This Investment Agreement
(this “Agreement”) is made and entered as of May 30, 2013 (the “Effective Date”) by and between
Lightlake Therapeutics Inc., a Nevada corporation (the “Company”), and Potomac Construction Limited (the “Investor”).
WHEREAS, the Company is developing a
naloxone hydrochloride nasal spray for the emergency reversal of heroin or opioid overdose, which naloxone hydrochloride nasal
spray is expected to enter into an initial trial during H1 2013 that is being sponsored by the National Institutes of Health
WHEREAS, the Investor
has agreed to invest Fifty Thousand Dollars (US$50,000.00) to fund the research, development, marketing, and any other commercialization
activities connected to the Product (the “Investment”) with the option to invest an additional One Hundred Thousand
Dollars until July 10, 2013 (US$100,000.00) (the “Optional Investment”); and
WHEREAS, the Company
has agreed to assign the Investor the right to receive a certain amount of the financial return produced by the Product;
NOW THEREFORE, with
reference to the foregoing facts, the Company and the Investor agree as follows:
1.1 In connection with
the Investment, the Company hereby agrees to assign the Investor the right to receive, pro rata, a one-half percent (0.5%) of the
net profit generated from the Product in perpetuity from the Effective Date (the “Interest”). If the Investor
exercises the option to fund the Optional Investment, then the Company shall assign the Investor an additional right to receive,
pro rata, one percent (1%) of the net profit generated from the Product in perpetuity from the date the Optional Investment is
delivered to the Company (the “Additional Interest”). “Net profit” shall be defined as the pre-tax
profits generated from the Product after the deduction of all expenses incurred by and payments made by the Company in connection
with the Product, including but not limited to an allocation of Company overhead based on the proportionate time, expenses and
resources devoted by Company to Product-related activities, which allocation shall be determined in good faith by the Company (the
|2.||Net Profit Audits, Updates, Distributions and Other Transactions.|
2.1 The Company shall
provide the Investor with an annual audit of Net Profits (the “Audit”), which Audit shall be completed after
the end of each calendar year. Notwithstanding the foregoing, this Paragraph 2.1 shall not be applicable until the Product
generates Net Profit.
2.2 After the end of
each quarter of the calendar year, the Company shall provide the Investor with a written or electronic update with respect to the
status of the Product. If the Product generates Net Profit, then the Company shall also provide the Investor with a written or
electronic statement of the estimated Net Profit represented by the Interest.
2.3 After the end of
each of the first three quarters of the calendar year, the Company shall distribute to the Investor eighty percent (80%) of such
calendar quarter’s Net Profits represented by the Interest and Additional Interest, if applicable, which amount shall be
estimated in good faith by the Company. Upon the completion of the Audit for such calendar year, the Company shall distribute to
the Investor the Net Profits represented by the Interest and Additional Interest, if applicable, for the fourth quarter of the
calendar year. In the event that the Audit for such calendar year determines the Net Profits represented by the Interest and Additional
Interest, if applicable, for the first three quarters of the calendar year (the “Audited NP”) to be greater
than the estimated Net Profits represented by the Interest and Applicable Interest, if applicable, actually paid to the Investor
for the first three calendar quarters (the “Estimated NP”), then the Company shall distribute to the Investor
the difference between the Audited NP and the Estimated NP. In the event that the Audit for such calendar year determines the Audited
NP to be less than the Estimated NP, then the Company shall deduct the difference between the Estimated NP and the Audited NP from
the distribution for the fourth quarter of such calendar year and, if required, each following distribution until such amount is
2.4 In the event that
the Product is sold by the Company, then the Investor shall receive one-half percent (0.5%) of the net proceeds of such sale, pro
rata, and in the form of such net proceeds, after the deduction of all expenses and costs related to such sale, and if the Optional
Investment is delivered to the Company, then the Investor shall receive an additional one percent (1%) of such amount. In the event
that the Company is sold, then the Company shall engage an independent financial or accounting firm to determine the fair value
of the Company which is directly attributable to the Product and the Investor shall receive one-half percent (0.5%) of such amount
after the deduction of all expenses and costs related to such sale, and if the Optional Investment is delivered to the Company,
then the Investor shall receive an additional one percent (1%) of such amount. All other material transactions involving the Product
not addressed herein shall be addressed in good faith by the Company and the Investor.
|3.||Option to Exchange Interest for Common Stock.|
3.1 If the Product is
not introduced to the market within twenty-four (24) months after the Effective Date, then the Investor shall have the option to
(a) receive six hundred and twenty-five thousand (625,000) shares of the Company’s common stock, par value $0.001 per share
(the “Shares”) in lieu of the Interest (the “Option”) and (b) if the Investor delivers the
Optional Investment, then the Investor shall have the option to receive an additional one million two hundred and fifty thousand
(1,250,000) shares of the Company’s common stock in lieu of the Additional Interest (the “Additional Option”
and together with the Option, the “Options”).
3.2 In the event that
Product is not approved for marketing within twenty-four (24) months after the Effective Date, then the Investor shall have sixty
(60) calendar days to provide written notice that the Investor intends to exercise the Options. The Investor shall waive their
rights to the Options if the Investor fails to provide sixty (60) calendar days written notice to the Company. If the Investor
exercises the Options, then the Investor shall waive all rights to the Interest and Additional Interest and receive fully paid
and non-assessable Shares. The Investor shall exercise the Options simultaneously.
|4.||Representations and Warranties of the Company.|
The Company represents
and warrants to the Purchaser that:
4.1 The Company is a public
company duly organized, validly existing and in good standing under the laws of Nevada and has all requisite power and authority
to own, lease and operate its properties and assets and to carry on its business as now being conducted and as proposed to be conducted.
4.2 This Agreement has
been duly executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors' rights generally, or the availability of
|5.||Representations, Warranties and Agreements of Investor.|
The Investor represents
and warrants to, and agrees with, the Company as follows:
5.1 Acquisition for
Investment. In the event that the Investor exercises the Options and receives Shares, the Investor is acquiring the Shares
solely for its own account for the purpose of investment and not with a view to or for sale in connection with distribution. In
the event that the Investor exercises the Options and receives Shares, the Investor does not have a present intention to sell the
Shares, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Shares to or
through any person or entity. The Investor acknowledges that it is able to bear the financial risks associated with an investment
in the Shares and in the Company and that it has been given full access to such records of the Company and the subsidiaries and
to the officers of the Company and the subsidiaries and received such information as it has deemed necessary or appropriate to
conduct its due diligence investigation and has sufficient knowledge and experience in investing in companies similar to the Company
in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the
5.2 Information on
Investor. Investor is, and will be on the Effective Date, an “accredited investor,” as such term is defined
in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased shares of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable
the Investor to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed
investment decision with respect to the proposed purchase, which represents a speculative investment. The Investor has the authority
and is duly and legally qualified to purchase and own the Shares. The Investor is able to bear the risk of such investment for
an indefinite period and to afford a complete loss thereof. The information set forth on the signature page hereto regarding the
Investor is accurate.
5.3 Opportunities for
Additional Information. The Investor acknowledges that the Investor has not received any information from the Company regarding
this Investment. The Investor has the opportunity to ask questions of and receive answers from, or obtain additional information
from, the executive officers of the Company concerning the financial and other affairs of the Company. The Investor has not asked
such questions from the Company and is making its own decision without input and the Investor desires to invest in the Company.
5.4 No General Solicitation.
The Investor acknowledges that the Shares were not offered to the Investor by means of any form of general or public solicitation
or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which the Investor was invited by any of the foregoing means of communications.
5.5 Rule 144. The
Shares may not be offered for sale, sold, assigned or transferred unless such Shares are registered under the Shares Act or an
exemption from registration is available. The Investor acknowledges that the Investor is familiar with Rule 144 of the rules and
regulations of the Commission, as amended, promulgated pursuant to the Shares Act (“Rule 144”), and that such
person has been advised that Rule 144 permits resales only under certain circumstances.
5.6 No Guarantee of
Success. The Investor acknowledges that this is a speculative investment involving a high degree of risk and that there is
no guarantee of success or that the Investor will realize any gain from this investment, and the Investor could lose the total
amount of its investment.
5.7 Legends. The
Investor hereby agrees with the Company that the Shares will bear the following legend or one that is substantially similar to
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SHARES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SHARES LAWS AND NEITHER
SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SHARES ACT AND APPLICABLE STATE SHARES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SHARES ACT AND APPLICABLE STATE SHARES LAWS, IN WHICH CASE THE INVESTOR MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH SHARES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SHARES ACT AND APPLICABLE STATE SHARES LAWS.
6.1 Notices. All
notices, requests, demands and other communications (collectively, “Notices”) given pursuant to this Agreement
shall be in writing, and shall be delivered by personal service, courier, facsimile transmission or by United States first class,
registered or certified mail, postage prepaid, addressed to the party at the address set forth on the signature page to this Agreement. Any
Notice, other than a Notice sent by registered or certified mail, shall be effective when received; a Notice sent by registered
or certified mail, postage prepaid return receipt requested, shall be effective on the earlier of when received or the fifth day
following deposit in the United States mails. Any party may from time to time change its address for further Notices
hereunder by giving notice to the other party in the manner prescribed in this Section. Notwithstanding the foregoing, the Company
may send the information set forth in Paragraphs 2.1 and 2.2 via email.
6.2 Entire Agreement. This
Agreement contains the sole and entire agreement and understanding of the parties with respect to the entire subject matter of
this Agreement, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related
to the subject matter of this Agreement are hereby merged herein.
6.3 Successors. This
Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors, heirs
and personal representatives.
6.4 Waiver and Amendment. No
provision of this Agreement may be waived unless in writing signed by all the parties to this Agreement, and waiver of any one
provision of this Agreement shall not be deemed to be a waiver of any other provision. This Agreement may be amended
only by a written agreement executed by all of the parties to this Agreement.
6.4 Governing Law. This
Agreement shall be construed in accordance with the laws of the State of Nevada without giving effect to the principles of conflicts
of law thereof.
6.5 Captions. The
various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
6.6 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by email delivery of a “pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “pdf”
signature page were an original thereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the
Company and the Investor have duly executed this Agreement as of the day and year first above written.
|LIGHTLAKE THERAPEUTICS INC.
||POTOMAC CONSTRUCTION LIMITED|
||/s/ Xxxxx Xxxxxxx
||/s/ Xxxxx Xxxxxxx|
||Chief Financial Officer
|Address: 00 Xxxxxxxxxx Xxxxx, Ground Floor Suite
|Xxxxxx, X0X 0XX, XX
|Attn: Dr. Xxxxx Crystal
|Tel.: x00 0000 000 000