Unassociated Document


    
      THIS NOTE
AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN
SATISFIED.

       

    

    
      CORMEDIX
INC.

      


    

    
      CONVERTIBLE
PROMISSORY NOTE

      


    

    
      Summit,
NJ

      


    

    
      	
              $1,000,000.00

            	 
      	
              April
      30, 2009

            


    

    
      


    

    
      	
               
      

            	
              1.

            	
              Principal and
      Interest

            


    

     

    CORMEDIX
INC. (the “Company”), a Delaware
corporation, for value received, hereby promises to pay to the order of Galenica
Ltd., or its assigns (“Holder”), in lawful
money of the United States of America at the address for notices to Holder set
forth in the applicable Purchase Agreement (as defined below) (or such other
address as Holder shall provide to the Company in writing pursuant hereto), the
principal amount of One Million dollars ($1,000,000.00), together with interest
as set forth below.

     

    The
Company promises to pay interest on the unpaid principal amount from the date
hereof until such principal amount is paid in full at the rate of eight percent
(8%), or such lesser rate as shall be the maximum rate allowable under
applicable law. Interest from the date hereof shall be computed on the basis of
a 360-day year of twelve 30-day months, shall compound annually and shall be
accrued and added to principal on an annual basis. Unless converted, all unpaid
principal and unpaid accrued interest on this Note shall be due and payable on
July 31, 2010; provided, however, that upon an
Event of Default (as defined herein), the interest rate on this Note shall be
increased to twelve percent (12%) per annum during the term of the default. For
purposes of this Note, an “Event of Default”
shall occur if (i) the Company shall default in the payment on the Note, when
and as the same shall become due and payable; or (ii) the Company shall default
in the due observance or performance of any material covenant, condition or
agreement on the part of the Company contained in this Note or the Purchase
Agreement, and any such default shall continue for a period of five (5) business
days after the Company receives written notice thereof.


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


    
      This Note
is being issued pursuant to that certain Note Purchase Agreement between the
Company and the Holder, dated as of December 10, 2008 (the “Purchase Agreement”), and is
subject to its terms. Capitalized terms used herein but not defined shall have
the meanings given to such terms in the Purchase Agreement. This Note is being
issued together with a series of convertible promissory notes issued by the
Company in connection with an offering described in the Company’s Confidential
Offering Memorandum (the “Memorandum”) dated
August 5, 2008 (such notes shall be collectively referred to as the “Bridge Notes”). The
Bridge Notes and the First Bridge Notes (as defined in the Purchase Agreement)
rank pari passu in right of payment with all other existing indebtedness of the
Company and, pursuant to the Purchase Agreement, no new indebtedness which is
secured or senior in right of payment to the Bridge Notes and the First Bridge
Notes may be issued by the Company without the consent of the holders of Bridge
Notes and the holders of First Bridge Notes collectively, consenting together as
one group, representing at least sixty-six and two-thirds percent (66 2/3%) of
the aggregate principal amount of all outstanding Bridge Notes and First Bridge
Notes. No consent of the holders of Bridge Notes or First Bridge Notes will be
required for issuances by the Company of unsecured indebtedness that ranks pari
passu in right of payment with, or junior in right of payment to, the Bridge
Notes and First Bridge Notes.

      


    

    
      
        	
                 

              	
                2.

              	
                Conversion.

              


      

       

    

    
      2.1 (a)
All unpaid principal and unpaid accrued interest on this Note shall be
automatically converted into the Company’s equity securities (the “Securities”) issued
in the Company’s next equity financing (or series of related equity financings)
involving the sale of Securities in which the Company receives gross aggregate
cash proceeds (before brokers’ fees or other transaction related expenses, and
excluding any such proceeds resulting from any conversion of the First Bridge
Notes) of at least $10,000,000 minus the aggregate principal amount of the
Bridge Notes (a “Qualified
Financing”), at a conversion price equal to the lesser of (a) the lowest
per unit price paid for such Securities in cash by investors in such Qualified
Financing, and upon such other terms, conditions and agreements as may be
applicable in such Qualified Financing, and (b) $30,000,000 divided by the
number of shares of Common Stock outstanding immediately prior to such Qualified
Financing (determined on a fully diluted basis) (the “Conversion
Price”).

       

    

    
      (b) In
the event that the Company consummates a merger, share exchange, or other
transaction (or series of related transactions), other than in connection with a
Qualified Financing, in which (i) the Company merges into or otherwise becomes a
wholly-owned subsidiary of a company subject to the public company reporting
requirements of the Securities Exchange Act of 1934, as amended, and (ii) the
aggregate consideration payable to the Company or its stockholders in such
transaction(s) (the “Reverse Merger
Consideration”) is greater than or equal to $10,000,000 (a “Reverse Merger”),
then immediately prior to such Reverse Merger, all unpaid principal and unpaid
accrued interest on this Note shall be automatically converted into Common Stock
at a conversion price per share equal to the quotient obtained by dividing (i)
the Reverse Merger Consideration less the amount of unpaid principal and accrued
interest on all Bridge Notes and First Bridge Notes by (ii) the number of shares
of Common Stock then outstanding, on a fully diluted basis, without giving
effect to the warrants issued pursuant to the Purchase Agreements, to the First
Bridge Warrants (as defined in the Purchase Agreement) or to the warrants issued
to Paramount BioCapital, Inc., as placement agent in connection with the sale of
the First Bridge Notes.


    


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    
      The
shares of Common Stock issuable pursuant to clause 2.1 (b) above shall be issued
effective prior to the consummation of the Reverse Merger and as a condition to
such Reverse Merger. As a holder of such shares of Common Stock, the Holder will
receive the consideration payable in connection with such Reverse Merger on a
share-for-share basis with all other stockholders of the Company and in like
kind, at the same time and upon the same conditions as all other stockholders of
the Company.

      


    

    
      If any
Reverse Merger Consideration is other than cash, its value will be deemed to be
its fair market value as determined, in good faith, by the Board of Directors of
the Company. The value of any securities shall be determined by the Board of
Directors of the Company as set forth for a Sale of the Company in Section
3.2(c) below.

      


    

    
      In the
event the Company completes (in one or a series of related transactions) a
merger, consolidation, sale or transfer of more than fifty percent (50%) of the
Company’s capital stock, in each case, which does not constitute a Sale of the
Company (as defined below), a Reverse Merger or a Qualified Financing, then the
term “Securities” as used
herein shall thereafter refer to the equity securities or securities convertible
into or exchangeable for equity securities of the surviving, resulting, combined
or acquiring entity in such merger, consolidation, sale or
transfer.

      


    

    
      2.2 Upon
conversion of this Note in accordance with the terms of Section 2.1, the
outstanding unpaid principal and unpaid accrued interest of the Note shall be
converted without any further action by the Holder and whether or not the Note
is surrendered to the Company or its transfer agent, and the indebtedness
evidenced by this Note shall be satisfied in full and no interest shall continue
to accrue on this Note and all rights of the Holder hereunder shall terminate.
The Company shall not be obligated to issue certificates evidencing the shares
of the securities issuable upon such conversion unless the Note is either
delivered to the Company or its transfer agent, or the Holder notifies the
Company or its transfer agent that such Note has been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection with such Note. The Company shall, as
soon as practicable after such delivery, or such agreement and indemnification,
issue and deliver to such Holder of such Note, a certificate or certificates for
the securities to which the Holder shall be entitled. Such conversion shall be
deemed to have been made concurrently with the close of the Qualified Financing
or the Reverse Merger, as applicable. The person or persons entitled to receive
securities issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such securities on such date. The Company shall
not issue fractional shares but shall round down the number of shares issued to
the nearest whole number. Any conversion effected in accordance with this
Section 2 shall be binding upon the Holder hereof.

       

    


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    
      
        	
                 

              	
                3.

              	
                Prepayment.

              


      

       

    

    
      3.1            Other
than as provided in Section 3.2 hereof, the Notes may not be prepaid at any
time, in whole or in part, prior to their maturity.

      


    

    
      3.2            In
the event of a Sale of the Company prior to a Qualified Financing, the Company
shall:

    

     

    
      (a)            pay
to the Holder an amount equal to the unpaid principal balance of this Note,
payable in cash or such other form of Sale Proceeds (as defined below), having a
value equal to such unpaid principal balance;

      


    

    
      (b)            pay
to the Holder all accrued but unpaid interest on this Note, payable in cash or
such other form of Sale Proceeds, having a value equal to such accrued but
unpaid interest; and

      


    

    
      (c)            as
consideration for the permitted prepayment of the Note, issue to the Holder a
number of fully paid, non-assessable shares of Common Stock equal to (i) the
Aggregate Prepayment Equity Amount (as defined below), multiplied by (ii) the
quotient equal to the principal amount of the Holder’s Note divided by the sum
of the aggregate principal amount of (x) all Bridge Notes plus (y) all First
Bridge Notes plus (z) all Existing Notes (as defined below), in each case, then
outstanding.

      


    

    
      The
shares of Common Stock issuable pursuant to clause (c) above shall be issued
effective immediately prior to, and conditioned upon, the consummation of the
Sale of the Company and as a condition to such Sale of the Company. As a holder
of such shares of Common Stock, the Holder will receive the consideration
payable in connection with such Sale of the Company on a share-for-share basis
with all other stockholders of the Company and in like kind, at the same time
and upon the same conditions as all other stockholders of the
Company.

      


    

    
      Upon the
consummation of the Sale of the Company and completion by the Company of the
deliveries set forth in clauses (a) through (c) above, the indebtedness
evidenced by this Note shall be satisfied in full and no interest shall continue
to accrue on this Note and all rights of the Holder hereunder shall
terminate.

      


    

    
      If any
Sale Proceeds resulting from the Sale of the Company are other than cash, the
value of such Sale Proceeds will be deemed to be its fair market value as
determined, in good faith, by the Board of Directors of the Company. The value
of any securities shall be determined by the Board of Directors of the Company
as follows:

      


    

    
      (i)
Securities not subject to an investment letter or other restriction on free
marketability covered by (ii) below:

    


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    
      (A)           If
traded on a securities exchange, the value shall be the average of the daily
average bid and asked prices of the securities on such exchange over the thirty
(30) day period ending three (3) days prior to the date of the Sale of the
Company;

       

      (B)           If
not traded on a securities exchange, but actively traded over-the-counter, the
value shall be the average of the daily average of the closing bid and sale
prices over the thirty (30) day period ending three (3) days prior to the date
of the Sale of the Company; and

       

      (C)           If
not traded on a securities exchange and if there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors with reference to the last sale of securities undertaken by the issuer
of such securities.

    

    


    
      (ii) An
appropriate discount from the market value determined in accordance with clauses
(A), (B) or (C) of subsection (i) above shall be made with respect to any
securities subject to an investment letter or other restriction on free
marketability (other than restrictions arising solely by virtue of a
shareholder’s status as an affiliate or former affiliate) to reflect the
approximate fair market value thereof, as determined by the Board of
Directors.

      


    

    
      The
following definitions shall apply for purposes of this Section 3.2:

       

    

    
      (v)           “Aggregate Prepayment Equity
Amount” shall mean a number of shares of Common Stock determined in
accordance with the following formula:

      


    

    
      
        
          
            	
                  	
                    Aggregate
      Prepayment Equity Amount =

                  	
                    

                  


          

        

         

      

      
        For
purposes of the foregoing formula:

        


      

      
        A = the
number of shares of the Company’s then outstanding Common Stock, determined on a
fully diluted basis, prior to any issuance under this Section 3.2;

         

        B = the
Applicable Percentage (as defined below).

      

      


      
        (w)      “Applicable
Percentage” shall mean the number determined in accordance with the
following formula:

        


      

      
        
          
            	
                  	
                    Applicable
      Percentage =

                  	
                    

                  


          

        

         

      

      


      
        For
purposes of the foregoing formula:

      


      
        
           


        

        
          5

          
            

          

        

        
           


        

      



    
      A = the
aggregate principal amount of all Bridge Notes, First Bridge Notes and Existing
Notes outstanding immediately prior to the Sale of the Company;

       

      B = 50%;
and

       

      C = the
aggregate principal amount of all Bridge Notes, First Bridge Notes and Existing
Notes then outstanding.

    

    
       

      (x)
“Sale of the
Company” shall mean a transaction (or series of related transactions)
with one or more non-affiliates, pursuant to which such party or parties acquire
(i) capital stock of the Company or the surviving entity possessing the voting
power to elect a majority of the board of directors of the Company or the
surviving entity (whether by merger, consolidation, sale or transfer of the
Company’s capital stock or otherwise) (a “Stock Acquisition”);
or (ii) all or substantially all of the Company’s assets determined on a
consolidated basis (an “Asset Sale”); provided, however, that
notwithstanding anything to the contrary contained herein, to the extent any
transaction (or series of related transactions) qualifies as a Qualified
Financing or a Reverse Merger, such transaction(s) shall not be deemed to
constitute a Sale of the Company.


    

    
       

      (y)
“Sale Proceeds”
shall mean (i) in the event of a Stock Acquisition, the cash or securities paid
by the acquirer to the Company or the selling stockholders to acquire such
shares; and (ii) in the event of an Asset Sale, the cash or securities legally
available for distribution to the Company’s stockholders, after creation of
adequate reserves for liabilities of the Company.


    

    
       

      (z)
“Existing
Notes” shall mean (i) the Future Advance Promissory Note in favor of
Paramount BioSciences, LLC, dated July 28, 2006 and amended on June 15, 2007,
(ii) the Future Advance Promissory Note in favor of The Lindsay A. Rosenwald
Family Trusts Dated December 15, 2000, dated August 11, 2006 and amended on June
15, 2007 and on July 22, 2008, and (iii) such additional amounts, if any,
borrowed under one or more of the foregoing notes to fund the operations of the
Company.


    

    
       

      4.           Attorney’s Fees. If
the indebtedness represented by this Note or any part thereof is collected in
bankruptcy, receivership or other judicial proceedings or if this Note is placed
in the hands of attorneys for collection after default, the Company agrees to
pay, in addition to the principal and interest payable hereunder, reasonable
attorneys’ fees and costs incurred by Holder.


    

    
       

      5.           Notices. Any notice,
other communication or payment required or permitted hereunder shall be in
writing and shall be deemed to have been given upon delivery to the address
provided pursuant to the Purchase Agreement.


    

    
       

      6.           Notice of Proposed
Transfers. Prior to any proposed transfer of this Note or the Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the Holder shall give written notice to the
Company of such Holder’s intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall, if the Company so requests, be accompanied (except
in transactions in compliance with Rule 144) by an unqualified written opinion
of legal counsel, who shall be reasonably satisfactory to the Company, addressed
to the Company and reasonably satisfactory in form and substance to the
Company’s counsel, to the effect that the proposed transfer of the Note or
Securities may be effected without registration under the Securities Act; provided, however, no such
opinion of counsel shall be necessary for a transfer without consideration by a
Holder to any affiliate of such Holder, or a transfer by a Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original Holder hereunder. Each
certificate evidencing Securities or the Note transferred as above provided
shall bear an appropriate restrictive legend, except that the Note or
certificate shall not bear such restrictive legend if in the opinion of counsel
for the Company such legend is not required in order to establish compliance
with any provisions of the Securities Act.

    


    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    
      7.           Acceleration. This
Note shall become immediately due and payable if (i) the Company commences any
proceeding in bankruptcy or for dissolution, liquidation, winding-up,
composition or other relief under state or federal bankruptcy laws; or (ii)
there is any material breach of any material covenant, warranty, representation
or other term or condition of this Note or the Purchase Agreement at any time
which is not cured within the time periods permitted therein, or if no cure
period is provided therein, within sixty (60) days after the date on which the
Company receives written notice of such breach.

      


    

    
      8.           No Dilution or
Impairment. The Company will not, by amendment of its Certificate of
Incorporation or Bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Note against dilution or other impairment.

      


    

    
      9.           Waivers. The Company
hereby waives presentment, demand for performance, notice of non-performance,
protest, notice of protest and notice of dishonor. No delay on the part of
Holder in exercising any right hereunder shall operate as a waiver of such right
or any other right. This Note is being delivered in and shall be construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws provisions thereof.

      


    

    
      10.           No Stockholder
Rights. Nothing contained in this Note shall be construed as conferring
upon the Holder or any other person the right to vote or to consent or to
receive notice as a stockholder of the Company.

      


    


    
      
         


      

      
        7

        
          

        

      

      
         


      

    


    
      11.           Amendment. Any term
of this Note may be amended with the written consent of the Company and the
holders of not less than sixty-six and two-thirds percent (66 2/3%) of the then outstanding
aggregate principal amount of the Bridge Notes and First Bridge Notes,
consenting together as one group, even without the consent of the Holder hereof.
Any amendment effected in accordance with this Section 11 shall be binding upon
each holder of any Bridge Note, each holder of any First Bridge Note, each
future holder of all such Bridge Notes or First Bridge Notes, and the Company;
provided, however, that no special consideration or inducement may be given to
any such Holder in connection with such consent that is not given ratably to all
such holders, and that such amendment must apply to all such holders ratably in
accordance with the principal amount of their then outstanding Bridge Notes or
First Bridge Notes. Pursuant to the Purchase Agreements and Section 1 of the
Bridge Notes and the First Bridge Notes, the Company may incur additional
indebtedness that ranks in priority junior to, or pari passu with, the Bridge
Notes and the First Bridge Notes without obtaining the consent of any holder of
Bridge Notes or First Bridge Notes. The Company shall promptly give notice to
all holders of outstanding Bridge Notes of any amendment effected in accordance
with this Section 11.

       

    

    *  *  *  *  *

    
      


       

      


    


    
      
         


      

      
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      ISSUED as
of the date first above written.

    

    
      


    

    
      


    

    
      


    

    
      CORMEDIX,
INC.

       

      By:  /s/ John Houghton        

      Name:
John Houghton

      Title:
President and Chief Executive Officer

    

     

    



    
      
         


      

      
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