rendered any services to the Company in connection with this Agreement; (b) the Warrants are not being issued as compensation; and (c) all tax returns and other information of each party relative to this Agreement and the Notes and Warrants issued pursuant hereto shall consistently reflect the matters agreed to in (a) and (b) above.

1.3. Sale and Purchase. Subject to the terms and conditions hereof, and in reliance upon the representations, warranties and covenants contained herein, (i) at the Initial Closing (as defined below) the Company shall issue and sell to each Purchaser, severally and not jointly, and each Purchaser shall purchase from the Company, severally and not jointly, a Note having an original principal amount equal to the amount set forth opposite such Purchaser’s name on Exhibit A under Column B (collectively, the “Initial Closing Notes”), and (ii) at the Second Closing (as defined below) the Company shall issue and sell to certain Purchasers, severally and not jointly, and such Purchasers shall purchase from the Company, severally and not jointly, a Note having an original principal amount equal to the amount set forth opposite such Purchaser’s name on Exhibit A under Column C (collectively, the “Second Closing Notes”).

1.4. Issuance of Warrants. The Company shall issue to each Purchaser a Warrant determined as follows:

(a) Upon conversion of the Note (or Notes) issued to such Purchaser pursuant to Section 4(b) thereof in connection with an Acquisition Transaction (as defined in the Note), the Company shall issue a Warrant to subscribe for and purchase up to a number of shares of Series B Preferred Stock equal to (i) the outstanding principal amount of the Note (or Notes) at the date of such conversion multiplied by twenty-five percent (25%), divided by (ii) the Acquisition Conversion Price (as defined in the Note). The per share exercise price under the Warrant shall initially be equal to the Acquisition Conversion Price.

(b) Upon conversion of the Note (or Notes) issued to such Purchaser pursuant to Section 4(c) thereof in connection with a Qualified Financing (as defined in the Note), the Company shall issue a Warrant to subscribe for and purchase up to a number of shares of Equity Securities (as defined in the Note) equal to (i) the outstanding principal amount of the Note (or Notes) at the date of such conversion multiplied by twenty-five percent (25%), divided by (ii) the Qualified Financing Conversion Price (as defined in the Note). The per share exercise price under the Warrant shall initially be equal to the Qualified Financing Conversion Price.

(c) If the Note (or Notes) issued to such Purchaser is not converted pursuant to Section 4 of the Note, at the Maturity Date (as defined in the Note), the Company shall issue a Warrant to subscribe for and purchase up to a number of shares of Series B Preferred Stock equal to (i) the outstanding principal amount of the Note (or Notes) at the date of such conversion multiplied by twenty-five percent (25%), divided by (ii) the Optional Conversion Price (as defined in the Note). The per share exercise price under the Warrant shall initially be equal to the Optional Conversion Price.

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2. CLOSINGS, DELIVERY AND PAYMENT.

2.1. Closings. The closing of the sale and purchase of the Initial Closing Notes under this Agreement (the “Initial Closing”) shall take place at 10:00 a.m. on the date hereof, at the offices of Morgan Lewis & Bockius LLP, 1701 Market Street, Philadelphia, PA 19103, or at such other time or place as the Company and the Purchasers may mutually agree (such date is hereinafter referred to as the “Initial Closing Date”). The closing of the sale and purchase of the Second Closing Notes under this Agreement (the “Second Closing,” and together with the Initial Closing, the “Closings”) shall take place at 10:00 a.m. on April 20, 2010, at the offices of Morgan Lewis & Bockius LLP, 1701 Market Street, Philadelphia, PA 19103, or at such other time or place as the Company and the Majority Holders (as defined in the Note) may mutually agree (such date is hereinafter referred to as the “Second Closing Date”); provided, that upon the satisfaction of the conditions set forth in Section 5.1 at the Initial Closing, there shall be no additional conditions with respect to the consummation of the Second Closing.

2.2. Delivery; Payment. At the Initial Closing and the Second Closing, subject to the terms and conditions hereof, the Company will deliver to each Purchaser a fully executed Initial Closing Note or Second Closing Note, as applicable, against payment for such securities in cash by wire transfer of immediately available funds made payable to the order of the Company or as it shall direct.

2.3. Use of Proceeds. The proceeds received by the Company from the sale of the Notes and the Warrants shall be used for general corporate purposes including working capital.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Purchasers that the statements made in this Section 3, together with the disclosure set forth on the disclosure schedules referenced herein and attached hereto (the “Schedules”), are true and correct on the date hereof. The Schedules shall be arranged to correspond to the numbered paragraphs contained in this Section 3, and the disclosure in any paragraph of the Schedules shall qualify other subsections in Section 3 only to the extent that it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other subsections. As used herein, the term “Knowledge” means the actual knowledge, following such inquiries and investigations as would be deemed appropriate by a reasonable businessperson engaged in a business similar to the Business in the prudent management of his or her business affairs, of the persons set forth on Exhibit D and the term “Actual Knowledge” means the actual knowledge of the persons set forth on Exhibit D.

3.1. Organization, Good Standing and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, to issue and sell each of the Notes and to issue each of the Warrants and, upon conversion of the Notes, to issue the Shares and, upon conversion of the Shares, to issue the Conversion Shares, and, upon exercise of the Warrants, to issue the Warrant Shares and, upon conversion of the Warrant Shares, to issue the Warrant Conversion Shares (the Notes, Shares, Conversion Shares, Warrants, Warrant Shares and Warrant Conversion Shares are sometimes referred to herein, collectively or separately as the context may require, as the "Securities”), and to carry out the provisions of this Agreement, the Notes and the Warrants and to carry on its Business as currently conducted and as currently proposed to be conducted. The Company is duly qualified, is authorized to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the assets, liabilities, financial condition, operations or prospects of the Company (a “Material Adverse Effect”).

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3.2. Subsidiaries. The Company does not have any Subsidiaries (as defined below). The Company does not own any ownership interest or profits interest in any other corporation, limited liability company, limited partnership or other entity. The Company is not a participant in any joint venture, partnership or similar arrangement. For the purposes of this Agreement, "Subsidiaries” means, with respect to any Person (as defined below) (including the Company), any corporation, partnership, association or other business entity of which more than 50% of the issued and outstanding stock or equivalent thereof having ordinary voting power is owned or controlled by such Person, by one or more Subsidiaries or by such Person and one or more Subsidiaries of such Person. For purposes of this Agreement, “Person” means any individual, corporation, partnership, firm, joint venture, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated organization or governmental entity.

3.3. Capitalization; Voting Rights. The authorized capital stock of the Company, immediately prior to the Closing, consists of: (i) 73,050,000 shares of Common Stock, par value $0.001 per share, of which 3,131,250 shares are issued and outstanding and an aggregate of 8,366,095 shares are reserved for future issuance pursuant to the NuPathe Inc. 2005 Equity Compensation Plan, as amended (the “Company Equity Incentive Plan”), and (ii) 53,967,262 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”), 17,056,914 of which are designated Series A Preferred Stock, $0.001 par value per share (“Series A Preferred Stock”), 16,922,506 of which are issued and outstanding, and 36,910,348 of which are designated Series B Preferred Stock, 36,173,834 of which are issued and outstanding; and immediately prior to the Closing, all issued and outstanding shares of the Company’s Common Stock, Series A Preferred Stock and Series B Preferred Stock (1) have been duly authorized and validly issued to the persons listed on Exhibit E-1 hereto in the amounts set forth thereon, (2) are fully paid and nonassessable, and (3) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. When issued in compliance with this Agreement, the Notes, the Warrants and the Certificate, the Securities will be, except as set forth on Schedule 3.3, free of any liens or encumbrances other than liens and encumbrances created by or imposed upon the Purchasers; provided, however, that the Shares, the Warrant Shares, the Conversion Shares and the Warrant Conversion Shares may be subject to restrictions on transfer under the Related Agreements (as defined below) and state and/or federal securities laws. The Shares and the Conversion Shares have been duly and validly reserved for issuance. The rights, preferences, privileges and restrictions of the Series B Preferred Stock and the Common Stock are as stated in the Certificate. Except as set forth on Schedule 3.3, and except as may be granted pursuant to the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or other agreements of any kind for the purchase or acquisition from the Company of any of its securities. Except as set forth on Schedule 3.3 and except as may be granted pursuant to the Related Agreements, there are no proxies, stockholder agreements or any other agreements between the Company and any stockholder of the Company or, to the Company’s Knowledge, between any stockholders of the Company, related to the capital stock of the Company, including agreements relating to the voting of the capital stock of the Company. Except as set forth in the Company Equity Incentive Plan or on Schedule 3.3, no stock plan, stock purchase agreement, stock option agreement or other equity-based agreement or understanding between the Company and any holder of any equity securities or rights to purchase equity securities provides for acceleration or other changes in the vesting provisions or other terms of such agreement or understanding as the result of any merger, consolidation, sale of stock or assets, change in control or other similar transaction by the Company. The total outstanding capital stock of the Company on a fully diluted basis immediately following the Closing on a pro forma basis will be as set forth as Exhibit E-2. For purposes of this Agreement, “Related Agreements” means the Amended and Restated Investor Rights Agreement, dated as of July 8, 2008, by and among the Company and the other parties named therein (the “Investor Rights Agreement”) and the Amended and Restated Stockholders Agreement, dated as of July 8, 2008, by and among the Company and the other parties named therein (the “Stockholders Agreement”).

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3.4. Authorization; Binding Obligations. All actions by or on behalf of the Company or the stockholders necessary for the authorization of this Agreement, the Notes and the Warrants, the performance of all obligations of the Company hereunder and thereunder at the Closing and the authorization, sale, issuance and delivery of the Notes and the Warrants pursuant hereto and the authorization and reservation of the Shares, the Warrant Shares, the Conversion Shares and the Warrant Conversion Shares pursuant to the Certificate have been taken or will be taken prior to the Closing. This Agreement (assuming due execution and delivery by the Purchasers), the Notes and the Warrants, when executed and delivered, will be valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) as limited by general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Sections 2.9 or 3.14 of the Investor Rights Agreement may be limited by applicable law.

3.5. Financial Statements. The Company has delivered, or will deliver, to the Purchasers (a) the unaudited financial statements (balance sheet, statement of operations, and statement of cash flows) of the Company as of and for the year ended December 31, 2009 and (b) the unaudited financial statements (balance sheet, statement of operations, and statement of cash flows) of the Company as of and for the two (2) months ended February 28, 2010, copies of which are attached hereto as part of Schedule 3.5 (collectively, the “Financial Statements”). The Financial Statements, together with the notes thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, and are complete and correct in all material respects and present fairly, in all material respects, the results of operations, financial condition and position of the Company as of the dates presented, subject (in the case of unaudited financial statements) to normal year-end adjustments, which adjustments will not be materially adverse to the Company, and an absence of footnotes.

3.6. Liabilities. The Company does not have any direct or indirect liabilities, indebtedness or obligations, known or unknown, asserted or unasserted and whether accrued, absolute, contingent, matured or unmatured (collectively, “Liabilities”), that are not disclosed in the Financial Statements, incurred in the ordinary course of business since the date thereof or set forth on Schedule 3.6 attached hereto, other than Liabilities incurred in the ordinary course of business after February 28, 2010 (the “Statement Date”) that are not individually in excess of $25,000 or in excess of $100,000 in the aggregate. The Company is not a guarantor or indemnitor of any indebtedness of any other Person.

3.7. Litigation. There is no action, suit or proceeding pending or, to the Company’s Actual Knowledge, any threatened action, suit or proceeding against the Company or any investigation of the Company.

3.8. Tax Returns and Payments. The Company has timely filed all tax returns, or timely filed appropriate extensions for such returns, required to be filed by it, and the Company has timely paid all taxes owed by it (whether or not shown on any tax return).

3.9. Real Property Holding Corporation. The Company is not, and has not ever been, a “United States real property holding corporation” as that term is defined in Section 897 of the Internal Revenue Code of 1986, as amended.

3.10. Consents; Approvals. No consent, approval, waivers or authorization of, or designation, declaration or filing with any court, governmental authority or instrumentality or arbitrator or any other Person is required in connection with the valid execution, delivery and performance of this Agreement, the Notes and the Warrants (including, without limitation, the issuance of the Shares, the

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Warrant Shares or the Conversion Shares), except such filings that have been duly and validly obtained or filed, or with respect to any filings that must be made after the Closings as will be filed in a timely manner.

3.11. Offering Valid. Assuming the accuracy of the representations and warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale and issuance of the Securities will be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act”) and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws.

3.12. Compliance with Laws; Permits. The Company is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government of any instrumentality or agency thereof in respect of the conduct of the Business or the ownership of its properties which violation would have a Material Adverse Effect.

3.13. Investment Company Act. The Company is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

3.14. No Broker. The Company has not employed any broker or finder, or incurred any liability for any brokerage or finders fees or any similar fees or commissions in connection with the transactions contemplated by this Agreement.

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

Each Purchaser hereby represents and warrants to the Company, severally, individually and not jointly, as follows, as of the date hereof:

4.1. Requisite Power and Authority. Purchaser has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. All actions on Purchaser’s part required for the lawful execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and thereby and the performance of all obligations of Purchaser hereunder and thereunder, have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement will be a valid and binding obligation of Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) as limited by general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Section 2.9 or 3.14 of the Investor Rights Agreement may be limited by applicable laws.

4.2. Investment Representations. Purchaser understands that none of the Securities have been registered under the Securities Act, under any state securities laws or under securities laws of any other jurisdiction. Purchaser also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser’s representations contained in this Agreement. Purchaser hereby represents and warrants as follows:

(a) Purchasers Bear Economic Risk. Purchaser understands that the Securities will be “restricted securities” under applicable securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations the Securities may be resold without registration and/or qualification under the

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Securities Act only in certain limited circumstances. Purchaser has substantial experience in evaluating and participating in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its purchase of securities in the Company and has the capacity to protect its own interests. Purchaser is capable of bearing the economic risk of this purchase indefinitely and is able to bear a complete loss of its holdings in the Company. Purchaser also represents that it has not been organized for the purpose of acquiring the Securities.

(b) Acquisition for Own Account. Purchaser is acquiring the Securities for its own account, not as nominee or agent, and not with a view towards their resale or distribution or any part thereof, and Purchaser has no present intention of selling, granting any participation in or otherwise distributing the same. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Securities.

(c) Accredited Investor. Purchaser is an “accredited investor” within the meaning of Regulation D under the Securities Act.

(d) Discussions with the Company; Access to Information. Purchaser has had an opportunity to discuss the Company’s Business, management and financial affairs with the Company’s management. Purchaser has had an opportunity to ask questions of and receive answers from, officers of the Company. Purchaser has made, either alone or together with its advisors, such independent investigation of the Company, its management and related matters as it deems to be, or as such advisors have advised to be, necessary or advisable in connection with the purchase of the Securities; and to Purchasers knowledge, Purchaser and its advisors have received all information and data that they, and such advisors, believe to be necessary in order to reach an informed decision as to the advisability of the purchase of the Securities, bearing in mind (among other factors, without limitation) that Purchaser may not be able to dispose of the Securities for the indefinite future.

4.3. Transfer Restrictions. Purchaser acknowledges and agrees that the Shares and the Warrant Shares and, if issued, the Conversion Shares, are subject to restrictions on transfer as set forth in the Related Agreements and/or applicable state and/or federal securities laws.

4.4. Litigation. There is no action, suit, proceeding or investigation pending, or to each Purchaser’s knowledge, currently threatened against Purchaser which, if adversely determined, would, individually or in the aggregate, have a material adverse effect on the ability of Purchaser to perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

4.5. No Broker. Purchaser has not employed any broker or finder, or incurred any liability for any brokerage or finders fees or any similar fees or commissions in connection with the transactions contemplated by this Agreement.

4.6. Residence. The office or offices of Purchaser in which it made its decision to purchase the Securities is located at Purchaser’s respective address set forth beneath Purchaser’s name on the signature pages hereto.

5. CONDITIONS TO CLOSING.

5.1. Conditions to Purchasers’ Obligations at the Closings. The obligations of the Purchasers to consummate the transactions contemplated herein is subject to the satisfaction, on or prior to the date of the Closing, of the conditions set forth below.

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(a) Representations and Warranties; Performance of Obligations. Each of the representations and warranties of the Company contained herein shall be true and correct on and as of the Initial Closing Date. As of the Initial Closing, the Company shall have performed and complied with the covenants and provisions of this Agreement required to be performed or complied with by it at or prior to the Initial Closing Date. At the Initial Closing, the Purchasers shall have received certificates of the Company dated as of the date of the Initial Closing, signed by an officer of the Company, certifying as to the fulfillment of the conditions set forth in this Section 5.1 and the truth and accuracy of the representations and warranties of the Company contained herein (as qualified by the Schedules) as of the Initial Closing Date.

(b) Issuance in Compliance with Laws. The sale and issuance of the Notes and the Warrants and the proposed issuance of the Shares, Warrant Shares and Conversion Shares shall be legally permitted by all laws and regulations to which any of the Purchasers and the Company are subject.

(c) Filings, Consents, Permits, and Waivers. The Company and the Purchasers shall have made all filings and obtained any and all consents, permits and waivers necessary for consummation of the transactions contemplated by the Agreement.

(d) Reservation of Shares, Warrant Shares and Conversion Shares. The Shares issuable upon conversion of the Notes and the Conversion Shares shall have been duly authorized and reserved for issuance upon such conversion. The Warrant Shares issuable upon the exercise of the Warrants and the Conversion Shares shall have been duly authorized and reserved for issuance upon such exercise or conversion, as applicable.

(e) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the applicable Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Purchasers and their counsel, and the Purchasers and their counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

(f) Proceedings and Litigation. No action, suit or proceeding shall have been commenced by any governmental authority against any party hereto seeking to restrain or delay the purchase and sale of Shares or the other transactions contemplated by this Agreement.

(g) No Material Adverse Effect. There shall have occurred no event or condition that has had, or reasonably could be expected to have, a Material Adverse Effect or which could adversely affect the Company’s ability to perform its obligations under this Agreement.

(h) Purchaser Approvals. As of the Initial Closing, all requisite approvals of the general partners or investment committees, as applicable, of each Purchaser necessary for the performance of the transactions contemplated by this Agreement shall have been obtained.

(i) Approval of Safeguard. As of the Initial Closing, all approvals of Safeguard Delaware, Inc., necessary for the performance of the transactions contemplated by this Agreement shall have been obtained.

(j) Secretary’s Certificate. The Company shall have executed and delivered to the Purchasers a certificate of the Secretary of the Company attaching (A) the Certificate as in effect at the Initial Closing, (B) the Bylaws of the Company in effect at the Initial Closing, (C) copies of resolutions by the Board of Directors authorizing and approving this Agreement, the issuance and delivery of the Notes, Warrants, Shares, Warrant Shares and the Conversion Shares, and an amendment to

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the Certificate required thereby (the “Amendment”), and copies of resolutions by the stockholders of the Company authorizing and approving the transactions contemplated by this Agreement and the Amendment (collectively, the “Resolutions”); and (D) certifying as to the incumbency of the officers executing this Agreement, the Notes, the Warrants and any other documents contemplated by this Agreement.

(k) Security Agreement. The Company shall have executed and delivered a Security Agreement in form and substance reasonably acceptable to the Purchasers and their counsel (the “Security Agreement”).

(l) Subordination Agreement. The Company and Oxford Finance Corporation shall have executed and delivered a Subordination Agreement with respect to the subordination of the indebtedness evidenced by the Notes (the “Subordination Agreement”).

5.2. Conditions to Obligations of the Company. The obligation of the Company to consummate the transactions contemplated herein to be consummated at each Closing is subject to the satisfaction, on or prior to such Closing of the conditions set forth below.

(a) Representations and Warranties; Performance of Obligations. Each of the representations and warranties of the Purchasers contained herein shall be true and correct on and as of the date of such Closing. As of the date of such Closing, the Purchasers shall have performed and complied with the covenants and provisions of this Agreement required to be performed or complied with by them at or prior to the date of such Closing.

(b) Proceedings and Litigation. No action, suit or proceeding shall have been commenced by any governmental authority against any party hereto seeking to restrain or delay the purchase and sale of the Securities or the other transactions contemplated by this Agreement.

(c) Subordination Agreement. The Purchasers and Oxford Finance Corporation shall have executed and delivered the Subordination Agreement.

6. COVENANTS OF THE PARTIES.

6.1. Directors’ and Officers’ Insurance. The Company shall maintain the Directors’ and Officers’ insurance described in Section 3.11 of the Investor Rights Agreement.

6.2. Key Person Life Insurance. The Company shall maintain a key person life insurance policy on the life of each of Jane H. Hollingsworth and Terri B. Sebree in an aggregate amount of $2,000,000 per individual, the proceeds of which shall be payable to the Company.

6.3. Reservation of Stock. As of or prior to Initial Closing, the Company shall, and shall cause its stockholders to, take any and all action necessary to reserve for issuance the number of Shares, Warrant Shares, Conversion Shares and Warrant Conversion Shares into which all of the Notes and Warrants to be sold or issued hereunder are convertible or exercisable, as applicable, and shall take (or cause to be taken) such further action from time to time thereafter to increase the number of Conversion Shares or Warrant Conversion Shares reserved for issuance as required by any increase in the number of Conversion Shares into which the Shares and Warrant Shares may then be converted.

6.4. Commercially Reasonable Efforts. Upon the terms and subject to the conditions set forth in this Agreement, the parties shall use their good faith commercially reasonable efforts to take, or cause to be taken, without any party being obligated to incur any material internal costs or make any

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payment or payments to any third party or parties which, individually or in the aggregate, are material and are not otherwise legally required to be made, all actions, and to do or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Closing and the other transactions contemplated hereunder, including (a) obtaining all required consents, and (b) the execution and delivery of any additional documents, agreements and instruments (in form and substance reasonably satisfactory to the parties) necessary to consummate the transactions contemplated hereunder and to fully carry out the purposes of this Agreement.

6.5. Post-Closing Filings. In connection with the Closing, the Company and the Purchasers, if required, agree to file all required forms or filings under applicable laws within the time required by such laws, including the filing of any UCC financing statements required pursuant to the Security Agreement.

6.6. Amendment of Certificate. The Company shall, immediately prior to the exercise of the Warrants, take all necessary actions to amend the Certificate to authorize, solely for the purpose of issuance upon exercise of such Warrants, such number and kind of shares of capital stock as may then be issuable upon the exercise of the Warrants, including, without limitation, the Warrant Shares. The Company covenants that all shares of capital stock which shall be so issuable will, upon the exercise of the Warrant, be duly and validly issued and fully paid and nonassessable by the Company.

6.7. Affixation of Legend. The Company shall affix a legend to each Note stating that such Note is subject to the terms of the Subordination Agreement, as it may be amended, restated or modified from time to time.

7. MISCELLANEOUS.

7.1. Indemnification.

(a) The Company agrees to indemnify, defend and hold harmless the Purchasers and their affiliates and their respective officers, directors, trustees, agents, representatives, employees, partners and controlling persons (each, an “Indemnified Party”) against any and all Losses (as hereinafter defined) arising out of or relating to any legal, administrative or other actions (including actions brought by the Purchasers or the Company or any equity holders of the Company or any derivative actions brought by any Person claiming through or in the Company’s name), proceedings or investigations (whether formal or informal), or written threats thereof, based upon, resulting from, relating to or arising out of any misrepresentation or breach of any representation, warranty, covenant or agreement by the Company in this Agreement or in any of the Notes and the Warrants.

(b) The Company shall indemnify, defend and hold harmless each Indemnified Party against any and all Losses of such Indemnified Party resulting from or arising out of any third party or governmental action or claim based upon the Indemnified Party’s status as a security holder of the Company (including, without limitation, any and all Losses arising under the Securities Act, the Securities Exchange Act of 1934, as amended, or similar securities law, any other federal or state statute, rule, regulation or law, or otherwise, which relate directly or indirectly to the registration, purchase, sale or ownership of any securities of the Company or to any fiduciary obligation owed with respect thereto), including, without limitation, in connection with any third party or governmental action or claim relating to any action taken or omitted to be taken or alleged to have been taken or omitted to have been taken by such Indemnified Party as a security holder. Notwithstanding the foregoing, the Company shall not be obligated to indemnify or hold harmless any Indemnified Party under this Section 7.1(b) against any Losses resulting from or arising out of any third party or governmental action or claim

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if it has been finally determined by a court or other trier of fact of competent jurisdiction that such Losses were the result of (i) a breach of such Indemnified Party’s fiduciary duty, (ii) any action or omission made by the Indemnified Party in bad faith or (iii) any criminal action on the part of such Indemnified Party.

(c) In connection with the obligation of the Company to indemnify for expenses as set forth in Sections 7.1(a) and 7.1(b) above, the Company shall reimburse each Indemnified Party for all such expenses (including reasonable expenses of investigation and reasonable fees, disbursements and other charges of counsel in connection with any claim, action, suit or proceeding) as they are incurred by such Indemnified Party. “Losses” means all losses (including the diminution in the value of the Shares purchased by Purchaser), claims (including any claim by a third party), damages, expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in connection with any claim, action, suit or proceeding, including any action between the Indemnified Party and the Company or between the Indemnified Party and any third party) or other Liabilities.

7.2. Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware without regard to the conflicts of laws principles of any jurisdiction. No suit, action or proceeding with respect to this Agreement or any of the Notes or Warrants may be brought in any court or before any similar authority other than in a court of competent jurisdiction in the State of Delaware, and the parties hereby submits to the exclusive jurisdiction of such courts for the purpose of such suit, proceeding or judgment. Each of the parties hereto hereby irrevocably waives any right which it may have had to bring such an action in any other court, domestic or foreign, or before any similar domestic or foreign authority and agreed not to claim or plead the same. Each of the parties hereto hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding in relation to this Agreement or any of the Notes or Warrants and for any counterclaim therein.

7.3. Survival. The representations, warranties, covenants and agreements made herein shall survive the Closings and any investigation made by the Purchasers for a period of two (2) years. All statements as to factual matters contained in any certificate delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties made by the Company hereunder solely as of the date of such certificate.

7.4. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the parties hereto. This Agreement may not be assigned without the prior written consent of the other parties hereto, except that each Purchaser may assign its rights and obligations hereunder to any affiliate or affiliates without such prior written consent provided that any such affiliate agrees to be subject to the terms of the Investor Rights Agreement to the same extent as if such affiliate was an original Holder (as defined in the Investor Rights Agreement) with respect to any Registrable Securities (as defined in the Investor Rights Agreement) that may be issued to such affiliate.

7.5. Entire Agreement. This Agreement, including the Exhibits and Schedules hereto, and the Notes and Warrants and each of the Exhibits delivered pursuant thereto constitute the full and entire understanding and agreement between the parties hereto with regard to the subject matter hereof and thereof and no party hereto shall be liable or bound to any other party hereto in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.

7.6. Severability. If any provision of the Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

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7.7. Amendment and Waiver. This Agreement may be amended or modified only upon the approval of the Company and the written consent of the Purchasers purchasing a majority of the outstanding principal amount of the Notes including any Notes that have been transferred to affiliates of the Purchasers.

7.8. Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Notes, the Warrants or the Certificate, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. Any waiver, permit, consent or approval of any kind or character on any Purchaser’s part of any breach, default or noncompliance under this Agreement, the Notes, the Warrants or under the Certificate or any waiver on such party’s part of any provisions or conditions of the Agreement, the Notes, the Warrants or the Certificate must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Notes, the Warrants, the Certificate, Bylaws of the Company, or otherwise afforded to any party, shall be cumulative and not alternative.

7.9. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, and if not, then on the next business day; (c) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt or (e) when sent by electronic mail, upon confirmation of receipt by the recipient via electronic mail. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to the Purchasers at the address set forth on the signature pages hereto or at such other address as the Company or the Purchasers may designate by ten (10) days advance written notice to the other parties hereto.

7.10. Expenses.

(a) The Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement, including, without limitation, any costs and expenses of its counsel.

(b) The Company shall pay all of the reasonable fees and expenses incurred by the Purchasers with respect to the negotiation and execution of this Agreement and the Notes and the Warrants, including the reasonable fees and expenses of accounting, consulting and legal counsel to the Purchasers and related due diligence expenses incurred by the Purchasers.

7.11. Titles and Subtitles. The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

7.12. Counterparts; Execution by Facsimile Signature. This Agreement may be executed in any number of counterparts (including execution by facsimile), each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile signature(s) which shall be binding on the party delivering same, to be followed by delivery of originally executed signature pages.

7.13. Acknowledgment. Any investigation or other examination that may have been made at any time by or on behalf of a party to whom representations and warranties are made in this Agreement or in any other Notes or Warrants shall not limit, diminish, supersede, act as a waiver of, or in

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any other way affect the representations, warranties and indemnities contained in this Agreement and the Notes and Warrants, and the respective parties may rely on the representations, warranties and indemnities made to them in this Agreement and the Notes and Warrants irrespective of and notwithstanding any information obtained by them in the course of any investigation, examination or otherwise, whether before or after the Closing.

7.14. Publicity. Except as otherwise required by law or applicable stock exchange rules, no announcement or other disclosure, public or otherwise, concerning the transactions contemplated by this Agreement shall be made, either directly or indirectly, by any party hereto which mentions another party (or parties) hereto without the prior written consent of such other party (or parties), which consent shall not be unreasonably withheld, delayed or conditioned.

7.15. Exculpation by Purchasers. Each Purchaser acknowledges that it is not relying upon the representations or warranties of any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. In addition, each Purchaser acknowledges that the obligations of each Purchaser hereunder are several, and such Purchaser is not entering into this Agreement in reliance upon the covenants of the other Purchasers party hereto.

7.16. No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

7.17. Pronouns. All pronouns contained herein, and any variations thereof shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

7.18. Pari Passu Notes. The Purchasers and the Company acknowledge and agree that the right of payment of all or any portion of the outstanding principal amounts of each of the Notes and all interest thereon shall be pari passu in right of payment and in all other respects to all of the other Notes. In the event a Purchaser receives payments in excess of its pro rata share of the Company’s payments to all of the Purchasers, then such Purchaser shall hold in trust all such excess payments for the benefit of the other Purchasers and shall pay such amounts held in trust to such other Purchasers upon demand by such Purchasers.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Subordinated Convertible Note and Warrant Purchase Agreement as of the date set forth in the first paragraph hereof.


COMPANY: NUPATHE INC.
By:	/s/ Jane H. Hollingsworth
	Name:	Jane H. Hollingsworth
	Title:	Chief Executive Officer
227 Washington Street, Suite 200 Conshohocken, PA 19428 Attention: Chief Executive Officer Telephone: (484) 567-0130 Facsimile: (484) 567-0136 with a copy to: Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 Attention: Michael N. Peterson Telephone: (215) 963-5025 Facsimile: (215) 963-5001 Email: *@*