CYTOSORBENTS CORPORATION

PLACEMENT AGENCY AGREEMENT

March 7, 2014

 

Brean Capital, LLC

1345 Avenue of the Americas

New York, NY 10105

 

Ladies and Gentlemen:

 

1.        Introductory. Cytosorbents Corporation, a Nevada corporation (the
“Company”), proposes, pursuant to the terms of this Placement Agency Agreement
(this “Agreement”) and the subscription agreements in the form of Exhibit A
attached hereto (the “Subscription Agreements”) entered into with the purchasers
identified therein (each a “Purchaser” and collectively, the “Purchasers”), to
sell to the Purchasers up to an aggregate of 40,800,000 units (the “Units”) with
each Unit consisting of one (1) share (collectively, the “Shares”) of common
stock, par value $0.001 per share (the “Common Stock”) of the Company and a
warrant to purchase one half of one (1/2) Share (collectively, the “Warrants”).
The Company hereby confirms its agreement with Brean Capital, LLC (“Brean” or
the “Placement Agent”), to act as lead placement agent in accordance with the
terms and conditions hereof as set forth below.

 

2.        Agreement to Act as Placement Agent; Placement of Shares. On the basis
of the representations, warranties and agreements of the Company herein
contained, and subject to all the terms and conditions of this Agreement:

 

(a)          The Company engages the Placement Agent to act as its exclusive
agents, on a best efforts basis, in connection with the issuance and sale by the
Company of the Shares (the “Offering”). Until the Closing Date (defined below),
the Company shall not, without the prior consent of Brean, solicit or accept
offers to purchase Shares, or securities convertible into or exercisable or
exchangeable for Shares, otherwise than through the Placement Agent.

 

(b)          Under no circumstances will the Placement Agent be obligated to
purchase any Units, Shares, Warrants or Warrant Shares (collectively, the
“Securities”), for their own account and, in soliciting purchases of Units, the
Placement Agent shall act solely as the Company’s agent and not as principal.

 

(c)          Subject to the provisions of this Section 2, offers for the
purchase of Units may be solicited by the Placement Agent as agent for the
Company at such times and in such amounts as the Placement Agent deems
advisable. The Placement Agent shall communicate to the Company, orally or in
writing, each reasonable offer to purchase Units received by it as agent of the
Company. The Company shall have the sole right to accept offers to purchase the
Units and may reject any such offer, in whole or in part. The Placement Agent
shall have the right, in its discretion reasonably exercised, with notice to the
Company, to reject any offer to purchase Units received by it, in whole or in
part, and any such rejection shall not be deemed a breach of their agreement
contained herein.

 

(d)          The purchases of the Units by the Purchasers shall be evidenced by
the execution of Subscription Agreements by each of the parties thereto.

 

(e)          As full compensation for services rendered, on the Closing Date,
the Company shall (i) pay to the Placement Agent by wire transfer of immediately
available funds to an account or accounts designated by the Placement Agent, an
aggregate amount equal to 6% of the gross proceeds received by the Company from
the sale of the Units on the Closing Date (the “Cash Fee”) and (ii) a warrant
which shall be exercisable for 1,224,000 shares of Common Stock at a price equal
$0.30 per share (the “Warrant Fee” and together with the Cash Fee, the
“Placement Fee”) pursuant to and in accordance with Section II of that certain
engagement letter by and among the Company and the Placement Agent dated as of
March 6, 2013 and as modified by the letter agreements dated February 14, 2014,
February 17, 2014 and February 21, 2014 (collectively, the “Engagement Letter”).
At the Closing, the Company shall direct the Escrow Agent (defined below) to
wire to an account or accounts designated by the Placement Agent such amounts
out of the Escrow Funds (defined below).

 

 

 

 

(f)          No Units that the Company has agreed to sell pursuant to this
Agreement shall be deemed to have been purchased and paid for, or sold by the
Company, until such Units shall have been delivered to the Purchaser thereof
against payment by such Purchaser. If the Company shall default in its
obligations to deliver Units to a Purchaser whose offer it has accepted, the
Company shall indemnify and hold the Placement Agent harmless against any loss,
claim or damage arising from or as a result of such default by the Company.

 

3.        Delivery and Payment.

 

(a)          Concurrently with the execution and delivery of this Agreement, the
Company, the Placement Agent and Continental Stock Transfer and Trust Company,
as escrow agent (the “Escrow Agent”), shall enter into an escrow agreement (the
“Escrow Agreement”), pursuant to which an escrow account (the “Escrow Account”)
will be established for the benefit of the Company and the Purchasers. Prior to
the completion of the purchase and sale of the Units pursuant to this Agreement
and the Subscription Agreements (the “Closing”), each such Purchaser shall
deposit into the Escrow Account an amount equal to the product of (x) the number
of Units such Purchaser has agreed to purchase and (y) the purchase price per
Units as set forth in the Subscription Agreements (the “Purchase Amount”). The
aggregate of such Purchase Amounts is herein referred to as the “Escrow Funds.”
On the Closing Date, upon satisfaction or waiver of all of the conditions to
Closing, the Escrow Agent will disburse the Escrow Funds to the Company and the
Placement Agent as provided in the Escrow Agreement and Section 2(e) above, and
the Company shall cause the Units to be delivered to the Purchasers.

 

(b)          Subject to the terms and conditions hereof, delivery of the Shares
shall be made by the Company to the Purchasers, and payment of the purchase
price shall be made by the Purchasers, at the office of Szaferman, Lakind,
Blumstein & Blader, P.C., 101 Grovers Mill Road, Suite 200, Lawrenceville, NJ
08648 (or at such other place as agreed upon by the Placement Agent and the
Company), at 10:00 a.m., New York City time, on or before March 11, 2014 or at
such time on such other date as may be agreed upon in writing by the Company and
Brean but in no event prior to the date on which the Escrow Agent shall have
received all of the Escrow Funds (such date of delivery and payment is
hereinafter referred to as the “Closing Date”). The Shares shall be delivered,
through the facilities of The Depository Trust Company, to such persons, and
shall be registered in such name or names and shall be in such denominations, as
the Placement Agent may request by written notice to the Company at least one
business day before the Closing Date. The cost of original issue tax stamps and
other transfer taxes, if any, in connection with the issuance and delivery of
the Shares by the Company to the respective Purchasers shall be borne by the
Company.

 

4.       Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Placement Agent that:

 

(a)          Filing and Effectiveness of Registration Statement; Certain Defined
Terms. The Company has filed with the Commission a registration statement on
Form S-1 (No. 333-193053), including a related prospectus or prospectuses,
covering the registration of the Units under the Act, which registration
statement has become effective. “Registration Statement” at any particular time
means such registration statement in the form then filed with the Commission,
including any amendment thereto, any document incorporated by reference therein
and all 430A Information with respect to such registration statement, that in
any case has not been superseded or modified. “Registration Statement” without
reference to a time means the Registration Statement as of the Effective Date.
For purposes of this definition, 430A Information shall be considered to be
included in the Registration Statement as of the time specified in Rule 430A. If
the Company has filed an abbreviated registration statement to register
additional securities pursuant to Rule 462(b) under the Act (the “462(b)
Registration Statement”), then any such reference herein to the Registration
Statement shall also be deemed to include such 462(b) Registration Statement.

 

For purposes of this Agreement:

 

“430A Information” means information included in a prospectus then deemed to be
a part of the Registration Statement pursuant to Rule 430A.

 

 

 

 

“Act” means the Securities Act of 1933, as amended.

 

“Applicable Time” means 5:00 p.m. (Eastern time) on the date of this Agreement.

 

“Closing Date” has the meaning defined in Section 3 hereof.

 

“Commission” means the Securities and Exchange Commission.

 

“Effective Date” of the Registration Statement means February 14, 2014.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Final Prospectus” means the Statutory Prospectus that discloses the public
offering price, other 430A Information and other final terms of the Units and
otherwise satisfies Section 10(a) of the Act.

 

“General Use Issuer Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is intended for general distribution to prospective investors,
as evidenced by its being so specified in Schedule A to this Agreement.

 

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433, relating to the Shares in the form filed or required to be
filed with the Commission or, if not required to be filed, in the form retained
in the Company’s records pursuant to Rule 433(g).

 

“Limited Use Issuer Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is not a General Use Issuer Free Writing Prospectus.

 

“Rules and Regulations” means the rules and regulations of the Commission.

 

“Securities Laws” means, collectively, the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley”), the Act, the Exchange Act, the Rules and Regulations, the
auditing principles, rules, standards and practices applicable to auditors of
“issuers” (as defined in Sarbanes-Oxley) promulgated or approved by the Public
Company Accounting Oversight Board and the rules of the American Stock Exchange.

 

“Statutory Prospectus” with reference to any particular time means the
prospectus relating to the Units that is included in the Registration Statement
immediately prior to that time, including any document incorporated by reference
therein and all 430A Information with respect to the Registration Statement. For
purposes of the foregoing definition, 430A Information shall be considered to be
included in the Statutory Prospectus only as of the actual time that form of
prospectus (including a prospectus supplement) is filed with the Commission
pursuant to Rule 424(b) and not retroactively.

 

Unless otherwise specified, a reference to a “rule” is to the indicated rule
under the Act.

 

(b)          Compliance with Securities Act Requirements. (i) (A) At the time
the Registration Statement initially became effective, (B) at the time of each
amendment thereto for the purposes of complying with Section 10(a)(3) of the Act
(whether by post-effective amendment, incorporated report or form of
prospectus), (C) on the Effective Date relating to the Units and (D) on the
Closing Date, the Registration Statement conformed and will conform in all
material respects to the requirements of the Act and the Rules and Regulations
and did not and will not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (ii) (A) on its date, (B) at the time
of filing the Final Prospectus pursuant to Rule 424(b) and (C) on the Closing
Date, the Final Prospectus will conform in all material respects to the
requirements of the Act and the Rules and Regulations, and will not include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The preceding sentence does not apply to
statements in or omissions from any such document based upon written information
furnished to the Company by the Placement Agent, if any, specifically for use
therein, it being understood and agreed that the only such information is that
described as such in Section 8(b) hereof.

 

 

 

 

(c)          Effectiveness. No stop order of the Commission preventing or
suspending the use of any Statutory Prospectus, the Final Prospectus, or any
Free Writing Prospectus, or the effectiveness of the Registration Statement, has
been issued, and no proceedings for such purpose have been instituted or, to the
Company’s knowledge, are contemplated by the Commission.

 

(d)          Reserved.

 

(e)          General Disclosure Package. As of the Applicable Time, neither (i)
the General Use Issuer Free Writing Prospectus(es) issued at or prior to the
Applicable Time, together with the accompanying prospectus (which is the most
recent Statutory Prospectus distributed to investors generally) and any other
documents listed or disclosures stated in Schedule A to this Agreement to be
included in the General Disclosure Package, all considered together
(collectively, the “General Disclosure Package”), nor (ii) any individual
Limited Use Issuer Free Writing Prospectus, when considered together with the
General Disclosure Package, included any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The preceding sentence does not apply to statements in or omissions
from any Statutory Prospectus or any Issuer Free Writing Prospectus in reliance
upon and in conformity with written information furnished to the Company by the
Placement Agent specifically for use therein, it being understood and agreed
that the only such information furnished by the Placement Agent consists of the
information described as such in Section 8(b) hereof.

 

(f)          Issuer Free Writing Prospectuses. Each Issuer Free Writing
Prospectus, as of its issue date and at all subsequent times through the
completion of the public offer and sale of the Shares or until any earlier date
that the Company notified or notifies the Placement Agent as described in the
next sentence, did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information then contained in
the Registration Statement. If at any time following issuance of an Issuer Free
Writing Prospectus there occurred or occurs an event or development as a result
of which such Issuer Free Writing Prospectus conflicted or would conflict with
the information then contained in the Registration Statement or as a result of
which such Issuer Free Writing Prospectus, if republished immediately following
such event or development, would include an untrue statement of a material fact
or omitted or would omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, (i) the Company has promptly notified or will promptly
notify the Placement Agent and (ii) the Company has promptly amended or will
promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or
correct such conflict, untrue statement or omission. The foregoing two sentences
do not apply to statements in or omissions from any Issuer Free Writing
Prospectus in reliance upon and in conformity with written information furnished
to the Company by the Placement Agent specifically for use therein, it being
understood and agreed that the only such information furnished by the Placement
Agent consists of the information described as such in Section 8(b) hereof.

 

(g)          Incorporated Documents. The documents incorporated by reference in
the Registration Statement and the General Disclosure Package and the Final
Prospectus, when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of the
Securities Act and the Exchange Act, as applicable and none of such documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and any further documents so filed and incorporated by reference in the
Registration Statement and the General Disclosure Package and the Final
Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and will not contain
any 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, in
the light of the circumstances under which they were made, not misleading.

 

 

 

 

(h)          Financial Statements. The financial statements and the notes
related thereto or incorporated by reference in the Registration Statement and
the General Disclosure Package and the Final Prospectus present fairly the
financial condition of the Company and its consolidated subsidiaries as of the
respective dates thereof and the results of operations and cash flows of the
Company and its consolidated subsidiaries for the respective periods covered
thereby, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the entire period involved, except where and to
the extent noted. WithumSmith + Brown, PC (“Accountants”), who have reported on
such financial statements and schedules, are independent accountants with
respect to the Company as required by the Act and the Rules and Regulations of
the Public Company Accounting Oversight Board (“PCAOB”). To the knowledge and
belief of the Company, such accounting firm (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall express its
opinion with respect to the financial statements to be included in the Company’s
Annual Report for the fiscal years ending December 31, 2013 and December 31,
2014. The summary and selected consolidated financial and statistical data
included in or incorporated by reference into the Registration Statement present
fairly the information shown therein and have been derived on a basis consistent
with the audited financial statements presented in the Registration Statement.

 

(i)          No Material Adverse Change. Since the date of the most recent
financial statements of the Company included or incorporated by reference in the
Registration Statement and the General Disclosure Package and the Final
Prospectus, (i) except for the issuance of options under option plans of the
Company described therein or shares issued upon the exercise of such options or
other convertible securities there has not been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries, or any dividend or
distribution of any kind declared, set aside for payment, paid or made by the
Company on any class of capital stock, or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
business, properties, management, financial position, stockholders’ equity,
results of operations or prospects of the Company and its subsidiaries taken as
a whole; (ii) neither the Company nor any of its subsidiaries has entered into
any transaction or agreement, other than in the ordinary course of business that
is material to the Company and its subsidiaries taken as a whole or incurred any
liability or obligation, direct or contingent, that is material to the Company
and its subsidiaries taken as a whole; and (iii) neither the Company nor any of
its subsidiaries has sustained any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor disturbance or dispute or any action, order or
decree of any court or arbitrator or governmental or regulatory authority,
except in each case as otherwise disclosed in the Registration Statement and the
General Disclosure Package and the Final Prospectus.

 

(j)          Organization and Good Standing. The Company and each of its
subsidiaries have been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of organization, are
duly qualified to do business and are in good standing in each jurisdiction in
which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all corporate power
and authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure to be
so qualified or have such power or authority would not, individually or in the
aggregate, have a material adverse effect on the business, properties,
management, financial position, stockholders’ equity, results of operations or
prospects of the Company and its Subsidiaries taken as a whole (a “Material
Adverse Effect”). The Company does not own or control, directly or indirectly,
any corporation, association or other entity other than the subsidiaries listed
in Exhibit 21.1 to the Company’s annual report on Form 10-K for the fiscal year
ended December 31, 2012.

 

(k)          Capitalization. The Company has an authorized capitalization as set
forth in the Registration Statement and the General Disclosure Package and the
Final Prospectus under the heading “Capitalization”(except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Final Prospectus or
pursuant to the exercise of convertible securities or options referred to in the
Final Prospectus); all the outstanding shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable and are not subject to any pre-emptive or similar rights; except
as described in or expressly contemplated by the General Disclosure Package and
the Final Prospectus, there are no outstanding rights (including, without
limitation, pre-emptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company or any of its subsidiaries, or any contract,
commitment, agreement, understanding or arrangement of any kind relating to the
issuance of any capital stock of the Company or any such subsidiary, any such
convertible or exchangeable securities or any such rights, warrants or options;
the capital stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement and the General
Disclosure Package and the Final Prospectus; and all the outstanding shares of
capital stock or other equity interests of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and are owned directly or indirectly by the Company, free and clear of any lien,
charge, encumbrance, security interest, restriction on voting or transfer or any
other claim of any third party. The Company has never been an issuer subject to
Rule 144(i) under the Securities Act.

 

 

 

 

(l)          Due Authorization. The Company has full right, power and authority
to execute and deliver this Agreement and to perform its obligations hereunder;
and all action required to be taken for the due and proper authorization,
execution and delivery by it of this Agreement and the consummation by it of the
transactions contemplated hereby has been duly and validly taken.

 

(m)          Placement Agency Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.

 

(n)          The Units. The Units, the Shares, the Warrants and the shares of
Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) have
been duly authorized by the Company and, when issued and delivered and paid for
as provided herein, will be duly and validly issued and will be fully paid and
nonassessable and will conform to the descriptions thereof in the General
Disclosure Package and the Final Prospectus; and the issuance of the Units, the
Shares, the Warrants and the Warrant Share is not in violation of any preemptive
or similar rights.

 

(o)          Description of Placement Agency Agreement. This Agreement conforms
in all material respects to the description thereof contained in the
Registration Statement and the General Disclosure Package and the Final
Prospectus.

 

(p)          No Violation or Default. Neither the Company nor any of its
subsidiaries is (i) in violation of its charter or by-laws or other
organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject; or
(iii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of clauses (ii) and (iii) above, for any such default or
violation that would not, individually or in the aggregate, have a Material
Adverse Effect.

 

(q)          No Conflicts. The execution, delivery and performance by the
Company of this Agreement, the issuance and sale of the Securities and the
consummation of the transactions contemplated by this Agreement will not (i)
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, (ii) result in any violation of the
provisions of the charter or by-laws of the Company or any of its subsidiaries
or (iii) result in the violation of any law or statute or any judgment, order,
rule or regulation of any court or arbitrator or governmental or regulatory
authority having jurisdiction over the Company or any of its subsidiaries,
except, in the case of clauses (i) and (iii) above, for any such conflict,
breach, violation, default, lien, charge or encumbrance that would not,
individually or in the aggregate, have a Material Adverse Effect.

 

(r)          No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of this Agreement, the issuance and sale of the Securities and
the consummation of the transactions contemplated by this Agreement, except for
the registration of the Shares under the Securities Act and such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required under applicable state securities laws in connection with the purchase
and distribution of the Units by the Placement Agent.

 

 

 

 

(s)          Legal Proceedings. Except as described in the Registration
Statement and the General Disclosure Package and the Final Prospectus, there are
no legal, governmental or regulatory investigations, actions, suits or
proceedings pending to which the Company or any of its subsidiaries is or may be
a party or to which any property of the Company or any of its subsidiaries is or
may be the subject that, individually or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under this Agreement; no
such investigations, actions, suits or proceedings are, to the knowledge of the
Company, threatened by any governmental or regulatory authority or threatened by
others; and (i) there are no current or pending legal, governmental or
regulatory actions, suits or proceedings that are required under the Securities
Act to be described in the Registration Statement that are not so described in
the Registration Statement and the General Disclosure Package and the Final
Prospectus and (ii) there are no contracts or other documents that are required
under the Securities Act to be filed as exhibits to the Registration Statement
or described in the Registration Statement and the General Disclosure Package
and the Final Prospectus that are not so filed as exhibits to the Registration
Statement or described in the Registration Statement and the General Disclosure
Package and the Final Prospectus.

 

(t)          Independent Accountants. WithumSmith + Brown, PC, who have
certified certain financial statements of the Company and its subsidiaries is an
independent registered public accounting firm with respect to the Company and
its subsidiaries within the applicable rules and regulations adopted by the
Commission and the Public Accounting Oversight Board (United States) and as
required by the Securities Act.

 

(u)          Title to Real and Personal Property. The Company and its
subsidiaries have good and marketable title in fee simple to, or have valid
rights to lease or otherwise use, all items of real and personal property that
are material to the respective businesses of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances, claims and defects and
imperfections of title except as described in the General Disclosure Package and
the Final Prospectus those that (i) do not materially interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries or (ii) could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.

 

(v)         Title to Intellectual Property. Except as described in the General
Disclosure Package, the Company and its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations or applications therefor, service
mark registrations or applications therefor, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, “Intellectual
Property”), that is used in the conduct of their respective businesses; and, to
the knowledge of the Company, the conduct of their respective businesses does
not conflict in any material respect with any such rights of others, and the
Company has not received any written, or to the knowledge of the Company, other
notice of infringement of or conflict with, and the Company has no knowledge of
any infringement of or conflict with, asserted rights of others with respect to
its Intellectual Property which could reasonably be expected to result in a
Material Adverse Effect. Further, except as described in the General Disclosure
Package, or which would not reasonably be expected to result in a Material
Adverse Effect, the Company is not obligated to pay a royalty, grant a license
or provide other consideration to any third party in connection with its
Intellectual Property; and, to the knowledge of the Company, no third party,
including any academic or governmental organization, possesses rights to the
Company’s Intellectual Property which, if exercised, could enable such third
party to develop products competitive with those of the Company or its
subsidiaries which could reasonably be expected to have a Material Adverse
Effect.

 

(w)        Clinical Trials. The studies, tests and preclinical and clinical
trials conducted by or on behalf of the Company that are described in the
General Disclosure Package or the Final Prospectus (collectively, the
“Products”) and that are described as ongoing, or the results of which are
referred to in the General Disclosure Package or the Final Prospectus, are the
only studies, tests and preclinical and clinical trials currently being
conducted by or on behalf of the Company with respect to the Products. Nothing
has come to the attention of the Company that has caused the Company to believe
that the studies, tests and preclinical and clinical trials described in the
General Disclosure Package and the Final Prospectus were not and, to the extent
still pending, are not being conducted in all material respects in accordance
with experimental protocols, procedures and controls pursuant to accepted
professional scientific standards; the descriptions of the results of such
studies, tests and trials contained in the General Disclosure Package and the
Final Prospectus are consistent in all material respects with such results.
Except as described in the General Disclosure Package and the Final Prospectus,
no results of any other studies or tests have come to the attention of the
Company that have caused the Company to believe that such results are materially
adverse to the results described in the General Disclosure Package and the Final
Prospectus of the clinical trials. The Company has not received any notices or
correspondence from the Food and Drug Administration (the “FDA”) or any other
governmental agency requiring the termination, suspension or modification of any
clinical trials currently conducted by, or on behalf of, the Company or in which
the Company has participated.

 

 

 

 

(x)          No Undisclosed Relationships. No relationship, direct or indirect,
exists between or among the Company or any of its subsidiaries, on the one hand,
and the directors, officers, stockholders, customers or suppliers of the Company
or any of its subsidiaries, on the other, that is required by the Securities Act
to be described in the Registration Statement and the General Disclosure Package
and the Final Prospectus and that is not so described in such documents.

 

(y)         Investment Company Act. The Company is not and, after giving effect
to the offering and sale of the Shares and the application of the proceeds
thereof as described in the Registration Statement and the General Disclosure
Package and the Final Prospectus, will not be required to register as an
“investment company” or an entity “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder (collectively, “Investment Company
Act”).

 

(z)         Taxes. The Company and its subsidiaries have paid all federal,
state, local and foreign income taxes and filed all income tax returns required
to be paid or filed through the date hereof; and except as otherwise disclosed
in the Registration Statement and the General Disclosure Package and the Final
Prospectus, there is no tax deficiency that has been, or could reasonably be
expected to be, asserted against the Company or any of its subsidiaries or any
of their respective properties or assets, in each case, except as would not have
a Material Adverse Effect.

 

(aa)        Licenses and Permits. The Company and its subsidiaries possess all
licenses, certificates, permits and other authorizations issued by, and have
made all declarations and filings with, the appropriate federal, state, local or
foreign governmental or regulatory authorities that are necessary for the
ownership or lease of their respective properties or the conduct of their
respective businesses as described in the Registration Statement and the General
Disclosure Package and the Final Prospectus, except where the failure to possess
or make the same would not, individually or in the aggregate, have a Material
Adverse Effect; and except as described in the Registration Statement and the
General Disclosure Package and the Final Prospectus, neither the Company nor any
of its subsidiaries has received notice of any revocation or modification of any
such license, certificate, permit or authorization or has any reason to believe
that any such license, certificate, permit or authorization will not be renewed
in the ordinary course which, if the subject of an unfavorable decision, ruling
or finding, would have a Material Adverse Effect.

 

(bb)       No Labor Disputes. No labor dispute with employees of the Company or
any of its Subsidiaries exists or, to the knowledge of the Company, is
threatened and the Company is not aware of any existing or imminent labor
disturbance by, or dispute with, the employees of any of its or its
Subsidiaries’ principal suppliers, contractors or customers, except, in each
case, as would not have a Material Adverse Effect.

 

(cc)       Compliance With Environmental Laws. Except as described in the Final
Prospectus, the Company and its subsidiaries (x) are in compliance with any and
all applicable federal, state, local and foreign laws, rules, regulations,
requirements, decisions and orders relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, “Environmental Laws”); (y) have
received and are in compliance in all material respects with all permits,
licenses, certificates or other authorizations or approvals required of them
under applicable Environmental Laws to conduct their respective businesses; and
(z) have not received written notice of any actual or potential liability for
the investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, and (ii) there are no
costs or liabilities associated with Environmental Laws of or relating to the
Company or its subsidiaries, except in the case of each of (i)(x) and (i)(y)
above, for any such failure to comply, or failure to receive required permits,
licenses or approvals, or cost or liability, as would not, individually or in
the aggregate, have a Material Adverse Effect.

 

 

 

 

(dd)       Compliance With ERISA. Each employee benefit plan, within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in compliance in all material
respects with its terms and the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the Internal
Revenue Code of 1986, as amended (the “Code”); no prohibited transaction, within
the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred
with respect to any such plan excluding transactions effected pursuant to a
statutory or administrative exemption; and for each such plan that is subject to
the funding rules of Section 412 of the Code or Section 302 of ERISA, no
“accumulated funding deficiency” as defined in Section 412 of the Code has been
incurred, whether or not waived, and the fair market value of the assets of each
such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions, in each case except as described in the
Final Prospectus or as would not have a Material Adverse Effect.

 

(ee)       Disclosure Controls. Except as described in the General Disclosure
Package and the Final Prospectus, the Company and its subsidiaries maintain an
effective system of “disclosure controls and procedures” (as defined in Rule
13a-15(e) of the Exchange Act) that is designed to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms, including
controls and procedures designed to ensure that such information is accumulated
and communicated to the Company’s management as appropriate to allow timely
decisions regarding required disclosure. The Company and its subsidiaries have
carried out evaluations of the effectiveness of their disclosure controls and
procedures as required by Rule 13a-15 of the Exchange Act.

 

(ff)         Accounting Controls. Except as described in the General Disclosure
Package and the Final Prospectus, the Company and its subsidiaries maintain
systems of “internal control over financial reporting” (as defined in Rule
13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange
Act and have been designed by, or under the supervision of, their respective
principal executive and principal financial officers, or persons performing
similar functions, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, including,
but not limited to internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Except as disclosed in the
Registration Statement and the General Disclosure Package and the Final
Prospectus, there are no material weaknesses in the Company’s internal controls.

 

(gg)       Insurance. The Company and its Subsidiaries have insurance covering
their respective properties, operations, personnel and businesses, which
insurance is in amounts and insures against such losses and risks as are
customary within the industry to protect the Company and its subsidiaries and
their respective businesses; and neither the Company nor any of its subsidiaries
has (i) received written notice from any insurer or agent of such insurer that
capital improvements or other expenditures are required or necessary to be made
in order to continue such insurance or (ii) any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage at reasonable cost from similar insurers
as may be necessary to continue its business.

 

(hh)       No Unlawful Payments. Neither the Company nor any of its subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or
other person associated with or acting on behalf of the Company or any of its
subsidiaries has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.

 

 

 

 

(ii)         Compliance with Money Laundering Laws. The operations of the
Company and its subsidiaries are and have been conducted at all times in
compliance in all material respects with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all jurisdictions, the rules
and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money Laundering Laws”) and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries with respect to the Money
Laundering Laws, to the knowledge of the Company, is pending or threatened.

 

(jj)         Compliance with OFAC. None of the Company, any of its subsidiaries
or, to the knowledge of the Company, any director, officer, agent, employee or
Affiliate of the Company or any of its subsidiaries is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”); and the Company will not directly or
indirectly use the proceeds of the offering of the Shares hereunder, or lend,
contribute or otherwise make available such proceeds to any subsidiary, joint
venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by
OFAC.

 

(kk)       No Restrictions on Subsidiaries. No subsidiary of the Company is
currently prohibited, directly or indirectly, under any agreement or other
instrument to which it is a party or is subject, from paying any dividends to
the Company, from making any other distribution on such subsidiary’s capital
stock, from repaying to the Company any loans or advances to such subsidiary
from the Company or from transferring any of such subsidiary’s properties or
assets to the Company or any other subsidiary of the Company.

 

(ll)         No Broker’s Fees. Neither the Company nor any of its subsidiaries
is a party to any contract, agreement or understanding with any person (other
than this Agreement) that would give rise to a valid claim against the Company
or any of its subsidiaries or any Placement Agent for a brokerage commission,
finder’s fee or like payment in connection with the offering and sale of the
Shares.

 

(mm)      No Registration Rights. No person has the right to require the Company
or any of its subsidiaries to register any securities for sale under the
Securities Act by reason of the filing of the Registration Statement with the
Commission or the issuance and sale of the Shares.

 

(nn)       No Stabilization. The Company has not taken, directly or indirectly,
any action designed to or that could reasonably be expected to cause or result
in any stabilization or manipulation of the price of the Shares.

 

(oo)      Margin Rules. Neither the issuance, sale and delivery of the Shares
nor the application of the proceeds thereof by the Company as described in the
Registration Statement and the General Disclosure Package and the Final
Prospectus will violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board of Governors.

 

(pp)       Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement and the General Disclosure Package
and the Final Prospectus has been made or reaffirmed without a reasonable basis
or has been disclosed other than in good faith. The statements and financial
information (including the assumptions described herein) included in the
Registration Statement and the General Disclosure Package and the Final
Prospectus under the Heading “Preliminary Results for the Year Ended December
31, 2013” (collectively, the “Projections”) (i) are within the coverage of the
safe harbor for forward looking statements set forth in Section 27A of the
Securities Act, Rule 175(b) under the Securities Act or Rule 3b-6 under the
Exchange Act, as applicable, (ii) were made by the Company with a reasonable
basis and in good faith and reflect the Company’s good faith best estimate of
the matters described therein, and (iii) have been prepared in accordance with
Item 10 of Regulation S-K under the Securities Act; all assumptions material to
the Projections are set forth in the Registration Statement and the General
Disclosure Package and the Final Prospectus; the assumptions used in the
preparation of the Projections are reasonable; and none of the Company or its
subsidiaries are aware of any business, economic or industry developments
inconsistent with the assumptions underlying the Projections.

 

 

 

 

(qq)       Statistical and Market Data. Nothing has come to the attention of the
Company that has caused the Company to believe that the statistical and
market-related data included in the Registration Statement and the General
Disclosure Package and the Final Prospectus is not based on or derived from
sources that are reliable and accurate in all material respects.

 

(rr)         Sarbanes-Oxley Act. There is and has been no failure on the part of
the Company or any of the Company’s directors or officers, in their capacities
as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley
Act”), including Section 402 related to loans and Sections 302 and 906 related
to certifications.

 

(ss)       Status under the Securities Act. The Company is not an ineligible
issuer as defined under the Securities Act, in each case at the times specified
in the Securities Act in connection with the offering of the Shares. The Company
has paid the registration fee for this offering pursuant to Rule 456(b)(1) under
the Securities Act or will pay such fees within the time period required by such
rule (without giving effect to the proviso therein) and in any event prior to
the Closing Date.

 

5.     Certain Agreements of the Company. The Company agrees with the Placement
Agent that it will furnish to counsel for the Placement Agent one copy of the
registration statement relating to the Units, including all exhibits, in the
form it became effective and of all amendments thereto and that, in connection
with the offering of Units

 

(a)         Filing of Prospectuses. The Company has filed or will file each
Statutory Prospectus (including the Final Prospectus) pursuant to and in
accordance with Rule 424(b)(1) no later than the second business day following
the earlier of the date of determination of the offering price or the date it is
first used after effectiveness in connection with a public offering or sales.
The Company has complied and will comply with Rule 433.

 

(b)         Filing of Amendments; Response to Commission Requests. The Company
will promptly advise the Placement Agent of any proposal to amend or supplement
the Registration Statement or any Statutory Prospectus until the completion of
the purchase and sale of the Shares contemplated herein and will afford the
Placement Agent a reasonable opportunity to comment on any such proposed
amendment or supplement; and the Company will also advise the Placement Agent
promptly of (i) the filing of any such amendment or supplement, (ii) any request
by the Commission or its staff for any amendment to the Registration Statement,
for any supplement to any Statutory Prospectus or for any additional
information, (iii) the institution by the Commission of any stop order
proceedings in respect of the Registration Statement or the threatening of any
proceeding for that purpose, and (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
(including the Shares) in any jurisdiction or the institution or threatening of
any proceedings for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.

 

(c)         Continued Compliance with Securities Laws. If, at any time when a
prospectus relating to the Shares is (or but for the exemption in Rule 172 under
the Act would be) required to be delivered under the Act in connection with
sales by the Company to any Purchasers, any event occurs as a result of which
the Final Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend the
Registration Statement or supplement the Final Prospectus to comply with the
Act, the Company will promptly notify the Placement Agent of such event and will
promptly prepare and file with the Commission and furnish, at its own expense,
to the Placement Agent and, to the extent applicable, the dealers and any other
dealers upon request of the Placement Agent, an amendment or supplement which
will correct such statement or omission or an amendment which will effect such
compliance. Neither the Placement Agent’ consent to, nor the Placement Agent’
delivery of, any such amendment or supplement shall constitute a waiver of any
of the conditions set forth in Section 7 hereof.

 

 

 

 

(d)         Rule 158. As soon as practicable, but not later than 16 months,
after the date of this Agreement, the Company will make generally available to
its securityholders an earnings statement covering a period of at least 12
months beginning after the date of this Agreement and satisfying the provisions
of Section 11(a) of the Act and Rule 158.

 

(e)         Furnishing of Prospectuses. The Company will furnish to the
Placement Agent copies of the Registration Statement, including all exhibits,
any Statutory Prospectus relating to the Shares, the Final Prospectus and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Placement Agent reasonably requests. The Company
will pay the expenses of printing and distributing to the Placement Agent all
such documents.

 

(f)          Blue Sky Qualifications. The Company will arrange for the
qualification of the Securities for sale under the laws of such jurisdictions as
the Placement Agent designate and will continue such qualifications in effect so
long as required for the distribution; provided that the Company will not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction or take any action that would
subject it to taxation in any such jurisdiction where it is not then so subject.

 

(g)         Reporting Requirements. During the period of five years after the
date of the this Agreement, the Company will furnish to the Placement Agent as
soon as practicable after the end of each fiscal year, a copy of its annual
report to stockholders for such year; and the Company will furnish to the
Placement Agent (i) as soon as available, a copy of each report and any
definitive proxy statement of the Company filed with the Commission under the
Exchange Act or mailed to stockholders, and (ii) from time to time, such other
information concerning the Company as the Placement Agent may reasonably request
in writing. However, so long as the Company is subject to the reporting
requirements of either Section 13 or Section 15(d) of the Exchange Act and is
timely filing reports with the Commission on its Electronic Data Gathering,
Analysis and Retrieval system (“EDGAR”), it is not required to furnish such
filed reports or statements to the Placement Agent required pursuant to
subsection (i) above.

 

(h)          Payment of Expenses. In accordance with and subject to the
limitations contained in the Engagement Letter, the Company will pay all fees
and expenses incident to the performance of its obligations under this
Agreement, including but not limited to (i) any filing fees and other expenses
(including reasonable fees and disbursements of counsel to the Placement Agent
in accordance with the terms of the Engagement Letter) incurred in connection
with qualification of the Shares for sale under the laws of such jurisdictions
as the Placement Agent may designate and the preparation and printing of
memoranda relating thereto, (ii) any costs and expenses related to, the review
by the Financial Industry Regulatory Authority (“FINRA”) of the Units (including
filing fees and the reasonable fees and disbursements of counsel for the
Placement Agent relating to such review), (iii) any travel expenses of the
Company’s officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers of the
Units, (iv) fees and expenses incident to listing the Shares on the OTC Bulletin
Board and other national and foreign exchanges, (v) fees and expenses in
connection with the registration of the Shares under the Exchange Act, (vi) fees
and expenses incurred in distributing any Statutory Prospectuses and the Final
Prospectus (including any amendments and supplements thereto) to the Placement
Agent and for expenses incurred for preparing, printing and distributing any
Issuer Free Writing Prospectuses to investors or prospective investors, (vii)
fees and expenses of the Escrow Agent and under the Escrow Agreement and (viii)
all other costs and expenses incurred by the Company incident to the performance
of the obligations of the Company hereunder for which provision is not otherwise
made in this Section.

 

(i)          Use of Proceeds. The Company will use the net proceeds received in
connection with any offering of the Shares in the manner described in the “Use
of Proceeds” section of the General Disclosure Package.

 

(j)          Absence of Manipulation. The Company will not take, directly or
indirectly, any action designed to or that would constitute or that might
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company to facilitate the sale or resale of
the Shares.

 

 

 

 

(k)          Restriction on Sale of Securities. For the period specified below
(the “Lock-Up Period”), the Company will not, directly or indirectly, take any
of the following actions with respect to its Common Stock or any securities
convertible into or exchangeable or exercisable for its Common Stock (“Lock-Up
Securities”): (i) offer, sell, issue, contract to sell, pledge or otherwise
dispose of, Lock-Up Securities, (ii) offer, sell, issue, contract to sell,
contract to purchase or grant any option, right or warrant to purchase Lock-Up
Securities, (iii) enter into any swap, hedge or any other agreement that
transfers, in whole or in part, the economic consequences of ownership of
Lock-Up Securities, (iv) establish or increase a put equivalent position or
liquidate or decrease a call equivalent position in Lock-Up Securities within
the meaning of Section 16 of the Exchange Act or (v) file with the Commission a
registration statement under the Act relating to Lock-Up Securities, or publicly
disclose the intention to take any such action, without the prior written
consent of Brean, except issuances of Lock-Up Securities pursuant to the
conversion of convertible securities or the exercise of warrants or options, in
each case outstanding on the date of this Agreement, grants of employee stock
options pursuant to the terms of a plan in effect on the date of this Agreement,
or issuances of Lock-Up Securities pursuant to the exercise of such options. The
initial Lock-Up Period will commence on the date hereof and continue for 90 days
after the date hereof; provided, however, that if (1) during the last 17 days of
the initial Lock-Up Period, the Company releases earnings results or material
news or a material event relating to the Company occurs or (2) prior to the
expiration of the initial Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of
the initial Lock-Up Period, then in each case the Lock-Up Period will be
extended until the expiration of the 18-day period beginning on the date of
release of the earnings results or the occurrence of the materials news or
material event, as applicable, unless Brean waives, in writing, such extension.
The Company will provide the Placement Agent with notice of any announcement
described above that gives rise to an extension of the Lock-Up Period. The
Company and Brean shall not waive compliance with this paragraph (k) during the
90 day period commencing on the date hereof without the consent of a majority of
the Company’s shareholders voting at a meeting held for the purpose thereof.

 

6.        Free Writing Prospectuses. The Company represents and agrees that,
unless it obtains the prior consent of the Placement Agent, and the Placement
Agent agrees that, unless it obtains the prior consent of the Company, it has
not made and will not make any offer relating to the Units that would constitute
an Issuer Free Writing Prospectus, or that would otherwise constitute a “free
writing prospectus,” as defined in Rule 405, required to be filed with the
Commission. Any such free writing prospectus consented to by the Company and the
Placement Agent, each of which is set forth on Schedule A hereto, is hereinafter
referred to as a “Permitted Free Writing Prospectus.” The Company represents
that it has treated and agrees that it will treat each Permitted Free Writing
Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and
has complied and will comply with the requirements of Rules 164 and 433
applicable to any Permitted Free Writing Prospectus, including timely Commission
filing where required, leg ending and record keeping.

 

7.       Conditions of the Obligations of the Placement Agent. The obligations
of the Placement Agent hereunder will be subject to the accuracy of the
representations and warranties of the Company herein (as though made on such
Closing Date), to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:

 

(a)         Registration Compliance; No Stop Order. No order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceeding for such purpose or pursuant to Section 8A under the Securities Act
shall be pending before or threatened by the Commission; the Final Prospectus
and each Issuer Free Writing Prospectus shall have been timely filed with the
Commission under the Securities Act (in the case of an Issuer Free Writing
Prospectus, to the extent required by Rule 433 under the Securities Act) and in
accordance with this Agreement; and all requests by the Commission for
additional information shall have been complied with to the reasonable
satisfaction of the Representative.

 

(b)         Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct on the date hereof and
on and as of the Closing Date, as the case may be; and the statements of the
Company and its officers made in any certificates delivered pursuant to this
Agreement shall be true and correct on and as of the Closing Date.

 

(c)         No Downgrade. Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded any
securities or preferred stock of or guaranteed by the Company or any of its
subsidiaries by any “nationally recognized statistical rating organization”, as
such term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act and (ii) no such organization shall have publicly announced that
it has under surveillance or review, or has changed its outlook with respect to,
its rating of any securities or preferred stock of or guaranteed by the Company
or any of its subsidiaries (other than an announcement with positive
implications of a possible upgrading).

 

 

 

 

(d)         No Material Adverse Change. No event or condition of a type
described in Section 4(i) hereof shall have occurred or shall exist, which event
or condition is not described in the General Disclosure Package (excluding any
amendment or supplement thereto) and the Final Prospectus (excluding any
amendment or supplement thereto) and the effect of which in the judgment of
Brean is so material and adverse that it makes it impracticable or inadvisable
to proceed with the offering, sale or delivery of the Units on the Closing Date,
on the terms and in the manner contemplated by this Agreement, the General
Disclosure Package and the Final Prospectus.

 

(e)         Officer’s Certificate. The Placement Agent shall have received on
and as of the Closing Date, a certificate of the chief financial officer or
chief accounting officer of the Company and one additional senior executive
officer of the Company who is satisfactory to Brean (i) confirming that such
officers have carefully reviewed the Registration Statement and the General
Disclosure Package and the Final Prospectus and, to the best knowledge of such
officers, the representations set forth in Sections 4(b) and 4(e) hereof are
true and correct, (ii) confirming that the other representations and warranties
of the Company in this Agreement are true and correct and that the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to such Closing Date and (iii) to
the effect set forth in paragraphs (a), (c) and (d) above.

 

(f)          Comfort Letters. On the date of this Agreement and on the Closing
Date, WithumSmith + Brown, PC shall have furnished to the Placement Agent, at
the request of the Company, letters, dated the respective dates of delivery
thereof and addressed to the Placement Agent, in form and substance reasonably
satisfactory to Brean, containing statements and information of the type
customarily included in accountants’ “comfort letters” to Placement Agent with
respect to the financial statements and certain financial information contained
or incorporated by reference in the Registration Statement and the General
Disclosure Package and the Final Prospectus; provided, that the letter delivered
on the Closing Date shall use a “cut-off” date no more than two business days
prior to such Closing Date.

 

(g)         Opinions of Counsel for the Company. Szaferman, Lakind, Blumstein &
Blader, P.C., counsel for the Company, shall have furnished to the Placement
Agent, at the request of the Company, their written opinion, dated the Closing
Date and addressed to the Placement Agent, in form and substance reasonably
satisfactory to Brean, to the effect set forth in Annex A hereto.

 

(h)         Opinion of Counsel for the Placement Agent. The Placement Agent
shall have received on and as of the Closing Date an opinion of Greenberg
Traurig, LLP, counsel for the Placement Agent, with respect to such matters as
Brean may reasonably request, and such counsel shall have received such
documents and information as they may reasonably request to enable them to pass
upon such matters.

 

(i)          No Legal Impediment to Issuance. No action shall have been taken
and no statute, rule, regulation or order shall have been enacted, adopted or
issued by any federal, state or foreign governmental or regulatory authority
that would, as of the Closing Date, prevent the issuance or sale of the Units;
and no injunction or order of any federal, state or foreign court shall have
been issued that would, as of the Closing Date, prevent the issuance or sale of
the Units.

 

(j)          Good Standing. The Placement Agent shall have received on and as of
the Closing Date satisfactory evidence of the good standing of the Company and
its subsidiaries in their respective jurisdictions of organization and their
good standing as foreign entities in such other jurisdictions as Brean may
reasonably request, in each case in writing or any standard form of
telecommunication from the appropriate governmental authorities of such
jurisdictions.

 

(k)          Exchange Listing. The Shares to be delivered on the Closing shall
have been approved for listing on the OTC Bulletin Board, subject to official
notice of issuance.

 

 

 

 

(l)          Lock-up Agreements. The “lock-up” agreements, each substantially in
the form of Exhibit B hereto, between the Placement Agent, the Company and
certain shareholders, officers and directors of the Company relating to sales
and certain other dispositions of shares of the Company’s capital stock or
certain other securities, delivered to the Placement Agent on or before the date
hereof, shall be full force and effect on the Closing Date.

 

(m)         Subscription Agreements; Escrow Agreement. The Company shall have
entered into (i) the Subscription Agreements with each of the Purchasers and
(ii) the Escrow Agreement with the Placement Agent and the Escrow Agent, and
such agreements shall be in full force and effect.

 

(n)          FINRA Matters. The Financial Industry Regulatory Authority
(“FINRA”) shall have confirmed that it has not raised any objection with respect
to the fairness and reasonableness of the placement agency terms and
arrangements.

 

(o)          Additional Documents. On or prior to the Closing Date, the Company
shall have furnished to Brean such further certificates and documents as Brean
may reasonably request.

 

All opinions, letters, certificates and evidence mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

 

8.        Indemnification and Contribution.

 

(a)          Indemnification of Placement Agent. The Company will indemnify and
hold harmless each Placement Agent, its partners, members, directors, officers,
employees, agents, affiliates and each person, if any, who controls any
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (each, an “Indemnified Party”), against any and all losses, claims,
damages or liabilities, joint or several, to which such Indemnified Party may
become subject, under the Act, the Exchange Act, other Federal or state
statutory law or regulation 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 any part of the Registration Statement at any time, any Statutory
Prospectus as of any time, the Final Prospectus or any Issuer Free Writing
Prospectus, or arise out of or are based upon the omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Indemnified Party for
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending against any such loss, claim, damage,
liability, action, litigation, investigation or proceeding whatsoever (whether
or not such Indemnified Party is a party thereto), whether threatened or
commenced, and in connection with the enforcement of this provision with respect
to any of the above as such expenses are incurred; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by the Placement Agent specifically for use therein, it being
understood and agreed that the only such information furnished by the Placement
Agent consists of the information described as such in subsection (b) below.

 

(b)          Indemnification of Company. Each Placement Agent will, severally
and not jointly, indemnify and hold harmless the Company, each of its directors
and each of its officers who signs the Registration Statement and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act (each, a “Placement Agent Indemnified Party”),
against any losses, claims, damages or liabilities to which such Placement Agent
Indemnified Party may become subject, under the Act, the Exchange Act, other
Federal or state statutory law or regulation 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 any part of the Registration Statement at any time,
any Statutory Prospectus as of any time, the Final Prospectus or any Issuer Free
Writing Prospectus, or arise out of or are based upon the omission or the
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such Placement Agent
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by such Placement Agent Indemnified Party in connection with
investigating or defending against any such loss, claim, damage, liability,
action, litigation, investigation or proceeding whatsoever (whether or not such
Placement Agent Indemnified Party is a party thereto), whether threatened or
commenced, based upon any such untrue statement or omission, or any such alleged
untrue statement or omission as such expenses are incurred, it being understood
and agreed that the only information furnished by any Placement Agent is set
forth in the second to last paragraph of the prospectus supplement dated the
date hereof under the caption “Plan of Distribution” concerning stabilization.

 

 

 

 

(c)          Actions against Parties; Notification. Promptly after receipt by an
indemnified party under this Section of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof; but the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
under subsection (a) or (b) above except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under subsection (a) or (b) above. In case
any such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has concluded (based on advice of counsel) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party), or (iv) the indemnifying
party has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement (i) includes
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of an indemnified party.

 

(d)          Contribution. If the indemnification provided for in this Section
is unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Placement Agent on the other from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Placement Agent on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Placement Agent on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by the Placement Agent. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Placement Agent and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim that is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), the Placement Agent shall not be required to contribute any
amount in excess of the amount by which total compensation received by the
Placement Agent in accordance with Section 2(e) exceeds the amount of any
damages which the Placement Agent have otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Company and the Placement Agent
agree that it would not be just and equitable if contribution pursuant to this
Section 8(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 8(d).

 

 

 

 

(e)          Control Persons. The obligations of the Company under this Section
shall be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Placement Agent within the meaning of the Act; and the obligations
of the Placement Agent under this Section shall be in addition to any liability
which the Placement Agent may otherwise have and shall extend, upon the same
terms and conditions, to each director of the Company, to each officer of the
Company who has signed the Registration Statement and to each person, if any,
who controls the Company within the meaning of the Act.

 

9.          Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Placement Agent set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Placement Agent, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Units. In accordance with the Engagement Letter, if the sale
and issuance of the Units by the Company hereunder are not consummated for any
reason, the Company will reimburse the Placement Agent for all out of pocket
expenses (including fees and disbursements of counsel) reasonably incurred in
connection with the offering of the Units, and the respective obligations of the
Company and the Placement Agent pursuant to Section 8 hereof shall remain in
effect. In addition, if any Units have been purchased under this Agreement and
the Subscription Agreements, the representations and warranties in Section 4
hereof and all obligations under Section 5 hereof shall also remain in effect.

 

10.         Notices. All communications hereunder will be in writing and, if
sent to the Placement Agent, will be mailed, delivered or telegraphed and
confirmed to Brean Capital LLC, 1345 Avenue of the Americas, New York, NY 10105;
Attention: Jeffrey Sacher, Managing Director, with a copy to Greenberg Traurig,
LLP, One International Place, Boston, Massachusetts 02110, Attention: Robert E.
Puopolo, Esq., or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 7 Deer Park Drive, Suite K, Monmouth
Junction, New Jersey 08852; Attention: Chief Financial Officer, with a copy to
Szaferman, Lakind, Blumstein & Blader, P.C., 101 Grovers Mill Road, 2nd Floor,
Lawrenceville, New Jersey 08648, Attention: Gregg E. Jaclin, Esq.

 

11.        Successors. This Agreement will inure to the benefit of and be
binding upon parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 8, and no other person
will have any right or obligation hereunder.

 

12.        Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

 

13.       Absence of Fiduciary Relationship. The Company acknowledges and agrees
that:

 

(a)          No Other Relationship. The Placement Agent have been retained
solely to act as Placement Agent in connection with the sale of Units and that
no fiduciary, advisory or agency relationship between the Company and the
Placement Agent has been created in respect of any of the transactions
contemplated by this Agreement, any Subscription Agreement or the Final
Prospectus, irrespective of whether the Placement Agent have advised or is
advising the Company on other matters;

 

 

 

 

(b)          Arm’s-Length Negotiations. The price of the Units set forth in this
Agreement was established by the Company following discussions and arm’s-length
negotiations with the Placement Agent and the Company is capable of evaluating
and understanding and understands and accepts the terms, risks and conditions of
the transactions contemplated by this Agreement;

 

(c)          Absence of Obligation to Disclose. The Company has been advised
that the Placement Agent and their affiliates are engaged in a broad range of
transactions which may involve interests that differ from those of the Company
and that the Placement Agent have no obligation to disclose such interests and
transactions to the Company by virtue of any fiduciary, advisory or agency
relationship; and

 

(d)          Waiver. The Company waives, to the fullest extent permitted by law,
any claims it may have against the Placement Agent for breach of fiduciary duty
or alleged breach of fiduciary duty and agrees that the Placement Agent shall
have no liability (whether direct or indirect) to the Company in respect of such
a fiduciary duty claim or to any person asserting a fiduciary duty claim on
behalf of or in right of the Company, including stockholders, employees or
creditors of the Company.

 

14.        Amendment. In case any provision in this Agreement shall be invalid,
illegal or unenforceable, the validity and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Agreement,
the Engagement Letter and the Subscription Agreements constitute the entire
agreements of the parties to this Agreement and supersede all prior and all
contemporaneous agreements (whether written or oral), understandings and
negotiations with respect to the subject matter hereof. This Agreement may only
be amended or modified in writing, signed by all of the parties hereto, and no
condition herein (express or implied) may be waived unless waived in writing by
each party whom the condition is meant to benefit.

 

15.        Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. The Company hereby submits
to the non-exclusive jurisdiction of any court of the State of New York or the
United States District Court located in the City of New York, New York in any
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated thereby. The Company irrevocably and unconditionally
waives any objection to the laying of venue of any suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated thereby in
any court of the State of New York or the United States District Court located
in the City of New York, New York and irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such suit or proceeding
in any such court has been brought in an inconvenient forum.

 

[The remainder of this page is intentionally left blank]

 

 

 

 

If the foregoing is in accordance with the Placement Agent’ understanding of our
agreement, kindly sign and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Placement Agent in accordance with its terms.

 

  Very truly yours   CYTOSORBENTS INCORPORATED   By:     Name:     Title:  

 

Signature Page to Placement Agency Agreement

 

 

 

 

The foregoing Placement Agency Agreement is hereby confirmed and accepted as of
the date first above written.

 

  BREAN CAPITAL LLC   By:     Name:     Title:  

 

Signature Page to Placement Agency Agreement

 

 

 

 

SCHEDULE A

 

1.   Statutory Prospectus Included in the General Disclosure Package     Base
prospectus included in the Registration Statement declared effective on February
14, 2014 2.   General Use Issuer Free Writing Prospectuses (included in the
General Disclosure Package)     “General Use Issuer Free Writing Prospectus”
includes each of the following documents: None. 3.   Other Information Included
in the General Disclosure Package     The following information is also included
in the General Disclosure Package: None. 4.   Permitted Free Writing Prospectus:
None.