This SUBSCRIPTION AGREEMENT AND THE OTHER DOCUMENTS RELATED TO THE ISSUANCE OF
THE UNITS (AS DEFINED HEREIN) IN THIS OFFERING (AS DEFINED HEREIN) may contain
material, non-public information. By accepting DELIVERY OF this SUBSCRIPTION
AGREEMENT, the recipient acknowledges its express agreement with THE COMPANY (AS
DEFINED HEREIN) and the Placement Agent (AS DEFINED HEREIN) to maintain in
STRICT confidence all information contained herein and in the other offering
documents AND SHALL NOT DIRECTLY AND/OR INDIRECTLY engage in any trading
activity (including, but not limited to, shorting and related activity) of our
common stock nor encourage others to do same. THE COMPANY and the Placement
Agent have caused THIS SUBSCRIPTION AGREEMENT to be delivered to you in reliance
upon your agreement to maintain the confidentiality of this information and upon
Regulation FD promulgated by the Securities and Exchange Commission for the sole
purpose of enabling you to consider and evaluate an investment in the Units. You
agree that you will treat such information in a STRICTLY confidential manner,
will not use such information for any purpose other than evaluating an
investment in the Units, and will not, directly or indirectly, disclose or
permit your agents, representatives or affiliates to disclose any of such
information without the express prior written consent of the Company. Likewise,
without the express prior written consent of the Company, you agree that you
will not, directly or indirectly, make any statements, public announcements, or
other release or provision of information in any form on any website or portal,
to any trade publication, to the press or to any other person or entity. If you
decide not to pursue further investigation of the Company or to not participate
in the Offering, you agree to promptly return this SUBSCRIPTION AGREEMENT and
any of THE OTHER OFFERING DOCUMENTS (and all copies thereof) to the Company and
to continue to keep such information confidential until it is otherwise publicly
disclosed. You understand that the United States’ securities laws provide severe
civil and criminal penalties for anyone trading in securities while in
possession of material, non-public information, passing along such information
to others and/or encouraging others to trade and/or disseminate such
information.

 

SUBSCRIPTION AGREEMENT

 

This SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered into as of
_______, 2012 by and among CorMedix Inc., a Delaware corporation (the
“Company”), and each of the purchasers signatories hereto (each a “Purchaser”
and collectively, the “Purchasers”) of the Company’s units (each, a “Unit”, and
collectively, the “Units”).

 

The parties hereto agree as follows:

 

Article 1

 

Purchase and Sale of Units

 

Section 1.1. The Offering. Pursuant to the terms and conditions of the
Confidential Private Placement Memorandum dated August 20, 2012 (including all
exhibits, attachments, annexes, amendments and supplements thereto)
(collectively, the “Memorandum”), the Company is offering (the “Offering”)
through John Carris Investments, LLC (the “Placement Agent”) its Units, each
Unit consisting of (i) a 9% Senior Convertible Note of the Company,
substantially in the form attached to the Memorandum as Exhibit B, in an
aggregate principal amount of $1,000 (each, a “Note” and collectively, the
“Notes”), convertible into shares (the “Conversion Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) at a conversion
price of $0.35 per share (the “Conversion Price”), and (ii) a five-year
redeemable warrant, substantially in the form attached to the Memorandum as
Exhibit C (each, a “Warrant” and collectively, the “Warrants”), to purchase
2,500 shares of Common Stock (the “Warrant Shares”). The Offering shall commence
on the date of the Memorandum until September 15, 2012, unless extended by the
Company and the Placement Agent without notice to Purchasers for up to an
additional 60-day period (the last date of the Offering shall hereinafter be
referred to as the “Termination Date”). The Units are being offered on a
“reasonable efforts, all or none basis” as to 500 Units ($500,000) (the “Minimum
Amount”), and, thereafter, on a “reasonable efforts” basis up to 3,000 Units
($3,000,000) (the “Maximum Amount”), provided that the Company and the Placement
Agent have the option, as determined in their mutual sole discretion, to offer
up to an additional 2,000 Units ($2,000,000) (the “Over-Subscription Amount”).

 

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Section 1.2. Subscription for Units. Subject to the terms and conditions of this
Agreement, the undersigned Purchaser hereby subscribes for and agrees to
purchase the number of Units set forth on the signature page to this Agreement,
at a purchase price of $1,000 per Unit (the “Purchase Price”).

 

Section 1.3. Payment. The Purchaser encloses herewith a check payable to, or
will immediately make a wire transfer payment to, “Signature Bank, as Escrow
Agent for CorMedix Inc.,” in the full amount of the Purchase Price of the Units
being subscribed for.

 

Section 1.4. Deposit of Funds. In the event that the Company does not affect a
Closing (as defined below) on the Minimum Amount on or before the Termination
Date, the Company will refund all subscription funds, without deduction and/or
interest accrued thereon.

 

Section 1.5. Acceptance of Subscription. The Purchaser understands and agrees
that the Company and the Placement Agent, in their mutual sole discretion,
reserve the right to accept or reject this or any other subscription for Units,
in whole or in part, notwithstanding prior receipt by the Purchaser of notice of
acceptance of this or any other subscription. Neither the Company nor the
Placement Agent will have any obligation hereunder until the Company executes
and delivers to the Purchaser an executed signature page to this Agreement. If a
Purchaser’s subscription is rejected in whole or the Offering is terminated, all
funds received from the Purchaser will be returned without interest, penalty,
expense or deduction thereon, and this Agreement will thereafter be of no
further force or effect. If a Purchaser’s subscription is rejected in part, the
funds for the rejected portion of such subscription will be returned without
interest, penalty, expense or deduction thereon, and this Agreement will
continue in full force and effect to the extent such subscription was accepted.

 

Section 1.6. Closing Deliveries. Together with the check for, or wire transfer
of, the full Purchase Price of the Units being subscribed for, the Purchaser is
delivering a completed and executed signature page to this Agreement, a
completed Purchaser questionnaire attached hereto as Annex A (the “Purchaser
Questionnaire”) and a completed Purchaser certification attached hereto as Annex
B or Annex C as applicable (the “Purchaser Certification”).

 

Section 1.7. Closings. The Company may hold an initial closing (the “Initial
Closing”) at any time and place, as determined solely by the Company, prior to
the Termination Date, after the receipt of accepted subscriptions and cleared
funds equal to or greater than the Minimum Amount and after all other conditions
to closing have been satisfied or waived. After the Initial Closing, subsequent
closings with respect to additional Units may take place at any time and place,
as determined solely by the Company, with respect to subscriptions accepted
prior to the Termination Date up to the Maximum Amount, or if the Company and
Placement Agent elect in their mutual sole discretion, the Over-Subscription
Amount (each such closing, together with the Initial Closing, being referred to
as a “Closing”). Not later than ten (10) business days after the Termination
Date, a final closing (the “Final Closing”) will be held with respect to any
Units sold but not closed as of such date. The date of each Closing shall be
referred to herein as a “Closing Date.”

 

Section 1.8. Offering to Accredited Investors. This Offering is limited solely
to accredited investors as defined in the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 501 of Regulation D promulgated thereunder
(“Regulation D”), and is being made without registration under the Securities
Act in reliance upon the exemptions contained in Section 4(2) of the Securities
Act, Rule 506 of Regulation D and Regulation S and applicable state securities
laws. Each Purchaser must qualify as an accredited investor.

 

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Article 2

 

Representations and Warranties

 

Section 2.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, as of the date hereof and as of the
Closing Date of the Initial Closing and the date of any other Closing (except as
set forth in the SEC Documents (as defined below)), as follows:

 

(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any direct or indirect Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except for any
jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, “Material Adverse Effect” means any material adverse effect on the
business, operations, properties, or financial condition of the Company and/or
any condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any of its
obligations under this Agreement or any of the Transaction Documents (as defined
below) in any material respect.

 

(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Notes, the Warrants
and the Registration Rights Agreement dated as of the date hereof (the
“Registration Agreement,” and collectively, with the Notes, the Warrants and
this Agreement, the “Transaction Documents”) and to issue and sell the Units,
the Notes, the Warrants and upon conversion or exercise thereof, to issue the
Conversion Shares and Warrant Shares in accordance with the terms hereof and
thereof. The execution, delivery and performance of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Boards of Directors or
stockholders is required. When executed and delivered by the Company, each of
the Transaction Documents shall constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor’s rights and remedies or
by other equitable principles of general application.

 

(c) Capitalization. The authorized capital stock and the issued and outstanding
shares of capital stock of the Company is set forth in the Company’s SEC
Documents. All of the outstanding shares of the Common Stock and any other
outstanding security of the Company have been duly authorized. Except as set
forth in this Agreement, the SEC Documents (as defined in Section 2.1(f)), no
shares of Common Stock or any other security of the Company are entitled to
preemptive rights, rights of first refusal or similar agreements or registration
rights and there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and the SEC
Documents, there are no equity plans, contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as otherwise described in the Company’s
SEC Documents, the Company is not a party to or bound by any agreement or
understanding granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. Except as set forth in the
Company’s SEC Documents, the Company is not a party to, and it has no knowledge
of, any agreement or understanding restricting the voting or transfer of any
shares of the capital stock of the Company. The Company has not made any
representations regarding equity incentives to any officer, employee, director
or consultant that are required to be disclosed in the Company’s SEC Documents
and not disclosed in the SEC Documents.

 

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(d) Issuance of Securities. The Units, the Notes and the Warrants (the
“Securities”) to be issued at each Closing have been duly authorized by all
necessary corporate action and, when paid for or issued in accordance with the
terms hereof, the Notes and the Warrants shall be validly issued and
outstanding, free and clear of all mortgage, pledge, hypothecation, rights of
others, rights of first refusal, claim, security interest, encumbrance, title,
defect, voting trust agreement, option, lien, taxes, charge or similar
restrictions or limitations (collectively, “Liens”). When the Conversion Shares
and the Warrant Shares are issued in accordance with the terms of this Agreement
and as set forth in the Notes and the Warrants, as applicable, such shares will
be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be entitled
to all rights accorded to a holder of Common Stock.

 

(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the performance by the Company of its obligations
under the Notes and the Warrants, the consummation by the Company of the
transactions contemplated hereby and thereby, and the issuance of the Units,
Notes and Warrants as contemplated hereby, do not and will not (i) violate or
conflict with any provision of the Company’s Certificate of Incorporation (the
“Certificate”) or Bylaws (the “Bylaws”), each as amended to date, (ii) conflict
with, 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, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which the Company’s properties or assets
are bound, (iii) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected, or (iv) create or impose
a lien, mortgage, security interest, charge or encumbrance of any nature on any
property or asset of the Company under any agreement or any commitment to which
the Company is a party or by which the Company is bound or by which any of their
respective properties or assets are bound, except, in the case of clause (ii),
for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company is not required under federal,
state, foreign or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents or issue and sell the Securities in
accordance with the terms hereof (other than the filing of a Form D pursuant to
Regulation D and counterpart filings under applicable state securities laws,
rules or regulations). The business of the Company is not being conducted in
violation of any laws, ordinances or regulations of any governmental entity.

 

(f) SEC Documents, Financial Statements. Prior to the date hereof, the Common
Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
Company has filed (subject to filings with respect to certain periodic filings
made pursuant to Rule 12b-25 of the Exchange Act) all reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
Exchange Commission (“SEC”) pursuant to the reporting requirements of the
Exchange Act, including, but not limited to, all Annual Reports on Form 10-K,
Quarterly Reports on From 10-Q and Current Reports on Form 8-K (all of the
foregoing filed with the SEC prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to herein as the
“SEC Documents”). The SEC Documents have been made available to the Purchaser
via the SEC’s EDGAR system. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a
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. In addition, as of each Closing, the SEC Documents, together
with any additional documents filed with the SEC after the date hereof and
through the date of Closing, when taken in their entirety, shall not contain any
untrue statements of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the date upon which they were made and the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents (“Company Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as in effect at the time of the filing. The Company Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”), consistently applied, during the
periods involved except (i) as may be otherwise indicated in such Company
Financial Statements or the notes thereto; or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiary,
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).

 

4

 

 

(g) Subsidiaries. The Company has no Subsidiaries. For the purposes of this
Agreement, “Subsidiary” shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company.

 

(h) No Material Adverse Change. Since December 31, 2011, the Company has not
experienced or suffered any Material Adverse Effect.

 

(i) No Undisclosed Liabilities. Other than as set forth in the Company’s SEC
Documents, the Company has not incurred any liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) other than those incurred in the ordinary
course of the Company’s business or which, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect.

 

(j) No Undisclosed Events or Circumstances. Since December 31, 2011, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.

 

(k) Indebtedness. The financial statements in the SEC Documents reflect, to the
extent required, as of the date thereof all outstanding secured and unsecured
Indebtedness (as defined below) of the Company, or for which the Company has
commitments. For the purposes of this Agreement, “Indebtedness” shall include,
without limitation, (a) any liabilities for borrowed money or other amounts
owed, (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP. The Company is not in default with
respect to any Indebtedness.

 

(l) Title to Assets. The Company has good and valid title to all of its real and
personal property reflected in the SEC Documents, free and clear of any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those that, individually or in the aggregate, do not cause a Material
Adverse Effect. Any leases of the Company are valid and subsisting and in full
force and effect.

 

(m) Actions Pending. Except as disclosed in the SEC Documents, there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened against the Company which questions the validity of this Agreement or
any of the other Transaction Documents or any of the transactions contemplated
hereby or thereby or any action taken or to be taken pursuant hereto or thereto.
Except as disclosed in the SEC Documents, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company, or any of its properties or assets, which individually or
in the aggregate, would reasonably be expected, if adversely determined, to have
a Material Adverse Effect. Except as disclosed in the SEC Documents, there are
no outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

5

 

 

(n) Compliance with Law. The Company has been and is presently conducting their
respective businesses in material compliance with all applicable federal, state
and local governmental laws, rules, regulations and ordinances, except such
that, individually or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The Company has all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

 

(o) Taxes. The Company has accurately prepared and filed all federal, state and
other tax returns required by law to be filed by it, has paid or made provisions
for the payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of
the Company for all current taxes and other charges to which the Company is
subject and which are not currently due and payable. Except as disclosed in the
SEC Documents, to the best of the Company’s knowledge, none of the federal
income tax returns of the Company has been audited by the Internal Revenue
Service. Except as disclosed in the SEC Documents, the Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company for any period, nor of any basis for any such assessment,
adjustment or contingency.

 

(p) Certain Fees. Except as set forth in the Memorandum, the Company has not
employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders’ structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents.

 

(q) Disclosure. Except for the information concerning the transactions
contemplated by this Agreement, the Company confirms that neither it nor any
other person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might constitute
material, nonpublic information. To the best of the Company’s knowledge, neither
this Agreement nor any other documents, certificates or instruments furnished to
the Purchasers by or on behalf of the Company in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.

 

(r) Operation of Business. Except as disclosed in the Company’s SEC Documents,
the Company owns or possesses the rights to all trademarks, trade names, service
marks, service mark registrations, service names, websites and intellectual
property rights relating thereto, software, documentation, original works of
authorship, patents, patent rights, copyrights, inventions, improvements,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights and all applications and registrations therefor and
any patentable improvements or copyrightable derivative works thereof, which are
necessary for the conduct of its business as now conducted and/or as the Company
believes will be conducted in the future by it without any conflict with the
rights of others.

 

(s) Books and Records; Internal Accounting Controls. The records and documents
of the Company accurately reflect in all material respects the information
relating to the business of the Company, the location and collection of their
assets, and the nature of all transactions giving rise to the obligations or
accounts receivable of the Company. The Company is in material compliance with
all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as
of the applicable Closing Date. The Company maintains a system of internal
control over financial reporting (as such term is defined in Rule 13a-15(f)
under the Exchange Act) that complies in all material respects with the
requirements of the Exchange Act and has been designed by the Company’s
principal executive officer and principal financial officer, or under their
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Except as
disclosed in the SEC Documents, the Company’s internal control over financial
reporting is effective and the Company is not aware of any material weaknesses
in its internal control over financial reporting. The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the Exchange Act) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal
financial or financial offers, as appropriate, to allow timely decisions
regarding required disclosure.

 

6

 

 

(t) Material Agreements. All material agreements to which the Company is a party
or to which its property or assets are subject that are required to be filed as
exhibits to the SEC Documents under Item 601 of Regulation S-K (each, a
“Material Agreement”) are included as part of, or specifically identified in,
the SEC Documents. The Company has in all material respects performed all the
obligations required to be performed by it to date under the foregoing
agreements, has received no notice of default by the Company, and, to the
Company’s knowledge, is not in default under any Material Agreement now in
effect, the result of which would individually or in the aggregate be reasonably
likely to have a Material Adverse Effect.

 

(u) Transactions with Affiliates. Except as set forth in the SEC Documents and
otherwise contemplated by this Agreement, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Company, or any of their
respective customers or suppliers, and (b) any officer, employee, consultant or
director of the Company, or any person owning at least 5% of the outstanding
capital stock of the Company or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the SEC Documents or in the Company’s most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the SEC
Documents or in such proxy statement.

 

(v) Securities Act of 1933. The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws, and neither the
Company nor any of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of any of the Securities.

 

(w) Employees. The Company does not have any collective bargaining arrangements
or agreements covering any of its employees. Except as set forth in the SEC
Documents, the Company does not have any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company required to be disclosed in
the SEC Documents that is not so disclosed. No officer, consultant or key
employee of the Company whose termination, either individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company.

 

(x) Absence of Certain Developments. Since the date of the Company’s financial
statements in the latest of the SEC Documents, there has not occurred any
undisclosed event that (i) has caused a Material Adverse Effect or any
occurrence, circumstance or combination thereof that reasonably would be likely
to result in a Material Adverse Effect, (ii) the Company has not incurred any
material liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business and (B) liabilities
that would not be required to be reflected in the Company’s financial statements
pursuant to GAAP or that would not be required to be disclosed in filings made
with the SEC, (iii) the Company has not (A) declared or paid any dividends, (B)
amended or changed the Certificate or Incorporation or Bylaws of the Company, or
(C) altered its method of accounting or the identity of its officers and (iv)
the Company has not made a material change in officer compensation except in the
ordinary course of business consistent with past practice.

 

7

 

 

(y) Investment Company Act Status. To the knowledge of the Company, the Company
is not, and as a result of and immediately upon each Closing will not be, an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended (the
“Investment Company Act”).

 

(z) Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase Securities pursuant to this Agreement has
been made by such Purchaser independently of any other purchase and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company which
may have made or given by any other Purchaser or by any agent or employee of any
other Purchaser, and no Purchaser or any of its agents or employees shall have
any liability to any Purchaser (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction Document, and
no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that for reasons of administrative convenience only, the Transaction Documents
have been prepared by counsel for one of the Purchasers and such counsel does
not represent all of the Purchasers but only such Purchaser and the other
Purchasers have retained their own individual counsel with respect to the
transactions contemplated hereby. The Company acknowledges that it has elected
to provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Purchasers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated hereby or thereby. The Company
acknowledges that each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

 

(aa) No Integrated Offering. Neither the Company, nor to the Company’s
knowledge, any of its affiliates, or any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the offering
of the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the Securities Act which would prevent
the Company from selling the Securities pursuant to Regulation D and Rule 506
thereof under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings if to do so would prevent the
Company from selling Securities pursuant to Regulation D and Rule 506 thereof
under the Securities Act or otherwise prevent a completed offering of Securities
hereunder. The Company does not have any registration statement pending before
the SEC or currently under the SEC’s review, and since December 31, 2011, the
Company has not offered or sold any of its equity securities or debt securities
convertible into shares of Common Stock.

 

(bb) Dilutive Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes and Warrant
Shares upon exercise of the Warrants in accordance with this Agreement, the
Notes and the Warrants is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interest of other
stockholders of the Company.

 

(cc) DTC Status. To the Company’s knowledge, the Company’s transfer agent is a
participant in and the Common Stock is eligible for transfer pursuant to the
Depository Trust Company Automated Securities Transfer Program.

 

8

 

 

(dd) Governmental Approvals. Except for the filing of any notice prior or
subsequent to the applicable Closing that may be required under applicable state
and/or federal securities laws (which if required, shall be filed on a timely
basis) and the declaration of the effectiveness of any registration statements
filed by the Company pursuant to the Transaction Documents, no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Conversion Shares, the Warrant
Shares or for the performance by the Company of its obligations under the
Transaction Documents.

 

(ee) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company is engaged. The Company has not been refused any insurance coverage
sought or applied for and the Company has no reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.

 

(ff) No General Solicitation. The Company has not, and to the Company’s
knowledge, no other person has conducted any “general solicitation,” as such
term is defined in Regulation D promulgated under the Securities Act, with
respect to any of the Units being offered hereby.

 

Section 2.2. Representations and Warranties of the Purchaser. The Purchaser
hereby represents, warrants and covenants to the Company as follows:

 

(a) Capacity. The Purchaser: (i) if a natural person, represents that the
Purchaser has reached the age of 21 and has full authority, legal capacity and
competence to enter into, execute and deliver this Agreement and any of the
other Transaction Documents to which the Purchaser is a party and all other
related agreements or certificates and to take all actions required pursuant
hereto and thereto and to carry out the provisions hereof and thereof, or (ii)
if a corporation, partnership, or limited liability company or partnership, or
association, joint stock company, trust, unincorporated organization or other
entity, represents that such entity was not formed for the specific purpose of
acquiring the Units and such entity is duly organized, validly existing and in
good standing under the laws of the state of its organization.

 

(b) Authorization and Power. The Purchaser has the requisite power and authority
to enter into and perform the Transaction Documents and to purchase the
Securities being sold to it hereunder. The execution, delivery and performance
of the Transaction Documents by the Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate or partnership action, and no further consent or authorization of the
Purchaser or its Board of Directors, stockholders, or partners, as the case may
be, is required. When executed and delivered by the Purchaser, the other
Transaction Documents shall constitute valid and binding obligations of the
Purchaser enforceable against the Purchaser in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.

 

(c) Acquisition for Investment. The Purchaser is purchasing the Securities
solely for its own account and not with a view to or for sale in connection with
distribution. The Purchaser does not have a present intention to sell any of the
Securities, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of any of the Securities to or through any
person or entity; provided, however , that by making the representations herein,
the Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition. The Purchaser acknowledges that it (i) has such knowledge and
experience in financial and business matters such that the Purchaser is capable
of evaluating the merits and risks of the Purchaser’s investment in the Company,
(ii) is able to bear the financial risks associated with an investment in the
Securities and (iii) has been given full access to such records of the Company
and to the officers of the Company as it has deemed necessary or appropriate to
conduct its due diligence investigation.

 

9

 

 

(d) Rule 144. The Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available. The Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the SEC,
as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that
the Purchaser has been advised that Rule 144 permits resales only under certain
circumstances. The Purchaser understands that to the extent that Rule 144 is not
available, the Purchaser will be unable to sell any Securities without either
registration under the Securities Act or the existence of another exemption from
such registration requirement.

 

(e) General. The Purchaser understands that the Securities are being offered and
sold in reliance on a transactional exemption from the registration requirements
of federal and state securities laws and the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of such Purchaser to
acquire the Securities. The Purchaser understands that no United States federal
or state agency or any government or governmental agency has passed upon or made
any recommendation or endorsement of the Securities. Commencing on the date that
the Purchaser was initially contacted regarding an investment in the Securities,
the Purchaser has not engaged in trading (including, but not limited to, any
short sale) of the Common Stock and will not engage in any trading of the Common
Stock prior to public announcement of the transactions contemplated by this
Agreement. The Purchaser agrees that no oral or written representations have
been made, or oral or written information furnished, to the Purchaser, if any,
in connection with the Offering which are in any way inconsistent with the
information contained in the Transaction Documents.

 

(f) Residency. The Purchaser is a resident of the jurisdiction set forth in the
Purchaser Questionnaire.

 

(g) No General Solicitation. The Purchaser acknowledges that the Securities were
not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which the
Purchaser was invited by any of the foregoing means of communications. The
Purchaser, in making the decision to purchase the Securities, has relied upon
independent investigation made by it and has not relied on any information or
representations made by third parties.

 

(h) Accredited Investor. The Purchaser is an “accredited investor” (as defined
in Rule 501 of Regulation D), and the Purchaser has such experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in the Securities. The Purchaser satisfies any special suitability
or other applicable requirements of its state of residence and/or the state in
which the transaction by which the Units are purchased occurs.

 

(i) FINRA. The Purchaser is neither a registered representative under the
Financial Industry Regulatory Authority (“FINRA”), a member of FINRA or
associated or affiliated with any member of FINRA, nor a broker-dealer
registered with the SEC under the Exchange Act or engaged in a business that
would require it to be so registered, nor is it an affiliate of such a
broker-dealer or any Person engaged in a business that would require it to be
registered as a broker-dealer. In the event the Purchaser is a member of FINRA,
or associated or affiliated with a member of FINRA, the Purchaser agrees, if
requested by FINRA, to sign a lock-up, the form of which shall be satisfactory
to FINRA, with respect to the Units. The Purchaser acknowledges that an
investment in the Securities is speculative and involves a high degree of risk.

 

(j) No Offer Until Suitability Determination. The Purchaser acknowledges that
any delivery to the Purchaser of the documents relating to the Offering of the
Units prior to the determination by the Company and the Placement Agent of the
Purchaser's suitability will not constitute an offer of the Units until such
determination of suitability is made.

 

(k) Certain Fees. The Purchaser has not employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders’ structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents. The Purchaser understands and
acknowledges that John Carris Investments LLC is the exclusive Placement Agent
to the Company and is receiving the compensation set forth in the Memorandum.

 

10

 

 

(l) Independent Investment. The Purchaser has not agreed to act with any of the
other Purchasers for the purpose of acquiring, holding, voting or disposing of
the Securities purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and the Purchaser is acting independently with respect to its
investment in the Securities.

 

(m) Irrevocability. The Purchaser hereby acknowledges and agrees that the
Purchaser is not entitled to cancel, terminate or revoke this subscription, and
any agreements made in connection herewith shall survive its death or
disability.

 

(n) Restrictive Legends. The Purchaser understands and agrees that all
certificates representing the Securities will contain restrictive legends
substantially in the form as follows:

 

THIS SECURITY HAS NOT 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.

 

(o) OFAC Regulation. The Purchaser should check the Office of Foreign Assets
Control (“OFAC”) website at <http://www.treas.gov/ofac> before making the
following representations. The Purchaser represents that the amounts invested by
it in the Company in the Offering were not and are not directly or indirectly
derived from activities that contravene federal, state or international laws and
regulations, including anti-money laundering laws and regulations. Federal
regulations and Executive Orders administered by OFAC prohibit, among other
things, the engagement in transactions with, and the provision of services to,
certain foreign countries, territories, entities and individuals. The lists of
OFAC prohibited countries, territories, persons and entities can be found on the
OFAC website at <http://www.treas.gov/ofac>. In addition, the programs
administered by OFAC (the “OFAC Programs”) prohibit dealing with individuals or
entities in certain countries regardless of whether such individuals or entities
appear on the OFAC lists. To the best of the Purchaser’s knowledge, none of: (1)
the Purchaser; (2) any person controlling or controlled by the Purchaser; (3) if
the Purchaser is a privately-held entity, any person having a beneficial
interest in the Purchaser; or (4) any person for whom the Purchaser is acting as
agent or nominee in connection with this investment is a country, territory,
individual or entity named on an OFAC list, or a person or entity prohibited
under the OFAC Programs. Please be advised that the Company may not accept any
amounts from a prospective investor if such prospective investor cannot make the
representations set forth in this paragraph. The Purchaser agrees to promptly
notify the Company and the Placement Agent should the Purchaser become aware of
any change in the information set forth in these representations. The Purchaser
understands and acknowledges that, by law, the Company may be obligated to
“freeze the account” of the Purchaser, either by prohibiting additional
subscriptions from the Purchaser, declining any redemption requests and/or
segregating the assets in the account in compliance with governmental
regulations, and the Placement Agent may also be required to report such action
and to disclose the Purchaser’s identity to OFAC. The Purchaser further
acknowledges that the Company may, by written notice to the Purchaser, suspend
the redemption rights, if any, of the Purchaser if the Company reasonably deems
it necessary to do so to comply with anti-money laundering regulations
applicable to the Company and the Placement Agent or any of the Company’s other
service providers. These individuals include specially designated nationals,
specially designated narcotics traffickers and other parties subject to OFAC
sanctions and embargo programs.

 

11

 

 

(p) Foreign Bank. If the Purchaser is affiliated with a non-U.S. banking
institution (a “Foreign Bank”), or if the Purchaser receives deposits from,
makes payments on behalf of, or handles other financial transactions related to
a Foreign Bank, the Purchaser represents and warrants to the Company that: (1)
the Foreign Bank has a fixed address, other than solely an electronic address,
in a country in which the Foreign Bank is authorized to conduct banking
activities; (2) the Foreign Bank maintains operating records related to its
banking activities; (3) the Foreign Bank is subject to inspection by the banking
authority that licensed the Foreign Bank to conduct banking activities; and (4)
the Foreign Bank does not provide banking services to any other Foreign Bank
that does not have a physical presence in any country and that is not a
regulated affiliate.

 

(q) ERISA (For ERISA plans only). The fiduciary of the ERISA plan represents
that such fiduciary has been informed of and understands the Company’s
investment objectives, policies and strategies, and that the decision to invest
“plan assets” (as such term is defined in ERISA) in the Company is consistent
with the provisions of ERISA that require diversification of plan assets and
impose other fiduciary responsibilities. The Purchaser fiduciary or plan (a) is
responsible for the decision to invest in the Company; (b) is independent of the
Company or any of its affiliates; (c) is qualified to make such investment
decision; and (d) in making such decision, the Purchaser fiduciary or plan has
not relied primarily on any advice or recommendation of the Company or any of
its affiliates.

 

(r) Confidentiality. THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE COMMON STOCK
IS PUBLICLY TRADED ON THE NYSE MKT AND THAT BY ACCEPTING THE MEMORANDUM THE
PURCHASER AGREES WITH THE COMPANY AND THE PLACEMENT AGENT TO MAINTAIN IN STRICT
CONFIDENCE ALL NON-PUBLIC INFORMATION, INCLUDING, BUT NOT LIMITED TO, THE
EXISTENCE OF THE OFFERING AND ANY OTHER NON-PUBLIC INFORMATION REGARDING THE
COMPANY OBTAINED FROM THIS MEMORANDUM AND ANY OF THE OTHER TRANSACTION DOCUMENTS
AND/OR FROM THE COMPANY, THE PLACEMENT AGENT, AND/OR EITHER OF THEIR AUTHORIZED
AGENTS. THE COMPANY HAS CAUSED THESE MATERIALS TO BE DELIVERED TO THE PURCHASER
IN RELIANCE UPON SUCH AGREEMENT AND UPON RULE 100(B)(2)(II) OF REGULATION FD AS
PROMULGATED BY THE SEC.

 

Article 3

 

Covenants by the Company

 

Unless otherwise specified in this Article, for so long as any Notes have not
been paid in full or converted in full and/or any Warrants are outstanding, the
Company covenants with the Purchaser as follows, which covenants are for the
benefit of the Purchaser and their respective permitted assignees:

 

Section 3.1. Securities Compliance. The Company shall notify the SEC in
accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Purchaser,
or their respective subsequent holders.

 

Section 3.2. Registration and Listing. The Company shall use commercially
reasonable efforts cause its Common Stock to continue to be registered under
Sections 12(b), 12(g) or 15(d) of the Exchange Act, to comply in all material
respects with its reporting and filing obligations under the Exchange Act, to
comply with all requirements related to any registration statement filed
pursuant to this Agreement, and to not take any action or file any document
(whether or not permitted by the Securities Act or the rules promulgated
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act or Securities Act,
unless otherwise required by applicable law, regulation or rule. The Company
will use commercially reasonable efforts to take all action reasonably necessary
to continue the listing, trading and/or quotation of its Common Stock on one or
more of the OTC Bulletin Board, the OTC Markets Group, Pink Sheets, LLC, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, or the New York Stock Exchange MKT, or any
successor thereto as the case may be (each, a “Trading Market”). The Company
further covenants that it will take such further reasonable action as the
Purchaser may reasonably request from time to time to enable the Purchaser to
sell the Securities without registration under the Securities Act pursuant to
the exemption provided by Rule 144 promulgated under the Securities Act,
including, without limitation, promptly obtaining any required legal opinions
from Company counsel at the Company’s expense. Upon the request of the
Purchaser, the Company shall deliver to the Purchaser a written certification of
a duly authorized officer as to whether it has complied with such requirements.

 

12

 

 

Section 3.3. Inspection Rights. Provided a Purchaser agrees that it will not
trade any shares of Common Stock if it learns of material, non-public
information from such inspection until such information becomes public, for so
long as any of the Notes or the Warrants are outstanding, the Company shall
permit, during normal business hours once a month upon reasonable request and
reasonable notice by the Purchasers, (i) Purchasers (or any employees, agents or
representatives thereof) holding no less than fifty percent (50%) of the
aggregate principal amount of all Notes then outstanding, and/or (ii) Purchasers
(or any employees, agents or representatives thereof) holding Warrants to
purchase fifty percent (50%) of the then aggregate number of Warrant Shares
underlying then outstanding Warrants, to examine the publicly available,
non-confidential records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company, and to discuss the
publicly available, non-confidential affairs, finances and accounts of the
Company with any of its officers, consultants, directors, and key employees;
provided, however, nothing to the contrary is provided herein or elsewhere, if
the Notes are in default, then the above limitations on inspection rights are
terminated.

 

Section 3.4. Compliance with Laws. The Company shall comply in all material
respects with all applicable laws, rules, regulations and orders, noncompliance
with which would be reasonably likely to have a Material Adverse Effect.

 

Section 3.5. Keeping of Records and Books of Account. The Company shall keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

 

Section 3.6. Reporting Requirements. If the SEC ceases making periodic reports
available via the Internet without charge, then the Company shall furnish the
following to the Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Securities or shall beneficially own any of the
Securities:

 

(a) Quarterly Reports filed with the SEC on Form 10-Q as soon as practical after
the document is filed with the SEC, and in any event within five days after the
document is filed with the SEC;

 

(b) Annual Reports filed with the SEC on Form 10-K as soon as practical after
the document is filed with the SEC, and in any event within five days after the
document is filed with the SEC; and

 

(c) Copies of all notices, information and proxy statements in connection with
any meetings, that are, in each case, provided to holders of shares of Common
Stock, contemporaneously with the delivery of such notices or information to
such holders of Common Stock.

 

Section 3.7. Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
to perform of the Company under any Transaction Document.

 

Section 3.8. Use of Proceeds. The proceeds from the sale of the Securities
hereunder shall be used by the Company for marketing, manufacturing, rent and
utilities, licensing obligations, payroll and working capital and general
corporate purposes. In no event shall the proceeds be used to redeem any Common
Stock or securities convertible, exercisable or exchangeable into Common Stock
or to settle any outstanding litigation or used to repay debt, including, but
not limited to, any Indebtedness to the Company’s current directors and
executive officers, but excluding accounts payable and accrued expenses incurred
in the ordinary course of business.

 

Section 3.9. Reporting Status. So long as a Purchaser beneficially owns any of
the Securities, the Company shall use commercially reasonable efforts to timely
file all reports required to be filed with the SEC pursuant to the Exchange Act,
and the Company shall use commercially reasonable efforts not to terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.

 

Section 3.10. Disclosure of Transaction. The Company shall issue a press release
(the “Press Release”) and file with the SEC a Current Report on Form 8-K (the
“Form 8-K”) describing the material terms of the transactions contemplated
hereby (and attaching as exhibits thereto this Agreement, the form of Note, the
form of Warrant and the Press Release) promptly following the date of execution
of this Agreement but in no event later than as required by the rules and
regulations of the SEC.

 

13

 

 

Section 3.11. Disclosure of Material Information. Except as may be contained in
this Agreement and the Memorandum, the Company covenants and agrees that neither
it nor any other person acting on its behalf has provided any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material, non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representation in effecting this transaction.

 

Section 3.12. Pledge of Securities. The Company acknowledges that the Securities
may be pledged by a Purchaser in connection with a bona fide margin agreement or
other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Purchaser effecting a pledge of the Securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document; provided that a Purchaser and its pledgee shall be
required to comply with the provisions of Article 5 hereof in order to effect a
sale, transfer or assignment of Securities to such pledgee. At the Company’s
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge
of the Securities to such pledgee by a Purchaser.

 

Section 3.13. Amendments. The Company shall not amend or waive any provision of
the Certificate or Bylaws of the Company in any way that would adversely affect
exercise rights, voting rights, conversion rights, prepayment rights or
redemption rights of the holder of the Notes and the Warrants.

 

Section 3.14. Maintenance of Insurance. The Company shall maintain insurance
with responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real
properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any governmental authority having jurisdiction with
respect thereto or as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated.

 

Section 3.15. Compliance with Transaction Documents. The Company shall use
commercially reasonable efforts to comply with its obligations under the
Transaction Documents.

 

Section 3.16. Transactions with Affiliates. The Company shall not engage in any
transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $50,000,
other than (i) for payment of reasonable salary for services actually rendered,
as approved by the Board of Directors of the Company as fair in all respects to
the Company, (ii) reimbursement for expenses incurred on behalf of the Company,
(iii) as otherwise contemplated by this Agreement, and (iv) for purchases of
Units in this Offering and purchases of the Company’s securities in any other
offering.

 

Section 3.17. No Dividends. The Company shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or other
equity security of the Company, or (ii) purchase or otherwise acquire for value,
directly or indirectly, any shares or other equity security of the Company.

 

14

 

 

Section 3.18. No Merger or Sale of Assets. The Company shall not (i) merge or
consolidate or sell or dispose of all its assets or any substantial portion
thereof or (ii) in any way or manner alter its organizational structure or
effect a change of entity or (iii) effect a Change of Control. For the purposes
of this Agreement, a “Change of Control” shall mean: (i.) the consolidation,
merger or other business combination of the Company with or into another person
(other than (A) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company, or (B) a
consolidation, merger or other business combination in which holders of the
Company’s voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the Board of
Directors (or their equivalent if other than a corporation) of such entity or
entities), (ii.) the sale, transfer disposition or exclusive license of more
than fifty percent (50%) of the Company’s intellectual property or assets (based
on the fair market value as determined in good faith by the Board of Directors
of the Company) other than inventory in the ordinary course of business in one
or a related series of transactions; except for any such transaction described
in this clause (ii) that either (a) the holders of at least 50.1% of the then
outstanding aggregate principal amount of all Notes have approved in writing
after full disclosure of the proposed transaction, or (b) a majority of the
non-employee directors of the Board of Directors of the Company have approved
such transaction by duly adopted resolution, or (iii.) closing of a purchase,
tender or exchange offer made to the holders of more than fifty percent (50%) of
the outstanding shares of Common Stock in which more than fifty percent (50%) of
the outstanding shares of Common Stock were tendered and accepted.

 

Section 3.19. Payment of Taxes, Etc. The Company shall use commercially
reasonable efforts promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company, except for such failures to pay that would not reasonably be expected
to have a Material Adverse Effect; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.

 

Section 3.20. Corporate Existence. The Company shall use commercially reasonable
efforts to maintain in full force and effect its corporate existence, rights and
franchises and all licenses and other rights to use property owned or possessed
by it and reasonably deemed to be necessary to the conduct of its business.

 

Section 3.21. Investment Company Act. The Company shall use commercially
reasonable efforts to conduct its businesses in a manner so that it will not
become subject to the Investment Company Act of 1940, as amended.

 

Section 3.22. Indebtedness to Affiliates. The Company shall not make any payment
on any Indebtedness owed to its officers, directors or affiliates until all
aggregate principal amount and accrued but unpaid interest on the Notes has been
repaid to the Purchasers, except to the extent that such Indebtedness is owed by
the Company to its officers, directors or affiliates holding Notes purchased in
the Offering.

 

Section 3.23. No Lien on IP. Unless either (i) the holders of at least 50.1% of
the then outstanding aggregate principal amount of the Notes have approved in
writing after full disclosure of the proposed transaction, or (ii) a majority of
the non-employee directors of the Board of Directors of the Company have
approved such transaction by a duly-adopted resolution, the Company shall not,
directly or indirectly, encumber or allow any Liens on any of its copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative work, whether published or unpublished,
any patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of the Company connected with and
symbolized thereby, know-how, operating manuals, trade secret rights, rights to
unpatented inventions, and any claims for damage by way of any past, present, or
future infringement of any of the foregoing.

 

Section 3.24. Benefit Plans. Unless either (i) the holders of at least 50.1% of
the then outstanding aggregate principal amount of the Notes have approved in
writing after full disclosure of the proposed transaction, or (ii) a majority of
the non-employee directors of the Board of Directors of the Company have
approved such transaction by a duly-adopted resolution, the Company shall not
adopt, amend or terminate any equity incentive plan or employee benefit plan or
arrangement for the benefit of officers or directors of the Company; provided
that the foregoing shall not apply to the amendment or termination any medical,
dental or vision plan broadly available on the same terms to all employees of
Company.

 

15

 

 

Section 3.25. Expenditures. Unless either (i) the holders of at least 50.1% of
the then outstanding aggregate principal amount of the Notes have approved in
writing after full disclosure of the proposed transaction, or (ii) a majority of
the non-employee directors of the Board of Directors of the Company have
approved such transaction by a duly-adopted resolution, the Company shall not
(a) make any capital expenditure for an amount greater than US$100,000, (b)
dispose of any asset for an amount greater than US$100,000 or less than the book
value of such asset (other than the sale of inventory in the ordinary course of
business), or (c) acquire or purchase any interest in any real property for an
amount greater than US$100,000.

 

Section 3.26. Compensation. Unless either (i) the holders of at least 50.1% of
the then outstanding aggregate principal amount of the Notes have approved in
writing after full disclosure of the proposed transaction, or (ii) a majority of
the non-employee directors of the Board of Directors of the Company have
approved such transaction by a duly-adopted resolution, the Company shall not
(a) materially increase or change the compensation package (including salary,
bonus and equity incentives, if any) of any member of the management team of
Company if the total compensation package, as increased or changed, would exceed
US$100,000 or (b) make any payments to any member of the management team or
board of directors of Company in respect of any deferred or foregone
compensation.

 

Section 3.27. Reservation of Shares. The Company shall, for so long as any of
the Notes or Warrants are outstanding, take all action necessary to reserve and
keep available out of its authorized and unissued capital stock, solely for the
purpose of effecting the exercise of all Warrants and conversion of all Notes,
such number of shares of Common Stock which would allow for full exercise of all
then outstanding Warrants and conversion of all then outstanding Notes. Upon
exercise of the Warrants and/or conversion of the Notes, the shares of Common
Stock issued with respect thereto will be validly issued, fully paid and
nonassessable and free from all Liens with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.

 

Section 3.28. Other Businesses. The Company shall not engage, directly or
indirectly, in any business other than the business currently conducted by
Company.

 

Article 4

 

Conditions

 

Section 4.1. Conditions Precedent to the Obligation of the Company to Close and
to Sell the Securities and the Purchaser to Close and to Purchase the
Securities. The obligations hereunder of the Company to close and issue and sell
the Securities to the Purchasers and the Purchaser to Close and to Purchase the
Securities at each Closing is subject to the satisfaction or waiver, at or
before the Closing of the conditions set forth below.

 

(a) Accuracy of the Representations and Warranties. The representations and
warranties of the Company and each Purchaser shall be true and correct in all
material respects as of the date when made and as of the applicable Closing Date
as though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.

 

(b) Performance by the Company and the Purchasers. The Company and each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company and/or the Purchasers at or
prior to the applicable Closing Date.

 

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

 

(d) Completion of Due Diligence. Each Purchaser shall have completed its due
diligence of the Company and the securities being offered to its satisfaction,
in its sole and absolute discretion.

 

(e) Delivery of Purchase Price. The Purchase Price for the Securities shall have
been delivered by the Purchaser to the Company prior to the applicable Closing
Date.

 

(f) Delivery of Transaction Documents. The Transaction Documents shall have been
duly executed and delivered by the Purchasers to the Company and the Placement
Agent.

 

16

 

 

(g) No Suspension, Etc. The shares of Common Stock (i) shall be designated for
quotation or listed on a Trading Market, and (ii) shall not have been suspended,
as of each Closing Date, by the SEC from trading on such Trading Market.

 

(h) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

 

(i) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company,
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

 

(j) Opinion of Counsel. The Placement Agent shall have received an opinion of
counsel to the Company, dated the date of the Closing as shall be reasonably
acceptable to counsel to the Placement Agent.

 

(k) Secretary’s Certificate. The Company shall have delivered to the Placement
Agent and counsel to the Placement Agent a secretary’s certificate, dated as of
each Closing Date, as to (i) the resolutions adopted by its Board of Directors
approving the transactions contemplated hereby, (ii) its certificate of
incorporation, (iii) its bylaws, each as in effect at the Closing Date, (iv) the
authority and incumbency of the officers executing the Transaction Documents and
any other documents required to be executed or delivered in connection
therewith, and (v) the good standing of the Company in such entity’s
jurisdiction of formation and all jurisdictions in which the Company is
qualified as a foreign corporation to do business, as evidenced by and attaching
true and complete copies of certificates of the secretary of state (or
comparable office) of each such jurisdiction as of a date within five (5)
calendar days prior to the applicable Closing Date.

 

(l) Officer’s Certificate. On each Closing Date, the Company shall have
delivered to the Placement Agent a certificate signed by an executive officer on
behalf of the Company, dated as of such Closing Date, confirming the accuracy of
the Company’s representations, warranties and covenants as of such Closing Date
and confirming the compliance by the Company with the conditions precedent set
forth in this Section 4.1 as of such Closing Date.

 

(m) Affiliate Lock-Up. The Placement Agent shall have received agreements (the
“Lock-Up Agreements”) from each director and officer of the Company (and any of
their respective transferees, assignees and/or affiliates) to the effect that
each such individual shall not sell, assign or transfer any of their securities
of the Company for the period commencing on the date of the Memorandum and
terminating on the earlier to occur of (i) six (6) months from the date the
registration statement covering the resale of all of the Conversion Shares has
been declared effective by the SEC (and the Company has no reason to believe it
will not stay effective without interruption for the foreseeable future), and
(ii) the date that such Conversion Shares have been continually eligible for
sale under Rule 144 without any limitations and/or restrictions, including, but
not limited to, volume or manner-of-sale restrictions or current public
information requirements for a period of six (6) months (and the Company has no
reason to believe sales of such Conversion Shares or Warrant Shares under Rule
144 without any limitations and/or restrictions will not continue to be
permitted without interruption for the foreseeable future), provided that
transfers may be made as gifts, to family members and trusts for the benefit of
family members, and to affiliates of our directors and officers. Notwithstanding
the foregoing, the Lock-Up Agreements shall not preclude the officers or
directors of the Company from exercising stock options granted pursuant to the
Company’s Amended and Restated 2006 Stock Incentive Plan. The form of Lock-up
Agreement shall be prepared by and satisfactory to counsel to the Placement
Agent.

 

(n) Material Adverse Effect. No Material Adverse Effect shall have occurred.

 

17

 

 

Article 5

 

Certificate; Legend

 

Section 5.1. Legend. Except as set forth herein, each certificate representing
the Securities, the Conversion Shares or the Warrant Shares shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or “blue sky”
laws):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.

 

The Company agrees to issue or reissue certificates representing any of the
Securities, the Conversion Shares or the Warrant Shares without the legend set
forth above when required to do so pursuant to the terms of the Notes or if (x)
the holder thereof shall provide the Company with reasonable assurances that the
such securities can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold (which assurances shall not require an opinion of counsel) or
(y) the holder is selling such Conversion Shares in compliance with the
provisions of Rule 144.

 

Article 6

 

Indemnification

 

Section 6.1. General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers, affiliates,
members, managers, employees, agents, successors and assigns) from and against
any and all losses, liabilities, deficiencies, costs, damages and expenses
(including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Purchasers as a result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Company
herein.

 

Section 6.2. Indemnification Procedure. Any party entitled to indemnification
under this Article 6 (an “Indemnified Party”) will give written notice to the
Company of any matter giving rise to a claim for indemnification; provided, that
the failure of any Indemnified Party hereunder to give notice as provided herein
shall not relieve the Company of its obligations under this Article 6 except to
the extent that the Company is actually prejudiced by such failure to give
notice. In case any such action, proceeding or claim is brought against the
Indemnified Party in respect of which indemnification is sought hereunder, the
Company shall be entitled to participate in and, unless in the reasonable
judgment of the Company a conflict of interest between it and the Indemnified
Party exists with respect to such action, proceeding or claim (in which case the
Indemnified Party shall be responsible for the reasonable fees and expenses of
one separate counsel for the indemnified parties), to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Party. In the event that
the Company advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the Company elects in writing to assume and does so assume the defense of any
such claim, proceeding or action, the Indemnified Party’s costs and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be losses subject to indemnification hereunder. The
Indemnified Party shall cooperate fully with the Company in connection with any
negotiation or defense of any such action or claim by the Company and shall
furnish to the Company all information reasonably available to the Indemnified
Party which relates to such action or claim. The Company shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the Company elects to
defend any such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The Company shall not be liable for any settlement of any action, claim
or proceeding effected without its prior written consent. Notwithstanding
anything in this Article 6 to the contrary, the Company shall not, without the
Indemnified Party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim. The
indemnification obligations to defend the Indemnified Party required by this
Article 6 shall be made by periodic payments of the amount thereof during the
course of investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred, so long as the Indemnified Party shall
refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The indemnity
agreements contained herein shall be in addition to (a) any cause of action or
similar rights of the Indemnified Party against the Company or others, and (b)
any liabilities the Company may be subject to pursuant to the law.

 

18

 

 

Article 7

 

Miscellaneous

 

Section 7.1. Fees and Expenses. Each party shall pay the fees and expenses of
its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, however, that
the Company, in accordance with the Engagement Letter, dated as of May 31, 2012,
by and between the Company and Placement Agent, shall pay all actual and
documented attorneys’ fees and expenses (including disbursements and
out-of-pocket expenses) incurred by counsel to the Placement Agent in connection
with the preparation, negotiation, execution and delivery of the Transaction
Documents and the transactions contemplated thereunder.

 

Section 7.2. Specific Performance; Consent to Jurisdiction; Venue; Waiver of
Jury Trial.

 

(a) The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Documents were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement or the other Transaction Documents and to
enforce specifically the terms and provisions hereof or thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.

 

(b) Each party hereby expressly and irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby expressly and irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby expressly and irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. In any action brought by the Company
concerning and/or arising directly and/or indirectly out of this Certificate,
the prevailing party shall be entitled to recover all of its legal fees and
expenses incurred by it with respect to any such legal action. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

Section 7.3. Entire Agreement; Amendment. This Agreement and the other
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers holding at least 66 2/3 % of
the principal amount of the Notes then held by the Purchasers. Any amendment or
waiver effected in accordance with this Section 7.3 shall be binding upon each
Purchaser (and their permitted assigns) and the Company.

 

19

 

 

Section 7.4. Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:

 

If to the Company:  

 

CorMedix Inc.

745 Rt. 202-206, Suite 303

Bridgewater, NJ 08807

    Attention: Richard Cohen     Telephone : (908) 517-9500     Facsimile: (908)
429-4307 with copies to:  

 

DLA Piper

300 Campus Drive, Suite 100

Florham Park, New Jersey 07932

    Attention: David C. Schwartz, Esq.     Telephone: (973) 520 2555    
Facsimile: (973) 520-2575 If to any Purchaser:   At the address of the Purchaser
set forth on Annex A to this Agreement or as specified in writing by such
Purchaser. with copies to:  

Gusrae Kaplan Nusbaum PLLC

120 Wall Street, 11th Floor

New York, New York 10005

    Attention: Lawrence Nusbaum, Esq.     Telephone: (212) 809-5449    
Facsimile: (212) 269-1400

 

Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.

 

Section 7.5. Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. No consideration shall be offered or paid to any Purchaser to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. This provision constitutes a separate
right granted to each Purchaser by the Company and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

 

Section 7.6. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

 

20

 

 

Section 7.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
assignment by a party to this Agreement of any rights hereunder shall not affect
the obligations of such party under this Agreement. The Purchasers may assign
the Securities and its rights under this Agreement and the other Transaction
Documents and any other rights hereto and thereto without the consent of the
Company.

 

Section 7.8. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

Section 7.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.

 

Section 7.10. Survival. The representations and warranties of the Company and
the Purchasers shall survive the execution and delivery hereof and the Initial
Closing.

 

Section 7.11. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.

 

Section 7.12. Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

 

Section 7.13. Further Assurances. From and after the date of this Agreement,
upon the request of the Purchasers or the Company, the Company and each
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the other
Transaction Documents

 

[SIGNATURE PAGE FOLLOWS]

 

21

 

 

SIGNATURE PAGE TO

SUBSCRIPTION AGREEMENT

 

Purchaser hereby elects to purchase a total of ______ Units at a price equal to
$1,000 per Unit (to be completed by the Purchaser).

 

If the Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as TENANTS
IN COMMON, or as COMMUNITY PROPERTY:

 

Purchaser:  

 

 

                      Print Name       Social Security Number                  
              Signature   Date   Address                

Co-Purchaser:

 

                          Print Name       Social Security Number              
                  Signature   Date   Address (if different from above)  

 

 

If the Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:                   Name of Partnership, Corporation, Limited Liability
Company or Trust       Federal Taxpayer Identification Number                  
  By:                   Name:         Date:         Title:              

 

ACCEPTED BY:

 

CORMEDIX INC.

 

By: /s/ Richard M. Cohen         Name: Richard M. Cohen   Title: Interim Chief
Executive Officer and Interim Chief Financial Officer         Date    

 

 

 

 

ANNEX A

PURCHASER QUESTIONNAIRE

 

INDIVIDUAL INVESTORS

 

Investor Name:

 

 

Co-Investor Name:

            Individual Executing Profile or Trustee (If Applicable):    

 

Marital Status:

                  SSN #:     Joint Party SSN #:             Date of Birth:    
Joint Party Date of Birth:             Primary Residence:                  
Street Address:                   City, State & Zip Code:                   Home
Phone:     Home Fax:  

 

Email address:

                  Business Address:        

 

Business Phone:

   

 

Business Fax:

 

 

Business Email Address:

                  ENTITY INVESTORS

 

Entity Investor Name:

       

 

Individual Executing Questionnaire:

 

 

Federal Tax ID No.:

                  Business Street Address:        

 

Business City, State & Zip Code:

 

 

Contact Person:

       

 

Business Phone:

   

 

Business Fax:

 

 

Business Email Address:

                           

SECURITY DELIVERY INSTRUCTIONS (Check One): ¨   Please deliver to the Home
Address listed above  ¨   Please deliver to the Business Address listed above ¨
  Please deliver my securities to the following address:

 

Annex A

 

 

ANNEX B

 

CERTIFICATE FOR INDIVIDUAL INVESTORS (Including Grantors of Revocable Trusts)

If the investor is an individual, including married couples and IRA accounts of
individual investors, please complete, date and sign this Certificate.  If the
investment is to be held jointly, each investor must execute and deliver the
Subscription Agreement and initial their Investor Status as requested below and
execute this Certificate.

 

¨ Individual ¨            Joint Tenants (both Joint Tenants must initial their
Investor Status and sign this Certificate) ¨ IRA ¨            Tenants in Common
(both tenants-in-common must initial their Investor Status and sign this
Certificate) ¨ Tenants in the Entirety ¨            Community Property (all
holders must initial their Investor Status and sign this Certificate)

 

¨           Grantor of a Revocable Trust (identify each grantor and indicate
under what circumstances the trust is revocable by the grantor.  If you check
this box, please note all Trustees must complete the Investor Status Section
below and sign this Certificate).

 

Names of Grantors:  

 

¨ Check if any Grantor is deceased, disabled or legally incompetent.

 

INVESTOR STATUS (Including Grantors of Revocable Trusts)

 

  I certify that I have a net worth (excluding the value of my primary
residence) in excess of $1 million either individually or through aggregating my
individual holdings and those in which I have a joint, community property or
other similar shared ownership interest with my spouse. Initial if Applicable  
  I certify that I have had an annual gross income for the past two years of at
least $200,000 (or $300,000 jointly with my spouse) and expect my income (or
joint income, as appropriate) to reach the same level in the current year.
Initial if Applicable    

 

I certify that I am a director or executive officer of CorMedix Inc.

Initial if Applicable  

 

The undersigned certifies that the representations and responses above are true
and accurate:

 

Investor Name (Print):     Co- Investor Name:             Signature:     Co-
Investor Signature:             Date:     Date:  

 

Annex B

 

 

ANNEX C

 

ENTITY INVESTORS CERTIFICATE

(CORPORATIONS, PARTNERSHIPS, LIMITED LIABILITY COMPANIES,

IRREVOCABLE TRUSTS, AND FOUNDATIONS)

If the Investor is a corporation, partnership, limited liability company,
irrevocable trust, pension plan, foundation or other entity, an authorized
officer, partner, or trustee must provide the requested information below,
initial the Investor Status and sign this Certificate.

Type of Entity (check one):

 

¨ Limited Partnership ¨ General Partnership ¨ Limited Liability Company ¨
Corporation ¨ Irrevocable Trust: ¨ Other form of organization: Grantors of
Revocable Trust: Please complete Annex B.     Date of Formation:        

 

NOTE: PLEASE PROVIDE A COPY OF THE ORGANIZATIONAL DOCUMENTATION. (i.e., Articles
of Incorporation, Partnership Agreement, Operating Agreement, Trust Agreement,
etc)

 

In order for the Company to offer and sell the Units in conformance with state
and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable to you
as an investor in the Company.

 

  A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity; Initial
if Applicable     A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; Initial if Applicable    

 

An insurance company as defined in Section 2(13) of the Securities Act;

Initial if Applicable     An investment company registered under the Investment
Company Act of 1940 or a business development company as defined in Section
2(a)(48) of that Act; Initial if Applicable     A Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; Initial if Applicable     A
plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of $5,000,
000; Initial if Applicable     An employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors; Initial if Applicable  

 

 

 

 

  A private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940; Initial if Applicable     Any partnership or
corporation or any organization described in Section 501(c)(3) of the Internal
Revenue Code or similar business trust, not formed for the specific purpose of
acquiring the Units, with total assets in excess of $5,000,000; Initial if
Applicable     A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Units, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act;
or Initial if Applicable     An entity in which all of the equity owners qualify
under any of the above subparagraphs.* Initial if Applicable *If the undersigned
belongs to this investor category only, please list the equity owners of the
undersigned, and, in addition, have each equity owner individually complete and
deliver Annex A and Annex B hereof:        

 

The undersigned certifies that the representations and responses above are true
and accurate and that the undersigned has the authority to execute and deliver
the Subscription Agreement and this Certificate on behalf of the Investor and to
take other actions with respect thereto.

 

Entity Investor Name:                   By (Signature):                   Print
Name:                   Title:        

 

Date:

 

 

     

 

 

 

 

SCHEDULE A

 

List of Purchasers and Number of Units Purchased

 

Purchaser   Units Bruce D. Walck R/O IRA   100 Dr. Lindsay A. Rosenwald   50
Manchester Securities Corporation   400 Wade Capital Corporation Money Purchase
Plan   35 Oliver Buck   100 MW Bridges LLC   50 Paul Schneider   15 Gary
Gelbfish, M.D.   100 Steven W. Lefkowitz   15 Matthew P. Duffy   10 Philip S.
Forte IRA   30 Collage Services Limited   25 Kingsbrook Opportunities Master
Fund LP   25 Patrick Caldwell   5 Janet Ballard   25 Mark Livingston   10 Roy
Whitehead   35 George B. Wright III   10 Ronald Globus   10 Ricky McKnight   18
Lori Shapero   35 Bowden Transportation Services RET Ltd   7 Philip S. Forte  
70 Jonathan Stanney   50 Alvin L. Gray Trust   25 Gregory Martino   25 Justin
Bagnato-Schulte   4 Jack S. Jacobsen   20 Elbow Canyon Estates   20