PLACEMENT AGENCY AGREEMENT

 

March 30, 2017

 

Joseph Gunnar & Co., LLC

30 Broad Street, 11th Floor

New York, NY 10004

 

Re: Akers Biosciences, Inc.

 

Gentlemen:

 

This Placement Agency Agreement (“Agreement”) sets forth the terms upon which
Joseph Gunnar & Co., LLC (the “Placement Agent”) shall be engaged by Akers
Biosciences, Inc., a corporation formed under the laws of the State of New
Jersey (the “Company”), to act as exclusive placement agent in connection with
the private placement (the “Offering”) of shares (the “Shares”) of the Company’s
common stock, no par value (the “Common Stock”), and warrants to purchase Common
Stock (the “Warrants”), directly to certain investors. The shares of Common
Stock issuable upon exercise of the Warrants are collectively referred to herein
as the “Warrant Shares.” The Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”

 

The Placement Agent shall not submit to the Company subscriptions in connection
with the Offering by any persons or entities who do not qualify as “accredited
investors,” as such term is defined in Rule 501 of Regulation D (“Regulation D”)
as promulgated under Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Act”).

 

The term of the Placement Agent’s exclusive engagement will be until the
completion of the Offering (the “Offering Period”); provided, however, that a
party hereto may terminate the engagement with respect to itself at any time
upon five (5) days’ written notice to the other parties. The final day of the
Offering Period, or the date on which the termination notice referenced in the
prior sentence takes effect, shall be referred to as the “Termination Date.”
Notwithstanding anything to the contrary contained herein, the provisions
concerning indemnification and contribution contained herein and the Company’s
obligations contained in the indemnification provisions will survive any
expiration or termination of this Agreement, and the Company’s obligation to pay
fees actually earned and payable and to reimburse expenses actually incurred and
reimbursable pursuant to Section 3 hereof and which are permitted to be
reimbursed under FINRA Rule 5110(f)(2)(D), will survive any expiration or
termination of this Agreement. The Company may hold a closing at any time during
the Offering Period after subscriptions for the Securities have been received
and accepted and other conditions to closing have been satisfied (the
“Closing”). Nothing in this Agreement shall be construed to limit the ability of
the Placement Agent or its Affiliates to pursue, investigate, analyze, invest
in, or engage in investment banking, financial advisory or any other business
relationship with Persons (as defined below) other than the Company. As used
herein (i) “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind and (ii) “Affiliate” means any Person that, directly
or indirectly through one or more intermediaries, controls or is controlled by
or is under common control with a Person as such terms are used in and construed
under Rule 405 under the Act.

 

With respect to the Offering, the Company shall provide the Placement Agent, on
terms set forth herein, the exclusive right to offer and sell all of the
Securities being offered. The Company may, in its sole discretion, accept or
reject, in whole or in part, any prospective investment in the Securities.
Purchases of Securities may, but shall not be required to, be made by the
Placement Agent and their respective officers, directors, employees and
affiliates.

 

 

 

 

The Offering will be made solely pursuant to public filings by the Company or
its predecessor with the Securities and Exchange Commission (the “SEC”) and the
Offering Documents (as defined below).

 

1.       Appointment of Placement Agent. On the basis of the representations and
warranties provided herein, and subject to the terms and conditions set forth
herein, the Placement Agent is appointed as exclusive Placement Agent of the
Company during the Offering Period to assist the Company in finding qualified
subscribers for the Offering. On the basis of such representations and
warranties and subject to such terms and conditions, the Placement Agent hereby
accepts such appointment and agrees to perform the services hereunder diligently
and in good faith and in a professional and businesslike manner and to use its
commercially reasonable efforts to assist the Company in finding subscribers of
Securities who qualify as “accredited investors,” as such term is defined in
Rule 501 of Regulation D, and to complete the Offering. The Placement Agent has
no obligation to purchase any of the Securities. Unless sooner terminated in
accordance with this Agreement, the engagement of the Placement Agent hereunder
shall continue until the later of the Termination Date or the Closing.

 

2.       Representations and Warranties of the Company.

 

(a)The Company hereby represents and warrants to the Placement Agent as follows:

 

  i. SEC Filings. The Company’s SEC Filings (as defined below), as of the date
on which the Closing occurs (the “Closing Date”), will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. For purposes of
this Agreement, “SEC Filings” means all reports, schedules, forms, statements
and other documents required to be filed by the Company under the Act and
Securities Exchange Act of 1934, as amended (the “Exchange Act”), including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law or regulation
to file such material), including the exhibits thereto and documents
incorporated by reference therein. The Company has provided the Placement Agent
with a draft, dated March 28, 2017 (12:11am EST), of its Annual Report on Form
10-K for its fiscal year ended December 31, 2016 (the “Draft 2016 Form 10-K”),
which as of the date of this Agreement has not been filed with the SEC. The
Draft 2016 Form 10-K, as of the Closing Date, will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company’s
Annual Report on Form 10-K that will be filed with the SEC after the date of
this Agreement shall be substantially identical to the Draft 2016 Form 10-K and
shall not contain any negative disclosure, financial or otherwise, relating to
the Company, its business, its financial condition, regulatory matters,
litigation matters, risk factors, prospects or otherwise that is materially
different from the disclosure contained in the Draft 2016 Form 10-K.

 

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  ii. Financial Statements. The financial statements of the Company included in
the SEC Filings comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.         iii. No Material Adverse Change. Subsequent to the
respective dates as of which information is presented in the SEC Filings: (i)
the Company has not declared, paid or made any dividends or other distributions
of any kind on or in respect of its capital stock, and (ii) there has been no
material adverse change (or, to the knowledge of the Company, any development
which has a material probability of involving a material adverse change in the
future), whether or not arising from transactions in the ordinary course of
business, in or affecting: (A) the business, condition (financial or otherwise),
results of operations, shareholders’ equity, properties or prospects of the
Company; (B) the long-term debt or capital stock of the Company; or (C) the
offering of the Securities or consummation of any of the other transactions
contemplated by this Agreement and the Offering Documents (defined below) (a
“Material Adverse Change”). Since the date of the latest balance sheet presented
in the SEC Filings, the Company has not incurred or undertaken any liabilities
or obligations, whether direct or indirect, liquidated or contingent, matured or
unmatured, or entered into any transactions, including any acquisition or
disposition of any business or asset, which are material to the Company.

 

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  iv. Authorization; Enforcement. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Placement Agent Warrants (as defined below), and the Company
has the requisite corporate power and authority to enter into and perform its
obligations under the Securities Purchase Agreements to be entered into between
the Company and each of the investors (collectively, the “Securities Purchase
Agreements”), the Registration Rights Agreement to be entered into between the
Company and each of the investors (the “Registration Rights Agreement”), and the
Warrants (collectively, the “Offering Documents”), and to issue, sell and
perform its obligations with respect to the Offering Documents in accordance
with the terms hereof and thereof, (b) the execution and delivery of this
Agreement, the Placement Agent Warrants and the Offering Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby will, as of the Closing, have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, and (c) this Agreement has
been duly executed and delivered by the Company and the Placement Agent Warrants
and the Offering Documents, when executed and delivered by the Company, will be
duly executed and delivered by the Company. This Agreement constitutes the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
Placement Agent Warrants and the Offering Documents, when executed and delivered
by the Company, will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.         v. No Conflicts. The execution, delivery and
performance of this Agreement by the Company, and the execution, delivery and
performance of the Placement Agent Warrants and the Offering Documents by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby, will not (a) result in a violation of the Company’s
certificate or articles of incorporation, as amended and as in effect on the
date hereof (the “Certificate of Incorporation”) or the Company’s By-laws, as in
effect on the date hereof (the “By-laws”), or (b) violate or conflict with, or
result in a breach of, any provision of, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien on or against any of the
properties of the Company, any note, bond, mortgage, agreement, license,
indenture or instrument to which the Company is a party, or result in a
violation of any statute, law, rule, regulation, writ, injunction, order,
judgment or decree applicable to the Company or by which any property or asset
of the Company is bound or affected, except where such violation, conflict,
breach or other consequence would not have a Material Adverse Change. The
Company is not in violation of any term of or in default under its Certificate
of Incorporation or By-laws or in violation of any material term of, or in
default under, any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company. Except as specifically contemplated by
this Agreement, the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
or regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Agreement, the
Placement Agent Warrants or the Offering Documents in accordance with the terms
hereof or thereof, other than filings pursuant to federal and state securities
laws in connection with the sale of the Securities. All consents,
authorizations, orders, filings and registrations that the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof, other than those which are required to be made
after the Closing and which will be duly made on a timely basis.

 

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  vi. Securities Law Exemption. Assuming the truth and accuracy of each
investor’s representations set forth in the Offering Documents and compliance by
the Placement Agent with its obligations hereunder, the offer, sale and issuance
of the Securities as contemplated by this Agreement and the Offering Documents
are exempt from the registration requirements of the Act and applicable state
securities laws, and neither the Company nor any authorized agent acting on its
behalf has taken or will take any action hereafter that would cause the loss of
such exemption.         vii. No Integrated Offering. Neither the Company, nor
its subsidiaries nor any of its affiliates, nor any person acting on its or
their behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under circumstances that
would require registration under the Act of the issuance of the Securities to
the investors in the Offering.         viii. Offering. The Securities will be
offered and sold pursuant to the registration exemption provided by Rule 506
under Regulation D promulgated under the Act (“Regulation D”), and Section
4(a)(2) of the Act as a transaction not involving a public offering and the
requirements of all other rules and regulations (the “Regulations”) of the SEC
relating to offerings of the type contemplated hereby, including any other
applicable state securities laws and the respective rules and regulations
thereunder in those jurisdictions in which the Placement Agent notifies the
Company that the Securities are being offered for sale. The Company has not
taken nor will it take any action which conflicts with the conditions and
requirements of, or which would make unavailable with respect to the Offering,
the exemption(s) from registration available pursuant to Regulation D or Section
4(a)(2) of the Act and knows of no reason why any such exemption would be
otherwise unavailable to it. None of the Company or its affiliates has been
subject to any order, judgment or decree of any court of competent jurisdiction
temporarily, preliminarily or permanently enjoining such persons for failing to
comply with Section 503 of Regulation D.

 

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  ix. Distribution of Materials. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the Offering other than the SEC Filings and the Offering Documents. The Company
has not taken, nor will it take, any action independent of the Placement Agent
to sell, offer for sale or solicit offers to buy any securities of the Company
which would bring the offer, issuance or sale of the Securities, as contemplated
by this Agreement and the Offering Documents, within the provisions of Section 5
of the Act.         x. Finders. The Company is not obligated to pay, and has not
obligated the Placement Agent to pay, a finder’s or origination fee or similar
fee in connection with the Offering, other than as provided in this Agreement,
and agrees to indemnify the Placement Agent from any such claim made by any
other person.         xi. Transfer Taxes. On the Closing Date, all stock
transfer or other taxes (other than income taxes) which are required to be paid
in connection with the issuance of the Placement Agent Warrants to the Placement
Agent and the sale and transfer of the Securities to be sold to the investors in
the Offering will be, or will have been, fully paid or provided for by the
Company and all laws imposing such taxes will be or will have been complied
with.         xii. Contributions. The Company has not directly or indirectly (i)
made any unlawful contribution to any candidate for public office, or failed to
disclose fully where required by law any contribution in violation of law, (ii)
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof, or (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977.         xiii. Money Laundering Laws. The operations of
the Company are in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, applicable money laundering statutes and applicable rules and
regulations thereunder (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 with respect to the
Money Laundering Laws is pending, or to the knowledge of the Company,
threatened.         xiv. OFAC. Neither The Company nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or
any subsidiary thereof is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”); and the Company will not directly or indirectly use the proceeds of
the Offering, or lend, contribute or otherwise make available such proceeds to
any subsidiary thereof 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.

 

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  xv. Patriot Act; Etc. Neither the sale of the Securities by the Company nor
its use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. Without limiting the foregoing,
the Company is not (a) a person whose property or interests in property are
blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) a person who
engages in any dealings or transactions, or be otherwise associated, with any
such person. The Company is in compliance, in all material respects, with the
USA Patriot Act of 2001 (signed into law October 26, 2001).         xvi.
Investment Company. The Company is not an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for an investment company,
within the meaning of the Investment Company Act of 1940, as amended.        
xvii. No Disqualification Events. None of the Company, any of its predecessors,
any affiliated issuer, any director, executive officer, other officer of the
Company participating in the offering hereunder, any beneficial owner of 20% or
more of the Company’s outstanding voting equity securities, calculated on the
basis of voting power, nor any promoter (as that term is defined in Rule 405
under the Act) connected with the Company in any capacity at the time of sale
(each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is
subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has
exercised reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished
to the Placement Agent a copy of any disclosures provided thereunder.

 

  (b) In addition, for the benefit of the Placement Agent, each of the
representations and warranties (together with any related disclosure schedules
thereto) made by the Company to the investors in the Securities Purchase
Agreements, is hereby incorporated herein by reference (as though fully restated
herein) and is hereby made to, and in favor of, the Placement Agent.

 

3.       Placement Agent’ Compensation. As compensation for services rendered,
on the Closing Date, the Company shall pay to the Placement Agent the fees and
expenses set forth below:

 

  (a) A cash fee equal to 7.0% of the gross proceeds received by the Company
from the sale of the Securities at the Closing.         (b) Such number of
Common Stock purchase warrants (the “Placement Agent Warrants”) to the Placement
Agent or its designees at the Closing to purchase such shares of Common Stock
equal to 5.0% of the aggregate number of Shares sold in the Offering. The
Placement Agent Warrants shall be in substantially the form of Exhibit A hereto.
The Placement Agent Warrants shall not be transferable for six months from the
date of the Offering except as permitted by Financial Industry Regulatory
Authority (“FINRA”) Rule 5110(g)(1).

 

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  (c) Subject to compliance with FINRA Rule 5110(f)(2)(D), the Company also
agrees to reimburse the Placement Agent’s actual expenses up to $50,000 without
the Company’s consent (provided, however, that such expense cap in no way limits
or impairs the indemnification and contribution provisions of this Agreement);
including, the fees and expenses of the Placement Agent’s legal counsel not to
exceed $50,000. The Company’s obligation to reimburse the Placement Agent for
the aforementioned out-of-pocket expenses pursuant to this Section 3(c) will
apply whether or not any Offering is consummated, subject to compliance with
FINRA Rule 5110(f)(2)(D).

 

4.       Subscription and Closing Procedures.

 

  (a) No person or entity is or will be authorized to give any information or
make any representations other than those contained in the Offering Documents
and the SEC Filings or to use any offering materials other than the SEC Filings
and the Offering Documents in connection with the sale of the Securities.      
  (b) The Company shall make available to the Placement Agent and its
representatives such information as may be reasonably requested in making a
reasonable investigation of the Company and its affairs and shall provide access
to such employees during normal business hours as shall be reasonably requested
by the Placement Agent. The Securities sold in the Offering will be sold
pursuant to Securities Purchase Agreements between the Company and each of the
investors in the Offering.         (c) If subscriptions for the Securities have
been accepted prior to the Termination Date and all of the conditions set forth
elsewhere in this Agreement are fulfilled or waived, a Closing shall be held
promptly with respect to the Securities sold at the offices of Lucosky Brookman,
LLP, counsel to the Company, or by exchange of documentation by facsimile or
email. Delivery of payment for the accepted subscriptions for Securities will be
made at the Closing against delivery of the Securities by the Company.        
(d) Upon receipt from investors in the Offering, the Placement Agent shall
forward to the Company’s counsel, Lucosky Brookman, LLP, all executed Securities
Purchase Agreements and other Offering Documents.

 

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5.       Further Covenants. The Company hereby covenants and agrees that:

 

  (a) Except upon prior written notice to the Placement Agent, the Company shall
not, at any time prior to the Closing, knowingly take any action which would
cause any of the representations and warranties made by it, or incorporated by
reference, in this Agreement not to be complete and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of each such date (except
to the extent any such representation or warranty expressly speaks of an earlier
date or time, in which case such representation or warranty shall be true and
correct in all material respects as of such earlier date or time, as
applicable).         (b) If, at any time prior to the Closing, any event shall
occur that causes (i) a Material Adverse Change as a result of which it becomes
necessary for the Company to file a Current Report on Form 8-K or otherwise
amend or supplement the disclosure in its SEC Filings so that the
representations and warranties herein remain true and correct in all material
respects, or to comply with any applicable securities laws or regulations, the
Company will promptly notify the Placement Agent and shall, at its sole cost,
prepare and furnish to the Placement Agent copies of the applicable documents in
such quantities as the Placement Agent may reasonably request.         (c)
Subject to Placement Agent’ actions and the actions of others in connection with
the Offering, the Company shall comply with the Act, the Exchange Act and the
rules and regulations thereunder, all applicable state securities laws and the
rules and regulations thereunder in the states in which Placement Agent’ counsel
has advised the Placement Agent, the Company and/or the Company that the
Securities are qualified or registered for sale or exempt from such
qualification or registration, so as to permit the continuance of the sales of
the Securities. Furthermore, the Company shall file a Notice of Sales of
Securities on Form D with the SEC no later than 15 days after the commencement
of the sale of Securities and shall file all amendments with the SEC as may be
required. Copies of the Form D and all amendments thereto shall be provided to
the Placement Agent.         (d) The Company shall use its commercially
reasonable efforts to qualify the Securities for sale under the securities laws
of such jurisdictions in such States as may be mutually agreed to by the Company
and the Placement Agent, and the Company will make or cause to be made such
applications and furnish information as may be required for such purposes,
provided that the Company will not be required to qualify as a foreign
corporation in any jurisdiction or take any action that would subject it to
general service of process in any jurisdiction where it is not presently
qualified or where it would be subject to taxation as a foreign corporation. The
Company will, from time to time, prepare and file such statements and reports as
are or may be required to continue such qualifications in effect for so long a
period as the Placement Agent may reasonably request with respect to the
Offering.         (e) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or which caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.

 

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  (f) The Company shall place or cause to be placed a legend on the certificates
representing the Securities that the securities evidenced thereby have not been
registered under the Act or applicable state securities laws, setting forth or
referring to the applicable restrictions on transferability and sale of such
securities under the Act and applicable state laws.         (g) During the
Offering Period, the Company shall afford each prospective purchaser of
Securities the reasonable opportunity to ask questions of and receive answers
from an officer of the Company concerning the terms and conditions of the
Offering.         (h) The Company shall pay all reasonable expenses incurred in
connection with the preparation and printing of all necessary offering documents
and instruments related to the Offering and the issuance of the Securities and
will also pay the Company’s own expenses for accounting fees, legal fees and
other costs involved with the Offering. In addition, the Company will pay all
reasonable filing fees, costs and legal fees for Blue Sky services and related
filings and reasonable expenses with respect to Blue Sky qualifications, if any.
Further, upon the reasonable determination by the Placement Agent that a FINRA
Rule 2710 filing is required in connection with the registration statement
relating to the resale of the Shares and the Warrant Shares, the Company will
pay all filing fees, costs and reasonable legal fees in connection with such
filing to be prepared by the Placement Agent’ counsel.         (i) Until the
earlier of the first to occur of the Closing and the Termination Date, without
the prior written consent of the Placement Agent, neither the Company nor any
person or entity acting on its behalf will negotiate with any other placement
agent or underwriter with respect to a private or public offering of the
Company’s debt or equity securities.

 

6.       Conditions of Placement Agent’ Obligations. The obligations of the
Placement Agent hereunder to cause the Closing to occur are subject to the
fulfillment, at or before the Closing, of the following additional conditions:

 

  (a) Each of the representations and warranties made by the Company shall be
true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date or time, in which case such representation or
warranty shall be true and correct in all material respects as of such earlier
date or time, as applicable.         (b) The Company and the investors shall
have entered into the Securities Purchase Agreements and the Registration Rights
Agreement and the other Offering Documents, in form and substance reasonably
satisfactory to the Placement Agent, and such agreements shall be in full force
and effect.

 

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  (c) The Company shall have performed and complied in all material respects
with all agreements and covenants required to be performed by it as contained
herein, and the Company shall have performed and complied in all material
respects with all agreements and covenants required to be performed by it as
contained in the Securities Purchase Agreements, at or before the Closing,
including, without limitation, the Company obtaining all necessary consents in
connection with the transactions contemplated herein and in the Securities
Purchase Agreements.         (d) The Placement Agent shall have received a
certificate of the Chief Executive Officer of the Company, dated as of the
Closing Date, certifying as to the fulfillment of the conditions set forth in
subparagraphs (a) and (c) above.         (e) The Company shall have delivered to
the Placement Agent: (i) a good standing certificate dated as of a date within
10 days prior to the Closing Date from the secretary of state of its
jurisdiction of incorporation; and (ii) resolutions of the Company’s Board of
Directors approving this Agreement and the transactions contemplated by this
Agreement, certified by the Chief Executive Officer of the Company.         (f)
The Company shall deliver to the Placement Agent a signed opinion of counsel to
the Company, substantially in the form annexed hereto as Exhibit B.         (g)
All proceedings taken at or prior to the Closing in connection with the
authorization, issuance and sale of the Securities will be reasonably
satisfactory in form and substance to the Placement Agent and its counsel, and
such counsel shall have been furnished with all such documents and certificates
as it may reasonably request upon reasonable prior notice in connection with the
transactions contemplated hereby.

 

7.       Conditions of the Company’s Obligations. The obligations of the Company
hereunder to cause the Closing to occur are subject to each of the
representations and warranties made by the Placement Agent herein and the
representations and warranties of the investors in their respective Securities
Purchase Agreements being true and correct in all material respects on the
Closing Date.

 

8.       Indemnification. The Company agrees to indemnify each of the Placement
Agent in accordance with the Indemnification Provisions attached as Schedule I
thereto, which are incorporated herein by reference.

 

9.       Termination. This Agreement shall terminate upon the earlier of the
Closing or, if there is no Closing, the Termination Date.

 

10.       Survival. The provisions of Sections 3(c) and 8 through 15 shall
survive any termination hereunder.

 

11.       Notices. All communications hereunder will be in writing and, except
as otherwise expressly provided herein or after notice by one party to the other
of a change of address, if sent to the Placement Agent, will be mailed,
delivered or telefaxed and confirmed to Joseph Gunnar & Co., LLC, 30 Broad
Street, 11th Floor, New York, NY 10004, Facsimile: (212) 440-9614, Attention:
Eric Lord, with a copy (which shall not constitute notice) to Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., 666 Third Avenue, New York, NY 10017,
Attention: Anthony J. Marsico, Esq., Facsimile (212) 983-3115, and if sent to
the Company, will be mailed, delivered or e-mailed and confirmed to Akers
Biosciences, Inc., 201 Grove Road, Trenton, NJ 08086, Attention: John J.
Gormally, Facsimile (856) 803-7669, with a copy (which shall not constitute
notice) to Lucosky Brookman LLP, 101 Wood Avenue South, 5th Floor, Woodbridge,
NJ 08830, Attention: Joseph M. Lucosky, Esq.

 

11 

 

 

12.       Governing Law, Jurisdiction. This Agreement and all controversies
arising hereunder or relating hereto will be governed by, and construed and
enforced in accordance with, the laws of the State of New York. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, or against public
policy, the remainder of the terms, provisions, covenants and restrictions
contained herein will remain in full force and effect and will in no way be
affected, impaired or invalidated. The Company irrevocably (a) submits to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York for the purpose of any suit, action or other
proceeding arising out of this Agreement or the transactions contemplated by
this Agreement, (b) agrees that all claims in respect of any such suit, action
or proceeding may be heard and determined by any such court, (c) waives to the
fullest extent permitted by applicable law, any immunity from the jurisdiction
of any such court or from any legal process, (d) agrees not to commence any such
suit, action or proceeding other than in such courts, and (e) waives, to the
fullest extent permitted by applicable law, any claim that any such suit, action
or proceeding is brought in an inconvenient forum.

 

EACH OF THE PLACEMENT AGENT AND THE COMPANY HEREBY WAIVES (ON ITS OWN BEHALF
AND, TO THE EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS
AND CREDITORS) ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING, WITHOUT LIMITATION, THE OFFERING).

 

13.       Miscellaneous. No provision of this Agreement may be changed or
terminated except by a writing signed by the party or parties to be charged
therewith. Unless expressly so provided, no party to this Agreement will be
liable for the performance of any other party’s obligations hereunder. Any party
hereto may waive compliance by the others with any of the terms, provisions and
conditions set forth herein; provided, however, that any such waiver shall be in
writing specifically setting forth those provisions waived thereby. No such
waiver shall be deemed to constitute or imply waiver of any other teen,
provision or condition of this Agreement. Except as expressly provided on the
first page of this Agreement, no party may assign its rights or obligations
under this Agreement to any other person or entity without the prior written
consent of the other parties.

 

14.       Entire Agreement; Severability. This Agreement together with any other
agreement referred to herein supersedes all prior understandings and written or
oral agreements between the parties with respect to the Offering and the subject
matter hereof. If any portion of this Agreement shall be held invalid or
unenforceable, then so far as is reasonable and possible (i) the remainder of
this Agreement shall be considered valid and enforceable and (ii) effect shall
be given to the intent manifested by the portion held invalid or unenforceable.

 

15.       Counterparts. 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 e-mail 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]

 

12 

 

 

If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly sign and return this
Agreement, whereupon it will become a binding agreement between the Company and
the Placement Agent in accordance with its terms.

 

AKERS BIOSCIENCES, INC.

 

  By:     Name:     Title:  

 

Accepted and agreed to this

30th day of March, 2017:

 

Joseph Gunnar & Co., LLC         By:     Name: Eric Lord   Title: Head of
Investment Banking/Underwritings  

 

13 

 

 

Exhibit A

Form of Placement Agent Warrant

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

 

WARRANT TO PURCHASE COMMON STOCK

 

AKERS BIOSCIENCS, INC.

 

Warrant Shares: _______ Issuance Date: _______, 20171 Initial Exercise Date:
______, 20172

 

THIS WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that, for value
received, _____________ or its assigns (the “Holder”) is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after ___________, 20173 (the “Initial Exercise
Date”) and, in accordance with FINRA Rule 5110(f)(2)(G)(i), prior to at 5:00
p.m. (New York time) on the date that is five (5) years following the
commencement of sales of the Offering (the “Termination Date”) but not
thereafter, to subscribe for and purchase from Akers Biosciences, Inc., a New
Jersey corporation (the “Company”), up to ______ shares4 of Common Stock, no par
value (“Common Stock”), of the Company, as subject to adjustment hereunder (the
“Warrant Shares”). The purchase price of one share of Common Stock under this
Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

This Warrant is issued by the Company pursuant to that certain Placement Agency
Agreement, dated March [___], 2017, between the Company and Joseph Gunnar & Co.,
LLC (the “Placement Agency Agreement”), as well as pursuant to Section 4(a)(2)
of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

 

Section 1. Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated in this Section 1:

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

 

 

1 Insert date of Closing.

2 Insert six-month anniversary of date of Closing.

3 Insert six-month anniversary of date of Closing.

4 Number of shares equal to 5% of the Shares offered in the Offering.

 

14 

 

 

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

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock Equivalents” means any securities of the Company or any subsidiary
thereof which entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Offering” has the meaning set forth in the Underwriting Agreement, dated
January 9, 2017, by and between the Company and Joseph Gunnar & Co., LLC.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Trading Day” means a day on which the New York Stock Exchange is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the OTCQB
or OTCQX operated by the OTC Markets Group, Inc., the NYSE MKT, The NASDAQ
Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, or
the New York Stock Exchange (or any successors to any of the foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if the Common Stock is then listed or quoted on the OTCQB or OTCQX
operated by the OTC Markets Group, Inc., the volume weighted average price of a
share of Common Stock for such date (or the nearest preceding date) on the OTCQB
or OTCQX as applicable, (c) if Common Stock is not then listed or quoted for
trading on a Trading Market or on the OTCQB or OTCQX and if prices for Common
Stock are then reported in the OTC Pink Market published by OTC Markets Group,
Inc. (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of Common Stock so
reported, or (d) in all other cases, the fair market value of the Common Stock
as determined by an independent appraiser selected in good faith by the Holder
and reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.

 

15 

 

 

Section 2. Exercise.

 

a) Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times on or after the Initial Exercise Date and
on or before the Termination Date by delivery to the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice
of Exercise Form annexed hereto. Within three (3) Trading Days following the
date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise
Price for the shares specified in the applicable Notice of Exercise by wire
transfer or cashier’s check drawn on a United States bank unless the cashless
exercise procedure specified in Section 2(c) below is specified in the
applicable Notice of Exercise. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the
Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder
shall surrender this Warrant to the Company for cancellation within three (3)
Trading Days of the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in purchases of a portion
of the total number of Warrant Shares available hereunder shall have the effect
of lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. The Holder
and the Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise Form within two (2) Business Days of receipt
of such notice. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be less
than the amount stated on the face hereof.

 

b) Exercise Price. The exercise price per share of the Common Stock under this
Warrant shall be $___, subject to adjustment hereunder (the “Exercise Price”).5

 

c) Cashless Exercise. If at any time after the six-month anniversary of the
Initial Exercise Date there is no effective registration statement registering,
or no current prospectus available for, the resale of all of the Warrant Shares
by the Holder, then this Warrant may also be exercised, in whole or in part, at
such time by means of a “cashless exercise” in which the Holder shall be
entitled to receive the number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:

 

  (A)=the VWAP on the Trading Day immediately preceding the date on which Holder
elects to exercise this Warrant by means of a “cashless exercise,” as set forth
in the applicable Notice of Exercise;         (B)=the Exercise Price of this
Warrant, as adjusted hereunder; and         (X)=the number of Warrant Shares
that would be issuable upon exercise of this Warrant in accordance with the
terms of this Warrant if such exercise were by means of a cash exercise rather
than a cashless exercise.

 

If Warrant Shares are issued in such a “cashless exercise,” the parties
acknowledge and agree that in accordance with Section 3(a)(9) of the Securities
Act, the Warrant Shares shall take on the characteristics of the Warrants being
exercised, and the holding period of the Warrants being exercised may be tacked
on to the holding period of the Warrant Shares. The Company agrees not to take
any position contrary to this Section 2(c).

 

Notwithstanding anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise pursuant to this
Section 2(c).

 

 

5 Price of purchaser warrant.

 

16 

 

 

d) Mechanics of Exercise.

 

  i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the
Warrant Shares purchased hereunder to be transmitted by its transfer agent to
the Holder by crediting the account of the Holder’s or its designee’s balance
account with The Depository Trust Company through its Deposit or Withdrawal at
Custodian system (“DWAC”) if the Company is then a participant in such system
and either (A) there is an effective registration statement permitting the
issuance of the Warrant Shares to or resale of the Warrant Shares by Holder, or
(B) the Warrant Shares are eligible for resale by the Holder without volume or
manner-of-sale limitations pursuant to Rule 144 and, in either case, the Warrant
Shares have been sold by the Holder prior to the Warrant Share Delivery Date (as
defined below), and otherwise by physical delivery of a certificate, registered
in the Company’s share register in the name of the Holder or its designee, for
the number of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of Exercise by the
date that is three (3) Trading Days after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery Date”). If the
Warrant Shares can be delivered via DWAC, the transfer agent shall have received
from the Company any legal opinions or other documentation required by it to
deliver such Warrant Shares without legend (subject to receipt by the Company of
reasonable back up documentation from the Holder, including with respect to
affiliate status) and, if applicable and requested by the Company prior to the
Warrant Share Delivery Date, the transfer agent shall have received from the
Holder a confirmation of sale of the Warrant Shares (provided the requirement of
the Holder to provide a confirmation as to the sale of Warrant Shares shall not
be applicable to the issuance of unlegended Warrant Shares upon a cashless
exercise of this Warrant if the Warrant Shares are then eligible for resale
pursuant to Rule 144(b)(1)). The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised, with payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all taxes required to
be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the
issuance of such shares, having been paid. If the Company fails for any reason
to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by
the second Trading Day following the Warrant Share Delivery Date, the Company
shall pay to the Holder, in cash, as liquidated damages and not as a penalty,
for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of
the Common Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after
such liquidated damages begin to accrue) for each Trading Day after the second
Trading Day following such Warrant Share Delivery Date until such Warrant Shares
are delivered or Holder rescinds such exercise.       ii. Delivery of New
Warrants Upon Exercise. If this Warrant shall have been exercised in part, the
Company shall, at the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the Warrant Shares, deliver to the
Holder a new Warrant evidencing the rights of the Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.       iii. Rescission
Rights. If the Company fails to cause its transfer agent to deliver to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share
Delivery Date, then the Holder will have the right to rescind such exercise;
provided, however, that the Holder shall be required to return any Warrant
Shares or Common Stock subject to any such rescinded exercise notice
concurrently with the return to Holder of the aggregate Exercise Price paid to
the Company for such Warrant Shares and the restoration of Holder’s right to
acquire such Warrant Shares pursuant to this Warrant (including, issuance of a
replacement warrant certificate evidencing such restored right).

 

17 

 

 

  iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder the Warrant
Shares pursuant to an exercise on or before the second Trading Day following the
Warrant Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Company shall
(A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed, and (B) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case
such exercise shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In
and, upon request of the Company, evidence of the amount of such loss. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.       v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.       vi. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the issuance of
such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in
such name or names as may be directed by the Holder; provided, however, that in
the event that Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the Holder and the Company
may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto. The Company shall pay all
transfer agent fees required for same-day processing of any Notice of Exercise.

 

18 

 

 

      vii. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.       viii. Signature. This Section 2 and the
exercise form attached hereto set forth the totality of the procedures required
of the Holder in order to exercise this Purchase Warrant. Without limiting the
preceding sentences, no ink-original exercise form shall be required, nor shall
any medallion guarantee (or other type of guarantee or notarization) of any
exercise form be required in order to exercise this Purchase Warrant. No
additional legal opinion, other information or instructions shall be required of
the Holder to exercise this Purchase Warrant. The Company shall honor exercises
of this Purchase Warrant and shall deliver Warrant Shares in accordance with the
terms, conditions and time periods set forth herein.

 

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any portion of
this Warrant, pursuant to Section 2 or otherwise, to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of the Holder’s
Affiliates), would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section
2(e), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by the Holder that the Company is not representing to the
Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and the Holder is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation contained in this
Section 2(e) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 2(e), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with the Commission, as
the case may be, (B) a more recent public announcement by the Company or (C) a
more recent written notice by the Company or the Company’s transfer agent
setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by the Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock was reported.
The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the Holder and the
provisions of this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the 61st day after
such notice is delivered to the Company. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor holder of
this Warrant.

 

19 

 

 

Section 3. Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such
that the aggregate Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
For the purposes of clarification, the Exercise Price of this Warrant will not
be adjusted in the event that the Company or any subsidiary thereof, as
applicable, sells or grants any option to purchase, or sell or grant any right
to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents, at an effective price per share less than the Exercise Price then
in effect.

 

b) [RESERVED]

 

c) Subsequent Rights Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or sells any
Common Stock Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).

 

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d) Pro Rata Distributions. During such time as this Warrant is outstanding, if
the Company shall declare or make any dividend (other than cash dividends) or
other distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of shares or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
“Distribution”), at any time after the issuance of this Warrant, then, in each
such case, the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation) immediately before the
date of which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to
be determined for the participation in such Distribution (provided, however, to
the extent that the Holder’s right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation, then the
Holder shall not be entitled to participate in such Distribution to such extent
(or in the beneficial ownership of any shares of Common Stock as a result of
such Distribution to such extent) and the portion of such Distribution shall be
held in abeyance for the benefit of the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). To the extent that this Warrant has not been partially or
completely exercised at the time of such Distribution, such portion of the
Distribution shall be held in abeyance for the benefit of the Holder until the
Holder has exercised this Warrant.

 

e) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more
of the outstanding Common Stock, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Company, directly or indirectly, in one
or more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person or
group of Persons whereby such other Person or group acquires more than 50% of
the outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the Holder
shall have the right to receive, for each Warrant Share that would have been
issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable by holders of Common Stock as a
result of such Fundamental Transaction for each share of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this Warrant in
accordance with the provisions of this Section 3(e) pursuant to written
agreements in form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
which is exercisable for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant (without regard to
any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the
Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein.

 

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f) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice to Holder.

 

  i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly mail (or
send electronic mail) to the Holder a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of Warrant
Shares and setting forth a brief statement of the facts requiring such
adjustment.       ii. Notice to Allow Exercise by Holder. If (A) the Company
shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
mailed a notice to the Holder at its last address as it shall appear upon the
Warrant Register of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, stating (x) the date
on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to provide such
notice or any defect therein shall not affect the validity of the corporate
action required to be specified in such notice. From and after the date on which
the Company becomes subject to Regulation FD promulgated by the Commission under
the Exchange Act, to the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Company or any of
its subsidiaries, the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such notice except as
may otherwise be expressly set forth herein.

 

22 

 

 

Section 4. Transfer of Warrant.

 

a) Transferability. Pursuant to FINRA Rule 5110(g)(1), neither this Warrant nor
any Warrant Shares issued upon exercise of this Warrant shall be sold during the
Offering, or sold, transferred, assigned, pledged, or hypothecated, or be the
subject of any hedging, short sale, derivative, put, or call transaction that
would result in the effective economic disposition of the securities by any
person for a period of 180 days immediately following the commencement of sales
of the Offering (the “Lock-Up Period”), except:

 

  i. the transfer of any security by operation of law or by reason of
reorganization of the Company;       ii. the transfer of any security to any
FINRA member firm participating in the offering and the officers or partners
thereof, if all securities so transferred remain subject to the lock-up
restriction in this Section 4(a) for the remainder of the time period;      
iii. the transfer of any security if the aggregate amount of securities of the
Company held by the Holder or related person do not exceed 1% of the securities
being offered;       iv. the transfer of any security that is beneficially owned
on a pro-rata basis by all equity owners of an investment fund, provided that no
participating member manages or otherwise directs investments by the fund, and
participating members in the aggregate do not own more than 10% of the equity in
the fund; or       v. the exercise or conversion of any security, if all
securities received remain subject to the lock-up restriction in this Section
4(a) for the remainder of the time period.       Subject to the foregoing
restriction, any applicable securities laws and the conditions set forth in
Section 4(d), this Warrant and all rights hereunder (including, without
limitation, any registration rights) are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. The Warrant, if properly assigned
in accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.

 

23 

 

 

b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall
be dated the initial issuance date of this Warrant and shall be identical with
this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in the name
of the record Holder hereof from time to time. The Company may deem and treat
the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.

 

d) Representation by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the
Securities Act.

 

Section 5. Registration Rights.

 

a) Registration under the Securities Act of 1933. As of the date hereof, neither
the Warrant nor the Warrant Shares have been registered for purposes of public
resale or distribution under the Securities Act.

 

b) Registrable Securities. As used herein, the term “Registrable Security” means
the Warrant Shares and any shares of Common Stock issued upon any stock split or
stock dividend in respect of such Warrant Shares; provided, however, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
registered under the Securities Act and disposed of pursuant thereto, (ii)
registration under the Securities Act is no longer required for the Holder for
subsequent public distribution of such security without regard to volume
restrictions under Rule 144 (including Rule 144(a)) promulgated under the
Securities Act or otherwise, or (iii) it has ceased to be outstanding. The term
“Registrable Securities” means any and/or all of the securities falling within
the foregoing definition of a “Registrable Security.” In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of Registrable Security as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Section5.

 

c) Demand Registration.

 

(i)       The Company, upon written demand (a “Demand Notice”) of the Holder(s)
of at least 51% of the Warrants and/or the Registrable Securities (“Majority
Holders”), agrees to register, on one occasion, all or any portion of the
Registrable Securities. On such occasion, the Company will file a registration
statement with the Commission covering the Registrable Securities within sixty
(60) days after receipt of a Demand Notice and use its reasonable best efforts
to have the registration statement declared effective promptly thereafter,
subject to compliance with review by the Commission; provided, however, that the
Company shall not be required to comply with a Demand Notice if the Company has
filed a registration statement with respect to which the Holder is entitled to
piggyback registration rights pursuant to Section 5(d) hereof and either: (i)
the Holder has elected to participate in the offering covered by such
registration statement or (ii) if such registration statement relates to an
underwritten primary offering of securities of the Company, until the offering
covered by such registration statement has been withdrawn or until thirty (30)
days after such offering is consummated. The demand for registration may be made
at any time after the expiration of the Lock-Up Period and prior to the fifth
(5th) anniversary of the commencement of sales of the Offering in accordance
with FINRA Rule 5110(f)(2)(G)(iv). The Company covenants and agrees to give
written notice of its receipt of any Demand Notice by any Holder(s) to all other
registered Holders of the Warrants and/or the Registrable Securities within ten
(10) days after the date of the receipt of any such Demand Notice.

 

24 

 

 

(ii)       The Company shall bear all fees and expenses attendant to the
registration of the Registrable Securities pursuant to Section 5(c), but the
Holders shall pay any and all underwriting commissions and the expenses of any
legal counsel selected by the Holders to represent them in connection with the
sale of the Registrable Securities. The Company agrees to use its reasonable
best efforts to cause the filing required herein to become effective promptly
and to qualify or register the Registrable Securities in such states as are
reasonably requested by the Holder(s); provided, however, that in no event shall
the Company be required to register the Registrable Securities in a state in
which such registration would cause: (i) the Company to be obligated to register
or license to do business in such State or submit to general service of process
in such State, or (ii) the principal shareholders of the Company to be obligated
to escrow their shares of capital stock of the Company. The Company shall cause
any registration statement filed pursuant to the demand right granted under
Section 5(c) to remain effective for a period of at least twelve (12)
consecutive months after the date that the Holders of the Registrable Securities
covered by such registration statement are first given the opportunity to sell
all of such securities. The Holders shall only use the prospectuses provided by
the Company to sell the shares covered by such registration statement, and will
immediately cease to use any prospectus furnished by the Company if the Company
advises the Holder that such prospectus may no longer be used due to a material
misstatement or omission.

 

d) Piggyback Registration.

 

(i)       In addition to the demand right of registration described in Section
5(c) hereof, the Holder shall have the right, for a period of no more than five
(5) years from the commencement of sales of the Offering in accordance with
FINRA Rule 5110(f)(2)(G)(v), to include the Registrable Securities as part of
any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Securities Act or pursuant to Form S-8 or any equivalent form); provided,
however, that if, solely in connection with any primary underwritten public
offering for the account of the Company, the managing underwriter(s) thereof
shall, in its reasonable discretion, impose a limitation on the number of shares
of Common Stock which may be included in the registration statement because, in
such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such registration statement only such limited
portion of the Registrable Securities with respect to which the Holder requested
inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of
Registrable Securities shall be made pro rata among the Holders seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Holders; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such registration statement or are not
entitled to pro rata inclusion with the Registrable Securities.

 

(ii)        The Company shall bear all fees and expenses attendant to
registering the Registrable Securities pursuant to Section 5(d) hereof, but the
Holders shall pay any and all underwriting commissions and the expenses of any
legal counsel selected by the Holders to represent them in connection with the
sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of outstanding
Registrable Securities with not less than thirty (30) days written notice prior
to the proposed date of filing of such registration statement. Such notice to
the Holders shall continue to be given for each registration statement filed by
the Company until such time as all of the Registrable Securities have been sold
by the Holder. The holders of the Registrable Securities shall exercise the
“piggyback” rights provided for herein by giving written notice within ten (10)
days of the receipt of the Company’s notice of its intention to file a
registration statement. Except as otherwise provided in this Warrant, there
shall be no limit on the number of times the Holder may request registration
under this Section 5(d); provided, however, that such registration rights shall
terminate on the seventh (7th) anniversary of the commencement of sales of the
Offering in accordance with FINRA Rule 5110(f)(2)(G)(v).

 

25 

 

 

e) Additional Covenants With Respect to Registration. In connection with any
registration of Registrable Securities pursuant to this Warrant, the parties
agree that:

 

(i)       The Company shall indemnify any Holder of the Registrable Securities
to be sold pursuant to any registration statement and each person, if any, who
controls such Holder, against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or otherwise arising from such
registration statement to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify Joseph Gunnar &
Co., LLC, as placement agent (the “Placement Agent”), as set forth in the
Placement Agency Agreement and to provide for just and equitable contribution as
set forth in the Placement Agency Agreement, except to such extent that such
losses, claims, damages, expenses or liabilities occur as a result of
information provided to the Company by or on behalf of such Holder or as a
result of such Holder’s gross negligence or willful misconduct.

 

(ii)       The Holders of Registrable Securities to be sold pursuant to a
registration statement, and such Holder’s successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Securities Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such Holder, or
such Holder’s successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions pursuant
to which the Placement Agent has agreed to indemnify the Company as set forth in
the Placement Agency Agreement and to provide for just and equitable
contribution as set forth in the Placement Agency Agreement.

 

(iii)       Nothing contained in this Warrant shall be construed as requiring
any Holder to exercise the Warrants held by such Holder prior to the initial
filing of any registration statement or the effectiveness thereof.

 

(iv)       If the Company shall fail to comply with the provisions of this
Section 5, the Company shall, in addition to any other equitable or other relief
available to the Holders of Registrable Securities, be liable for any or all
consequential damages sustained by the Holders of Registrable Securities
requesting registration of their Registrable Securities; provided, however, that
the Holders of Registrable Securities shall not be entitled to any special or
punitive damages with respect to any such failure on behalf of the Company.

 

Section 6. Miscellaneous.

 

a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.

 

26 

 

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the
Trading Market upon which the Common Stock may be listed. The Company covenants
that all Warrant Shares which may be issued upon the exercise of the purchase
rights represented by this Warrant will, upon exercise of the purchase rights
represented by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Placement Agency Agreement.

 

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by state and
federal securities laws.

 

27 

 

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice the Holder’s rights, powers or remedies.
Without limiting any other provision of this Warrant or the Placement Agency
Agreement, if the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to the Holder such amounts as shall be sufficient to cover
any costs and expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance
with the notice provisions of the Placement Agency Agreement.

 

i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive and
not to assert the defense in any action for specific performance that a remedy
at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors and permitted assigns of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of any Holder from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 

(Signature Page Follows)

 

28 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above indicated.

 

  AKERS BIOSCIENCES, INC.         By:                 Name:     Title:  

 

29 

 

 

NOTICE OF EXERCISE

 

To: AKERS BIOSCIENCES, inc.  

_________________________

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] if permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).

 

(3) Please register and issue said Warrant Shares in the name of the undersigned
or in such other name as is specified below:

 _______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited Investor. If the Warrant is being exercised via cash exercise,
the undersigned is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as amended

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:
________________________________________________________________________

 

Signature of Authorized Signatory of Investing Entity:
_________________________________________________

 

Name of Authorized Signatory:
___________________________________________________________________

 

Title of Authorized Signatory:
____________________________________________________________________

 

Date:
________________________________________________________________________________________

 

30 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant
and all rights evidenced thereby are hereby assigned to

 

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

Holder’s Signature: _____________________________

 

Holder’s Address: _____________________________

 

_____________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

 

31 

 

 

Exhibit B

Form of Opinion-the Company Counsel

 

March 30, 2017

 

Joseph Gunnar & Co., LLC

30 Broad Street, 11th Floor

New York, NY 10004

 

  Re: Akers Biosciences, Inc.  

 

Ladies and Gentlemen:

 

We have acted as counsel to Akers Biosciences, Inc., a corporation incorporated
under the laws of the State of New Jersey (the “Company”), in connection with
that certain Placement Agency Agreement, dated March 30, 2017 (the “Agreement”),
by and between the Company, and Joseph Gunnar & Co., LLC, as exclusive placement
agent (the “Agent”), in connection with the private placement of shares of the
Company’s common stock and warrants to purchase shares of the Company’s common
stock.

 

In connection herewith, we have examined originals or copies certified to our
satisfaction of the following documents:

 

  (a) the Agreement;         (b) that certain Placement Agent Warrant, dated
March 30, 2017 (the “Warrant”), issued by the Company to the Agent in connection
with the Agreement, pursuant to which the Company granted the Agent the right to
purchase the Warrant Shares (as defined in each Warrant) from the Company,
subject to the terms and conditions therein contained;

 

(documents (a) and (b) above being hereinafter referred to as the “Transaction
Documents”)

 

  (c) the Articles of Incorporation and By-laws of the Company (as certified by
an officer of the Company in an Officer’s Certificate, dated March 30, 2017);  
      (d) resolutions of the Board of Directors of the Company approving the
execution of the Transaction Documents (as certified by an officer of the
Company in an Officer’s Certificate, dated March 30, 2017);         (e) a
certificate of good standing with respect to the Company issued by the Secretary
of State of the State of New Jersey, dated as of March 29, 2017 (the “Good
Standing Certificate”);         (f) all such other agreements, instruments,
documents and certificates of public officials and/or of officers and directors
of the Company as we have deemed necessary or advisable as a basis for the
opinion herein rendered.

 

32 

 

 

In connection with the opinions expressed herein, we have made such examination
of law as we considered appropriate or advisable for purposes hereof. As to
matters of fact material to the opinions expressed herein, we have relied, with
your permission, upon the representations and warranties as to factual matters
contained in and made by the Company and the Agent pursuant to the Transaction
Documents and upon certificates and statements of certain government officials
and of officers of the Company as described below.

 

In rendering the opinions set forth in this opinion letter, we assume the
following:

 

(a)       the legal capacity of each natural person;

 

(b)       the legal existence of all parties to the transactions referred to in
the Transaction Documents excluding the Company;

 

(c)       the power and authority of each person other than the Company or
person(s) acting on behalf of the Company to execute, deliver and perform each
document executed and delivered and to do each other act done or to be done by
such person;

 

(d)       the authorization, execution and delivery by each person other than
the Company or person(s) acting on behalf of the Company of each document
executed and delivered or to be executed and delivered by such person;

 

(e)       the legality, validity, binding effect and enforceability as to each
person other than the Company or person(s) acting on behalf of the Company of
each document executed and delivered or to be executed or delivered and of each
other act done or to be done by such person;

 

(f)       due compliance of the Transaction Documents with all matters of, and
the validity and enforceability thereof under, all such laws as govern or relate
to them other than the laws of the State of New York and the laws of the State
of New Jersey in respect of which we are opining;

 

(g)       that any consents, licenses, permits, approvals, exemptions or
authorizations required of or by, and any required registrations or filings
with, any governmental authority or regulatory body of any jurisdiction other
than the State of New York and the State of New Jersey in connection with the
transactions contemplated by the Transaction Documents have been duly obtained
or made;

 

(h)       the transactions referred to in the Transaction Documents have been
consummated;

 

(i)       that there have been no undisclosed modifications of any provision of
any document reviewed by us in connection with the rendering of the opinions set
forth in this opinion letter and no undisclosed prior waiver of any right or
remedy contained in the Transaction Documents;

 

(j)       the genuineness of each signature, the completeness of each document
submitted to us, the authenticity of each document reviewed by us as an
original, the conformity to the original of each document reviewed by us as a
copy and the authenticity of the original of each document received by us as a
copy;

 

(k)       the truthfulness of each statement as to all factual matters otherwise
not known to us to be untruthful contained in any document encompassed within
the due diligence review undertaken by us;

 

(l)       the accuracy on the date of this letter as well as on the date stated
in all governmental certifications of each statement as to each factual matter
contained in such governmental certifications;

 

33 

 

 

(m)       that the addressee has acted in good faith, without notice of adverse
claims, and has complied with all laws applicable to it that affect the
transactions referred to in the Transaction Documents;

 

(n)       that the transactions referred to in the Transaction Documents comply
with all tests of good faith, fairness and conscionability required by law;

 

(o)       that routine procedural matters such as service of process or
qualification to do business in the relevant jurisdictions will be satisfied by
the parties seeking to enforce the Transaction Documents;

 

(p)       that all statutes, judicial and administrative decisions, and rules
and regulations of governmental agencies constituting the law for which we are
assuming responsibility are published or otherwise generally accessible, in each
case in a manner generally available to lawyers practicing in the State of New
York or the State of New Jersey (as applicable);

 

(q)       that other agreements related to the transactions referred to in the
Transaction Documents will be enforced as written;

 

(r)       that there are no other agreements or understandings among the parties
that would modify the terms of the Transaction Documents or the respective
rights or obligations of the parties to the Transaction Documents;

 

(s)       that with respect to the Transaction Documents and to the transactions
referred to therein, there has been no mutual mistake of fact and there exists
no fraud or duress; and

 

(t)       the constitutionality and validity of all relevant laws, regulations
and agency actions unless a reported case has otherwise held or widespread
concern has been expressed by commentators as reflected in materials which
lawyers routinely consult.

 

Whenever a statement herein is qualified by “to our knowledge” or similar
phrase, it means that, to our actual knowledge, during the course of our
representation of the Company for the purposes of this opinion letter, (1) no
information that would give those lawyers who participated in the preparation of
the letter or who have been actively involved in negotiating or preparing the
Transaction Documents (collectively, the “Opinion Letter Participants”) current
actual knowledge of the inaccuracy of such statement has come to their
attention; (2) we have not undertaken any independent investigation or inquiry
to determine the accuracy of such statement; (3) any limited investigation or
inquiry otherwise undertaken by the Opinion Letter Participants during the
preparation of this opinion letter should not be regarded as such an
investigation or inquiry; and (4) no inference as to our knowledge of any
matters bearing on the accuracy of any such statement should be drawn from the
fact of our representation of the Company. We also call to your attention to the
fact that we are not general counsel to the Company and we are not familiar with
all aspects of the Company’s business affairs. We have not conducted an
independent audit of the Company or their files.

 

We are members of the bar of the State of New York and the State of New Jersey.
We express no opinion as to the laws of any jurisdiction other than the laws of
the State of New York or the State of New Jersey and the federal laws of the
United States of America.

 

We express no opinion with respect to the effect or application of any other
laws. Special rulings of authorities administering any of such laws or opinions
of other counsel have not been sought or obtained by us in connection with
rendering the opinions expressed herein. We express no opinions as to the
application of the laws of usury to the Transaction Documents.

 

34 

 

 

Based upon the foregoing and such other investigations as we have deemed
necessary and subject to the qualifications included in this letter, we are of
the opinion that:

 

  1. The Company is a corporation duly organized, validly existing and, based
solely upon the Good Standing Certificate, as of the date thereof, in good
standing under the laws of the State of New Jersey. To our knowledge, the
Company has all requisite power and authority, and all material governmental
licenses, authorizations, consents and approvals, that are required to own and
operate its properties and assets and to carry on its business as now conducted
and as proposed to be conducted. To our knowledge, the Company is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure to qualify could have a material adverse effect on the Company.        
2. The Company has all requisite power and authority (i) to execute, deliver and
perform the Transaction Documents, (ii) to issue, sell and deliver the Warrants,
and, upon exercise of the Warrants, the Warrant Shares pursuant to the
Transaction Documents and (iii) to carry out and perform its obligations under,
and to consummate the transactions contemplated by, the Transaction Documents.  
      3. All corporate action on the part of the Company and its directors
necessary for the authorization, execution and delivery by the Company of the
Transaction Documents, the authorization, issuance, sale and delivery of the
Warrants pursuant to the Agreement, the issuance and delivery of the Warrant
Shares and the consummation by the Company of the transactions contemplated by
the Transaction Documents has been duly taken. The Transaction Documents have
been duly and validly executed and delivered by the Company and constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with their terms, except that (a) such enforceability may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors’ rights in general and (b) the remedies of specific
performance and injunctive and other forms of injunctive relief may be subject
to equitable defenses.         4. The Warrants which are being issued on the
date hereof pursuant to the Agreement have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive or similar
rights, and have been issued in compliance with applicable securities laws,
rules and regulations. The Warrant Shares have been duly and validly authorized,
and when issued upon the exercise of the Warrants in accordance with the terms
therein, will be validly issued, fully paid and nonassessable and free of
preemptive or similar rights.         5. To our knowledge, the Company has filed
all periodic reports (the “SEC Reports”) required to be filed by it under
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). As of their respective filing dates, the SEC Reports complied
in all material respects as to form with the requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder.

 

35 

 

 

  6. Based in part upon the representations of the Agent contained in the
Agreement, the Warrants and the Warrant Shares may be issued to the Agent
without registration under the Securities Act of 1933, as amended.         7.
The execution, delivery and performance by the Company of, and the compliance by
the Company with the terms of, the Transaction Documents and the issuance, sale
and delivery of the Warrants and the Warrant Shares pursuant to the Agreement do
not (a) conflict with or result in a violation of any provision of law, rule or
regulation or any rule or regulation of any trading market applicable to the
Company or of the certificate of incorporation or by-laws or other similar
organizational documents of the Company, or (b) result in the creation or
imposition of any lien, claim or encumbrance on any of the assets or properties
of the Company, or (c) result in a violation of, or constitute a default (or
event of which, with the giving of notice or lapse of time or both, constitutes
or will constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any agreement, note, lease, mortgage, deed or
other instrument to which the Company is bound or affected that has been
publicly filed.         8. In connection with the valid execution, delivery and
performance by the Company of the Transaction Documents, or the offer, sale,
issuance or delivery of the Warrants and the Warrant Shares or the consummation
of the transactions contemplated thereby, no consent, license, permit, waiver,
approval or authorization of, or designation or declaration with, any court,
governmental or regulatory authority, or self-regulatory organization, is
required.         9. We are not currently representing the Company as a
defendant in connection with any litigation.         10. The Company is not, and
after the consummation of the transactions contemplated by the Transaction
Documents shall not be, an Investment Company within the meaning of the
Investment Company Act of 1940, as amended.

 

Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:

 

A.       The effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the relief of debtors or the rights
and remedies of creditors generally, including without limitation the effect of
statutory or other law regarding fraudulent conveyances and preferential
transfers.

 

B.       Limitations imposed by state law, federal law, general equitable
principles, or a requirement as to commercial reasonableness, conscionability or
good faith upon the specific enforceability of any of the remedies, covenants or
other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether enforcement
of any such agreement is considered in a proceeding in equity or at law.

 

36 

 

 

This opinion is rendered as of the date first written above, is solely for your
benefit in connection with the Transaction Documents and may not be relied upon
or used by, circulated, quoted, or referred to nor may any copies hereof be
delivered to any other person without our prior written consent. We disclaim any
obligation to update this opinion letter or to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed herein.
This opinion letter speaks only as of the date hereof and shall not be deemed to
have been reissued

 

as of any date. We have no responsibility or obligation to consider the
applicability or correctness of this opinion letter to any person other than its
original addressees.

 

  Very truly yours,       FORM

 

37 

 

 

Schedule I

 

INDEMNIFICATION AND CONTRIBUTION PROVISIONS

 

(a) Indemnification of the Placement Agent. The Company agrees to indemnify and
hold harmless the Placement Agent, its officers and employees, and each person,
if any, who controls the Placement Agent within the meaning of the Act and the
Exchange Act against any loss, claim, damage, liability or expense, as incurred,
to which such Placement Agent or such controlling person may become subject,
under the Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in the SEC Filings or
Offering Documents, or any amendment thereto, or the omission or alleged
omission therefrom of 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; or (ii) in whole or in part upon any inaccuracy
in the representations and warranties of the Company contained herein; or (iii)
in whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; or (iv) any act or failure to act or any alleged act or
failure to act by any Placement Agent in connection with, or relating in any
manner to, the Securities or the Offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i), (ii), or
(iii) above, provided that the Company shall not be liable under this clause
(iv) to the extent that a court of competent jurisdiction shall have determined
by a final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by any Placement Agent through its bad faith or willful misconduct; and to
reimburse such Placement Agent and each such controlling person for any and all
expenses (including the reasonable fees and disbursements of counsel chosen by
Joseph Gunnar) as such expenses are reasonably incurred by such Placement Agent
or such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by the
Placement Agent expressly for use in the Offering Documents (or any amendment or
supplement thereto).

 

(b)       Indemnification of the Company, its Directors and Officers. The
Placement Agent agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer or controlling
person may become subject, under the Act, the Exchange Act, or other federal,
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Placement Agent), insofar as such loss, claim, damage, liability
or expense (or actions in respect thereof as contemplated below) arises out of
or is based upon any untrue or alleged untrue statement of a material fact
contained in any Offering Documents (or any amendment or supplement thereto), or
arises out of or is based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein 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 such Offering Documents (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by such Placement Agent expressly for use therein and
to reimburse the Company, or any such director, officer or controlling person
for any legal and other expense reasonably incurred by the Company, or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The indemnity agreement set forth in Section (b)
of this Schedule I shall be in addition to any liabilities that the Placement
Agent may otherwise have.

 

38 

 

 

(c)       Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Schedule I of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Schedule I,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability, which it may have to any indemnified party for contribution to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it shall
elect, jointly with all other indemnifying parties similarly notified, by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party’s election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Schedule I for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless: (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with local counsel),
approved by the indemnifying party), representing the indemnified parties who
are parties to such action); (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action; or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.

 

(d)       Settlements. The indemnifying party under this Schedule I shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes: (i) an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding; 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 any indemnified party.

 

39 

 

 

(e)       Contribution. If the indemnification provided for in this Schedule I
is unavailable to or insufficient to hold harmless an indemnified party under
(a) or (b) of this Schedule I above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by such party on the one hand and the Placement Agent
on the other from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of such indemnifying
party 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 (or actions or proceedings in respect thereof), as well as any other
relevant equitable considerations. 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 “control” stockholders on
the one hand or the Placement Agent on the other and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

 

The Company and Placement Agent agree that it would not be just and equitable if
contributions pursuant to Section (e) of this Schedule I were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in Section (e) of this
Schedule I. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in Section (e) of this Schedule I shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of Section (e) of this Schedule I: (i) no
Placement Agent shall be required to contribute any amount in excess of the
amount of the placement agent fees actually received by such Placement Agent
pursuant to this Agreement; and (ii) 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 Placement Agent’s obligations under Section (e) of this
Schedule I to contribute are several in proportion to their respective placement
obligations and not joint.

 

(f)       Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Schedule I shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than forty-five
(45) days of invoice to the indemnifying party.

 

(g)       Survival. The indemnity and contribution agreements contained in this
Schedule I and the representations and warranties set forth in this Agreement
shall remain operative and in full force and effect, regardless of: (i) any
investigation made by or on behalf of any Placement Agent or any person
controlling such Placement Agent, the Company, its directors or officers or any
persons controlling the Company; (ii) acceptance of any Securities and payment
therefor hereunder; and (iii) any termination of this Agreement. A successor to
any Placement Agent, or to the Company, its directors or officers or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Schedule I.

 

(h)       Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Schedule I, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Schedule I fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the SEC Filings as required by the Act and the Exchange
Act.

 

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