As filed with the Securities and Exchange Commission on November 25, 2009

Registration No. 333-      

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



 

FORM S-1

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



 

CORMEDIX INC.

(Exact Name of Registrant As Specified in Its Charter)

   
Delaware   2834   20-5894890
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

86 Summit Avenue, Suite 301
Summit, NJ 07901-3647
(908) 517-9500

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)



 

John C. Houghton
President and Chief Executive Officer
CorMedix Inc.
86 Summit Avenue, Suite 301
Summit, NJ 07901-3647
(908) 517-9500

(Name, Address Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)



 

Copies to:

 
Yehuda Markovits, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55 th Street
New York, New York 10022
Telephone: (212) 451-2300
Facsimile: (212) 451-2222
  Mitchell S. Nussbaum, Esq.
Angela M. Dowd, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Telephone: (212) 407-4000
Facsimile: (212) 407-4990


 

Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after the effective date of this registration statement .

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 
Large Accelerated Filer o   Accelerated Filer o
Non-Accelerated Filer o
(Do not check if a smaller reporting company)
  Smaller Reporting Company x
 

 


 
 

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CALCULATION OF REGISTRATION FEE

       
Title of Each Class of Securities to Be Registered   Amount to Be
Registered (1)
  Proposed Maximum
Offering Price per
Unit (2)
  Proposed Maximum
Aggregate Offering
Price (2)
  Amount of
Registration Fee
Units, each consisting of two shares of common stock, $0.001 par value per share, and a warrant           Units     $             $             $          
Common stock included in the Units         shares                   (3)  
Warrants included in the Units           warrants                   (3)  
Shares of common stock underlying the warrants included in the Units           shares     $             $             $          
Underwriters’ Unit purchase option     1 option     $             $               (3)  
Units underlying Underwriters’ Unit purchase option (“Underwriters’ Units”)           Units     $             $             $          
Common stock included in the Underwriters’ Units           shares                   (3)  
Warrants included in the Underwriters’ Units           warrants                   (3)  
Shares of common stock underlying the warrants included in the Underwriters’ Units           shares     $             $             $          
Total                     $ 18,000,000     $ 1,004.40  

(1) Includes       Units, consisting of       shares of common stock and       warrants, which may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) No fee pursuant to Rule 457(g).


 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


 
 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 
PRELIMINARY PROSPECTUS   SUBJECT TO COMPLETION, DATED NOVEMBER 25, 2009

      Units

[GRAPHIC MISSING]



 

This offering is the initial public offering of our securities. We are offering        units, each unit consisting of two shares of our common stock and a warrant to purchase one share of common stock.

Each warrant entitles the holder to purchase one share of our common stock at a price equal to 110% of the offering price of the common stock underlying the units, subject to adjustment as described herein. Each warrant will become exercisable upon the earlier to occur of the expiration of the underwriters’ over allotment option or its exercise in full, and will expire on       , or earlier upon redemption.

We expect the initial public offering price to be between $       and $       per unit. Currently, no public market exists for our units, common stock or warrants. We intend to apply for listing our units, as well as our common stock and warrants underlying the units, on NYSE Amex. The units will begin trading on or promptly after the date of this prospectus. Each of the common stock and warrants will trade separately within the first        trading days following the earlier to occur of the expiration of the underwriters’ over allotment option or its exercise in full.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.



 

   
  Per Unit   Total
Public offering price   $            $         
Underwriting discount and commissions (1)   $            $         
Proceeds to us, before expenses   $            $         

(1) Does not include a corporate finance fee in the amount of 1% of the gross proceeds of the offering.

We granted the underwriters the right to purchase up to       additional units from us at the public offering price, less the underwriting discount, within 45 days from the date of this prospectus to cover over-allotments, if any. Following the closing of this offering, we will grant the underwriters an additional warrant to purchase such number of units equal to 8.0% of the units sold in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

We are offering the units for sale on a firm-commitment basis. The underwriters expect to deliver our securities to investors in this offering on or about       , 2010.

Maxim Group LLC

The date of this prospectus is       , 2010


 
 

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CORMEDIX INC.

TABLE OF CONTENTS

 
  Page
Prospectus Summary     1  
Risk Factors     6  
Special Note Regarding Forward-Looking Statements     20  
Use of Proceeds     21  
Dividend Policy     22  
Capitalization     22  
Dilution     24  
Selected Financial Data     26  
Management’s Discussion and Analysis of Financial Condition and Results of Operations     27  
Business     37  
Management     61  
Executive Compensation     65  
Certain Relationships and Related Transactions     71  
Principal Stockholders     73  
Description of Capital Stock     76  
Shares Eligible for Future Sale     83  
Underwriting     85  
Legal Matters     89  
Experts     89  
Where You Can Find More Information     89  
Index to Consolidated Financial Statements     F-1  


 

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. We are not, and the underwriters are not, making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

Through and including          , 2010 (the 25 th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This obligation is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

For Investors Outside the United States:   Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

We obtained statistical data, market data and other industry data and forecasts used throughout this prospectus from market research, publicly available information and industry publications. While we believe that the statistical data, industry data and forecasts and market research are reliable, we have not independently verified the data, and we do not make any representation as to the accuracy of the information.

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PROSPECTUS SUMMARY

This summary highlights material information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making an investment decision. We urge you to read this entire prospectus carefully, including the “Risk Factors” section and condensed consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision. Unless the context provides otherwise, all references in this prospectus to “CorMedix,” “we,” “us,” “our,” or similar terms, refer to CorMedix Inc.

CorMedix Inc.

General

We are a biopharmaceutical company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, also know as Cardiorenal disease. Specifically, our goal is to treat kidney disease by reducing the commonly associated cardiovascular and metabolic complications — in effect, “Treating the kidney to treat the heart.” To date, we have licensed all of the products in our Cardiorenal pipeline.

We have several proprietary product candidates in clinical development that address large market opportunities, including our most advanced product candidates, CRMX003 (CorMedix Neutrolin®), a liquid designed to prevent central venous catheter infection and clotting initially in dialysis catheters, and CRMX001 (our unique formulation of the drug deferiprone), which targets the prevention of contrast-induced nephropathy in high-risk patients. We intend to submit an Investigational Device Exemption for CRMX003 by mid-2010, which if approved will enable us to start a phase III trial. For CRMX001, we intend to start a small biomarker “proof of concept” study by mid-2010. We expect this study to generate supportive data on the ability of CRMX001 to reduce biomarker evidence of acute kidney injury, which we believe will increase the likelihood of success of the later phase III trial.

Platforms and Products

We have two foundational platforms. Our first foundational platform seeks to utilize liquid and gel formulations of Neutrolin® (CRMX003 and CRMX004, respectively) to prevent the infection and clotting that can occur with the use of central venous catheters and peripherally inserted central catheters. These catheters are frequently used for vascular access in hemodialysis, for cancer chemotherapy, long term antibiotic therapy, total parenteral nutrition and intensive care patients. Our second foundational platform seeks to reduce excess free (labile) iron, which is toxic to cells and tissues, using CRMX001, our unique formulation of the drug deferiprone.

Over the past two years we have made rapid and significant progress, including the following:

we licensed liquid and gel formulations of Neutrolin® (CRMX003 and CRMX004, respectively);
CRMX001 received a Special Protocol Assessment from the Food and Drug Administration (“FDA”) for a single pivotal study as the basis of a New Drug Application for reducing the serious kidney damage and associated morbidity and mortality that can follow X-ray dye injection when used to visualize the blood vessels in the heart (cardiac angiography) in high-risk patients with chronic kidney disease;
we published proof-of-concept studies for the slowing of progression of chronic kidney disease with CRMX001; and
we signed a development agreement for a diagnostic labile iron biomarker test product, CRMX002, that will support CRMX001.

Additionally, CRMX003 and CRMX001 are poised to enter pivotal studies, and both products have the benefit of significant market experience outside of the United States, potentially reducing development risk and defined FDA regulatory pathways.

Business Strategy

We will seek to license other therapeutic product candidates for the treatment of diseases related to cardiac and renal dysfunction while simultaneously developing our existing product pipeline. Our strategy

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reduces risk by licensing product candidates that are currently marketed outside of the United States or have previously been tested in patients, providing an initial indication of the drug’s safety and biological activity in humans before committing capital to the drug’s development. We do not conduct any drug discovery activities and intend to limit our involvement with preclinical research activity.

Our current strategy is to develop CRMX003 and CRMX004 independently and, following the anticipated success of the biomarker proof of concept study for CRMX001, we will seek to raise additional funds or co-develop CRMX001 with a suitable partner to commercialization. The proceeds from this offering would allow us to make significant progress on those value creating projects.

Risks Associated With Our Business

In executing our business strategy, we face significant risks and uncertainties, as more fully described in the section entitled “Risk Factors.” These risks include, among others, the incurrence of substantial and increasing net losses for the foreseeable future because we have no products approved for commercial sale and we have not generated any product revenue to date, and a potential need to obtain substantial additional funding for product development. In addition, to receive regulatory approval for the commercial sale of CRMX003, CRMX001 or any other product candidates, we must conduct adequate and well-controlled clinical trials to demonstrate safety and efficacy in humans.

If the clinical trials of CRMX003 and CRMX001 discussed herein or the clinical trials of other product candidates do not produce results necessary to support regulatory approval, we will be unable to commercialize these products.

Company Information

We were organized as a Delaware corporation on July 28, 2006 under the name “Picton Holding Company, Inc.” and we changed our corporate name to “CorMedix Inc.” on January 18, 2007. Our principal executive offices are located at 86 Summit Avenue, Suite 301, Summit, NJ 07901-3647. Our telephone number is (908) 517-9500. Our website address is www.cormedix.com . The information on, or accessible through, our website is not part of this prospectus.

We have a license to use the following trademarks:

In the United States and the European Union — Neutrolin®
In Japan — CLS®

We have filed applications for the following trademarks:

In the United States —  Transforming Medicine at the Cardiorenal Crossroads TM and Therapeutics at the Cardiorenal Crossroads TM .

This prospectus also contains trademarks and tradenames of other companies.

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The Offering

Securities offered by us    
               units, each unit consisting of two shares of common stock and a warrant to purchase one share of common stock (a “Unit”).
Common stock to be outstanding after this offering    
             shares.
Warrants to be outstanding after this offering    
    8% Noteholder Warrants, Consultant Warrants, Warrants issued as a part of the Units, and Underwriters’ Warrant. See “Description of Capital Stock” on page 76 for more information.
Terms of warrants issued as a part of the Units    
   

•  

Exercise price — $    , which is equal to 110% of the offering price of the common stock underlying the units.

   

•  

Exercisability — each warrant is exercisable for one share of common stock, subject to adjustment as described herein.

   

•  

Exercise period —         .

Redemption of warrants issued as a part of the Units    
    We may call the warrants issued as a part of the Units for redemption as follows: (i) at a price of $0.01 for each warrant at any time while the warrants are exercisable, so long as a registration statement relating to the common stock issuable upon exercise of the warrants is effective and current; (ii) upon not less than      days prior written notice of redemption to each warrant holder; and (iii) if, and only if, the reported last sale price of the common stock equals or exceeds $     per share for any 20 trading days within a 30 consecutive trading day period ending on the      business day prior to the notice of redemption to warrant holders.
    If the foregoing conditions are satisfied and we call the warrants for redemption, each warrant holder will then be entitled to exercise his or her warrant prior to the date scheduled for redemption. However, there can be no assurance that the price of the common stock will exceed the call price or the warrant exercise price after the redemption call is made.
Over-allotment option    
    We granted the underwriters the right to purchase up to          additional Units from us at the public offering price, less the underwriting discount, within 45 days from the date of this prospectus to cover over-allotments, if any.
Use of proceeds    
    We estimate that our net proceeds from this offering, without exercise of the over-allotment option, will be approximately $       million. We intend to use these proceeds as follows: (i) approximately $        for CRMX003 development; (ii) approximately $         for CRMX001 development; and (iii) the balance to fund

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    working capital and other general corporate purposes. See “Use of Proceeds” on page 21 for more information.
Market for our common stock    
    We intend to apply for listing the Units, as well as our common stock and warrants underlying the Units, on NYSE Amex.
Separation of common stock and warrants issued as a part of the Units.    
    The Units will begin trading on or promptly after the date of this prospectus. Each of the common stock and warrants will trade separately within the first      trading days following the earlier to occur of the expiration of the underwriters’ over allotment option or its exercise in full.
Risk Factors    
    Investing in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 6 .

The number of shares of common stock that will be outstanding after this offering set forth above is based on            shares of common stock outstanding as of                after giving effect to a 1 for        reverse stock split of our common stock, and excludes the following:

185,000 shares of common stock issuable upon exercise of outstanding options at a weighted average exercise price of $1.05 per share;
740,000 shares of common stock reserved for issuance under our stock incentive plan;
140,000 shares of common stock issuable upon exercise of outstanding warrants other than the First Bridge Warrants and the First Bridge Placement Agent Warrants at a weighted average exercise price of $1.36 per share, all of which are currently exercisable; and
shares of common stock issuable upon exercise of the First Bridge Warrants and the First Bridge Placement Agent Warrants.

Unless specifically stated otherwise, all information in this prospectus assumes the following:

the automatic conversion of all of our outstanding shares of Non-Voting Subordinated Class A Common Stock (“Non-Voting Common Stock”) into shares of common stock on a one-for-one basis upon the completion of this offering;
the automatic conversion of all of our outstanding convertible notes into an aggregate of          Units and          shares of common stock upon the completion of this offering;
the cancellation of all First Bridge Warrants, Second Bridge Warrants and First Bridge Placement Agent Warrants prior to the completion of this offering;
the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated by-laws effective upon the completion of this offering;
no exercise of warrants or options outstanding on the date of this prospectus, except as specifically set forth herein; and
a 1 for        reverse stock split of our common stock to be effected prior to the completion of this offering.

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SUMMARY FINANCIAL DATA

The following statement of operations data for 2007 and 2008, are derived from our audited financial statements, which are included elsewhere in this document. The statement of operations data for the nine months ended September 30, 2008 and 2009, along with the period from July 28, 2006 (Inception) to September 30, 2009, and the balance sheet data as of September 30, 2009, have been derived from our unaudited financial statements, which are also included elsewhere in this document. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of our financial position and results of operations for these periods. The following selected financial data should be read together with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The summary financial data in this section is not intended to replace our financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.

Statement of Operations Data

         
  Year Ended
December 31,
2007
  Year Ended
December 31,
2008
  Nine Months
Ended
September 30,
2008
  Nine Months
Ended
September 30,
2009
  Period from
July 28, 2006
(Inception) to
September 30,
2009
               (Unaudited)   (Unaudited)   (Unaudited)
Operating expenses:
                                            
Research and development   $ 3,820,429     $ 3,083,002     $ 2,508,358     $ 994,195     $ 8,650,106  
General and administrative     1,667,056       1,732,602       1,286,567       1,090,386       4,699,733  
Loss from operations     (5,487,485 )       (4,815,604 )       (3,794,925 )       (2,084,581 )       (13,349,839 )  
Interest income     60,830       25,903       25,511       2,104       88,837  
Interest expense, including amortization of deferred financing costs and debt discounts     (1,810,871 )       (4,207,044 )       (3,648,417 )       (1,498,510 )       (7,529,573 )  
Net loss   $ (7,237,526 )     $ (8,996,745 )     $ (7,417,831 )     $ (3,580,987 )     $ (20,790,575 )  
Basic and diluted net loss per common share   $ (1.51 )     $ (1.75 )     $ (1.45 )     $ (0.70 )        
Weighted average common shares outstanding – basic and diluted     4,778,291       5,147,700       5,111,134       5,147,700        

Balance Sheet Data

     
  September 30, 2009
     Actual   Pro Forma   Pro Forma As Adjusted
       (Unaudited)       (Unaudited)       (Unaudited)  
Cash   $ 24,093     $        $     
Total Assets     123,922                    
Total Liabilities     15,643,728                    
Deficit Accumulated During the Development Stage     (20,790,575 )                    
Total Stockholders’ Equity (Deficiency)     (15,519,806 )                    

The September 30, 2009 unaudited pro forma balance sheet data reflects (i) the automatic conversion of all of our outstanding convertible notes into an aggregate of      Units and          shares of common stock upon the completion of this offering, (ii) the automatic conversion of all of our outstanding shares of Non-Voting Common Stock into shares of common stock on a one-for-one basis upon the completion of this offering and (iii) our issuance of $2,619,973 aggregate principal amount of 8% Notes in October and November 2009. The September 30, 2009 unaudited pro forma as adjusted balance sheet data further reflects our sale of      Units in this offering at an assumed initial public offering price of $      per Unit (the mid-point of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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RISK FACTORS

Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus (including our financial statements and the related notes appearing at the end of this prospectus), before deciding whether to invest in our securities. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. The occurrence of any of the following risks could harm our business, financial condition, results of operations or growth prospects. In that case, the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and a history of escalating operating losses, and expect to incur significant additional operating losses.

We were established in July 2006 and have only a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have generated operating losses in all periods since we began operations and, to date, have incurred substantial net losses. As of September 30, 2009, we had a deficit accumulated during the development stage of approximately $21 million. We expect to incur substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, and clinical trial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability will depend on, among other things, the following: successful completion of the development of our product candidates; obtaining necessary regulatory approvals from the FDA and international regulatory agencies; establishing manufacturing, sales, and marketing arrangements, either alone or with third parties; and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

Our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern.

In their report accompanying our audited financial statements, our independent registered public accounting firm expressed substantial doubt as to our ability to continue as a going concern. A “going concern” opinion could impair our ability to finance our operations through the sale of debt or equity securities. Our ability to continue as a going concern will depend, in large part, on our ability to generate positive cash flow from operations and obtain additional financing if necessary, neither of which is certain. If we are unable to achieve these goals, our business would be jeopardized and we may not be able to continue operations.

We are not currently profitable and may never become profitable.

We have a history of losses and expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain profitability. Even if we succeed in developing and commercializing one or more product candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we continue to undertake development of our product candidates, undertake clinical trials of our product candidates, seek regulatory approvals for product candidates, implement additional internal systems and infrastructure, and hire additional personnel.

We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability would negatively impact the value of our securities.

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We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Any additional funds that we obtain may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights.

To date, we have no approved product on the market and have generated no product revenues. Unless and until we receive approval from the FDA and other regulatory authorities for our product candidates, we cannot sell our products and will not have product revenues. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from the net proceeds of this offering, cash on hand, licensing fees and grants.

We believe that the net proceeds from this offering and existing cash will be sufficient to enable us to fund our projected operating requirements for at least two years. However, we may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate, and we may decide to raise additional funds even before we need them if the conditions for raising capital are favorable.

We may seek to sell additional equity or debt securities, obtain a bank credit facility, or enter into a corporate collaboration or licensing arrangement. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations. Raising additional funds through collaboration or licensing arrangements with third parties may require us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders.

Our independent registered public accounting firm has identified material weaknesses in our financial reporting process.

Our independent registered public accounting firm has identified material weaknesses in our financial reporting process with respect to lack of segregation of duties and lack of independent review over financial reporting. Our independent registered public accounting firm also identified numerous errors in the accounting for non-routine, complex transactions during their audit of our financial statements. Our failure to successfully implement our plans to remediate these material weaknesses could cause us to fail to meet our reporting obligations, to produce timely and reliable financial information, and to effectively prevent fraud. Additionally, such failure could cause investors to lose confidence in our reported financial information, which could have a negative impact on our financial condition and stock price.

Risks Related to the Development and Commercialization of Our Product Candidates

Our product candidates are still in development.

We are a biopharmaceutical company focused on the development of product candidates that are in various stages of development. Our product development methods may not lead to commercially viable products for any of several reasons. For example, our product candidates may fail to be proven safe and effective in clinical trials, or we may have inadequate financial or other resources to pursue development efforts for our product candidates. Our product candidates will require significant additional development, clinical trials, regulatory clearances and investment by us or our collaborators before they can be commercialized.

Successful development of our products is uncertain.

Our development of current and future product candidates is subject to the risks of failure and delay inherent in the development of new pharmaceutical products, including but not limited to the following:

delays in product development, clinical testing, or manufacturing;
unplanned expenditures in product development, clinical testing, or manufacturing;
failure to receive regulatory approvals;
emergence of superior or equivalent products;

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inability to manufacture our product candidates on a commercial scale on our own, or in collaboration with third parties; and
failure to achieve market acceptance.

Because of these risks, our development efforts may not result in any commercially viable products. If a significant portion of these development efforts are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercialized successfully, our business, financial condition, and results of operations may be materially harmed.

Clinical trials required for our product candidates are expensive and time-consuming, and their outcome is uncertain.

In order to obtain FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans. To meet these requirements, we must conduct “adequate and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-consuming, and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of the product candidate, and often can be several years or more per trial. Delays associated with products for which we are directly conducting clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of clinical trials may be delayed by many factors, including, for example:

inability to manufacture sufficient quantities of qualified materials under the FDA’s current Good Manufacturing Practices requirements, referred to herein as cGMP, for use in clinical trials;
slower than expected rates of patient recruitment;
failure to recruit a sufficient number of patients;
modification of clinical trial protocols;
changes in regulatory requirements for clinical trials;
lack of effectiveness during clinical trials;
emergence of unforeseen safety issues;
delays, suspension, or termination of clinical trials due to the institutional review board responsible for overseeing the study at a particular study site; and
government or regulatory delays or “clinical holds” requiring suspension or termination of the trials.

The results from early clinical trials are not necessarily predictive of results to be obtained in later clinical trials. Accordingly, even if we obtain positive results from early clinical trials, we may not achieve the same success in later clinical trials.

Our clinical trials may be conducted in patients with serious or life-threatening diseases for whom conventional treatments have been unsuccessful or for whom no conventional treatment exists, and in some cases, our product is expected to be used in combination with approved therapies that themselves have significant adverse event profiles. During the course of treatment, these patients could suffer adverse medical events or die for reasons that may or may not be related to our products. We cannot ensure that safety issues will not arise with respect to our products in clinical development.

Clinical trials may not demonstrate statistically significant safety and effectiveness to obtain the requisite regulatory approvals for product candidates. The failure of clinical trials to demonstrate safety and effectiveness for the desired indications could harm the development of our product candidates. Such a failure could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical trials would delay the filing of our New Drug Applications or Premarket Approvals with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues. Any change in, or termination of, our clinical trials could materially harm our business, financial condition, and results of operations.

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We do not have, and may never obtain, the regulatory approvals we need to market our product candidates.

To date, we have not applied for or received the regulatory approvals required for the commercial sale of any of our products in the United States or in any foreign jurisdiction. None of our product candidates has been determined to be safe and effective, and we have not submitted a New Drug Application or Premarket Approval to the FDA or an equivalent application to any foreign regulatory authorities for any of our product candidates.

It is possible that none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory approvals, may adversely affect the successful commercialization of any drugs or biologics that we or our partners develop, impose additional costs on us or our collaborators, diminish any competitive advantages that we or our partners may attain, and/or adversely affect our receipt of revenues or royalties.

Even if approved, our products will be subject to extensive post-approval regulation.

Once a product is approved, numerous post-approval requirements apply. Depending on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval.

The successful commercialization of our products will depend on obtaining coverage and reimbursement for use of these products from third-party payors.

Sales of pharmaceutical products largely depend on the reimbursement of patients’ medical expenses by government health care programs and private health insurers. Without the financial support of the government or third-party payors, the market for our products will be limited. These third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services. Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our products or enable our collaborators to sell them at profitable prices.

Physicians and patients may not accept and use our products.

Even if the FDA approves one or more of our product candidates, physicians and patients may not accept and use it. Acceptance and use of our products will depend upon a number of factors including the following:

perceptions by members of the health care community, including physicians, about the safety and effectiveness of our drug or device product;
cost-effectiveness of our product relative to competing products;
availability of reimbursement for our product from government or other healthcare payers; and
effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.

Because we expect sales of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future, the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.

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Risks Related to Our Business and Industry

Competition and technological change may make our product candidates and technologies less attractive or obsolete.

We compete with established pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing and that have greater financial and other resources. Other companies may succeed in developing products earlier than we do, obtaining FDA approval for products more rapidly, or developing products that are more effective than our product candidates. Research and development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments or cures superior to any therapy we develop. We face competition from companies that internally develop competing technology or acquire competing technology from universities and other research institutions. As these companies develop their technologies, they may develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result in a decrease in the revenue we would be able to derive from the sale of any products.

There can be no assurance that any of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore, if our competitors’ products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even if our products are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that physicians and patients will accept our product(s) as a treatment of choice.

Furthermore, the pharmaceutical industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us from forecasting revenues or income with certainty or even confidence.

In certain cases, we may rely on a single supplier for a particular manufacturing material, and any interruption in or termination of service by such supplier could negatively affect our operations.

We expect to rely on third-party suppliers for the materials used in the manufacturing of our product candidates. Some of these materials may be available from only one supplier or vendor. Any interruption in or termination of service by such sole source suppliers could result in a delay or interruption in manufacturing until we locate an alternative source of supply. Any delay or interruption in manufacturing operations (or failure to locate a suitable replacement for such suppliers) could materially adversely affect our business, prospects, or results of operations.

We face the risk of product liability claims and may not be able to obtain insurance.

Our business exposes us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our collaborators’ drugs harms people, we may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, health care providers, pharmaceutical companies or others selling our products. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators.

We currently do not carry clinical trial insurance or product liability insurance. We intend to obtain such insurance in the future. We cannot predict all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we hold may not be adequate to cover all liabilities we might incur. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential product liability claims, we may be exposed to significant liabilities, which may materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by our or our collaborators’ products and do not have sufficient insurance coverage, our liability could exceed our total assets and our ability to pay the liability. A product liability claim or series of claims brought against us would decrease our cash and could reduce our value or marketability.

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We may be exposed to liability claims associated with the use of hazardous materials and chemicals.

Our research, development and manufacturing activities and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and results of operations.

If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in compensation costs, our business may materially suffer.

We are highly dependent on the principal members of our management and scientific staff. Any employment agreement we enter into will not ensure the retention of the employee who is a party to the agreement. In addition, we have only limited ability to prevent former employees from competing with us. Furthermore, our future success will also depend in part on the continued service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Moreover, our work force is located in the New York/New Jersey metropolitan area, where competition for personnel with the scientific and technical skills that we seek is extremely high and is likely to remain high. Because of this competition, our compensation costs may increase significantly.

If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.

Over time, we will need to hire additional qualified personnel with expertise in clinical testing, clinical research and testing, government regulation, formulation and manufacturing, and sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining such qualified personnel will be critical to our success.

We will need to hire accounting personnel to perform the expanded fiscal and financial management responsibilities associated with running a public company.

We currently use third party personnel to meet our internal accounting needs. In order to meet the heightened accounting and budgeting needs associated with operating a public company, it will be necessary to hire full-time accounting personnel, including a Chief Financial Officer. The hiring of a Chief Financial Officer is crucial to ensure the coordination and appropriate supervision of all financial and fiscal management aspects of our operations. The ability to retain a qualified Chief Financial Officer, and other appropriate accounting personnel as needed, will be essential to our success.

We may not successfully manage our growth.

Our success will depend upon the expansion of our operations and the effective management of our growth, which will place a significant strain on our management and our administrative, operational and financial resources. To manage this growth, we must expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel. If we are unable to manage our growth effectively, our business may be materially harmed.

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Risks Related to Our Intellectual Property

If we and our licensors do not obtain protection for and successfully defend our respective intellectual property rights, our competitors may be able to take advantage of our research and development efforts to develop competing products.

Our commercial success will depend in part on obtaining further patent protection for our products and other technologies and successfully defending any patents that we currently have or will obtain against third-party challenges. We are currently seeking further patent protection for numerous compounds and methods of treating diseases. However, the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products by obtaining and defending patents. These risks and uncertainties include those stated below.

Patents that may be issued or licensed may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage.
Our competitors, many of which have substantially greater resources than we have and many of which have made significant investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential products either in the United States or in international markets.
There may be significant pressure on the United States government and other international governmental bodies to limit the scope of patent protection both inside and outside the United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns.
Countries other than the United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products.

In addition, the United States Patent and Trademark Office (the “PTO”) and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.

The patent applications in our patent portfolio are exclusively licensed to us. To support our patent strategy, we have engaged in a review of patentability and freedom to operate issues, including performing certain searches. We may not be aware, however, of all patents, published applications or published literature that may affect our business either by blocking our ability to commercialize our product candidates, preventing the patentability of our product candidates to us or our licensors, or covering the same or similar technologies that may invalidate our patents, limit the scope of our future patent claims or adversely affect our ability to market our product candidates.

In addition to patents, we also rely on trade secrets and proprietary know-how. Although we take measures to protect this information by entering into confidentiality and inventions agreements with our employees, scientific advisors, consultants, and collaborators, we cannot provide any assurances that these agreements will not be breached, that we will be able to protect ourselves from the harmful effects of disclosure if they are breached, or that our trade secrets will not otherwise become known or be independently discovered by competitors. If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced.

Patent protection and other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk that such protections will prove inadequate.

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Intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights.

The biotechnology and pharmaceutical industries have been characterized by extensive litigation regarding patents and other intellectual property rights, and companies have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement claims or litigation arising out of patents and pending applications of our competitors, or additional interference proceedings declared by the PTO to determine the priority of inventions. The defense and prosecution of intellectual property suits, PTO proceedings, and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability, scope, and validity of the proprietary rights of others. An adverse determination in litigation or interference proceedings to which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or restrict or prevent us from selling our products in certain markets. Although patent and intellectual property disputes might be settled through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include our paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms or at all.

If we infringe the rights of third parties we could be prevented from selling products and forced to pay damages and defend against litigation.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may have to do one or more of the following:

obtain licenses, which may not be available on commercially reasonable terms, if at all;
abandon an infringing product candidate;
redesign our products or processes to avoid infringement;
stop using the subject matter claimed in the patents held by others;
pay damages; or
defend litigation or administrative proceedings, which may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.

Risks Related to Our Dependence on Third Parties

If we are not able to develop collaborative marketing relationships with licensees or partners, or create an effective sales, marketing, and distribution capability, we may be unable to market our products successfully.

Our business strategy may rely on out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships, that such relationships, if established, will be successful, or that we will be successful in gaining market acceptance for our products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will have to establish our own in-house capabilities. We currently have no sales, marketing, or distribution infrastructure. To market any of our products directly, we would need to develop a marketing, sales, and distribution force that has both technical expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales, or distribution capabilities. If we are unable to, or

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choose not to establish these capabilities, or if the capabilities we establish are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships with third parties.

If we or our collaborators are unable to manufacture our products in sufficient quantities or are unable to obtain regulatory approvals for a manufacturing facility, we may be unable to meet demand for our products and we may lose potential revenues.

Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture a sufficient supply of our product candidates. All of our manufacturing processes currently are, and we expect them to continue to be, outsourced to third parties. If, for any reason, we become unable to rely on our current sources for the manufacture of our product candidates, either for clinical trials or, at some future date, for commercial quantities, then we would need to identify and contract with additional or replacement third-party manufacturers to manufacture compounds for pre-clinical, clinical, and commercial purposes. We may not be successful in identifying such additional or replacement third-party manufacturers, or in negotiating acceptable terms with any that we do identify. Such third-party manufacturers must receive FDA approval before they can produce clinical material or commercial product, and any that are identified may not receive such approval. We may be in competition with other companies for access to these manufacturers’ facilities and may be subject to delays in manufacturing if the manufacturers give other clients higher priority than they give to us. If we are unable to secure and maintain third-party manufacturing capacity, the development and sales of our products and our financial performance may be materially affected.

Before we can begin to commercially manufacture our product candidates, we must obtain regulatory approval of the manufacturing facility and process. Manufacturing of drugs for clinical and commercial purposes must comply with current Good Manufacturing Practices (referred to herein as “cGMPs”), and applicable non-U.S. regulatory requirements. The cGMP requirements govern quality control and documentation policies and procedures. Complying with cGMP and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition, and results of operations may be materially adversely affected.

Corporate and academic collaborators may take actions that delay, prevent, or undermine the success of our products.

Our operating and financial strategy for the development, clinical testing, manufacture, and commercialization of product candidates is heavily dependent on our entering into collaborations with corporations, academic institutions, licensors, licensees, and other parties. Our current strategy assumes that we will successfully establish these collaborations or similar relationships. However, there can be no assurance that we will be successful establishing such collaborations. Some of our existing collaborations are, and future collaborations may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms, or at all. The activities of any collaborator will not be within our control and may not be within our power to influence. There can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue or profits from such collaborations, or that any collaborator will not compete with us. If any collaboration is not pursued, we may require substantially greater capital to undertake development and marketing of our proposed products and may not be able to develop and market such products effectively, if at all. In addition, a lack of development and marketing collaborations may lead to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.

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Data provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.

We rely on third-party vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical trials, and business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and results of operations could be materially adversely affected.

Risks Related to this Offering and Ownership of Our Securities

We are currently controlled by our executive officers, directors and principal stockholders, and after this offering, our executive officers, directors and principal stockholders will have significant influence regarding all matters submitted to our stockholders for approval.

Our directors, executive officers and 5% or greater stockholders currently beneficially own approximately 66.3% of our voting capital stock. When this offering is completed, our directors, executive officers and 5% or greater stockholders will, in the aggregate, beneficially own shares representing     % of our voting capital stock, assuming such persons do not purchase any Units in this offering. As a result, if these stockholders were to choose to act together, they would be able to exercise significant influence with respect to all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, will exercise significant influence with respect to the election of directors and approval of any merger, consolidation, sale of all or substantially all of our assets or other business combination or reorganization. This concentration of voting power could delay or prevent an acquisition of us on terms that other stockholders may desire. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders, and they may act in a manner that advances their best interests and not necessarily those of other stockholders, and might affect the prevailing market price for our securities.

There are certain interlocking relationships among us and certain affiliates of Paramount BioCapital, Inc., which may present potential conflicts of interest.

Lindsay A. Rosenwald, M.D. is the Chairman, Chief Executive Officer and sole stockholder of Paramount BioCapital, Inc. Dr. Rosenwald currently beneficially owns approximately 17.5% of our voting capital stock. In addition, certain trusts established for the benefit of Dr. Rosenwald’s children currently own less than one percent of our voting capital stock, and certain trusts established for the benefit of Dr. Rosenwald and his family currently own approximately 12.4% of our voting capital stock. Certain other employees of Paramount BioCapital, Inc. or its affiliates are also current stockholders and/or directors of the Company. Paramount BioSciences, LLC, of which Dr. Rosenwald is the sole member, and certain trusts established for the benefit of Dr. Rosenwald’s children also have loaned us amounts from time to time pursuant to the PBS Note and Family Trusts Note (each as defined below). As of September 30, 2009, approximately $601,000, including accrued and unpaid interest, remained outstanding under such notes. For more information regarding these relationships and other relationships between us and related parties, see “Certain Relationships and Related Transactions.”

Generally, Delaware corporate law, under which we are governed, requires that any transactions between us and any of our affiliates be on terms that, when taken as a whole, are substantially as favorable to us as those then reasonably obtainable from a person who is not an affiliate in an arms-length transaction. We believe that the terms of the agreements we have entered into with our affiliates satisfy the requirements of Delaware law, but in the event that one or more parties challenges the fairness of such terms we could have to expend substantial resources in resolving the challenge and we can make no guarantees as to the result. Furthermore, none of our affiliates, Paramount BioSciences, LLC or Dr. Rosenwald is obligated pursuant to any agreement or understanding with us to make any additional products or technologies available to us, nor can there be any assurance, and we do not expect and purchasers of the Units should not expect, that any biomedical or pharmaceutical product or technology identified by such affiliates, Paramount BioSciences, LLC or Dr. Rosenwald in the future will be made available to us. In addition, certain of our current officers and directors or certain of any officers or directors hereafter appointed may from time to time serve as officers or directors of other biopharmaceutical or biotechnology companies. There can be no assurance that such other companies will not have interests in conflict with our own.

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Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and amended and restated by-laws that will become effective upon the completion of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors. Because our Board of Directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware (referred to herein as the “DGCL”), which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. We have not opted out of the restrictions under Section 203.

If you purchase securities in this offering, you will suffer immediate dilution of your investment.

Assuming our sale of      Units at an assumed public offering price of $     per Unit (which is the mid-point of the estimated initial offering price range set forth on the cover of this prospectus) and after deducting the underwriting discount and commissions and estimated offering expenses, our as adjusted net tangible book value as of      would be approximately $     million, or $     per share of common stock outstanding. This represents an immediate increase in net tangible book value of $     per share of common stock to our existing stockholders and an immediate dilution of $     per share of common stock to the new investors purchasing Units in this offering. Purchasers of Units in this offering will have contributed approximately     % of the aggregate price paid by all owners of our common stock but will own only approximately     % of our common stock outstanding after this offering.

To the extent outstanding options or warrants are exercised, you will incur further dilution.

You will also incur dilution as a result of the conversion of our senior convertible notes, the Paramount Notes and our Non-Voting Common Stock upon the completion of this offering. Assuming an offering price of $       per Unit, the 12% Notes and the Paramount Notes will automatically convert into        Units and the 8% Notes will automatically convert into        shares of common stock. In addition, all shares of Non-Voting Common Stock will automatically convert into shares of common stock, on a one-for-one basis, upon the completion of this offering. See “Description of Capital Stock” on page 76 for more information regarding these securities.

An active trading market for our common stock and other securities may not develop.

This is our initial public offering of equity securities and prior to this offering, there has been no public market for our common stock or other securities.

The initial public offering price for the Units sold in this offering will be determined through negotiations with the underwriters. We intend to apply for listing our Units, as well as our common stock and warrants issued as a part of the Units, on NYSE Amex. The Units will begin trading on or promptly after the date of this prospectus. Each of the common stock and warrants will trade separately within the first      trading days following the earlier to occur of the expiration of the underwriters’ over allotment option or its exercise in full.

An active trading market for our common stock and other securities may never develop or be sustained. If an active market for our common stock and other securities does not develop, it may be difficult for you to sell the securities you purchase in this offering without depressing the market price for such securities.

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If the prices of our securities are volatile, purchasers of our securities could incur substantial losses.

The prices of our securities are likely to be volatile. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their securities at or above the price paid in this initial public offering. The market prices of our securities may be influenced by many factors, including but not limited to the following:

results of clinical trials of our product candidates or those of our competitors;
our entry into or the loss of a significant collaboration;
regulatory or legal developments in the United States and other countries, including changes in the healthcare payment systems;
variations in our financial results or those of companies that are perceived to be similar to us;
market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts’ reports or recommendations;
general economic, industry and market conditions;
developments or disputes concerning patents or other proprietary rights;
future sales or anticipated sales of our securities by us or our stockholders; and
any other factors described in this “Risk Factors” section.

For these reasons and others, you should consider an investment in our securities as risky and invest only if you can withstand a significant loss and wide fluctuations in the value of your investment.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our securities. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our securities to decline and delay the development of our product candidates. Pending the application of these funds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

We intend to use the proceeds from this offering as follows: (i) approximately $       for CRMX003 development; (ii) approximately $       for CRMX001 development; and (iii) the balance to fund working capital and other general corporate purposes, which may include the acquisition or licensing of complementary technologies, products or businesses. Because of the number and variability of factors that will determine our use of the proceeds from this offering, their ultimate use may vary substantially from their currently intended use. For a further description of our intended use of the proceeds of this offering, see the “Use of Proceeds” section of this prospectus.

A significant number of our shares of our common stock will become eligible for sale upon the completion of this offering, and a significant number of additional shares of our common stock may become eligible for sale at a later date, and their sale could depress the market price of our common stock.

Each Unit issued in this offering will consist of two shares of common stock and a warrant to purchase one share of common stock. We will also issue a warrant to purchase        Units to the underwriters that, if executed, would result in the issuance of an additional        shares of common stock and warrants to purchase an additional        shares of common stock. Additionally, following the completion of this offering, we will have outstanding other warrants that, if executed, would result in the issuance of an additional 140,000 shares of common stock.

As of September 30, 2009, we had outstanding $13,764,911 aggregate principal amount and interest of 12% Notes and $601,194 aggregate principal amount and interest outstanding under the Paramount Notes, all

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of which will automatically convert into Units upon the completion of this offering. In addition, in October and November 2009, we issued $2,619,973 aggregate principal amount of 8% Notes (as defined below), all of which, together with accrued and unpaid interest thereon, will automatically convert into shares of common stock upon the completion of this offering. Assuming an offering price of $       per Unit, the 12% Notes and the Paramount Notes will automatically convert into        Units and the 8% Notes will automatically convert into        shares of common stock. In addition, all shares of Non-Voting Common Stock will automatically convert into shares of common stock on a one-for-one basis upon the completion of this offering.

We have issued options to purchase 185,000 shares of our common stock to our officers, directors and employees under our 2006 Stock Incentive Plan. Options to purchase 78,333 of such shares are currently exercisable or will be exercisable within 60 days of the date of this prospectus.

The sale or even the possibility of sale of the shares of common stock described above could substantially reduce the market price for our common stock or our ability to obtain future financing.

Future sales and issuances of our equity securities or rights to purchase our equity securities, including pursuant to equity incentive plans, would result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be further diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to existing stockholders.

Pursuant to our 2006 Stock Incentive Plan, our Board of Directors is authorized to award up to a total of 925,000 shares of common stock or options to purchase shares of common stock to our officers, directors and employees. As of November 24, 2009, options to purchase 185,000 shares of common stock had been issued under the 2006 Stock Incentive Plan. Stockholders will experience dilution in the event that additional shares of common stock are issued under the 2006 Stock Incentive Plan, or options previously issued or to be issued under the 2006 Stock Incentive Plan are exercised.

If our existing securityholders exercise their registration rights, they may substantially reduce the market price of our common stock. The existence of these rights may make it more difficult for us to effect future offerings.

Following the completion of this offering, holders of        Units and holders of        shares of common stock will be entitled to certain “demand” and “piggyback” registration rights. Additionally, a warrant to purchase      Units that we will issue to the underwriters as partial compensation for their services as underwriters will provide for certain “demand” and “piggyback” registration rights at our expense with respect to the underlying shares of common stock during the five year period commencing six months after the effective date. See “Description of Capital Stock” on page 76 for more information on these registration rights.

If these holders exercise their registration rights with respect to all of their securities, then there would be up to an additional        shares of common stock eligible for trading in the public market. The presence of this additional number of shares of common stock eligible for trading in the public market may substantially reduce the market price of our common stock. In addition, the existence of these holders’ piggyback registration rights may make it more difficult for us to effect future public offerings and may reduce the amount of capital that we are able to raise for our own account in these offerings.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission (the “SEC”) and NYSE Amex, have imposed various new requirements

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on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. We expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage.

The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we will be required to perform system and process evaluation and testing of our internal control over financial reporting to allow management and possibly our independent registered public accounting firm to report, commencing in our annual report on Form 10-K for the year ending December 31, 2011, on the effectiveness of our internal control over financial reporting. To date, our independent registered public accounting firm has identified a number of deficiencies in our internal controls over financial reporting that it deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial costs and expend significant management efforts. We currently do not have an internal accounting group, and we will need to hire additional accounting and financial staff. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner or if we are not able to remediate the material weaknesses identified by our independent registered public accounting firm, the market price of our stock could decline and we could be subject to sanctions or investigations by NYSE Amex, the SEC or other regulatory authorities, which would require additional financial and management resources.

There is no guarantee that our securities will be listed on NYSE Amex.

We will apply to have our Units, common stock and warrants listed on NYSE Amex. After the completion of this offering, we believe that we will satisfy the listing requirements and expect that our Units, common stock and warrants will be listed on NYSE Amex. Such listing, however, is not guaranteed. If the application is not approved, we will seek to have our Units, common stock and warrants quoted on the OTC Bulletin Board. Even if such listing is approved, there can be no assurance any broker will be interested in trading our securities. Therefore, it may be difficult to sell any securities you purchase in this offering if you desire or need to sell them. Our lead underwriter, Maxim Group LLC (“Maxim”), is not obligated to make a market in our securities, and even after making a market, can discontinue market making at any time without notice. Neither we nor the underwriters can provide any assurance that an active and liquid trading market in our securities will develop or, if developed, that the market will continue.

If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price of our common stock and other securities and their trading volume could decline.

The trading market for our common stock and other securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us the trading price for our common stock and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and other securities and their trading volume to decline.

We have never paid dividends and do not expect to pay dividends for the foreseeable future.

We have never paid dividends on our capital stock and do not anticipate paying any dividends for the foreseeable future. Accordingly, to the extent the securities you purchase in this offering convert into equity securities, you should not expect to receive dividends on such equity securities.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, including statements regarding the progress and timing of clinical trials, the safety and efficacy of our product candidates, the goals of our development activities, estimates of the potential markets for our product candidates, estimates of the capacity of manufacturing and other facilities to support our products, our expected future revenues, operations and expenditures and projected cash needs. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among others:

our ability to obtain additional funding to develop our product candidates;
the need to obtain regulatory approval of our product candidates;
the success of our clinical trials through all phases of clinical development;
any delays in regulatory review and approval of product candidates in clinical development;
our ability to commercialize our products;
market acceptance of our product candidates;
our ability to establish an effective sales and marketing infrastructure;
competition from existing products or new products that may emerge;
regulatory difficulties relating to products that have already received regulatory approval;
potential product liability claims;
our dependency on third-party manufacturers to supply or manufacture our products;
our ability to establish or maintain collaborations, licensing or other arrangements;
our ability and third parties’ abilities to protect intellectual property rights;
compliance with obligations under intellectual property licenses with third parties;
our ability to adequately support future growth; and
our ability to attract and retain key personnel to manage our business effectively.

Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” or the negative of those terms, and similar expressions and comparable terminology intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus. The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended.

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of the Units we are offering will be approximately $     million, or $     million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $     per Unit, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes for this offering are to fund our development activities, including clinical trials for our most advanced product candidates, CRMX003 and CRMX001, to increase our working capital, to create a public market for our common stock, to increase our ability to access the capital markets in the future, for general corporate purposes and to provide liquidity for our existing stockholders.

We anticipate using the net proceeds from this offering as follows:

approximately $          for CRMX003 development to include the following:
º development of the final formulation for clinical trial use;
º FDA regulatory filing costs;
º phase III clinical development costs;
º patent maintenance fees;
approximately $           for CRMX001 development to include the following:
º FDA regulatory costs;
º clinical development costs associated with the biomarker proof of concept study; and
the balance to fund working capital and other general corporate purposes, which may include the acquisition or licensing of complementary technologies, products or businesses.

The expected use of net proceeds of this offering represents our intentions based on our current plans and business conditions. The amount and timing of our actual expenditures will depend on numerous factors, including the progress of our clinical trials and any unforeseen cash needs. As a result, we will retain broad discretion in the allocation and use of the remaining net proceeds of this offering. We have no current plans, agreements or commitments for any material acquisitions or licenses of any technologies, products or businesses.

We expect that the net proceeds from this offering, along with our existing cash resources, will be sufficient to enable us to fully develop CRMX003 through the phase III trial to the point of launch, and in parallel develop CRMX001 through completion of the biomarker proof of concept study to the point of commencing the phase III trial. We may need to raise additional funds following the completion of this offering in order to complete the development of CRMX001 and further develop CRMX002, CRMX004 or any new product candidates.

A $1.00 increase (decrease) in the assumed initial public offering price of $     per Unit would increase (decrease) the net proceeds to us from this offering by approximately $     million, assuming the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Pending application of the net proceeds, as described above, we intend to invest any remaining proceeds in a variety of short-term, investment-grade, interest-bearing securities.

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DIVIDEND POLICY

We have never declared dividends on our equity securities, and currently do not plan to declare dividends on shares of our common stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our Board of Directors and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant by our Board of Directors.

CAPITALIZATION

The following table sets forth our cash and our capitalization as of September 30, 2009:

on an actual basis;
on a pro forma basis to reflect the following:
º the cancellation of all shares of our Class B Common Stock, Class C Common Stock, Class D Common Stock, Class E Common Stock and Class F Common Stock on October 6, 2009 and the issuance of 773,717 shares of common stock in exchange for the cancellation of such shares;
º the issuance of $2,619,973 in aggregate principal amount of the 8% Notes (occurred in October and November 2009);
º the automatic conversion of all of our outstanding shares of Non-Voting Common Stock into shares of common stock on a one-for-one basis upon the completion of this offering; and
º the automatic conversion of all of our outstanding convertible notes into an aggregate of        Units and        shares of common stock upon the completion of this offering; and
on a pro forma as adjusted basis to reflect our sale of      Units in this offering, at an assumed initial public offering price of $       per Unit (the mid-point of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, the filing of our amended and restated certificate of incorporation upon completion of this offering and a 1 for      reverse stock split of our common stock to be effected prior to the completion of this offering.

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The pro forma information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited financial statements and the related notes appearing elsewhere in this prospectus.

     
  As of September 30, 2009
     Actual   Pro Forma   Pro Forma
As Adjusted
     (Unaudited)   (Unaudited)   (Unaudited)
Cash   $ 24,093     $                      
Note payable – Galenica, Ltd.     1,000,000                    
Senior convertible notes     10,745,000                    
Notes payable – related parties     510,429                    
8% notes                  
Stockholders’ deficiency:
                          
Preferred stock, $.001 par value; 10,000,000 shares authorized; none issued                        
Common stock – Non-voting – Class A, $.001 par value; 5,000,000 shares authorized; 193,936 issued and outstanding     194                    
Common stock – Class A, $.001 par value; 33,000,000 shares authorized; 5,079,077 issued and outstanding, respectively     5,079                    
Common stock – Classes B – F, $.001 par value; 2,000,000 shares authorized; 1,000,000 issued and escrowed     1,000,000                    
Deferred stock issuances     (1,125 )                    
Additional paid-in capital     5,265,621           
Deficit accumulated during the development stage     (20,790,575 )                    
Total stockholders’ deficiency     (15,519,806 )                    
Total capitalization   $ (3,264,377 )                    

The table above does not include the following:

185,000 shares of common stock issuable upon exercise of outstanding options at a weighted average exercise price of $1.05 per share;
740,000 shares of common stock reserved for issuance under our stock incentive plan; and
140,000 shares of common stock issuable upon exercise of outstanding warrants other than the First Bridge Warrants and the First Bridge Placement Agent Warrants at a weighted average exercise price of $1.36 per share, all of which are currently exercisable.
shares of common stock issuable upon exercise of the First Bridge Warrants and the First Bridge Placement Agent Warrants.

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DILUTION

If you invest in our securities, your investment will be diluted immediately to the extent of the difference between the public offering price per share of common stock, assuming no value is attributed to the warrants underlying the Units you purchase in this offering, and the net tangible book value per share of common stock immediately after this offering.

Our net tangible book value as of September 30, 2009 was approximately $(15.5) million, or $(2.47) per common share. Net tangible book value per share is determined by dividing tangible stockholders’ equity, which is total tangible assets less total liabilities, by the aggregate number of shares of common stock outstanding. Tangible assets represent total assets excluding goodwill and other intangible assets. Dilution in net tangible book value per share represents the difference between the amount per share of common stock issued as a part of the Units paid by purchasers of Units in this offering and the net tangible book value per share of our common stock immediately afterwards. Assuming the sale by us of        shares of common stock issued as a part of the Units at an assumed public offering price of $     per Unit (which is the mid-point of the estimated initial offering price range set forth on the cover of this prospectus) and after deducting the underwriting discount and commissions and estimated offering expenses, our as adjusted net tangible book value as of      would be approximately $     million, or $     per common share. This represents an immediate increase in net tangible book value of $     per share to our existing shareholders and an immediate dilution of $     per share to the new investors purchasing Units in this offering.

The following table illustrates this per share dilution, assuming no value is attributed to the warrants issued as a part of the Units:

   
Assumed initial public offering price per share         $           
Historical net tangible book value per share   $ (2.47 )           
Increase attributable to the conversion of convertible promissory notes   $           
Increase attributable to the conversion of Non-Voting Common Stock   $                 
Pro forma net tangible book value per share before this offering   $                    
Increase per share attributable to new investors   $                 
Pro forma net tangible book value per share after this offering         $           
Dilution per share to new investors         $           

The following table sets forth, on an as adjusted basis as of     , the difference between the number of shares of common stock issued as a part of the Units, the total cash consideration paid, and the average price per share paid by our existing shareholders and by new public investors before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, using an assumed public offering price of $     per Unit.

         
  Shares Purchased   Total Consideration   Average
Price per
Share
     Number   Percent   Amount   Percent
Existing stockholders                  %     $              %     $         
New stockholders                                              
Total              100.0 %                100.0 %        

If the underwriters’ over-allotment option of      Units, which will include      shares of common stock issued as a part of the Units, is exercised in full, the number of shares of common stock held by existing stockholders will be reduced to     % of the total number of shares to be outstanding after this offering, and the number of shares held by the new investors will be increased to      shares, or     %, of the total number of shares of common stock outstanding after this offering.

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The foregoing information is based on 6,360,601 shares of common stock issued and outstanding as of November 24, 2009, including the shares of common stock held in escrow for NDP pending the achievement of certain milestones under the NDP License Agreement, and assumes the automatic conversion of all of our outstanding convertible notes into an aggregate of          Units and          shares of common stock upon the completion of this offering and the automatic conversion of all outstanding shares of Non-Voting Common Stock into shares of common stock on a one-for-one basis upon the completion of this offering. The table above excludes (i) 185,000 shares of common stock issuable upon exercise of outstanding options at a weighted average exercise price of $1.05 per share; (ii) 740,000 shares of common stock reserved for issuance under our stock incentive plan; and (iii)          shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $     per share, all of which are currently exercisable. To the extent the options or warrants are exercised, there will be further dilution to new investors. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.

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SELECTED FINANCIAL DATA

The following statement of operations data for 2007 and 2008, and the balance sheet data as of December 31, 2007 and 2008 are derived from our audited financial statements, which are included elsewhere in this document. The statement of operations data for the nine months ended September 30, 2008 and 2009, along with the period from July 28, 2006 (Inception) to September 30, 2009, and the balance sheet data as of September 30, 2009, have been derived from our unaudited financial statements, which are also included elsewhere in this document. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of our financial position and results of operations for these periods. The following selected financial data should be read together with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The selected financial data in this section is not intended to replace our financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.

Statement of Operations Data

         
  Year Ended
December 31,
2007
  Year Ended
December 31,
2008
  Nine Months
Ended
September 30,
2008
  Nine Months
Ended
September 30,
2009
  Period from
July 28, 2006
(Inception) to
September 30,
2009
               (Unaudited)   (Unaudited)   (Unaudited)
Operating expenses:
                                            
Research and development   $ 3,820,429     $ 3,083,002     $ 2,508,358     $ 994,195     $ 8,650,106  
General and administrative     1,667,056       1,732,602       1,286,567       1,090,386       4,699,733  
Loss from operations     (5,487,485 )       (4,815,604 )       (3,794,925 )       (2,084,581 )       (13,349,839 )  
Interest income     60,830       25,903       25,511       2,104       88,837  
Interest expense, including amortization of deferred financing costs and debt discounts     (1,810,871 )       (4,207,044 )       (3,648,417 )       (1,498,510 )       (7,529,573 )  
Net loss   $ (7,237,526 )     $ (8,996,745 )     $ (7,417,831 )     $ (3,580,987 )     $ (20,790,575 )  
Basic and diluted net loss per common share   $ (1.51 )     $ (1.75 )     $ (1.45 )     $ (0.70 )        
Weighted average common shares outstanding
 – basic and diluted
    4,778,291       5,147,700       5,111,134       5,147,700        

Balance Sheet Data

     
  December 31,
2007
  December 31,
2008
  September 30,
2009
               (Unaudited)
Cash   $ 2,534,478     $ 1,380,012     $ 24,093  
Total Assets     4,112,803       1,620,298       123,922  
Total Liabilities     8,508,742       13,647,446       15,643,728  
Deficit Accumulated During the Development Stage     (8,212,843 )       (17,209,588 )       (20,790,575 )  
Total Stockholders’ Deficiency     (4,395,939 )       (12,027,148 )       (15,519,806 )  

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our financial statements and the notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a biopharmaceutical company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, also know as Cardiorenal disease. Specifically, our goal is to treat kidney disease by reducing the commonly associated cardiovascular and metabolic complications — in effect, “Treating the kidney to treat the heart.” To date, we have licensed all of the products in our Cardiorenal pipeline.

We have several proprietary product candidates in clinical development that address large market opportunities, including our most advanced product candidates, CRMX003 (CorMedix Neutrolin®), a liquid designed to prevent central venous catheter infection and clotting initially in dialysis catheters, and CRMX001 (our unique formulation of the drug deferiprone), which targets the prevention of contrast-induced nephropathy in high-risk patients. We intend to submit an Investigational Device Exemption for CRMX003 by mid-2010, which if approved will enable us to start a phase III trial. For CRMX001, we intend to start a small biomarker “proof of concept” study by mid-2010. We expect this study to generate supportive data on the ability of CRMX001 to reduce biomarker evidence of acute kidney injury, which we believe will increase the likelihood of success of the later phase III trial.

Since our inception in July 2006, we have had no revenue from product sales, and have funded our operations principally through debt financings. Our operations to date have been primarily limited to organizing and staffing our Company, licensing product candidates, developing clinical trials for our product candidates, establishing manufacturing for our product candidates and maintaining and improving our patent portfolio.

We have generated significant losses to date, and we expect to continue to generate losses as we progress towards the commercialization of our product candidates, including CRMX003 and CRMX001. As of September 30, 2009, we had an accumulated deficit of $20,790,575. Because we do not generate revenue from any of our product candidates, our losses will continue as we advance our product candidates towards regulatory approval and eventual commercialization. As a result, our operating losses are likely to be substantial over the next several years. We are unable to predict the extent of any future losses or when we will become profitable, if at all.

We believe that the net proceeds from this offering and existing cash will be sufficient to fund our projected operating requirements for at least two years. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements.

Financial Operations Overview

Revenue

We have not generated any revenue since our inception. To date, we have funded our operations primarily through debt financings. If our product development efforts result in clinical success, regulatory approval and successful commercialization of any of our products, we could generate revenue from sales or licenses of any such products.

Research and Development Expense

Research and development expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third party contract research organizations, contract manufacturers, investigative sites, and consultants; (iii) technology and intellectual property license costs; (iv) manufacturing

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development costs; (v) personnel related expenses, including salaries, benefits, travel, and related costs for the personnel involved in drug development; (vi) activities relating to regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials; and (vii) facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies. All research and development is expensed as incurred.

Conducting a significant amount of development is central to our business model. Through September 30, 2009, we incurred approximately $8.7 million in research and development expenses since our inception in July 2006. Product candidates in later-stage clinical development generally have higher development costs than those in earlier stages of development, primarily due to the significantly increased size and duration of the clinical trials. We plan to increase our research and development expenses for the foreseeable future in order to complete development of our two most advanced product candidates, CRMX003 and CRMX001, and our earlier-stage research and development projects.

The following table summarizes the percentages of our research and development payments related to our two most advanced product candidates and other projects. The percentages summarized in the following table reflect payments directly attributable to each development candidate, which are tracked on a project basis. A portion of our internal costs, including indirect costs relating to our product candidates, are not tracked on a project basis and are allocated based on management’s estimate.

         
  Year Ended
December 31,
    
Nine Months Ended
September 30,
  Period from July 28,
2006 (Inception)
through
September 30,
2009
     2007   2008   2008   2009
CRMX003     0.8 %       54.1 %       54.6 %       43.6 %       17.0 %  
CRMX001     97.9 %       32.6 %       33.7 %       43.0 %       77.9 %  
CRMX002           0.8 %       0.9 %             0.2 %  
CRMX004     1.3 %       12.5 %       10.8 %       13.4 %       4.9 %  

The process of conducting pre-clinical studies and clinical trials necessary to obtain FDA approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties discussed above, the uncertainty associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates. Development timelines, probability of success and development costs vary widely. We are currently focused on developing our two most advanced product candidates, CRMX003 and CRMX001. However, we may need to raise additional capital in the future in order to fund the development and commercialization of CRMX003, CRMX001, or our other product candidates.

General and Administrative Expense

General and administrative expense consists primarily of salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, finance and accounting functions. Other general and administrative expense includes facility-related costs not otherwise included in research and development expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services. We expect that our general and administrative expenses will increase as we add personnel and become subject to the reporting obligations applicable to public companies. From our inception in July 2006 through September 30, 2009, we spent $4.7 million on general and administrative expense.

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Interest Income and Interest Expense

Interest income consists of interest earned on our cash and cash equivalents and marketable securities. Interest expense consists of interest incurred on the 12% Notes, PBS Notes and Family Trust Notes as well as the amortization of deferred financing costs and our debt discount attributable to the issuance of the 12% Notes.

Results of Operations

Comparison of the Nine Months Ended September 30, 2009 and September 30, 2008

Research and Development Expense .  Research and development expense was $994,195 for the nine months ended September 30, 2009, a decrease of $1,514,163, or 60%, from $2,508,358 for the nine months ended September 30, 2008. The decrease was primarily due to the refocusing of our business strategy on business development and fund raising activities.

General and Administrative Expense .  General and administrative expense was $1,090,386 for the nine months ended September 30, 2009, a decrease of $196,181, or 15%, from $1,286,567 for the nine months ended September 30, 2008. The decrease was primarily due to a reduction in headcount and outsourced activities.

Interest Income and Interest Expense .  Interest income was $2,104 for the nine months ended September 30, 2009, a decrease of $23,407, or 92%, from $25,511 for the nine months ended September 30, 2008. The decrease was primarily due to lower average cash balances.

Interest expense was $1,498,510 for the nine months ended September 30, 2009, a decrease of $2,149,907, or 59%, from $3,648,417 for the nine months ended September 30, 2008. The decrease was primarily due to lesser charges related to the amortization of our deferred financing costs and debt discount in 2009.

Comparison of the Years Ended December 31, 2008 and December 31, 2007

Research and Development Expense .  Research and development expense was $3,083,002 for the year ended December 31, 2008, a decrease of $737,427, or 19%, from $3,820,429 for the year ended December 31, 2007. The decrease was primarily due to the completion, in 2007, of our initial start-up manufacturing and clinical development activities.

General and Administrative Expense .  General and administrative expense was $1,732,602 for the year ended December 31, 2008, an increase of $65,546, or 4%, from $1,667,056 for the year ended December 31, 2007. The increase was primarily due to an increase in headcount and relocation to independent office space.

Interest Income and Interest Expense .  Interest income was $25,903 for the year ended December 31, 2008, a decrease of $34,927, or 57%, from $60,830 for the year ended December 31, 2007. The decrease was primarily due to lower average cash balances and interest rates in 2008.

Interest expense was $4,207,044 for the year ended December 31, 2008, an increase of $2,396,173, or 132%, from 1,810,871 for the year ended December 31, 2007. The increase was primarily due to an increase in charges related to the amortization of our deferred financing costs and debt discount attributable to our fund raising activities.

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Liquidity and Capital Resources

Sources of Liquidity

As a result of our significant research and development expenditures and the lack of any approved products to generate product sales revenue, we have not been profitable and have generated operating losses since we were incorporated in July 2006. We have funded our operations through September 30, 2009 principally with $11,745,000 in convertible notes. The following table summarizes our funding sources as of November 24, 2009:

     
Source   Amount Raised
($) (1)
  Principal and
Interest
Outstanding as of
September 30, 2009
  Shares of
Common Stock
Issuable Upon
Conversion
(Upon Completion
of the Offering) (2)
12% Notes
                          
First Bridge Notes (July and September 2007)     8,645,000       10,423,679                 
Second Bridge Notes (August 2008)     2,100,000       2,304,515                 
Galenica Note (April 2009)     1,000,000       1,036,717                 
8% Notes (October 2009)     2,619,973       (3)                 
Paramount Notes
                          
PBS Notes     1,062,003 (4)       166,479                 
Family Trust Notes     1,430,000       434,715                 
Total     16,856,976       16,986,078                 

(1) Represents gross proceeds.
(2) Assumes principal and interest outstanding at the time of the completion of the offering is the same as the principal and interest outstanding as of September 30, 2009.
(3) The 8% Notes were not issued until October and November 2009.
(4) Includes $52,003 in aggregate principal amount of notes issued to PBS in respect of expenses paid by PBS on our behalf.

12% Notes

In July and September of 2007, we issued a series of convertible promissory notes in the aggregate principal amount of $8,645,000 (the “First Bridge Notes”). In August 2008, we issued another series of convertible promissory notes in the aggregate principal amount of $2,100,000 on terms substantially the same as the First Bridge Notes (the “Second Bridge Notes”). In April 2009, we issued a convertible note in the principal amount of $1,000,000 to Galenica, Ltd., a pharmaceuticals company (“Galenica”), on terms substantially the same as the First Bridge Notes and the Second Bridge Notes (the “Galenica Note”, and together with the First Bridge Notes and the Second Bridge Notes, the “12% Notes”). The 12% Notes are unsecured obligations of ours with a maturity date of July 31, 2010 and currently accrue interest at the rate of 12% per annum. The aggregate amount of accrued and unpaid interest under the 12% Notes as of September 30, 2009 was $2,019,911.

The outstanding principal amount of the 12% Notes, and all accrued interest thereon, will automatically convert into Units at a conversion price equal to at the lesser of (a) the lowest price at which our equity securities of are sold in a Qualified Financing and (b) $30,000,000 divided by the number of shares of common stock outstanding immediately prior to the Qualified Financing (determined on a fully diluted basis), upon the terms and conditions on which such securities are issued in the Qualified Financing. For purposes of the 12% Notes, “Qualified Financing” means the closing of an equity financing or series of related equity financings by us resulting in aggregate gross cash proceeds (before commissions or other transaction expenses, and excluding any such proceeds resulting from any conversion of First Bridge Notes) to us of at least $10,000,000 minus the aggregate principal amount of Second Bridge Notes. This offering, if consummated, will be considered a Qualified Financing. Assuming an offering price of $       per Unit, the 12% Notes will automatically convert into            Units.

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In connection with the issuance of the First Bridge Notes, we issued seven-year warrants to their purchasers (the “First Bridge Warrants”). The First Bridge Warrants are currently exercisable and entitle the holders thereof to purchase that number of shares of common stock equal to 40% of the principal amount of the First Bridge Notes purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.

In connection with the issuance of the Second Bridge Notes, we issued seven-year warrants to their purchasers (the “Second Bridge Warrants”). The Second Bridge Warrants entitle the holders thereof to purchase that number of shares of common stock equal to 40% of the principal amount of the Second Bridge Notes purchased by them divided by the lowest price at which our equity securities are sold in a Qualified Financing at a per share exercise price equal to 110% of such lowest price paid, subject to adjustment as set forth in the Second Bridge Warrants. If a Qualified Financing does not occur on or before the second anniversary of the initial closing of the Second Bridge Notes offering, August 18, 2010, then the Second Bridge Warrants will be exercisable for that number of shares of common stock equal to 40% of the principal amount of the Second Bridge Notes purchased by the original holder divided by $1.00, at a per share exercise price of $1.00. For purposes of the Second Bridge Warrants, “Qualified Financing” has the same meaning as it does in connection with the 12% Notes.

The First Bridge Warrants and the Second Bridge Warrants will be cancelled prior to the completion of this offering.

8% Notes

In October and November 2009, we issued another series of convertible promissory notes in the aggregate principal amount of $2,619,973 (the “8% Notes”). The 8% Notes are unsecured obligations of ours with a maturity date of October 30, 2011 and currently accrue interest at the rate of 8% per annum.

The outstanding principal amount of the 8% Notes, and all accrued interest thereon, will automatically convert into shares of common stock upon the completion of a Qualified IPO. For purposes hereof, “Qualified IPO” means the completion of an underwritten initial public offering of equity securities by us resulting in aggregate gross cash proceeds (before commissions or other expenses) to us of at least $10,000,000. This offering, if consummated, will be considered a Qualified IPO. Assuming an offering price of $       per Unit, the 8% Notes will automatically convert into          shares of common stock at a conversion price equal to 70% of the portion of the price of the Units sold in this offering that is allocated to the common stock.

In connection with the issuance of the 8% Notes, we issued seven-year warrants to the purchasers of the 8% Notes (the “8% Noteholder Warrants”). The 8% Noteholder Warrants entitle the holders thereof to purchase a number of shares of common stock equal to 60% of the principal amount of the 8% Notes divided by the price at which our equity securities are sold in a Qualified IPO, at a per share exercise price equal to 110% of the offering price in the Qualified IPO, subject to adjustment as set forth in the warrant. If a Qualified IPO does not occur on or before the second anniversary of the closing of the offering of the 8% Noteholder Warrants, then each warrant will be exercisable for that number of shares of common stock equal to 60% of the principal amount of the note purchased by the original holder divided by $1.00, at a per share exercise price of $1.00. In the event of a sale of the Company (whether by merger, consolidation, sale or transfer of our capital stock or assets or otherwise) prior to, but not in connection with, a Qualified IPO, the 8% Noteholder Warrants will terminate immediately upon such sale without opportunity for exercise. Assuming an offering price of $       per Unit, the 8% Noteholder Warrants will entitle the holders thereof to purchase         shares of common stock at a conversion price equal to       .

Paramount Notes

From July 26, 2006 through September 30, 2009, Paramount BioSciences, LLC (“PBS”), of which Lindsay A. Rosenwald is the sole member, had loaned us an aggregate principal amount of $1,062,003 pursuant to a future advance promissory note, dated July 28, 2006, as amended on June 15, 2007 and as amended and restated on September 30, 2009 (the “PBS Note”). From August 11, 2006 through September 30, 2009, certain trusts established for the benefit of Dr. Rosenwald’s children (the “Family Trusts”) had loaned us an aggregate principal amount of $1,430,000 pursuant to a future advance promissory note, dated August 11, 2006, as amended on June 15, 2007 and July 22, 2008 and as amended and restated on

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September 30, 2009 (the “Family Trusts Note” and together with the PBS Note, the “Paramount Notes”). As of September 30, 2009, $166,479, including accrued and unpaid interest, was outstanding under the PBS Note, and $434,715, including accrued and unpaid interest, was outstanding under the Family Trusts Note. The Paramount Notes will mature on July 31, 2010 and all outstanding principal amount of the Paramount Notes, and all accrued interest thereon, will automatically convert into the securities issued in a Qualified Financing on the same terms as the 12% Notes. This offering, if consummated, will be considered a Qualified Financing. Assuming an offering price of $       per Unit, the Paramount Notes will automatically convert into          Units.

Net Cash Used in Operating Activities

Net cash used in operations was $4.1 million for the year ended December 31, 2008. The net loss for the year ended December 31, 2008 is higher than cash used in operating activities by approximately $4.9 million. The primary drivers for the difference are adjustments for non-cash charges such as amortization of deferred financing costs and our debt discount of $3.3 million and interest accruals of $0.9 million related to our senior convertible notes and stock-based compensation of $0.6 million related to a license agreement, consulting agreement and option and warrant issuances to employees and consultants. Net cash used in operations was $4.8 million for the year ended December 31, 2007. The net loss for the year ended December 31, 2007 is higher than cash used in operating activities by approximately $2.4 million. The primary drivers for the difference are adjustments for non-cash charges such as amortization of deferred financing costs and our debt discount of $1.5 million and interest accruals of $0.2 million related to our senior convertible notes as well as an increase in accounts payable and accrued expenses of $1.0 million tied to an increase in head count and operating activities.

Net cash used in operations was $1.5 million for the nine months ended September 30, 2009. The net loss for the nine months ended September 30, 2009 is higher than cash used in operating activities by approximately $2.1 million. The primary drivers for the difference is adjustments for non-cash charges such as amortization of deferred financing costs and our debt discount of $0.6 million and interest accruals of $0.9 million related to our senior convertible notes as well as an increase in accounts payable and accrued expenses of $0.5 million tied to cash conservation during 2009 fund raising activities. Net cash used in operations was $3.2 million for the nine months ended September 30, 2008. The net loss for the nine months ended September 30, 2008 is higher than cash used in operating activities by approximately $4.3 million. The primary drivers for the difference are the adjustments for non-cash charges of deferred financing costs and our debt discount of $3.1 million and interest accruals of $0.6 million related to our senior convertible notes and stock-based compensation of $0.6 million related to a license agreement, consulting agreement and option and warrant issuances to employees and consultants.

Net Cash Used in Investing Activities

No cash was used in investing activities for the year ended December 31, 2008. Net cash used in investing activities was $47,255 for the year ended December 31, 2007. Net cash used in investing activities reflects $47,255 for the purchase of furniture and fixtures as well as computer equipment related to our move to new office space during 2007.

No cash was used in investing activities for the nine months ended September 30, 2009 and 2008.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $3.0 million for the year ended December 31, 2008. Net cash provided by financing activities consisted primarily of private placements of our senior convertible notes through which we received gross proceeds of $2.1 million and a promissory note issued in connection with a term sheet with Galenica, Ltd. through which we received proceeds of $1.0 million which was offset by cash paid for financing costs of approximately $141,000. Net cash provided by financing activities was $7.4 million for the year ended December 31, 2007. Net cash provided by financing activities consisted primarily of our senior convertibles notes through which we received gross proceeds of $8.6 million as well as proceeds from related party notes of $1.5 million offset by a repayment of principal under the related party notes of $2.0 million and cash paid from financing costs of approximately $0.8 million.

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Net cash provided by financing activities was $105,365 for the nine months ended September 30, 2009, consisted primarily of $165,000 of proceeds received under related party notes offset by cash paid for financing costs of approximately $60,000. Net cash provided by financing activities was $1.9 million for the nine months ended December 31, 2008, consisted primarily of $2.1 million gross proceeds from our senior convertible notes offset by cash paid for financing costs of approximately $0.2 million.

Funding Requirements

We expect to incur losses from operations for the foreseeable future. We expect to incur increasing research and development expenses, including expenses related to the hiring of personnel and additional clinical trials. We expect that our general and administrative expenses will also increase as we expand our finance and administrative staff, add infrastructure, and incur additional costs related to being a public company, including directors’ and officers’ insurance, investor relations programs, and increased professional fees. Our future capital requirements will depend on a number of factors, including the timing and outcome of clinical trials and regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the acquisition of licenses to new products or compounds, the status of competitive products, the availability of financing, and our success in developing markets for our product candidates.

Our expected future expenditures related to product development are as follows:

approximately $    million for CRMX003 development to include the following:
º development of the final formulation for clinical trial use;
º FDA regulatory filing costs;
º phase III clinical development costs;
º patent maintenance fees; and
approximately $    million for CRMX001 development to include the following:
º FDA regulatory costs; and
º clinical development costs associated with the biomarker proof of concept study.

We believe that the net proceeds from this offering, together with our existing cash, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least until the end of 2011. We believe that if we sell        Units in this offering at an initial public offering price of $     per share ($1.00 lower than the mid-point of the price range set forth on the cover page of this prospectus), or if we sell a fewer number of Units in this offering than anticipated, the resultant reduction in proceeds we receive from the offering would cause us to require additional capital earlier. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials.

We do not anticipate that we will generate product revenue for at least the next several years. In the absence of additional funding, we expect our continuing operating losses to result in increases in our cash used in operations over the next several quarters and years.

We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. We do not currently have any commitments for future external funding. We may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate, and we may decide to raise additional funds even before we need them if the conditions for raising capital are favorable. We may seek to sell additional equity or debt securities or obtain a bank credit facility. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations.

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Additional equity or debt financing, grants, or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

Financial Uncertainties Related to Potential Future Milestone Payments

We have acquired rights to develop and commercialize our product candidates through licenses granted by various parties. Certain of these licensing arrangements contain cash milestone payments and royalties.

On July 28, 2006, we entered into a contribution agreement, amended on October 6, 2009 (the “Shiva Contribution Agreement”), with Shiva Biomedical, LLC (“Shiva”), Picton Pharmaceuticals, Inc, a Delaware corporation (“Picton”), and the stockholders of Picton, including Lindsay Rosenwald, the Family Trusts and several of our current directors and officers (Antony Pfaffle, Timothy Hofer and Stephen Pilatzke). Pursuant to the Shiva Contribution Agreement, Shiva contributed to us its kidney products business and granted us an exclusive, worldwide license agreement for a patent estate covering proprietary formulations of deferiprone and a biomarker diagnostic test for measuring levels of labile iron (the “Shiva Technology”). The Shiva Technology served as the basis for CRMX001 and CRMX002, respectively. In addition to an initial fee and equity stake in the Company provided to Shiva under the Shiva Contribution Agreement, we are also required to make cash payments to Shiva upon the achievement of certain clinical and regulatory-based milestone and the maximum aggregate amount of such payments, assuming achievement of all milestones, is $10,000,000. Events that trigger milestone payments include but are not limited to the reaching of various stages of applicable clinical trials and regulatory approval processes. Under the terms of the Shiva Contribution Agreement, in the event that the Shiva Technology is commercialized, we are also obligated to pay to Shiva annual royalties based upon net sales of the products. In the event that we sublicense Shiva Technology to a third party, we are obligated to pay to Shiva a portion of the royalties, fees or other lump-sum payments we receive from the sublicense.

On January 30, 2008, we entered into a License and Assignment Agreement (the “NDP License Agreement”) with ND Partners LLC, a Delaware limited liability company (“NDP”). Pursuant to the NDP License Agreement, NDP granted us exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications (the “NDP Technology”). We acquired such licenses and patents through our assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann, and Dr. Johannes Reinmueller. NDP also granted us exclusive licenses, with the right to grant sublicenses, to use and display certain trademarks in connection with the NDP Technology. In addition to an initial fee and equity stake in the Company provided to NDP under the NDP License Agreement, we are also required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Such payments will be made in the form of shares of common stock currently held in escrow for NDP, and may amount to up to 213,562 shares of common stock, subject to certain anti-dilution adjustments.

On January 30, 2008, we also entered into an Exclusive License and Consulting Agreement with Dr. Polaschegg (the “Polaschegg License Agreement”). Pursuant to the Polaschegg License Agreement, Dr. Polaschegg granted us an exclusive, worldwide license for a gel lock invention and certain taurolidine treatments and the corresponding United States patent applications (the “Polaschegg Technology”). The Polaschegg Technology serves as a basis for CRMX004. As consideration for the rights to the Polaschegg Technology, in addition to an initial fee, we agreed to pay Dr. Polaschegg certain royalty payments ranging from 1% to 3% of the net sales of the Polaschegg Technology. The Polaschegg License Agreement also sets forth certain minimum royalty payments (on an annual basis) to be made to Dr. Polaschegg in connection with the Polaschegg Technology.

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Potential milestone payments for licensed technologies may or may not be triggered and may vary in size, depending on a number of variables, almost all of which are currently uncertain. Additionally, we believe we will not begin selling any products that would require us to make any such royalty payments until the end of 2012. Whether we will be obligated to make milestone or royalty payments in the future is subject to the success of our product development efforts and, accordingly, is inherently uncertain.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

While our significant accounting policies are more fully described in Note 2 to our financial statements included at the end of this prospectus, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our financial statements.

Stock-Based Compensation

We account for stock options according to the Financial Accounting Standards Board Accounting Standards Codification No. 718 (“ASC 718”), “Compensation — Stock Compensation”. Under ASC 718, share-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period on a straight-line basis.

We account for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method in accordance with SFAS 123R and Emerging Issues Task Force No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF No. 96-18”), The initial non-cash charge to operations for non-employee options with vesting are revalued at the end of each reporting period based upon the change in the fair value of the options and amortized to consulting expense over the related vesting period.

For the purpose of valuing options and warrants granted to employees, non-employees and directors and officers of the Company during the year ended December 31, 2008, we used the Black-Scholes option pricing model utilizing the assumptions noted in the following table. No options were issued during the year ended December 31, 2007. To determine the risk-free interest rate, we utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards. We estimated the expected life of the options granted based on anticipated exercises in the future periods assuming the success of its business model as currently forecasted. The expected dividend yield reflects our current and expected future policy for dividends on its common stock. The expected stock price volatility for our stock options was calculated by examining historical volatilities for publicly traded industry peers as we do not have any trading history for our common stock. We will continue to analyze the expected stock price volatility and expected term assumptions as more historical data for our common stock becomes available. Given the limited service period for its current employees, directors and officers and non-employees, as well as the senior nature of the roles of those employees and directors and officers, we currently estimate that we will experience no forfeitures for those options currently outstanding.

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Recent Accounting Pronouncements

None.

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

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BUSINESS

Overview

General

We are a biopharmaceutical company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, also know as Cardiorenal disease. Specifically, our goal is to treat kidney disease by reducing the commonly associated cardiovascular and metabolic complications — in effect, “Treating the kidney to treat the heart.” To date, we have licensed all of the products in our Cardiorenal pipeline.

We have several proprietary product candidates in clinical development that address large market opportunities, including our most advanced product candidates, CRMX003 (CorMedix Neutrolin®), a liquid designed to prevent central venous catheter infection and clotting initially in dialysis catheters, and CRMX001 (our unique formulation of the drug deferiprone), which targets the prevention of contrast-induced nephropathy in high-risk patients. We intend to submit an Investigational Device Exemption for CRMX003 by mid-2010, which if approved will enable us to start a phase III trial. For CRMX001, we intend to start a small biomarker “proof of concept” study by mid-2010. We expect this study to generate supportive data on the ability of CRMX001 to reduce biomarker evidence of acute kidney injury, which we believe will increase the likelihood of success of the later phase III trial.

Platforms and Products

We have two foundational platforms. Our first foundational platform seeks to utilize liquid and gel formulations of Neutrolin® (CRMX003 and CRMX004, respectively) to prevent the infection and clotting that can occur with the use of central venous catheters and peripherally inserted central catheters. These catheters are frequently used for vascular access in hemodialysis, for cancer chemotherapy, long term antibiotic therapy, total parenteral nutrition and intensive care patients. Our second foundational platform seeks to reduce excess free (labile) iron, which is toxic to cells and tissues, using CRMX001, our unique formulation of the drug deferiprone.

Over the past two years we have made rapid and significant progress, including the following:

we licensed liquid and gel formulations of Neutrolin® (CRMX003 and CRMX004, respectively);
CRMX001 received a Special Protocol Assessment from the FDA for a single pivotal study as the basis of a New Drug Application for reducing the serious kidney damage and associated morbidity and mortality that can follow X-ray dye injection when used to visualize the blood vessels in the heart (cardiac angiography) in high-risk patients with chronic kidney disease;
we published proof-of-concept studies for the slowing of progression of chronic kidney disease with CRMX001; and
we signed a development agreement for a diagnostic labile iron biomarker test product, CRMX002, that will support CRMX001.

Additionally, CRMX003 and CRMX001 are poised to enter pivotal studies, and both products have the benefit of significant market experience outside of the United States, potentially reducing development risk and defined FDA regulatory pathways.

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The following table summarizes our product candidates.

     
Product   Intended Indication   Status of Clinical Programs   Commercial
Rights
CRMX003 (CorMedix Neutrolin®)   Prevention of catheter-related blood stream infections and maintenance of catheter function in hemodialysis patients who are asymptomatic for catheter-related blood stream infections using both incident and prevalent catheters with any brand of central venous catheter   In Europe, CorMedix Neutrolin® (taurolidine 1.35%, citrate 4% and heparin 1000 u/mL) is considered to be a Type 3 device requiring submission and approval of a CE mark for marketing of the product. In the U.S., CorMedix Neutrolin® is considered to be a device/drug combination product, requiring submission and approval of a Premarket Approval application for marketing of the product. We anticipate starting a pivotal trial in the U.S. following the completion of this offering.   Worldwide
CRMX004   Prevention of catheter-related blood stream infections and maintenance of catheter function in hemodialysis patients who are asymptomatic for catheter-related blood stream infections using both incident and prevalent catheters with any brand of central venous catheter   In Europe, CRMX004 is considered to be a Type 3 device requiring submission and approval of a CE mark for marketing of the product. In the U.S. CRMX004 is considered to be a device/drug combination product, requiring submission and approval of a Premarket Approval application for marketing of the product. CRMX004 is in the pre-clinical phase of development.   Worldwide
CRMX001   Prevention (decrease in the rate of incidence) of morbidity and mortality associated with acute kidney injury in subjects with moderate to severe chronic kidney disease and other risk factors undergoing interventional cardiac procedures and receiving an iodinated radiocontrast agent   We currently have an approved Investigational New Drug application in the U.S. and final approval for marketing will be obtained following approval of a New Drug Application. We anticipate staring a phase II biomarker proof of concept study following the completion of this offering.   Worldwide
CRMX002   Urine diagnostic test for “toxic labile iron” that could be used to diagnose chronic kidney disease, identify patients at risk for the disease, identify likely treatment responders and monitor response to therapy with CRMX001   We anticipate starting pre-clinical assay development following the completion of this offering.   Worldwide

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CRMX003 (CorMedix Neutrolin®) and CRMX004

Market Opportunity

Patients undergoing hemodialysis require access to the vascular system in order to perform treatments on a multiple scheduled basis each week. According to a U.S. Renal Data System 2008 Annual Data Report, approximately 80,000 hemodialysis patients relied on a central venous catheter in 2008. One of the major complications for the use of a central venous catheter for hemodialysis treatment is catheter-related blood stream infections and the inflammatory complications associated with them. Catheter-related blood stream infections and inflammatory complications associated with these are a primary cause of morbidity in the end-stage renal disease hemodialysis patient population, and the second most common cause of mortality. Recent data from the United States Renal Data System (USRDS, 2008) indicates nearly 2 catheter infection events per-patient year or 5.37 per 1000 catheter days.

Prevention of catheter-related blood stream infections and inflammatory complications requires decontamination of the intraluminal surface of the catheter to prevent the systemic dissemination of the organisms contained within the biofilm and an anticoagulant to retain patency. The current standard of catheter care is to instill a heparin lock solution at a concentration of 1000 – 5000 u/mL into each catheter lumen immediately post treatment, in order to prevent clotting between dialysis treatments. However, a heparin lock solution provides no protection from the risk of infection. Currently, there are no pharmacologic agents approved for the prevention of catheter-related blood stream infections in central venous catheters.

There is a significant unmet need for prevention of catheter-related blood stream infections in the hemodialysis patient population as well as for other patient populations utilizing central venous catheters, such as oncology/chemotherapy, total parenteral nutrition and intensive care unit patients.

CRMX003

CRMX003, or CorMedix Neutrolin®, is a broad-spectrum antimicrobial/antifungal and anticoagulant combination that is active against common microbes including antibiotic-resistant strains and in addition may prevent biofilm formation. We believe that using CorMedix Neutrolin® as a catheter lock solution will significantly reduce the incidence of catheter-related blood stream infections, thus reducing the need for local and systemic antibiotics while prolonging catheter life.

CRMX004

We believe that CRMX004, a thixotropic gel formulation of Neutrolin®, could be developed for the indication for prevention of catheter-related blood stream infections and maintenance of catheter function in hemodialysis. CRMX004 would provide an alternative to CRMX003 that may have superior applications in hemodialysis catheters.

Our Formulation

CRMX003

CorMedix Neutrolin® contains 1.35% taurolidine, 4% Citrate and 1000 u/mL heparin.

Taurolidine was first synthesized around 1972 by Geistlich Pharma. Taurolidine is a derivative of the amino acid taurine. It is a potent antimicrobial agent with a novel mechanism of action. Taurolidine releases methylol derivatives which selectively interact with components of bacterial/fungal cell walls resulting in irreparable injury to the microorganism.

Taurolidine has several clinically beneficial characteristics relating to its antimicrobial action, including:

broad spectrum antibacterial and antifungal action;
no tendency to induce bacterial resistance; and
the ability to inactivate endotoxins.

We believe these characteristics give taurolidine a potential advantage over conventional antibiotics in the control and near eradication of infections. However, taurolidine was not successfully commercialized for systemic use because of several clinically-significant limitations, including the following:

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the need to provide high concentrations of taurolidine at the infection site in order to inhibit infection (i.e., a concentration approximately 1000 times greater than a typical antibiotic);
the low solubility of taurolidine in an aqueous solution, which makes it virtually impossible to achieve the high concentrations required for efficacy at an infection site within the body; and
the short and unpredictable shelf life of the previously available taurolidine + polyvinylpyrrolidone (“PVP”) mixture.

Because of these issues, the adoption of taurolidine in the clinical setting has been limited. For the 15 years prior to Biolink utilizing taurolidine in a catheter lock formulation, the only clinical use was as a lavage solution for treating peritonitis (taurolidine mixed with PVP).

Citrate (4%) is considered to be non-inferior to heparin as an anticoagulant and in addition improves the antimicrobial activity and solubility of taurolidine. Heparin at a concentration of 1000 u – 5000 u/mL is an anticoagulant widely used as a catheter locking solution in hemodialysis.

The rationale for commercializing CorMedix Neutrolin®is to capture the established efficacy of heparin as an anticoagulant and to combine it with the established potent antimicrobial and anticoagulant properties of taurolidine and citrate, respectively.

CRMX004

We are currently in the process of optimizing the thixotropic gel formulation of Neutrolin®; however the formulation will be a semi-solid gel that liquifies under the pressure of insertion and withdrawal from the catheter, a property known as thixotropic. This would prevent any “spillage” from the catheter tip and from the end of the catheter in the event the luer lock becomes disengaged. The solid nature of the gel when at rest in the catheter could also negate the need for an anticoagulant within the formulation.

Development

Previous Formulations (Biolink Neutrolin®)

Biolink Neutrolin® was a catheter lock solution that had been under development by a company known as Biolink Corporation (“Biolink”) to address the limitations of the current standard of catheter care. Biolink Neutrolin® contained taurolidine, a potent antimicrobial agent, and citric acid, which lowers pH thereby enhancing taurolidine’s antimicrobial activity and improves the solubility of taurolidine and is a stabilizing agent. Taurolidine provides broad-spectrum antimicrobial activity against Gram positive and Gram negative bacteria, including antibiotic-resistant strains, as well as activity against several clinically important fungi. Biolink Neutrolin® also contained Citrate, which acts as an anticoagulant.

On July 27, 2001, Biolink submitted an Investigational Device Exemption (#G0102000) to initiate clinical trials of Biolink Neutrolin®. In 2001, Biolink Neutrolin® was considered to be a device in Europe, and the CE marking classification rendered it a Type 2A device when it was formulated without the inclusion of heparin. This means that the manufacturer needs approval/certification from a Notified Body for its quality systems and takes responsibility to deem the device marketable (CE marked). During the development of Biolink Neutrolin®, Biolink decided to first pursue a CE marking of the product in Europe before its development and approval in the United States. Biolink utilized TUV of Germany as the Notified Body to obtain approval of compliance of Quality Systems Requirements (QSR) Certification. Biolink obtained QSR certification in 2002, which remained valid until March 2005.

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Published Clinical Studies of Neutrolin® (taurolidine 1.35% + citrate 4%) are listed below:

           
           
Study   Number of
Catheters
(Patients)
  Average
Duration
  CRBI per 1,000
Catheter Days
(Taurolidine -
Citrate
CLS vs. Control)
  Control
Group
  Taurolidine -
Citrate CLS:
% Patients
Without
Infection
  Catheter
Dysfunction
Betjes and van Atgern Nephrol. Dial.
Transplant 2004
19:1546-1551
  76 (58)   158 d   0 vs. 2.1
(P=0.047)
  RCT vs.
heparin
5,000 u/mL
  100   Catheter
removal:
2 heparin
1 Neutrolin
Taylor J of Renal Care 2008
34(3):116-120
  ~20/month   180 d   0.6 vs. 5.2
(P<0.001)
  Cross-over
cohort vs.
heparin
5,000 u/mL
  (89%
reduction)
  Incr.
urokinase
resolved
with?
500 u/mL
heparin
Sodemann Poster:
American Society of Nephrology 2001
  76 (76)   250 d
(41 patient
years)
  0.20   None   96   No increase
Allon Clin. Infect.
Dis. 2003
36 (12):1539-44
  20/30
Neutrolin
(taurolidine
+ citrate)/
Heparin
  85 d   0.60 vs. 5.6
(P<0.001)
  Case-control
vs. heparin
5,000 u/mL
  94   Unassisted
catheter
patency 24%
vs 68%

Prior to its filing for bankruptcy in August 2003, Biolink had an Investigational Device Exemption approved by the FDA for Biolink Neutrolin®. A small non-randomized, case-control study of the Biolink Neutrolin® solution (formulated with a lower pH) versus the standard heparin lock solution was carried out in 20 catheter-dependent hemodialysis patients at the University of Alabama, Birmingham. Biolink Neutrolin® dramatically reduced the frequency of catheter-related blood stream infections, although in these same patients, blood flow problems related to some type of thrombus formation (measured by increased use of tissue plasminogen activator) was increased compared to the heparin control. Laboratory studies indicated that the blood flow issues may have resulted from the low pH of the Biolink Neutrolin® formulation, and this was subsequently adjusted. Furthermore, after some testing by Biolink, this issue resulted in the addition of heparin to the catheter lock solution. The FDA then approved a pivotal trial to be conducted with a vanguard phase (four centers, 60 patients) before proceeding to the main study. This trial would include Biolink Neutrolin® solution with heparin added at the bedside. At this point all development activity stopped however, due to Biolink’s filing for bankruptcy. A German company, TauroPharm GmbH (“TauroPharm”), established by Biolink to manufacture Biolink Neutrolin®, launched the product in Europe under the name of TauroLock (taurolidine and 4% citrate without heparin).

TauroLock is currently being used in Europe and the Middle East as a catheter lock solution in hemodialysis, in intensive care units and for oncology/chemotherapy patients. TauroLock is registered as a device and has the approval of a CE Mark from the Technischer Ueberwachungs Verein (TUV) in Munich, Germany. Several small studies using TauroLock have appeared in the published literature in Europe, all of which demonstrate positive results with near eradication of infection and limited blood flow issues, particularly with added heparin. In November 2007, TauroPharm launched two new products called TauroLock Heparin 500 and TauroLock Heparin 100 to address the needs of those customers who were using TauroLock and adding heparin separately.

Extensive pre-clinical testing has been completed with Biolink Neutrolin® and its use in hemodialysis catheters, including compatibility with catheter materials; safety, as demonstrated through biocompatibility testing and direct injection in dogs; efficacy in anticoagulation models, in-vitro antimicrobial efficacy models and biofilm elimination, and stability, including forced degradation models.

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Development of CorMedix Neutrolin® to Date

As a result of the NDP License Agreement and the Polaschegg License Agreement we entered into in January 2008, as described below under “License Agreements and Intellectual Property,” CorMedix is now the current Sponsor of the Biolink Neutrolin® Investigational Device Exemption. The conditional Investigational Device Exemption approval obtained from the FDA on March 12, 2003 outlined the need for the following actions in order for the Investigational Device Exemption to be fully approved for conducting a pivotal clinical trial to support marketing approval:

addition of heparin to the taurolidine + citrate formulation to address patency issues;
evaluation of maintenance of patency and prevention of infection as co-primary end points in proposed clinical trial;
conduct of a pilot/vanguard study in 60 patients, with results submitted to the FDA for evaluation before proceeding to a single pivotal study of an additional 340 patients to support marketing approval.

As there have been changes in the standards of patient and catheter care since the earlier Investigational Device Exemption approval, we held an informal pre-Investigational Device Exemption meeting with the FDA in October 2008 to discuss the current registration requirements for developing CorMedix Neutrolin® as a device/drug combination product.

We intend to submit a new Investigational Device Exemption, or supplement the current Investigational Device Exemption, to the FDA requesting approval of a clinical trial for CorMedix Neutrolin® by mid-2010. The addition of heparin is made to address the catheter patency issue, as highlighted in the study carried out at the University of Alabama. The proposed trial will be a double-blind study involving CorMedix Neutrolin® compared to the current standard of catheter care, the heparin lock. It is anticipated that the study will be of 15 months duration (9 months recruitment, 6 months follow-up), with an expected product launch 12 to 15 months following completion of the trial and submission of the Premarket Approval application to the FDA.

Our strategy is to obtain worldwide approval for CorMedix Neutrolin® solution, and to obtain “Orphan” designation and qualify for FDA grants (of up to $400,000). An Orphan Device grant request was submitted in February 2009. We expect the FDA to remove the requirement for a vanguard phase to the pivotal trial based on the substantial European experience that has been gained with the product in the last 6 years.

Projected key regulatory submissions/communications for both the United States and European Union in the next 12 months include:

selection of E.U. Notified Body and discussions/agreements with them for Type 3 CE marking and CSR certification;
submission of the CTA (if EU studies are necessary) and approval of Type 3 CE mark;
obtaining Investigational Device Exemption approval from the FDA for the trial required to achieve registration.

Development Plans for CRMX003 (CorMedix Neutrolin®)

Pivotal Clinical Trial Design

We plan to conduct a phase III, prospective, multicenter, double-blind, randomized, active comparator controlled study of approximately 400 patients to demonstrate the safety and effectiveness of CorMedix Neutrolin® (1.35% taurolidine, 4% citrate and heparin 1000 u/mL) in preventing catheter-related blood stream infections and maintaining catheter patency in patients receiving hemodialysis therapy as treatment for End Stage Renal Disease three times a week with a tunneled silicone or polyurethane hemodialysis catheter that has demonstrated the ability to deliver sufficient blood flow to enable successful hemodialysis. Patients can be enrolled with either incident catheters (catheters placed less than one week prior to entry) or prevalent catheters.

Subjects will be randomized in a 1:1 ratio to receive either CorMedix Neutrolin® or the active comparator heparin (1000 u/ml) as a catheter locking solution. CorMedix Neutrolin® or heparin will be

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instilled into central venous hemodialysis catheters following all dialysis sessions and will be withdrawn prior to the initiation of the next dialysis session. All subjects will receive standard of care consistent with clinical practice guidelines recommended by KDOQI for the placement, care and use of central venous catheters for hemodialysis therapy.

A total of 400 randomized subjects are planned for this trial, which will have co-primary endpoints. Each will be powered at 90%, such that the aggregate endpoint will have 80% power (0.9*0.9). Calculation of the sample size was based upon the assumption that the cumulative event rate for catheter-related blood stream infections would be 22.6% at 180 days. Although published data have consistently demonstrated an 80 – 90% reduction in catheter-related blood stream infections with Neutrolin®, we conservatively calculated sample size based upon an assumed 60% reduction in catheter-related blood stream infections. Using an α of 0.05 and a power of 90% (2-sided), the required sample size was 190 patients in each arm. The patency endpoint tests the hypothesis that the use of CorMedix Neutrolin® is non-inferior to the heparin comparator for the composite endpoint of requirement for catheter intervention (including use of a tissue plasminogen activator) or requirement for catheter replacement due to catheter thrombosis/dysfunction. A non-inferiority margin of 10% was assumed as was an event rate of 36%. Using an α of 0.05 and a power of 90% (1-sided), the required sample size was 200 patients per arm. The planned treatment duration is 180 days.

The total cost for the study is estimated to be approximately $10 million. The primary endpoints for the study are discussed below.

Freedom from Infection — Up to 180 day freedom from catheter-related bloodstream infections following the initial instillation of CorMedix Neutrolin® solution, or heparin alone

The primary hypothesis is that CorMedix Neutrolin® will significantly increase the time to event of catheter-related blood stream infection, and will reduce the total number of episodes of catheter-related blood stream infection. Catheter-related blood stream infections are defined in the following manner:

the patient must demonstrate clinical signs and symptoms compatible with sepsis, which include one or more of the following: temperature greater than 38° C, rigors, chills, change in mental status or signs of localized catheter-related infection (e.g., tenderness and/or pain, erythema, swelling, purulent exudates within 2 cm of catheter entry site);
the patient must have microbiologically defined catheter-related blood stream infections as demonstrated by positive peripheral blood (or dialyzer blood line) cultures and concordant growth of bacteria with the same antibiogram from one of the following: (i) catheter lumen blood cultures; (ii) catheter tip or interior surface cultures with quantitative cultures >10 3 organisms per segment; or (iii) catheter exit site exudates; and
no other alternative source of infection is identified by clinically indicated testing.

Patency Endpoint — Duration of time that patency and adequate function is maintained up to 180 days following the initial instillation of CorMedix Neutrolin®, or heparin alone

The primary hypothesis is that the instillation of CorMedix Neutrolin® is non-inferior to heparin alone in maintaining patency and catheter function. For the purposes of this study, the endpoint can be satisfied by either of the following clinical events:

need for an interventional procedure (e.g., de-clotting procedure or use of a tissue plasminogen activator) due to dysfunction; or
need for catheter removal or exchange to restore catheter patency.

Secondary Efficacy Endpoints

Secondary efficacy endpoints include mortality, infection rate per-1,000 catheter days, patency-related catheter removal/exchange rate per 1,000 catheter days, frequency of requirement for thrombolytic therapy (tPA) to restore access patency, assessed as events per 1,000 catheter days, freedom from thrombolytic therapy (tPA) at 90 days and 180 days, preservation of catheter blood flow (Qb), and dialysis adequacy (the ability of

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the hemodialysis catheter to deliver sufficient blood flow to enable successful hemodialysis as defined by a monthly average single pool Kt/V (spKt/V) greater than or equal to 1.2 based on all values available for each patient-month).

Efficacy Analysis

The primary efficacy analysis will include all patients. Given the anticipated censoring rate that would normally occur in any study of central venous catheters in hemodialysis patients, the primary analysis will be time to event using the Kaplan-Meier method. As the incidence of catheter-related blood stream infection is quite variable between dialysis units, patients will be stratified by unit and incident vs. prevalent catheter status. Given that hemodialysis patients have multiple co-morbidities, and that patients dialyzing with a central catheter have a high mortality rate, Cox proportional hazards modeling will be done to identify possible confounding covariates (as risk factors for catheter-related blood stream infections have been identified in other studies). Confounding variables will be identified using logistic regression. Additionally, the impact of variables that are thought to be risk factors (age, gender, race, existence of diabetes and previous catheter-related blood stream infections) will be entered into the model. If there are no statistical or clinically relevant confounding covariates, differences in survival will be analyzed using the log-rank test. If important confounding covariates are identified, the primary comparison will be done using the Cox Proportional Hazards Model.

Development Plans for CRMX004

We are conducting pre-clinical laboratory tests with a view to commencing animal studies in the first quarter of 2010 and if successful would expect to start human pilot studies in the fourth quarter of 2010.

Product Commercialization

CRMX003

We expect to launch CorMedix Neutrolin® for the prevention of catheter-related blood stream infections and maintenance of catheter function in hemodialysis patients late in 2012.

The sales model will primarily be one of achieving formulary listing and inclusion as policy and procedure with the key customers (Fresenius and Davita, as dialysis providers, cover 70% of dialysis patients). Key account managers will be required as well as medical liaison specialists.

It is anticipated that the costs of CorMedix Neutrolin® will be included in the future dialysis “bundle”, which will transition in from 2011 – 2014. In the interim, for those centers not participating in the bundle, the product will be billable on the basis of a separate billing “J” code. In any future model of full capitation reimbursement for dialysis services, the value proposition for CorMedix Neutrolin® would be even stronger. Clear demonstration of cost-effectiveness will be important for CMS, private payers and users of CorMedix Neutrolin®.

CRMX004

We will formulate plans for the commercialization of CRMX004 when the product reaches a later stage of development.

Life Cycle Management

CRMX003

We will consider developing CorMedix Neutrolin® for indications for prevention of catheter-related blood stream infections associated with any chronic central venous catheter and peripherally inserted central catheter use, such as cancer chemotherapy, intensive care and total parenteral nutrition.

CRMX004

We intend CRMX004 to provide an alternative to CRMX003 in the dialysis setting. We believe CRMX004 would provide potential advantages over CRMX003 in the dialysis setting due to its unique formulation and would have a longer patent life.

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CRMX001

Market Opportunity — Prevention of Morbidity and Mortality Associated with Contrast Induced Nephropathy

Contrast-induced nephropathy, or CIN, is a common and potentially serious complication arising from the use of iodinated contrast media used in X-ray procedures to identify the status of blood vessels in different parts of the body. CIN is most commonly defined as a new onset or exacerbation of renal dysfunction after contrast administration without other identifiable causes. There are an estimated 150,000 cases per year in the United States. It is the third most common cause of hospital-acquired renal insufficiency (11% of cases) after low blood pressure and major surgery, and is associated with increased mortality, cardiovascular complications (myocardial infarction, stroke, heart failure, etc.), in-hospital and long term, increased dialysis, permanent kidney damage, and delayed discharge/re-hospitalization. In addition, CIN, or the risk of developing CIN, disrupts the workflow of the catheterization laboratory — a key profit center of many hospitals. Any decrease in case load potentially reduces revenue. The most important risk factor for developing CIN is the presence of chronic kidney disease, or CKD.

Currently, the standard of care to prevent CIN in high risk patients with CKD is hydration before and after the procedure with saline (e.g., 1 – 1.5 mL/kg/h of 0.9% saline given 3 – 12 hours before and 6 – 24 hours after contrast procedure) or bicarbonate (3 mL/kg/h given for 1 hour before and 3 – 6 hours afterwards). Additional methods to reduce the risk of developing CIN include minimizing the volume of contrast used, utilizing low or iso-osmolar contrast agents, and withholding potentially nephrotoxic drugs.

There is no single therapeutic intervention that has conclusively and consistently proven to be effective in the prevention of CIN, and there are no FDA-approved preventative treatments. N-acetylcysteine (NAC —  Mucomyst), an antioxidant and free radical scavenger, has been extensively studied in the prevention of CIN, but study results are conflicting. Other therapies that have suggested some efficacy in studies include vitamin C, Prostaglandin E1, theophylline, statins and bicarbonate.

We expect that the incidence of CIN will increase as the number of procedures requiring contrast grows with the ever-expanding scope of image-guided radiological interventions and the burgeoning older population.

There is accumulating evidence that iron plays an important role in the pathogenesis of CIN and the progression of CKD. The mechanism by which iron causes tissue injury in these renal diseases likely involves the generation of reactive oxygen species which cause damage to cell membranes, proteins and deoxyribonucleic acid. Reactive oxidants have the ability to cause both local tissue damage and also to instigate toxic effects distant from their site of generation. We believe that deferiprone, which traps or chelates iron, reducing oxidative stress and cellular injury, will be an effective treatment for the prevention of morbidity and mortality associated with CIN.

Deferiprone is a logical choice for evaluation of the potential therapeutic effect of iron chelation in these renal and cardiovascular diseases for a variety of reasons. There is clear experimental and clinical evidence of the efficacy of deferiprone as an oral iron chelator, complimented by an extensive safety database gathered from the administration of deferiprone for long periods of time and often at considerably higher drug exposure levels than is likely to be required for the suggested renal indications. Deferiprone is able to mobilize iron from reticuloendothelial, hepatocellular and myocardial stores, from intracellular ferritin and hemosiderin, and from transferrin and non-transferrin bound iron present in the serum. Due to its small size and neutral charge, deferiprone is able to access multiple intracellular iron pools and shuttle iron to acceptor molecules in the extracellular space. Deferiprone is also known to be partially excreted in an active form in the urine.

Market Opportunity — Treatment of Chronic Kidney Disease

According to the National Kidney Foundation’s website, one in nine Americans (approximately 20 million people) has chronic kidney disease, or CKD. CKD may lead to the eventual need for dialysis, or early death from cardiovascular diseases. Early detection can help prevent the progression of kidney disease to kidney failure.

We believe deferiprone has the potential to substantially impact the disease burden and reduce the progression of CKD.

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The role of iron in the pathogenesis of chronic renal disease has been proven through research using animal models and human data demonstrating an increased amount of iron in the kidneys and urine of patients with CKD. Furthermore, the use of iron chelators has been demonstrated to reduce or prevent injury in several studies using animal models to research CKD. Most importantly, small proof of concept trials in humans support the potential role of iron chelation in the treatment of CKD. These studies include cohorts of patients with early diabetic renal disease as well as patients with various forms of chronic glomerulonephritis. Both studies demonstrated a reduction in proteinuria (an important predictor of protection from progressive loss of kidney function) over a treatment period of six to nine months and did not demonstrate safety concerns. These studies provide strong supportive evidence for conducting phase II trials in either diabetic nephropathy or chronic glomerulonephritis.

Current treatments for CKD depend upon the primary diagnosis and overall activity of the disease. For diabetics, control of blood pressure and blood sugar are recognized to provide protection against the development and/or progression of CKD. However, even with excellent control of risk factors (and the use of angiotensin-receptor blockers) patients still have “residual risk” for loss of kidney function. On the other hand, high-risk patients with a variety of forms of chronic glomerulonephritis (a very heterogeneous population) are frequently treated with immunosuppressive therapy. However, there are subsets of patients within each of these populations that don’t respond well to any current therapy. Although our Phase II program in CKD is not completely defined, we currently believe that we might initially study patients with either unresponsive IgA Nephropathy or Focal Segmental Glomerulosclerosis.

Our Formulations

We have acquired a range of formulations of deferiprone, which we believe are novel, patentable and targeted to different conditions, including a slow release formulation that allows twice-daily dosing. Oral administration of deferiprone achieves rapid therapeutic plasma concentrations of drug followed by sustained plasma levels using a combination of immediate release and extended release formulations.

CorMedix deferiprone tablets are 900 mg formulated as separate immediate release and extended release tablets. The intended dose is one immediate release tablet and two extended release tablets twice a day for eight days. The unique combination of one immediate release tablet and two extended release tablets, which we plan to use in our lead CIN indication, results in a lower peak drug concentration (Cmax), reducing nausea, while allowing extended iron trapping for 12 hours.

These formulations have been studied in a pharmacokinetic study in the United States including patients with mild to moderate CKD.

Development

Deferiprone is marketed in approximately 50 countries outside of the United States as a treatment for iron overload in a rare condition called Thalassemia major. We benefit substantially from the international body of knowledge already in place, which we believe significantly reduces development risk for future programs. The basic efficacy and safety of deferiprone is well-known from treatment of iron overload disorders, and it has been shown to be very effective at reducing heart damage due to iron. In general, deferiprone is well tolerated, but as with other iron chelators in the iron overload setting, some patients may experience white cell suppression with long-term and high doses; this side effect has not been seen to date with the short term dosing proposed in our study.

Prevention of Morbidity and Mortality Associated with Contrast Induced Nephropathy

Our first targeted indication for deferiprone is for the prevention (decrease in the rate of incidence) of morbidity and mortality associated with acute kidney injury in subjects with moderate to severe CKD and other risk factors undergoing interventional cardiac procedures and receiving an iodinated radiocontrast agent. There are multiple lines of evidence that form the scientific and clinical basis for our belief in the potential efficacy of deferiprone in preventing the morbidity and mortality associated with x-ray dye, which are described below.

1) Oxidative stress due to labile (toxic) iron is a fundamental mechanism in the pathogenesis of contrast induced nephropathy and many other forms of acute kidney injury. Labile iron and

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oxidative stress increase following contrast in humans, labile iron is increased in the kidneys of patients with CKD, and contrast further increases urinary labile iron and markers of tubular injury.
2) CKD presents the “perfect storm” for contrast damage, including increased labile iron, chronic inflammation, increased baseline oxidative stress, mitochondrial dysfunction, and endothelial dysfunction with reduced vascular autoregulation.
3) Raised labile iron predicts poor kidney transplant function and poor outcomes following myocardial infarction in diabetics.
4) Deferiprone protects the heart from damaging effects of excess labile iron in chronic iron overload disorders and binding labile iron improves clinical outcomes in the following circumstances:
binding labile iron (deferoxamine) reduces markers of oxidative stress, better preserves myocardial cells and improves outcomes following cardiopulmonary bypass surgery; and
binding labile iron (dexrazoxane) reduces the cardiovascular toxicity of doxorubicin.
5) The primary mechanisms leading to kidney injury following contrast appear to be both a direct toxic effect of the dye, and blood vessel spasm leading to a reduction in tissue oxygenation. The latter could be thought of as a “mild heart attack” occurring in the kidney. Iron chelators have been demonstrated to be protective in animal models of simulated “heart attack” and in patients have demonstrated improved outcomes following coronary artery bypass surgery.
6) A secondary mechanism leading to CIN is the direct toxic effect of contrast on renal cells. Binding labile iron is effective in all studied models of AKI (myoglobinuria, cisplatin, gentamicin and contrast). Also, labile iron is an important mediator of cellular injury, oxidative stress and mitochondrial dysfunction: deferiprone reduces labile iron, oxidative stress and improves mitochondrial and endothelial function.

Our current regulatory strategy for deferiprone is to obtain approval in the United States for the marketing of deferiprone for the prevention (decrease in the rate of incidence) of morbidity and mortality associated with acute kidney injury in subjects with moderate to severe CKD and risk factors undergoing interventional cardiac procedures and receiving an iodinated radiocontrast agent. Our goal is to be the first company to obtain this approval. As a second step, we plan to develop a strategy for the approval of deferiprone for the above indication in the rest of the world, with Europe as the next region of interest. We also believe that we may be able to obtain orphan status for this indication, thus extending our regulatory exclusivity.

An in-person meeting with the FDA was held on March 27, 2007, to discuss development plans for the approval of deferiprone for the prevention (decrease in the rate of incidence) of acute kidney injury secondary to contrast agent administration in high risk patients with CKD. This meeting was instrumental in reaching the following key verbal agreements with the FDA:

no additional preclinical studies would be required to support marketing approval;
one pivotal safety and efficacy clinical study would be required to support marketing approval (also reached agreement over the acceptable study end points); and
agreement to accept and review the protocol for the pivotal clinical study via the Special Protocol Assessment process.

On September 10, 2007, a response was obtained from the FDA confirming the satisfactory design of the pivotal clinical study to support marketing approval.

Our current expectation is that completion of the New Drug Application for deferiprone for the desired indication will require completion of the following: a single, pivotal safety and efficacy clinical trial (DEFEND-AKI), a thorough QT/QTc study and a drug-drug interaction study. The total cost to file the New Drug Application is anticipated to be approximately $30 million (DEFEND-AKI study, pharmacology studies, manufacturing/CMC and regulatory filing costs).

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Biomarker Study: Dr. Peter McCullough, William Beaumont Hospital, Royal Oak, MI

Prior to commencement of the pivotal trial, we have decided to initially perform a small biomarker “proof of concept” study, which is planned to begin in the first quarter of 2010. We expect that the trial will generate specific data on the ability of our formulations of deferiprone to reduce biomarker evidence of acute kidney injury, consequently reducing the risk of the phase III trial, potentially enhancing the primary endpoint and providing pharmacokinetic data that is required for our patent continuation filing. This study will include exactly the same population as DEFEND-AKI and will recruit 60 patients over 6 months and cost approximately $1 million. The primary endpoint will be a reduction in biomarkers with CRMX001 versus placebo (NGAL, Cystatin C, creatinine, liver fatty acid binding protein, Kidney injury molecule-1, glutathione-S- transferase).

Pivotal Clinical Trial: DEFEND-AKI

The phase III pivotal trial is already designed and would be the largest pharmaceutical trial ever conducted for the prevention of CIN. In addition, the patient population will also be the highest-risk population ever studied. Currently there is no proven pharmaceutical therapy that prevents or reduces the frequency/severity of CIN. Given this need, and the clear relationship between the development of CIN (defined as a change in renal function) and important clinical outcomes, the FDA has allowed us a unique opportunity to register CRMX001 following the successful completion of a single pivotal trial.

The trial will be a randomized, double-blind, placebo-controlled, parallel-arm, multicenter study. The entry criteria for the trial includes the requirement for moderate to severe CKD as determined by an eGFR <60 mL/min, and at least one additional risk factor (diabetes, age greater than or equal to 75 years or heart failure). The patients will receive either low or iso-osmolar radiocontrast dye for a cardiac interventional procedure. Standard of care will be provided to all patients. This includes the avoidance of nephrotoxic medications, limiting contrast volume as much as clinically possible and hydration both before and after the procedure.

CRMX001 will be given as one immediate release tablet and two extended release tablets (total dose 2.7 g) 1 – 3 hours before angiography and given twice daily for a total of eight days. This dose is close to the initial starting dose for treatment of iron-overload disorders. Eight days of dosing was selected as contrast may be retained in patients with CKD for an extended period and oxidative stress is also present for at least 72 hours in some patients. Patients will be monitored for 90 days following the procedure and the composite endpoint includes any of the following: death, myocardial infarction, dialysis, stroke/TIA, heart failure or re-hospitalization. Given the known safety profile of deferiprone, no significant toxicity or safety issues are anticipated during the trial. From a statistical perspective, the trial is powered (80%) to demonstrate a  1/3 reduction of the composite event rate (30% to 20%) at an α of 0.025.

The principal investigator for the DEFEND-AKI trial will be Peter McCullough M.D., who is widely considered to be one of the foremost authorities on CIN. The “Executive Committee” for the trial consists of Peter McCullough, John Hirshfeld, Bruce Molitoris, Christian Mueller and Sudhir Shah (a principal stockholder of CorMedix). The Clinical Research Organization conducting the trial is Quintiles, Inc., which has significant recent experience in catheterization lab studies. Ninety study sites for the trial have been identified in the United States, Germany, Poland and Switzerland.

Treatment of Chronic Kidney Disease

The risk-benefit profile of deferiprone must be carefully balanced with the underlying condition given the rare occurrence of neutropenia agranulocytosis with chronic therapy. Therefore, a careful development plan will be conducted, taking into account dose-response and the impact on surrogate markers of disease and safety — including our own catalytic iron biomarker test — to ensure that a patient population and dose regimen with the best risk-benefit profile is selected prior to starting a phase III trial.

An Investigational New Drug Application (No. 62,180) is already in place for CKD progression. We could anticipate beginning a new proof of concept study in 2010 with dose-ranging utilizing extended release formulations. We are consulting with some of the world’s experts in the field to design our program. We have also received direction from the FDA in an in-person meeting held in March 2007. In particular, we are exploring the FDA’s willingness to consider the use of novel endpoints beyond the typical death/dialysis or

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doubling of serum creatinine typically required for registration of such an indication. Assuming successful completion of the proof of concept study, which, according to our current timelines, we estimate will take approximately eighteen months, we could potentially commence a phase III trial for deferiprone in 2012 and have a product launch in 2015.

Primary Glomerulonephritis

We currently have early proof of concept from two studies in diabetic nephropathy and glomerulonephritis which were presented at the 40 th Annual American Society of Nephrology meeting in November 2007. In these studies, deferiprone was able to significantly reduce protein in the urine, a sign of active kidney disease and a predictor for loss of kidney function. The glomerulonephritis study was conducted in fourteen patients with the following types of glomerulonephritis: Membranous, Focal Segmental Sclerosis, IgA nephropathy, Membranoproliferative and secondary glomerulonephritis (SLE, hemolytic-uremic syndrome, Henoch-Schonlein purpura). Deferiprone was given in a dose of 50mg/Kg/day for six months and consistent reduction (48%) in proteinuria, regardless of etiology, was demonstrated.

We have completed a pharmacokinetic study in renally impaired patients, and are discussing the optimal design of our next studies with the FDA and world experts. Some of these options include focused orphan indications such as specific types of glomerulonephritis (IgA nephropathy, FSGS, etc.).

Product Commercialization

Prevention of Morbidity and Mortality Associated with Contrast Induced Nephropathy

The primary target audience for the CIN indication will be catheterization laboratory-based interventional cardiologists and secondarily nephrologists and interventional radiologists. There are 6,300 interventional cardiologists and approximately 2,200 catheterization labs in the United States of which 1,000 “target” labs conduct the majority of procedures.

We believe that a “sales” force of approximately 50, including medical liaisons, sales representatives and management would be adequate to support the product. The rapid inclusion in relevant guidelines would be important to accelerate uptake. Given the medical safety issue surrounding the use of radiocontrast in at-risk patients and the anticipated morbidity-mortality label for deferiprone, we expect the ramp-up to peak sales and penetration to be faster (3 years) and larger (up to 90%) than for a typical new product launch.

We conducted a formal value-based pricing analysis based on expected events avoided. This analysis shows that the product is cost-neutral at a per-treatment cost of $3,500 (using a threshold cost per-QALYG less than $50,000) and, we believe, highly cost-effective at a cost of $1,000 per treatment (cost per QALYG of only $3,500). The actual cost-effectiveness will ultimately depend on the results of the DEFEND-AKI trials and the chosen sales price.

Given the largely in-patient nature of this high-risk patient group, reimbursement is expected to be via specific Disease Related Groups that cover these high-risk patients.

All in all, we believe that the disease area known as CIN represents a reasonably fast-to-market opportunity — with significant sales potential.

Treatment of Chronic Kidney Disease

The target physician population for CKD will depend upon the intended indication. If we ultimately develop CRMX001 as a therapy to reduce “residual risk” in patients with diabetic nephropathy, the target group would include both nephrologists and endocrinologists, although nephrologists are more likely to care for these more advanced stage patients. Currently in the United States, there are approximately 5,500 nephrologists, although it is likely that a subset of these would treat the majority of these high-risk patients. However, to reach a larger population it would be important to achieve guideline endorsement for CRMX001 in this specific population.

If the CKD indication is partial or unresponsive chronic glomerulonephritis, the physician pool is much smaller. These patients are generally seen at major nephrology centers that specialize in the care of uncommon chronic glomerular disorders (such as the Center for Glomerular Diseases at Columbia University in New York City). Key opinion leader support and inclusion on treatment guidelines will be very important for this indication.

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Life Cycle Management

Prevention of Morbidity and Mortality Associated with Contrast Induced Nephropathy

Pending a positive result from the first study, and successful issuance of a CIN patent, we could extend the product label by conducting additional studies, which could include:

a broader range of angiography procedure involving iodinated contrast, such as urgent coronary angiography and peripheral angiography (e.g., whole body CT, neurological imaging);
patients with a broader range of risk factors such as hypertension, acute hypotension, nephrotoxic drug use, anemia, single kidney, transplanted kidney, staged procedure with contrast media less than 2 weeks prior, age over 60 years, chemotherapy, and HIV/AIDS;
prevention of AKI associated with various nephrotoxins such as aminoglycoside antibiotics and cis-platinum;
prevention of AKI in CABG (coronary bypass); and
other contrast media such as gadolinium-based contrast.

We believe that the value drivers (exclusivity, first mover advantage, development costs, unmet need) and ultimately return on investment is maximized by rapid execution, for the reasons stated below.

1) There is a major unmet medical need
Significant morbidity and mortality is associated with the development of CIN
Improvements in radiocontrast agents and hydration has not eliminated CIN in high risk patients
Major medical safety issue means high level of support from regulatory and other agencies and associations as first mover (FDA CDER, FDA Orphan division, CMS, Professional bodies like AKIN, ACC)
2) There are compelling exclusivity reasons to move quickly
Exclusivity would be enhanced by being first deferiprone NCE in United States (5 vs. 3 years)
Achieving first orphan designation requires followers to demonstrate superiority (adds 2 years to base exclusivity)
3) Being the first marketed preventive agent with a morbidity-mortality claim is important
Drug with morbidity-mortality claim could rapidly become standard of care due to medical safety issue/litigation risk
Future agents would need to compare to deferiprone in non-inferiority design or as add-on
Hurdle for followers is substantially raised due to increased development cost and risk
4) Clear FDA pathway has significantly reduced development costs
Single 800 patient study as basis for New Drug Application — defined by SPA
Minimal clinical-pharmacology requirements; no additional toxicology testing

Treatment of Chronic Kidney Disease

We believe that the target population for use of deferiprone for the prevention (decrease in the rate of incidence) of morbidity and mortality associated with acute kidney injury numbers fewer than 200,000 patients in the United States, making it a potential orphan indication. As a result, we anticipate that we will achieve at minimum 7 years of exclusivity (5 years of regulatory Hatch-Waxman exclusivity with the first United States registration of Deferiprone and an additional 2 years for the orphan indication).

There are other potential indications for deferiprone, which have pediatric uses. With the approval of the pediatric uses during the above exclusivity period(s), six months will be added to the above exclusivity

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periods. In addition, if CRMX001 is first to market, it will also be considered a Reference Listed Drug and we will be able to list our patents regarding deferiprone (currently pending) in the Orange Book. This should delay generic competition for several years beyond the above-mentioned exclusivity periods.

CRMX002 (Labile Iron Diagnostic Test)

Market Opportunity

Iron is an essential element within all cells of the body. Iron’s importance, in part, has to do with its ability to cycle between two different chemical forms. One of these forms, however, can be damaging to cells through a process called “oxidative stress”. Labile iron has been shown to be both a cause and a marker of multiple types of tissue injury and is increased in the urine of patients with chronic kidney disease and in the blood of patients that have acute coronary syndromes (ex. heart attack).

Based on the toxicity of raised labile iron to cells and tissues, we see a possible future in which testing for “toxic labile iron” could be as relevant as testing for HbA1c or LDL cholesterol, in other words making the concept of “knowing your labile iron number” as important as knowing your cholesterol.

To this end, we aim to develop, validate and, make widely available, a urine diagnostic test for labile iron that could be used to diagnose CKD, identify patients at risk for CKD and identify likely treatment responders and monitor response to therapy with CRMX001.

Formulation

We envision a diagnostic test that would be performed by multiple reference laboratories worldwide. Depending upon the actual performance characteristics of the assay, it is possible that it could be performed in most large hospital laboratories. The clinical validation of the assay as to its sensitivity and specificity to diagnose or monitor chronic renal diseases will largely determine demand, which, in turn, will determine how widely and easily available the assay will become.

Development

Our issued chronic kidney disease patents cover the use of a diagnostic test for urine labile iron and allow us to develop the market for this biomarker. We anticipate developing assay methodology and validating this against current methodologies. Once we have established a reproducible test we will scale-up the test and establish predictive levels for risk, diagnosis and treatment monitoring. We expect that the fully developed test would then be licensed to a global diagnostic company before the launch of CRMX001 in chronic kidney disease.

The timeline for development of CRMX002 will be determined based in part on our funds available.

Product Commercialization

Depending upon the actual performance characteristics of the assay, it is possible that it could be performed in most large hospital laboratories. Consequently we envision the assay being available in most central laboratories. The test could also be developed into a point of care product for use in doctor’s offices.

We would seek to partner the diagnostic product with a suitable diagnostic company.

Manufacturing

All of our manufacturing processes currently are, and we expect them to continue to be, outsourced to third parties. We rely on third-party manufacturers to produce sufficient quantities of drug product for use in clinical trials. We intend to continue this practice for any future clinical trials and commercialization of our products.

A U.S.-based Active Pharmaceutical Ingredient developer, has agreed in principle to provide Active Pharmaceutical Ingredient (manufactured in India at an FDA-compliant facility) and a Drug Master File for CRMX003, subject to entering into a definitive supply agreement, which we expect to do once sufficient funding is available. The clinical trial material and finished product will be manufactured by either or both a European and U.S. company.

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The deferiprone drug substance for CRMX001 is sourced from a company based in India. This site has received previous FDA audits and was also audited by us. No significant issues were identified. The finished product is manufactured by a United States company which was also recently audited by the FDA without citations. The first phase III commercial-sized batch has been produced. Stability studies are ongoing in PVC and ACLAR blisters and bottles and no substantive stability issues have been identified to date. Additional API is available for production of the second and third batches required for the New Drug Application. In order to meet the requirements for 18 months stability, production of these batches will commence when the pivotal trial is about to start. The clinical trial packaging was undertaken by a United States company.

Competitive Landscape for Our Products

CRMX003 and CRMX004 — Prevention and Treatment of Catheter-Related Blood Stream Infections

Products in development in the United States for the prevention and treatment of catheter-related blood stream infections are listed below.

       
Product   Company   Mechanism   Estimated Launch   Differentiation
Zuragen   Ash Access   Antimicrobial and anticoagulant Methylene blue + parabens + citrate 7%   2011   First potential approvable treatment for catheter-related blood stream infections in the U.S. Potentially need to undertake a 2 nd pivotal trial which will delay launch
B-Lock   Great Lakes Pharmaceuticals Inc.   Minocycline + EDTA + ethanol combinations   Pre Investigational Device Exemption discussions with the FDA   Contains an antibiotic

Antibiotic or antimicrobial coated catheters have been launched by some device companies as short term prevention of catheter infection. These are not effective for hemodialysis catheters due to long term use and high blood flow.

CRMX001 — Prevention of Morbidity and Mortality Associated with Contrast Induced Nephropathy

There are only three other iron traps, or chelators, currently marketed. We believe that none are suited for use in cardiorenal disease and that our patents would preclude the marketing of any iron chelator for cardiorenal indications without a cross-license with us.

The Ferriprox® brand of deferiprone is sold in Europe and Asia as a 500mg immediate release formulation with a high Cmax (associated with nausea) that must be given three times daily, exhibiting a completely different pharmacokinetic profile from the CorMedix formulations.

Deferoxamine (Desferal®) has been available for the longest period of time. It is given intravenously or subcutaneously and due to the large size of the molecule, it does not adequately penetrate cells. Further, we believe the parenteral delivery system will preclude its use in our targeted indications and that multiple days of therapy are likely required.

Desferasirox (Exjade®) is an oral iron trap that was recently launched in the United States and European Union. It has a different pharmacokinetic profile than CRMX001 and is excreted primarily in the feces. Post-marketing experience has revealed frequent and significant renal adverse events (increasing proteinuria and creatinine) including cases of fatal renal failure, making it unlikely, in our opinion, that this product could be used for cardiorenal indications.

A comparison of CRMX001 with the other three currently marketed iron chelators is found below:

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  Deferiprone
CMX001
(CorMedix)
  Deferiprone
Ferriprox® (1)
  Desferasirox
Exjade® (2)
  Deferoxamine (3)
Desferal®
Route   Oral IR/ER
(b.i.d)
  Oral IR
(t.i.d)
  Oral daily   I.V./S.C.
Renal Toxicity   No   No   Yes   No
Active drug in urine   Yes   Yes   No   Yes
Method of use patents in cardiorenal disease   Yes   No   No   No
Effective at redistributing iron/ membrane permeable   Yes   Yes   Yes   No
Launch date   N/A   2000 EU   2006   1970s

(1) Registered Trademark of Apopharma Inc.
(2) Registered Trademarks of Novartis
(3) Also known as desferrioxamine, desferoxamine

We do not believe that currently available iron traps are suited for development for the prevention (decrease in the rate of incidence) of morbidity and mortality associated with CIN either because of an intravenous form of delivery in the case of deferoxamine or because of documented renal toxicity in the case of desferasirox (Exjade®).

We do not believe there are any late stage investigational new drugs currently in development for this indication. Off-label studies continue to be conducted for N-acetyl cysteine and sodium bicarbonate, but results are inconclusive.

However, there are a number of device-based approaches currently under development by our competitors, including those listed below.

Reprieve® Endovascular Temperature Therapy  — cooling system for core body temperature
Benephit® CV Infusion System  — renal artery infusion catheter for targeted drug delivery or fluids
RenalGuard® Therapy  — matched fluid replacement device

We believe that none of these approaches will match the efficacy and simplicity of a short course of deferiprone tablets given before and after contrast administration.

CRMX001 — Treatment of Chronic Kidney Disease

Although we have not yet made a final decision, we believe that our initial studies would be in patients with unresponsive or partially responsive forms of chronic glomerulonephritis, specifically IgA Nephropathy and Focal Segmental Glomerulosclerosis. The treatments for these two disorders are largely targeted to drugs that modify the body’s immune system (glucocorticoids, azathioprine, cyclosporine, cytoxan, etc.). However, there are groups of patients that do not respond at all or that have only a partial response or toxicity from the drugs themselves. This would likely be our target population.

There are other compounds in clinical trials for these specific diseases. Most are immune-modulating therapies (mycophenolate mofetil, Rituximab, sirolimus, active forms of vitamin D, etc.) and therapies targeting the Renin-Angiotensin System (angiotensin converting-enzyme inhibitors, angiotensin receptor blockers and direct rennin inhibitors). Our proof of concept studies suggests that deferiprone will reduce proteinuria in patients with these disorders and thus may improve long-term outcomes.

Government Regulation

General

The production, distribution, and marketing of products employing our technology, and our development activities, are subject to extensive governmental regulation in the United States and in other countries. In the

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United States, our products are regulated as drugs and are subject to the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations of the FDA, as well as to other federal, state, and local statutes and regulations. These laws, and similar laws outside the United States, govern the clinical and preclinical testing, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, record-keeping, reporting, advertising, and promotion of our products. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantial resources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay in approving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.

The following paragraphs provide further information on certain legal and regulatory issues with a particular potential to affect our operations or future marketing of products employing its technology.

Research, Development, and Product Approval Process

The research, development, and approval process in the United States and elsewhere is intensive and rigorous and generally takes many years to complete. The typical process required by the FDA before a therapeutic drug may be marketed in the United States includes:

preclinical laboratory and animal tests performed under the FDA’s Good Laboratory Practices regulations;
submission to the FDA of an Investigational New Drug Application, which must become effective before human clinical trials may commence;
preliminary human clinical studies to evaluate the drug’s safety and effectiveness for its intended uses;
FDA review of whether the facility in which the drug is manufactured, processed, packed, or held meets standards designed to assure the product’s continued quality; and
submission of a marketing application to the FDA, and approval of the application by the FDA.

During preclinical testing, studies are performed with respect to the chemical and physical properties of candidate formulations. These studies are subject to GLP requirements. Biological testing is typically done in animal models to demonstrate the activity of the compound against the targeted disease or condition and to assess the apparent effects of the new product candidate on various organ systems, as well as its relative therapeutic effectiveness and safety. An Investigational New Drug Application must be submitted to the FDA and become effective before studies in humans may commence.

Clinical trial programs in humans generally follow a three-phase process. Typically, Phase 1 studies are conducted in small numbers of healthy volunteers or, on occasion, in patients afflicted with the target disease. Phase 1 studies are conducted to determine the metabolic and pharmacological action of the product candidate in humans and the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness. In Phase 2, studies are generally conducted in larger groups of patients having the target disease or condition in order to validate clinical endpoints, and to obtain preliminary data on the effectiveness of the product candidate and optimal dosing. This phase also helps determine further the safety profile of the product candidate. In phase III, large-scale clinical trials are generally conducted in patients having the target disease or condition to provide sufficient data for the statistical proof of effectiveness and safety of the product candidate as required by United States and foreign regulatory agencies.

In the case of products for certain serious or life-threatening diseases, the initial human testing may be done in patients with the disease rather than in healthy volunteers. Because these patients are already afflicted with the target disease or condition, it is possible that such studies will also provide results traditionally obtained in Phase 2 studies. These studies are often referred to as “Phase 1/2” studies. However, even if patients participate in initial human testing and a Phase 1/2 study carried out, the sponsor is still responsible for obtaining all the data usually obtained in both Phase 1 and Phase 2 studies.

Before proceeding with a study, sponsors may seek a written agreement from the FDA regarding the design, size, and conduct of a clinical trial. This is known as a Special Protocol Assessment (“SPA”). Among

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other things, SPAs can cover clinical studies for pivotal trials whose data will form the primary basis to establish a product’s efficacy. SPAs help establish up-front agreement with the FDA about the adequacy of a clinical trial design to support a regulatory approval, but the agreement is not binding if new circumstances arise. There is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA.

United States law requires that studies conducted to support approval for product marketing be “adequate and well controlled.” In general, this means that either a placebo or a product already approved for the treatment of the disease or condition under study must be used as a reference control. Studies must also be conducted in compliance with good clinical practice requirements, and informed consent must be obtained from all study subjects.

The clinical trial process for a new compound can take ten years or more to complete. The FDA may prevent clinical trials from beginning or may place clinical trials on hold at any point in this process if, among other reasons, it concludes that study subjects are being exposed to an unacceptable health risk. Trials may also be prevented from beginning or may be terminated by institutional review boards, who must review and approve all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede, or prevent marketing authorization. Similarly, adverse events that are reported after marketing authorization can result in additional limitations being placed on a product’s use and, potentially, withdrawal of the product from the market.

Following the completion of clinical trials, the data are analyzed to determine whether the trials successfully demonstrated safety and effectiveness and whether a product approval application may be submitted. In the United States, if the product is regulated as a drug, a New Drug Application must be submitted and approved before commercial marketing may begin. The New Drug Application must include a substantial amount of data and other information concerning the safety and effectiveness of the compound from laboratory, animal, and human clinical testing, as well as data and information on manufacturing, product quality and stability, and proposed product labeling.

Each domestic and foreign manufacturing establishment, including any contract manufacturers CorMedix may decide to use, must be listed in the New Drug Application and must be registered with the FDA. The application generally will not be approved until the FDA conducts a manufacturing inspection, approves the applicable manufacturing process for the drug product, and determines that the facility is in compliance with cGMP requirements.

Under the Prescription Drug User Fee Act, as amended, the FDA receives fees for reviewing an New Drug Application and supplements thereto, as well as annual fees for commercial manufacturing establishments and for approved products. These fees can be significant. For fiscal year 2010, the New Drug Application review fee alone is $1,405,500, although certain limited deferral, waivers, and reductions may be available.

Each New Drug Application submitted for FDA approval is usually reviewed for administrative completeness and reviewability within 45 to 60 days following submission of the application. If deemed complete, the FDA will “file” the New Drug Application, thereby triggering substantive review of the application. The FDA can refuse to file any New Drug Application that it deems incomplete or not properly reviewable. The FDA has established performance goals for the review of New Drug Applications — six months for priority applications and 10 months for standard applications. However, the FDA is not legally required to complete its review within these periods and these performance goals may change over time. Moreover, the outcome of the review, even if generally favorable, typically is not an actual approval but an “action letter” that describes additional work that must be done before the application can be approved. The FDA’s review of an application may involve review and recommendations by an independent FDA advisory committee. Even if the FDA approves a product, it may limit the approved therapeutic uses for the product as described in the product labeling, require that warning statements be included in the product labeling, require that additional studies be conducted following approval as a condition of the approval, impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval.

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Significant legal and regulatory requirements also apply after FDA approval to market under a New Drug Application. These include, among other things, requirements related to adverse event and other reporting, product advertising and promotion and ongoing adherence to cGMPs, as well as the need to submit appropriate new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. The FDA also enforces the requirements of the Prescription Drug Marketing Act which, among other things, imposes various requirements in connection with the distribution of product samples to physicians.

The regulatory framework applicable to the production, distribution, marketing, and/or sale, of our products may change significantly from the current descriptions provided herein in the time that it may take for any of its products to reach a point at which a New Drug Application is approved.

Overall research, development, and approval times depend on a number of factors, including the period of review at FDA, the number of questions posed by the FDA during review, how long it takes to respond to the FDA’s questions, the severity or life-threatening nature of the disease in question, the availability of alternative treatments, the availability of clinical investigators and eligible patients, the rate of enrollment of patients in clinical trials, and the risks and benefits demonstrated in the clinical trials.

Drugs for Serious or Life-Threatening Illnesses

The Federal Food, Drug, and Cosmetic Act, as amended, and FDA regulations provide certain mechanisms for the accelerated “Fast Track” approval of products intended to treat serious or life-threatening illnesses which have been studied for safety and effectiveness and which demonstrate the potential to address unmet medical needs. The procedures permit early consultation and commitment from the FDA regarding the preclinical and clinical studies necessary to gain marketing approval. Provisions of this regulatory framework also permit, in certain cases, New Drug Applications to be approved on the basis of valid surrogate markets of product effectiveness, thus accelerating the normal approval process. Where the FDA approves a product on the basis of a surrogate market, it requires the sponsor to perform post-approval, or Phase 4, studies as a condition of approval, and may withdraw approval if post-approval studies do not confirm the intended clinical benefit or safety of the product. Special rules would also apply to the submission to the FDA of advertising and promotional materials prior to use.

Orphan Drugs

Under the Orphan Drug Act, special incentives exist for companies to develop products for rare diseases or conditions, which are defined to include those diseases or conditions that affect fewer than 200,000 people in the United States, companies may request that the FDA grant a drug orphan designation prior to approval. Products designated as orphan drugs are eligible for special grant funding for research and development, FDA assistance with the review of clinical trial protocols, potential tax credits for research, reduced filing fees for marketing applications, and a special seven-year period of market exclusivity after marketing approval. Orphan drug exclusivity prevents FDA approval of applications by others for the same drug and the designated orphan disease or condition. The FDA may approve a subsequent application from another entity if the FDA determines that the application is for a different drug or different use, or if the FDA determines that the subsequent product is clinically superior, or that the holder of the initial orphan drug approval cannot assure the availability of sufficient quantities of the drug to meet the public’s need. A grant of an orphan designation is not a guarantee that a product will be approved. If a sponsor receives orphan drug exclusivity upon approval, there can be no assurance that the exclusivity will prevent another entity or a similar drug from receiving approval for the same or other uses.

Controlled Substances

Compounds that have a potential for patient dependence and abuse are classified as controlled substances under the Controlled Substances Act, regulations of the DEA, and similar state and foreign laws. In the United States, for new chemical entities under development for medicinal use, designated staff at the FDA make recommendations about whether a drug should be scheduled as a controlled substance, and the Drug Enforcement Administration (“DEA”) makes the final determination. States then either follow the federal classification or make their own determination. In the case of a new drug approved by the FDA, the final DEA scheduling determination generally occurs several months or longer after the FDA’s approval.

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Drugs that are scheduled as controlled substances are subject to stringent regulatory requirements, including requirements for registering manufacturing and distribution facilities, security controls and employee screening, recordkeeping, reporting, product labeling and packaging, import and export. There are five federal schedules for controlled substances, known as Schedule I, II, III, IV and V. The regulatory requirements that apply to a drug vary depending on the particular controlled substance schedule into which a drug is placed, based on consideration of its potential for dependence and abuse and its medicinal uses. Schedules I and II contain the most stringent restrictions and requirements, and Schedule V the least. No products with recognized medicinal uses are in Schedule I. For substances in Schedule I and II, quotas must be obtained from the DEA in order to manufacture, procure, and distribute inventory. For all controlled substances, there are potential criminal and civil penalties that apply for the failure to meet applicable legal requirements. Healthcare professionals must have special DEA licenses in order to prescribe controlled substances.

Other United States Regulatory Requirements

In the United States, the research, manufacturing, distribution, sale, and promotion of drug and biological products are potentially subject to regulation by various federal, state, and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Heath Care Financing Administration), other divisions of the United States Department of Health and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments. For example, sales, marketing, and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, the privacy provision of the Health Insurance Portability and Accountability Act, and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection, unfair competition, and other laws.

Moreover, CorMedix is now, and may become subject to, additional federal, state, and local laws, regulations, and policies relating to safe working conditions, laboratory practices, the experimental use of animals, and/or the use, storage, handling, transportation, and disposal of human tissue, waste, and hazardous substances, including radioactive and toxic materials and infectious disease agents used in conjunction with our research work.

Foreign Regulatory Requirements

CorMedix and its collaborative partners may be subject to widely varying foreign regulations, which may be quite different from those of the FDA, governing clinical trials, manufacture, product registration and approval, and pharmaceutical sales. Whether or not FDA approval has been obtained, CorMedix or its collaboration partners must obtain a separate approval for a product by the comparable regulatory authorities of foreign countries prior to the commencement of product marketing in these countries. In certain countries, regulatory authorities also establish pricing and reimbursement criteria. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. In addition, under current United States law, there are restrictions on the export of products not approved by the FDA, depending on the country involved and the status of the product in that country.

Reimbursement and Pricing Controls

In many of the markets where CorMedix or its collaborative partners would commercialize a product following regulatory approval, the prices of pharmaceutical products are subject to direct price controls (by law) and to drug reimbursement programs with varying price control mechanisms. Public and private health care payors control costs and influence drug pricing through a variety of mechanisms, including through negotiating discounts with the manufacturers and through the use of tiered formularies and other mechanisms that provide preferential access to certain drugs over others within a therapeutic class. Payors also set other criteria to govern the uses of a drug that will be deemed medically appropriate and therefore reimbursed or otherwise covered. In particular, many public and private health care payors limit reimbursement and coverage

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to the uses of a drug that are either approved by the FDA or that are supported by other appropriate evidence (for example, published medical literature) and appear in a recognized drug compendium. Drug compendia are publications that summarize the available medical evidence for particular drug products and identify which uses of a drug are supported or not supported by the available evidence, whether or not such uses have been approved by the FDA. For example, in the case of Medicare coverage for physician-administered oncology drugs, the Omnibus Budget Reconciliation Act of 1993, with certain exceptions, prohibits Medicare carriers from refusing to cover unapproved uses of an FDA-approved drug if the unapproved use is supposed by one or more citations in the American Hospital Formulary Service Drug Information the American Medical Association Drug Evaluations, or the United States Pharmacopoeia Drug Information. Another commonly cited compendium, for example under Medicaid, is the DRUGDEX Information System.

License Agreements and Intellectual Property

CRMX001 and CRMX002

On July 28, 2006, we entered into the Shiva Contribution Agreement. Pursuant to the Shiva Contribution Agreement, Shiva contributed to us its kidney products business and granted us an exclusive, worldwide license agreement for a patent estate covering proprietary formulations of deferiprone and a biomarker diagnostic test for measuring levels of labile iron, the Shiva Technology. The Shiva Technology served as the basis for CRMX001 and CRMX002, respectively. In addition to an initial fee and equity stake in the Company provided to Shiva under the Shiva Contribution Agreement, we are also required to make cash payments to Shiva upon the achievement of certain clinical and regulatory-based milestone and the maximum aggregate amount of such payments, assuming achievement of all milestones, is $10,000,000. Events that trigger milestone payments include but are not limited to the reaching of various stages of applicable clinical trials and regulatory approval processes. Under the terms of the Shiva Contribution Agreement, in the event that the Shiva Technology is commercialized, we are also obligated to pay to Shiva annual royalties based upon net sales of the products. In the event that we sublicense Shiva Technology to a third party, we are obligated to pay to Shiva a portion of the royalties, fees or other lump-sum payments we receive from the sublicense.

Pursuant to the Shiva Contribution Agreement, we have licensed worldwide rights to “Kidney Disease” use patents for deferiprone as well as the following patents and patent applications:

all method of use patents for the application of iron chelators to the treatment of chronic kidney disease and the prevention of contrast induced nephropathy filed in major non-U.S. markets like Japan, Europe, Australia and Canada;
seven Chronic Kidney Disease diagnosis and treatment patents in the U.S. (6,933,104; 6,906,052; 6,908,733; 6,995,152; 6,998,396; 7,045,282; 7,037,643). Patent office action or responses for non-U.S. filings are awaited; and
fourteen additional patent applications, some in different renal indications such as contrast induced nephropathy, erythropoetin resistant anemia and gadolinium associated nephrogenic fibrosing dermopathy, which have been published and/or are pending.

The original composition of the patent for deferiprone has now expired.

Three patent families for deferiprone were developed and filed by Shiva Biomedical, LLC and licensed by CorMedix. All these patents are focused on the application of iron chelators in cardiorenal disease. The earliest patent family, originally filed in 2000 (now issued in the United States and a notice of allowance received in Europe), has broad claims related to the diagnosis (based on urine catalytic iron) and treatment of progressive kidney disease (all forms of glomerulonephritis and other nephropathies). The patent covers the use of any iron chelator (including deferoxamine and desferasirox) in this setting and will expire in 2020.

The second patent family, focused on the prevention of acute renal failure associated with iodinated radiocontrast dyes (CIN), was filed in August 2005, and is still undergoing prosecution. This patent also seeks the broad application of all iron chelators and through the filing of a continuation in part application is anticipated to have a significant formulation element (drug product claim/s) as well as method of treatment claims and if issued, will expire in 2025.

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The third patent, seeks to apply iron chelators to reduce the so-called erythropoietin ‘resistance’ sometimes encountered in the dialysis setting, on the basis that this approach reduces inflammation and oxidative stress and increases iron flux.

In addition to the above three patent families, a fourth patent application, filed by us in November 2006, seeks to apply iron chelators and catalytic iron in the treatment of and diagnosis of gadolinium-induced toxicity. Gadolinium is a contrast agent commonly used for magnetic resonance imaging.

CRMX003 and CRMX004

On January 30, 2008, we entered into a License and Assignment Agreement with NDP. Pursuant to the NDP License Agreement, NDP granted us exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications, the NDP Technology. We acquired such licenses and patents through our assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann, and Dr. Johannes Reinmueller. NDP also granted us exclusive licenses, with the right to grant sublicenses, to use and display certain trademarks in connection with the NDP Technology. As consideration in part for the rights to the NDP Technology, we paid NDP an initial licensing fee of $325,000 and granted NDP an equity interest in the Company, consisting presently of 533,905 shares of common stock, subject to certain anti-dilution adjustments. In addition, we are required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Such payments will be made in the form of shares of common stock currently held in escrow for NDP, presently amounting to 213,562 shares of common stock, subject to certain anti-dilution adjustments. The NDP License Agreement contains other customary clauses and terms as are common in similar agreements in the industry.

On January 30, 2008, we also entered into an Exclusive License and Consulting Agreement with Dr. Polaschegg. Pursuant to the Polaschegg License Agreement, Dr. Polaschegg granted us an exclusive, worldwide license for a gel lock invention and certain taurolidine treatments and the corresponding United States patent applications, the Polaschegg Technology. The Polaschegg Technology serves as a basis for CRMX004. As consideration for the rights to the Polaschegg Technology, in addition to an initial fee, we agreed to pay Dr. Polaschegg certain royalty payments ranging from 1% to 3% of the net sales of the Polaschegg Technology. The Polaschegg License Agreement also sets forth certain minimum royalty payments (on an annual basis) to be made to Dr. Polaschegg in connection with the Polaschegg Technology. The Polaschegg License Agreement contains other customary clauses and terms as are common in similar agreements in the industry.

Pursuant to the NDP License Agreement and the Polaschegg License Agreement, we have licensed worldwide rights to the following patents and patent applications:

four issued U.S. patents and three issued foreign patents in connection with an antimicrobial catheter lock solution comprising taurolidine, citric acid and sodium citrate;
one pending U.S. patent application and four pending foreign patent applications in connection with an antimicrobial catheter lock solution comprising taurolidine and low concentration heparin;
one pending U.S. patent application and one issued foreign patent in connection with an antimicrobial catheter lock solution comprising a thixotropic gel incorporating taurolidine;
one issued U.S. patent and one pending foreign patent application in connection with a biocidal lock system providing an infection-free fluid connection to the vascular system of a patient;
two issued U.S. patents, one issued foreign patent and two pending foreign patent applications in connection with a process for disinfecting the space between an implanted device and encapsulating tissue, using an antimicrobial substance such as taurolidine;
one issued U.S. patent and four pending foreign patent applications in connection with an antimicrobial peritoneal dialysis solution for inhibiting infection within the abdomen; and

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one pending U.S. patent application and one pending foreign patent application for processes and treatments relating to the use of antimicrobial substances such as taurolidine for a wide range of specific infections and specific prophylaxis methods and devices used in treatment.

We believe that this patent portfolio covers effective solutions to the various problems discussed previously when using taurolidine in clinical applications, and specifically in hemodialysis applications. We intend to file additional patent applications to cover any additional related subject matter we develop.

Employees

We currently employ 3 full-time employees. None of our employees is represented by a labor union and we have not experienced any strikes or work stoppages. We believe our relations with our employees are good.

Facilities

Our facilities consist of approximately 3,800 square feet of leased office space in Summit, New Jersey that houses our corporate headquarters. The lease terminates in March 2010.

We believe that these facilities are adequate to meet our current needs. We believe that if additional or alternative space is needed in the future, such space will be available on commercially reasonable terms as necessary.

Corporate History

We were organized as a Delaware corporation on July 28, 2006 under the name “Picton Holding Company, Inc.” and we changed our corporate name to “CorMedix Inc.” on January 18, 2007. Our principal executive offices are located at 86 Summit Avenue, Suite 301, Summit, NJ 07901-3647. Our telephone number is (908) 517-9500.

Legal Proceedings

We are not currently a party to any material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

The following table sets forth the name, age and position of each of our directors and executive officers.

   
Name   Age   Position
John C. Houghton   46   President and Chief Executive Officer, Director
Russell H. Ellison, M.D., M.Sc.   62   Chairman of the Board
Mark Houser, M.D., M.B.A.   58   Chief Medical Officer
Mahendra Patel, Ph.D.   60   Director
Antony E. Pfaffle, M.D.   46   Director
Timothy Hofer   35   Director, Secretary
Stephen Pilatzke   30   Treasurer

The business experience for the past five years (and, in some instances, for prior years) of each of the Company’s executive officers and directors are as follows:

John C. Houghton became our President and Chief Executive Officer in May 2009. Previously, Mr. Houghton was our Chief Business Officer from January 2007 to May 2009. Mr. Houghton was the Vice President for Global Sales & Marketing at Stryker Biotech, a manufacturer of medical devices and medical equipment, from February 2005 to December 2006, where he helped build the United States and European Union sales and marketing infrastructure. Mr. Houghton worked for Aventis, Inc. and predecessor company Rhone-Poulenc Rorer Ltd. from 1992 to 2005, now a part of Sanofi-Aventis, an international pharmaceutical company, where he held positions of increasing responsibility, culminating in his role as Global New Products Marketing & Licensing Head for Cardiovascular, Diabetes, Respiratory, Inflammation and Bone. Mr. Houghton received his B.Sc. degree from Liverpool University in 1987.

Russell H. Ellison, M.D., M.Sc. joined us as Chairman of the Board in July 2007. Dr. Ellison serves as Executive Vice President of PBS. From October 2005 until June 2007, Dr. Ellison served as the Vice President of Clinical Development of Fibrogen, Inc., a privately held biotechnology company. From August 2002 to December 2004, Dr. Ellison served as Vice President of Medical Affairs and Chief Medical Officer of Sanofi-Synthelabo, USA, a pharmaceutical company. From May 1997 to August 2002, Dr. Ellison served as Vice President, Medical Affairs and Chief Medical Officer of Hoffman-La Roche, Inc., a pharmaceutical company. Dr. Ellison also serves as a director of several privately held development stage biotechnology companies. Dr. Ellison holds an M.D. from the University of British Columbia and an M.Sc. (with distinction) from The London School of Tropical Medicine and Hygiene.

Mark Houser, M.D., M.B.A. joined us as our Chief Medical Officer in March 2007. Previously, Dr. Houser worked for Ortho Biotech Products, a biopharmaceutical company that is an affiliate of Johnson & Johnson, a health, medical devices and pharmaceuticals conglomerate, from August 2002 to February 2007, where he held positions of increasing responsibility, culminating in his role as Medical Director, Internal Medical Clinical Affairs. Dr. Houser is Clinical Professor of Pediatrics at the University of Nebraska Medical Center, where he has been on teaching staff since 1983. Dr. Houser earned a Masters of Business Administration degree from Arizona State University in 2002, and completed his medical degree at University of Nebraska Medical Center in 1975.

Mahendra Patel, Ph.D. has been a director of CorMedix since March 2008. Dr. Patel is the Chief Executive Officer of Navinta LLC, a technology development company that supplies dosage formulations to the pharmaceutical industry. Previously, Dr. Patel served as Chief Scientific Officer in charge of Global Pharmaceutical Development and as Support Leader to the Business Development and Merger & Acquisition groups at Sandoz, a Novartis affiliate, from January 2000 to December 2004. He is a member of the Board of Directors of Emcure Pharmaceuticals based in Pune, India, and of Zydus Pharmaceuticals USA. Dr. Patel received his M.S. and Ph.D. degrees in Pharmacy from the University of Wisconsin, Madison, and his B.Sc. degree in Chemistry from Gujarat University, India. Dr. Patel is a director of Shiva BioMedical, LLC, which is one of our technology licensors and major stockholders.

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Antony E. Pfaffle, M.D. has been a director of CorMedix since February 2007. Dr. Pfaffle has been a Partner at Bearing Circle Capital, L.P., an investment fund, since May 2007. He was a Managing Director at Paramount BioCapital, Inc. and Senior Vice-President of Business Development at Paramount BioSciences, LLC from December 2005 to May 2007. Dr. Pfaffle was a Principal and Founder of Black Diamond Research, an investment research company, from July 2001 to December 2005. Dr. Pfaffle is an internist who practiced nephrology at New York Hospital, Lenox Hill and Memorial Sloan-Kettering. Dr. Pfaffle received his M.D. degree from New York Medical College in 1989.

Timothy M. Hofer has been a director of CorMedix since February 2007, and was appointed our Secretary in November 2006. Mr. Hofer is Senior Vice President, Legal Affairs for Paramount BioCapital, Inc. and Paramount Biosciences, LLC, where he has been employed since April 2005. Mr. Hofer also serves as an officer and director of several privately held development stage biotechnology companies. From July 2000 until March 2005, Mr. Hofer was an associate in the Mergers & Acquisitions/Private Equity practice group of the New York office of the law firm O’Melveny & Myers LLP, and its predecessor, O’Sullivan Graev & Karabell, LLP.

Stephen Pilatzke has been our Treasurer since February 2008. Mr. Pilatzke currently serves as the Senior Controller of PBS, where he has been employed since December 2005. Previously, Mr. Pilatzke worked as an auditor at Eisner LLP, an accounting and advisory firm, from November 2001 through December 2005. Mr. Pilatzke is an officer of several privately held biotechnology companies. Mr. Pilatzke received his Bachelor’s degree in Accounting from Binghamton University in 2001. Mr. Pilatzke is a certified public accountant.

Director Independence

We anticipate that each of our directors and nominees, with the exception of                 , will qualify as “independent” under the listing standards of NYSE Amex (even though we are not currently listed on such exchange), federal securities laws and SEC rules with respect to members of boards of directors and members of all board committees on which he or she serves.

Arrangements Regarding Nomination for Election to the Board of Directors

The Underwriting Agreement with Maxim Group LLC, referred to herein as Maxim, will provide that we will permit Maxim to either (i) designate one individual who meets the independence criteria of NYSE Amex to serve on the Board of Directors for the three-year period following the closing of this offering or (ii) in the event that the individual designated by Maxim is not elected to the Board of Directors, have a representative of Maxim attend all meetings of the Board of Directors as an observer during such three-year period. Such director or observer, as the case may be, will attend meetings of the Board of Directors, receive all notices and other correspondence and communications sent by us to our directors, and such director will receive compensation equal to the highest compensation of other non-employee directors, excluding the Chairman of the Audit Committee. We expect to appoint a designee of Maxim to our Board of Directors prior to the completion of this offering.

Under the terms of the Shiva Contribution Agreement, Shiva has the right to appoint one person to our Board of Directors during the term of the Shiva Contribution Agreement. Mr. Patel was appointed to our Board of Directors pursuant to this right.

Board Committees

Our Board of Directors does not have any committees at this time. Prior to the completion of this offering, our Board of Directors will have the following committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by our Board of Directors.

Audit Committee

Our Audit Committee will consist of           , each of whom will satisfy the independence requirements under NYSE Amex and SEC rules and regulations applicable to audit committee members and have an understanding of fundamental financial statements.            will serve as chairman of the Audit Committee.

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           will qualify as an “audit committee financial expert” as that term is defined in the rules and regulations of the SEC. The designation of            as an “audit committee financial expert” will not impose on him any duties, obligations or liability that are greater than those that are generally imposed on him as a member of our Audit Committee and our Board of Directors, and his designation as an “audit committee financial expert” pursuant to this SEC requirement will not affect the duties, obligations or liability of any other member of our Audit Committee or Board of Directors.

The Audit Committee will monitor our corporate financial statements and reporting and our external audits, including, among other things, our internal controls and audit functions, the results and scope of the annual audit and other services provided by our independent registered public accounting firm and our compliance with legal matters that have a significant impact on our financial statements. Our Audit Committee also will consult with our management and our independent registered public accounting firm prior to the presentation of financial statements to stockholders and, as appropriate, initiates inquiries into aspects of our financial affairs. Our Audit Committee will be responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters, and will have established such procedures to become effective upon the effectiveness of the registration statement of which this prospectus forms a part. In addition, our Audit Committee will be directly responsible for the appointment, retention, compensation and oversight of the work of our independent auditors, including approving services and fee arrangements. All related party transactions will be approved by our Audit Committee before we enter into them.

Both our independent auditors and internal financial personnel will regularly meet with, and will have unrestricted access to, the Audit Committee.

Compensation Committee

Our Compensation Committee will consist of       , each of whom will satisfy the independence requirements of NYSE Amex and SEC rules and regulations. Each member of this committee will be a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended.        will serve as chairman of the Compensation Committee.

The Compensation Committee will review and approve our compensation policies and all forms of compensation to be provided to our executive officers and directors, including, among other things, annual salaries, bonuses, and other incentive compensation arrangements. In addition, our Compensation Committee will administer our stock option and employee stock purchase plans, including granting stock options to our executive officers and directors. Our Compensation Committee also will review and approve employment agreements with executive officers and other compensation policies and matters.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee will consist of             , each of whom will satisfy the independence requirements of NYSE Amex and SEC rules and regulations.        will serve as chairman of the Nominating and Corporate Governance Committee.

Our Nominating and Corporate Governance Committee will identify, evaluate and recommend nominees to our Board of Directors and committees of our Board of Directors, conduct searches for appropriate directors and evaluate the performance of our Board of Directors and of individual directors. The Nominating and Corporate Governance Committee also will be responsible for reviewing developments in corporate governance practices, evaluating the adequacy of our corporate governance practices and reporting and making recommendations to the Board of Directors concerning corporate governance matters.

Family Relationships

There are no family relationships between any of our directors or executive officers.

Scientific Advisory Boards

CorMedix has established two Scientific Advisory Boards that provide guidance to the Company on matters of scientific relevance.

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Our Cardiorenal Advisory Board is composed of leading physicians with special expertise in cardiorenal disease, representing the fields of nephrology, diabetes and endocrinology and cardiology. We believe these outstanding physicians will provide the high-level critical thinking and cutting-edge expertise we will require as we work to become a leading innovator in this exciting, challenging area of medicine. They provide feedback and advice regarding unmet medical needs, new therapeutic options, guidance on the design and conduct of clinical studies; and critical thinking on product development strategies and in-licensing opportunities.

Our Ferroscience Advisory Board is composed of leading scientists in the field of iron biology, or “ferroscience” to provide feedback and advice regarding the role of iron and oxidative stress in tissue injury and cardiorenal disease, and the current and potential future uses of iron chelation therapy.

In addition to our Scientific Advisory Boards, we have a Neutrolin® consultant group, which is composed of leading physicians with expertise in hemodialysis, infectious diseases (specifically catheter-related blood stream infections) and vascular access. We believe that the group will be able to advise us on the optimal development plan, with particular emphasis on clinical trial design.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following Summary Compensation Table shows the compensation awarded to or earned by our President and Chief Executive Officer and other two most highly-compensated executive officers for fiscal 2008. Also shown is the compensation awarded to or earned by our former President and Chief Executive Officer due to the fact that he held such positions during a portion of fiscal 2008. The persons listed in the following Summary Compensation Table are referred to herein as the “Named Executive Officers.”

         
Name and Principal Position   Year   Salary
($)
  Bonus
($)
  Option
Awards
($)
  Total
($)
John Houghton
President and Chief Executive Officer (1)
    2008       220,000       75,000       3,265 (2)       298,265  
Bruce Cooper
Former President and Chief Executive Officer (3)
    2008       350,000       100,000             450,000  
Mark Houser
Chief Medical Officer
    2008       220,000             3,265 (4)       223,265  
Stephen Pilatzke
Treasurer (5)
    2008                          

(1) Mr. Houghton became our President and Chief Executive Officer in May 2009. Previously, Mr. Houghton was our Chief Business Officer from January 2007 to May 2009.
(2) On August 1, 2008, under the 2006 Stock Incentive Plan, our Board of Directors granted Mr. Houghton options to purchase 15,000 shares of our common stock at an exercise price of $1.05 per share. One-third of the options vest on each of the first three anniversaries of the grant date.
(3) Dr. Cooper served as our President and Chief Executive Officer from November 2006 to June 2009.
(4) On August 1, 2008, under the 2006 Stock Incentive Plan, our Board of Directors granted Dr. Houser options to purchase 15,000 shares of our common stock at an exercise price of $1.05 per share. One-third of the options vest on each of the first three anniversaries of the grant date.
(5) Mr. Pilatzke is not compensated by us for his services as Treasurer. Mr. Pilatzke is an employee of Paramount BioSciences, LLC.

Employment Agreements and Arrangements

John Houghton

On December 22, 2006, we entered into an employment agreement with Mr. Houghton to act as our Chief Business Officer (the “Original Houghton Employment Agreement”), for an initial term of three years. We have agreed with Mr. Houghton to amend and restate his employment agreement, effective as of November 25, 2009 (the “Amended and Restated Houghton Employment Agreement”) in connection with his appointment as our President and Chief Executive Officer in May 2009.

Pursuant to the Amended and Restated Houghton Employment Agreement, Mr. Houghton will receive an annual base salary of $250,000, and is eligible for annual milestone bonus payments of up to 30% of his base salary. The Amended and Restated Houghton Employment Agreement will also provide for incentive bonuses of $25,000 or $50,000 if we license a therapeutic drug, diagnostic, device or biologic through Mr. Houghton’s primary efforts, depending on the safety and efficacy of such compound. In addition, the Amended and Restated Houghton Employment Agreement will provide for a $50,000 bonus upon consummation of this offering and certain market capitalization bonuses. In connection with his entry into the Original Houghton Employment Agreement, on January 2, 2007, Mr. Houghton was issued 105,999 restricted shares of common stock, one third of which vests on each of the first three anniversaries of the grant, if Mr. Houghton remains our employee. The Original Houghton Employment Agreement further entitled Mr. Houghton to a one-time $30,000 cash payment in reimbursement for relocation expenses. The Original Houghton Employment Agreement did, and the Amended and Restated Houghton Agreement will, provide for severance payments in certain circumstances, as discussed in detail below.

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Mark Houser

On February 14, 2007, we entered into an employment agreement with Dr. Houser to act as our Chief Medical Officer (the “Houser Employment Agreement”) for an initial term of three years, which term will extend automatically for additional one-year periods unless appropriate notice is given by one of parties. Pursuant to the Houser Employment Agreement, Dr. Houser receives an annual base salary of $220,000, and is eligible for annual milestone bonus payments of up to 30% of his base salary. In connection with his entry into the Houser Employment Agreement, on March 1, 2007, Dr. Houser was issued 105,999 restricted shares of common stock, one third of which vests on each of the first three anniversaries of the grant, if Dr. Houser remains our employee. The Houser Employment Agreement provides for severance payments in certain circumstances, as discussed in detail below.

Bruce Cooper

On November 9, 2006, we entered into an employment agreement with Dr. Cooper to act as our President and Chief Executive Officer (the “Cooper Employment Agreement”) for a term of three years. Pursuant to the Cooper Employment Agreement, Dr. Cooper received an annual base salary of $350,000, with a guaranteed annual bonus of $100,000 provided he was employed on the last day of the applicable year. Dr. Cooper was also eligible for annual milestone bonus payments of up to 40% of his base salary. The Cooper Employment Agreement further provided for market capitalization bonuses of between $125,000 and $1,000,000 depending on the attainment of market capitalization milestones. The Cooper Employment Agreement provided for the issuance to Dr. Cooper of common stock equal to 7.5% of our then outstanding common stock on a fully-diluted basis, with the shares vesting on each of the first three anniversaries of the grant, if Dr. Cooper remained our employee. The Cooper Employment Agreement also provided anti-dilution protections under which we were obligated to issue stock options to Dr. Cooper sufficient to maintain his ownership percentage at 7.5% of the outstanding common stock on a fully diluted basis. Such options were to vest, if at all, annually from the date of grant in equal proportions on each anniversary of Dr. Cooper’s employment agreement, such right terminating once we raised $10 million through the sale of our equity securities. The Cooper Employment Agreement also provided for severance payments in certain circumstances, as discussed in detail below.

Dr. Cooper resigned from his position as our Chief Executive Officer in June 2009, and continued to serve as a member of our Board of Directors until November 2009.

Potential Payments Upon Termination or Change in Control

John Houghton

Pursuant to the Amended and Restated Houghton Employment Agreement, if we terminate Mr. Houghton as a result of his death or disability, Mr. Houghton, or his estate, as applicable, will receive his base salary, plus any accrued but unpaid annual milestone bonus and incentive bonus he is owed for a period of three months following his death or disability, and all unvested restricted shares and stock options held by Mr. Houghton that are scheduled to vest within the next year will be accelerated and vest as of the termination date. If we terminate Mr. Houghton for cause or Mr. Houghton terminates his employment other than for good reason, Mr. Houghton will receive his base salary and unreimbursed expenses through the date of termination. If we terminate Mr. Houghton upon the occurrence of a change of control, and on the date of termination the fair market value of our common stock is more than $50,000,000 (as determined by the Board of Directors in good faith), Mr. Houghton will receive his base salary and benefits for a period of six months following his termination, and all unvested restricted shares and stock options held by Mr. Houghton that are scheduled to vest will be accelerated and vest as of the termination date. If we terminate Mr. Houghton for reasons other than those stated above or Mr. Houghton terminates his employment for good reason, Mr. Houghton will receive his base salary and benefits for a period of six months following his termination, and all unvested restricted shares and stock options will be accelerated and vest as of the termination date.

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Mark Houser

Pursuant to the Houser Employment Agreement, if we terminate Dr. Houser as a result of his death or disability, Dr. Houser, or his estate, as applicable, will receive his base salary, plus any accrued but unpaid annual milestone bonus and incentive bonus he is owed through the date of his death or disability, and all unvested restricted shares and stock options held by Dr. Houser that are scheduled to vest on the next succeeding anniversary of March 1, 2007 will be accelerated and vest as of the termination date. If we terminate Dr. Houser for cause or Dr. Houser terminates his employment other than for good reason, Dr. Houser will receive his base salary and unreimbursed expenses through the date of termination. If we terminate Dr. Houser within 30 days prior to or 60 days following the occurrence of a change of control, and on the date of termination the fair market value of our common stock is less than twice the amount we have raised in gross proceeds through the sale of equity securities (as determined by the Board of Directors in good faith), Dr. Houser will receive his base salary and benefits for a period of three months following his termination, and all unvested restricted shares and stock options held by Dr. Houser that are scheduled to vest on the next succeeding anniversary of March 1, 2007 will be accelerated and vest as of the termination date. If we terminate Dr. Houser for reasons other than those stated above or Dr. Houser terminates his employment for good reason, Dr. Houser will receive his base salary and benefits for a period of six months following his termination, and all unvested restricted shares and stock options will be accelerated and vest as of the termination date.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth certain information, on an award-by-award basis, concerning unexercised options to purchase common stock and common stock that has not yet vested for each Named Executive Officer and outstanding as of December 31, 2008.

           
  Option Awards   Stock Awards
Name   Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number of
Shares That
Have Not
Vested
(#)
  Market
Value of
Shares That
Have Not
Vested
($)
John Houghton (1)           15,000       1.05       8/1/2018                    
                                           35,333       37,100  
Bruce Cooper                                    
Mark Houser (2)           15,000       1.05       8/1/2018                    
                                           35,333       37,100  
Stephen Pilatzke                                    

(1) On August 1, 2008, Mr. Houghton was granted options to purchase 15,000 shares of common stock, with one third of such options vesting on each of the first three anniversaries of the grant date, if Mr. Houghton remains employed by us at such times. On January 2, 2007, in conjunction with the execution of the Houghton Employment Agreement, Mr. Houghton purchased 105,999 restricted shares of our common stock at a purchase price of $0.001 per share, with one third of such shares vesting on each of the first three anniversaries of such purchase if Mr. Houghton remains employed by us at such times.
(2) On August 1, 2008, Dr. Houser was granted options to purchase 15,000 shares of common stock, with one third of such options vesting on each of the first three anniversaries of the grant date, if Dr. Houser remains employed by us at such times. On March 1, 2007, in conjunction with the execution of the Houser Employment Agreement, Dr. Houser purchased 105,999 restricted shares of our common stock at a purchase price of $0.001 per share, with one third of such shares vesting on each of the first three anniversaries of such purchase if Dr. Houser remains employed by us at such times.

Employee Benefit and Stock Plans

2006 Stock Incentive Plan

Our 2006 Stock Incentive Plan provides us with the flexibility to use restricted stock, stock options and other awards based on our common stock as part of an overall compensation package to provide performance-based compensation to attract and retain qualified personnel. We believe that awards under the 2006 Stock

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Incentive Plan may serve to broaden the equity participation of key employees and further link the long-term interests of management and stockholders. Awards under the 2006 Stock Incentive Plan are limited to shares, and options to purchase shares, of our common stock.

To date, no shares of common stock, and options to purchase 185,000 shares of common stock, have been issued under the 2006 Stock Incentive Plan. As of November 24, 2009, 740,000 shares of common stock remain authorized for issuance under the 2006 Stock Incentive Plan.

Administration

The 2006 Stock Incentive Plan will be administered by a compensation committee appointed by our Board of Directors. The compensation committee will consist of two or more non-employee directors, each of whom is intended to be, to the extent required by Rule 16b-3 under the Securities Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code (the “Code”), a non-employee director under Rule 16b-3 and an outside director under Section 162(m), or if no committee exists, the Board of Directors. References below to the compensation committee include a reference to the board for those periods in which the board is acting. The compensation committee has the full authority to administer and interpret the 2006 Stock Incentive Plan and to take any other actions and make all other determinations that it deems necessary or appropriate in connection with the 2006 Stock Incentive Plan or the administration or interpretation thereof.

Eligibility and Types of Awards

Our employees, directors and consultants, advisors or other independent contractors who provide services to us are eligible to be granted stock options, stock awards and performance shares under the 2006 Stock Incentive Plan.

Available Shares

Subject to adjustment upon certain corporate transactions or events, a maximum of 925,000 shares of our common stock may be issued under the 2006 Stock Incentive Plan. In addition, subject to adjustment upon certain corporate transactions or events, a participant may not receive awards with respect to more than 300,000 shares of common stock in any year. If an option or other award granted under the 2006 Stock Incentive Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. Unless previously terminated by our Board of Directors, no new award may be granted under the 2006 Stock Incentive Plan after the tenth anniversary of the date that such plan was initially approved by our stockholders.

Awards Under the Plan

Stock Options .  The terms of specific options, including whether options will constitute “incentive stock options” for purposes of Section 422(b) of the Code, will be determined by the compensation committee. The exercise price of an option will be determined by the compensation committee and reflected in the applicable award agreement. The exercise price with respect to incentive stock options may not be lower than 100% (110% in the case of an incentive stock option granted to a 10% stockholder, if permitted under the plan) of the fair market value of the common stock on the date of grant. Each option will be exercisable after the period or periods specified in the award agreement, which will generally not exceed ten years from the date of grant (or five years in the case of an incentive stock option granted to a 10% stockholder, if permitted under the plan). Options will be exercisable at such times and subject to such terms as determined by the compensation committee.

Stock Awards and Restricted Stock .  A stock award consists of the transfer by us to a participant of shares of common stock as additional compensation for their services. Restricted stock will be subject to restrictions as the compensation committee will determine, and such restrictions may include a prohibition against transfer until such time as the compensation committee determines, forfeiture upon a termination of employment or other service during the applicable restriction period and such other conditions or restrictions as the compensation committee may deem advisable.

Performance Shares .  A performance share consists of an award paid in shares of common stock or cash (as determined by the compensation committee), subject to performance objectives to be achieved by the participant before the end of a specified period. The grant of performance shares to a participant does not

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create any rights in such participant as a shareholder until the payment of shares of common stock with respect to an award. In the event that a participant’s employment or consulting engagement with us is terminated for any reason other than normal retirement, death or disability prior to the achievement of the participant’s performance objectives, the participant’s rights to the performance shares will expire and terminate unless otherwise determined by the compensation committee.

Change in Control

Upon a change in control of us (as defined in the 2006 Stock Incentive Plan), if the acquiring entity or successor to the Company does not assume the incentive awards or replace them with substantially equivalent incentive awards, all outstanding options will vest and become immediately exercisable in full, the restrictions on all shares of restricted stock awards will lapse immediately and all performance shares will be deemed to be met and payment made immediately.

Amendment and Termination

Our Board of Directors may amend the 2006 Stock Incentive Plan as it deems advisable, except that it may not amend the 2006 Stock Incentive Plan in any way that would adversely affect a participant with respect to an award previously granted. In addition, our Board of Directors may not amend the 2006 Stock Incentive Plan without shareholder approval if such approval is then required pursuant to Section 422 of the Code, the regulations promulgated thereunder or the rules of any stock exchange or similar regulatory body.

Director Compensation

The following table sets forth information regarding compensation earned by our directors who are not Named Executive Officers during the fiscal year ended December 31, 2008.

       
Director   Fees Earned
or Paid in
Cash ($)
  Stock
Awards
($)
  Option
Awards
($)
  Total
($)
Russell H. Ellison                 26,116 (1)       26,116  
Mahendra Patel                        
Antony E. Pfaffle                        
Timothy Hofer                        

(1) On August 1, 2008, Dr. Ellison was awarded options to purchase 120,000 shares of common stock at an exercise price of $1.05 per share. One-third of the options vest on each of the first three anniversaries of the grant date.

Other than Dr. Ellison, our directors did not receive compensation for their service on our Board of Directors in 2008. The Board of Directors or a committee thereof will adopt a comprehensive director compensation policy prior to the completion of this offering.

Mr. Hofer does not receive any compensation from us for his service as our Corporate Secretary. Mr. Hofer is an employee of Paramount BioSciences, LLC and Paramount BioCapital, Inc.

Indemnification of Officers and Directors

Our amended and restated certificate of incorporation that will be in effect upon the closing of this offering limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the General Corporation Law of the State of Delaware, referred to herein as the DGCL. Our amended and restated certificate of incorporation provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors for any of the following:

any breach of their duty of loyalty to us or our stockholders;
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
voting or assenting to unlawful payments of dividends or other distributions; or

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any transaction from which the director derived an improper personal benefit.

Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act or failure to act, or any cause of action, suit or claim that would accrue or arise prior to any amendment or repeal or adoption of an inconsistent provision. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited in accordance with the DGCL.

In addition, our amended and restated certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.

We have entered into, and intend to continue to enter into, separate indemnification agreements with each of our officers and directors. These agreements, among other things, require us to indemnify our officers and directors for certain expenses, including attorney’s fees, judgments, fines and settlement amounts incurred by an officer or director in any action or proceeding arising out of their services as one of our officers and directors, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request, to the fullest extent permitted by Delaware law. We will not indemnify an officer director, however, unless he or she acted in good faith, reasonably believed his or her conduct was in, and not opposed, to our best interests, and, with respect to any criminal action or proceeding, had no reason to believe his or her conduct was unlawful.

Equity Compensation Plan Information

The following table provides information as of December 31, 2008 about the common stock that may be issued upon exercise of options, warrants and rights under all of our equity compensation plans as of December 31, 2008.

     
Plan Category   Number of Shares to
Be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights (1)
  Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
  Number of Shares
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
     (a)   (b)   (c)
Equity compensation plans approved by security holders     235,000     $ 1.05       690,000  
Equity compensation plans not approved by security holders                  
Total     235,000     $ 1.05       690,000  

(1) The number of shares is subject to adjustments in the event of stock splits and other similar events.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Paramount BioCapital, Inc., Lindsay A. Rosenwald, M.D. and Picton

Dr. Rosenwald is the Chairman, Chief Executive Officer and sole stockholder of Paramount BioCapital, Inc. (“Paramount”). Dr. Rosenwald currently beneficially owns approximately 17.5% of our voting capital stock. In addition, the Family Trusts (certain trusts established for the benefit of Dr. Rosenwald’s children) currently own approximately less than one percent of our voting capital stock. In addition, certain other trusts established for the benefit of Dr. Rosenwald and his family currently own approximately 12.4% of our voting capital stock. Following the completion of the offering, Dr. Rosenwald will beneficially own approximately   % of our voting capital stock, and the Family Trusts will own approximately   % of our voting capital stock.

Pursuant to the Shiva Contribution Agreement, Picton’s stockholders, which included Dr. Rosenwald, the trusts mentioned above, Antony Pfaffle and Timothy Hofer, contributed to us all of their Picton shares in exchange for shares of our common stock on a one-for-one basis.

From July 28, 2006 through September 30, 2009, PBS, of which Dr. Rosenwald is the sole member, had loaned us an approximate aggregate principal amount of $1,062,003, and from August 11, 2006 through September 30, 2009, the Family Trusts had loaned us an approximate aggregate principal amount of $1,430,000. The loans from PBS are evidenced by the PBS Note and the loans from the Family Trusts are evidenced by the Family Trusts Note, which together with the PBS Note, are referred to herein as the Paramount Notes. As of September 30, 2009, $166,479, including accrued and unpaid interest, was outstanding under the PBS Note and $434,715, including accrued and unpaid interest, was outstanding under the Family Trusts Note. The Paramount Notes will mature on July 31, 2010 and all outstanding principal amount of the Paramount Notes, and all accrued interest thereon, will automatically convert into the securities issued in a Qualified Financing on the same terms as the 12% Notes. This offering, if consummated, will be considered a Qualified Financing. Assuming an offering price of $       per Unit, the Paramount Notes will automatically convert into            Units.

Paramount acted as the co-placement agent in connection with the offering of the First Bridge Notes. As compensation for its services, Paramount received $505,050 in commissions and a warrant exercisable for such number of shares of common stock equal to 10% of the aggregate purchase price of the First Bridge Notes sold through Paramount ($7,215,000) divided by $1.00, or 721,500 shares, at a per share exercise price of $1.00. This warrant will be cancelled prior to the completion of this offering.

Paramount also acted as a co-placement agent in connection with the offering of the Second Bridge Notes. As compensation for its services, Paramount received $126,000 in commissions.

In addition, certain employees of Paramount and its affiliates are current stockholders, and former and current employees, of the Company and certain current and former employees of Paramount and its affiliates have been granted options to purchase shares of common stock. Specifically, on August 1, 2008, our Board of Directors granted options to purchase 120,000 shares of common stock to Dr. Russell Ellison, the Chairman of our Board and Executive Vice President of PBS, and options to purchase 15,000 shares of common stock to Matt Davis, a former employee of PBS and consultant to the Company. These options were granted under the 2006 Stock Incentive Plan and each has an exercise price of $1.05 per share. Dr. Ellison’s options have a three-year vesting schedule, with one-third vesting on each of the first three anniversaries of the grant date, while Mr. Davis’ options are fully vested.

Shiva BioMedical and Dr. Sudhir Shah, M.D.

Pursuant to the Shiva Contribution Agreement, Shiva contributed to us its kidney products business and granted us an exclusive, worldwide license agreement for the Shiva Technology. As consideration in part for the rights to the Shiva Technology, we paid Shiva an initial licensing fee of $500,000 and granted Shiva an equity interest in the Company. Shiva currently owns 773,717 shares of our common stock. Additionally, under the Shiva Contribution Agreement we are also required to make cash payments to Shiva upon the achievement of certain clinical and regulatory-based milestone and the maximum aggregate amount of such payments, assuming achievement of all milestones, is $10,000,000. Events that trigger milestone payments include but are not limited to the reaching of various stages of applicable clinical trials and regulatory

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approval processes. Under the terms of the Shiva Contribution Agreement, in the event that the Shiva Technology is commercialized, we are also obligated to pay to Shiva annual royalties based upon net sales of the products. In the event that we sublicense Shiva Technology to a third party, we are obligated to pay to Shiva a portion of the royalties, fees or other lump-sum payments we receive from the sublicense.

Pursuant to the terms of the Shiva Contribution Agreement, we are currently obligated to issue additional shares of common stock to Shiva BioMedical, LLC sufficient to maintain its ownership percentage, as defined, at 7.0% of the outstanding common stock on a fully diluted basis, until such time that we have raised $25 million through the sale of our equity securities or until an initial public offering, reverse merger or a sale of the Company. This obligation will expire upon the completion of this offering.

In connection with the Shiva Contribution Agreement, on July 28, 2006, we entered into a consulting agreement with Sudhir Shah, a member of our Cardiorenal Advisory Board and President of Shiva, which was amended and restated on January 10, 2008 (the “Shah Consulting Agreement”). Pursuant to the Shah Consulting Agreement, Dr. Shah provides us with consulting services involving areas mutually agreed to by Dr. Shah and us for up to 40 hours per month and he serves on one of our Scientific Advisory Boards. As compensation for Dr. Shah’s consulting services, we agreed to pay Dr. Shah $7,000 per month, which fee will be increased to $12,000 per month if we consummate a sale of equity securities (excluding convertible debt instruments) or assets in a transaction or series of related transactions with gross proceeds of at least $10,000,000. Under the Shah Consulting Agreement, the consulting services were to be provided for an initial one-year period, which ended on January 10, 2009, and thereafter on a month-to-month basis upon mutual agreement of the parties. We are currently continuing the consulting arrangement on such month-to-month basis.

Mahendra Patel, a director of the Company, is also a director of Shiva.

ND Partners, LLC

As consideration in part for the rights to the NDP Technology, we paid NDP an initial licensing fee of $325,000 and granted NDP an equity interest in the Company, consisting presently of 533,905 shares of common stock, subject to certain anti-dilution adjustments. In addition, we are required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Such payments will be made in the form of shares of common stock currently held in escrow for NDP, presently amounting to 213,562 shares of common stock, subject to certain anti-dilution adjustments.

Pursuant to the terms of a stockholder agreement with NDP, we are currently obligated to issue additional shares of common stock to NDP sufficient to maintain its ownership percentage at 5.0% of the outstanding common stock (7.0%, including the escrow shares) on a fully diluted basis, until such time that the Company has raised $25 million through the sale of its equity securities or until an initial public offering, reverse merger or a sale of the Company. This obligation will expire upon the completion of this offering.

John Houghton

In conjunction with the execution of the Houghton Employment Agreement, Mr. Houghton purchased 105,999 restricted shares of our common stock at a purchase price of $0.001 per share pursuant to the terms of a stock purchase agreement. One third of these purchased shares vest on each of the first three anniversaries of such purchase, in each case only if Mr. Houghton remains employed by the Company at such times.

In addition, we have paid a total of $75,000 in finder’s fees to John Houghton, our Chief Executive Officer, in connection with the in-licensing of our product candidates.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial ownership of our common stock as of November 24, 2009, as adjusted to reflect the sale of the shares of common stock in this offering and the other adjustments discussed below, by the following:

each of our directors and named executive officers;
all of our directors and executive officers as a group; and
each person, or group of affiliated persons, known to us to beneficially own 5% or more of our outstanding common stock.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated.

The table below lists the number of shares and percentage of shares beneficially owned prior to this offering based on 6,360,601 shares of common stock issued and outstanding as of November 24, 2009, including the shares of common stock held in escrow for NDP pending achievement of certain milestones pursuant to the NDP License Agreement. The table also lists the number of shares and percentage of shares beneficially owned after this offering based on          shares of common stock outstanding upon completion of this offering, assuming no exercise by the underwriters of their over-allotment option and after giving effect to the following:

the automatic conversion of all of our outstanding convertible notes into an aggregate of          shares of common stock upon the completion of this offering;
the automatic conversion of all of our outstanding shares of Non-Voting Common Stock into shares of common stock on a one-for-one basis upon the completion of this offering.
the cancellation of all First Bridge Warrants, Second Bridge Warrants and First Bridge Placement Agent Warrants prior to the completion of this offering;
the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated by-laws effective upon the completion of this offering;
no exercise of warrants or options outstanding on the date of this prospectus, except as specifically set forth herein; and
a 1 for        reverse stock split of our common stock to be effected prior to the completion of this offering.

For purposes of the table below, we treat shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days after November 24, 2009 to be outstanding and to be beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of the person, but we do not treat the shares as outstanding for the purpose of computing the percentage ownership of any other stockholder.

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Except as otherwise set forth below, the address of each of the persons or entities listed in the table is c/o CorMedix Inc., 86 Summit Avenue, Suite 301, Summit, NJ 07901-3647.

       
  Shares Beneficially Owned
Prior to Offering (1)
  Shares Beneficially Owned
After the Offering
Name   Number   Percentage   Number   Percentage
Named Executive Officers and Directors:
                                   
John C. Houghton     110,999 (2)       1.7 %                    
Mark Houser, M.D.     75,666 (3)       1.2 %                    
Russell H. Ellison, M.D.     40,000 (4)       *                    
Mahendra Patel, Ph.D.     773,717 (5)       12.2 %                    
Antony E. Pfaffle, M.D.     116,362 (6)       1.8 %                    
Timothy Hofer     58,181       *                    
Stephen Pilatzke     3,879       *                    
All executive officers and directors as a group (eight persons)     1,128,804       18.4 %                    
5% Stockholders:
                                   
Lindsay A. Rosenwald, M.D.     1,113,188 (7)       17.5 %                    
Lester E. Lipschutz     787,377 (8)       12.4 %                    
Shiva BioMedical, LLC     773,717       12.2 %                    
ND Partners, LLC     747,467 (9)       11.8 %                    
Bruce Cooper, M.D.     421,130       6.6 %                    

* Represents less than 1%
(1) Does not include shares of common stock issuable upon exercise of the First Bridge Warrants and the First Bridge Placement Agent Warrants, which will be cancelled prior to the completion of this offering.
(2) Includes 5,000 vested options granted to Mr. Houghton pursuant to the 2006 Stock Incentive Plan. Does not include 10,000 options to purchase shares of common stock granted to Mr. Houghton under the 2006 Stock Incentive Plan that have not yet vested pursuant to their terms.
(3) Includes 70,666 restricted shares of common stock which have vested under Dr. Houser’s employment agreement. Does not include 35,333 restricted shares of common stock that have not yet vested pursuant to their terms. The Company has the right to purchase such unvested shares upon the occurrence of certain events. Also includes 5,000 vested options granted to Dr. Houser pursuant to the 2006 Stock Incentive Plan. Does not include 10,000 options to purchase shares of common stock granted to Dr. Houser under the 2006 Stock Incentive Plan that have not yet vested pursuant to their terms.
(4) Includes 40,000 vested options granted to Dr. Ellison pursuant to the 2006 Stock Incentive Plan. Does not include 80,000 options to purchase shares of common stock granted to Dr. Ellison under the 2006 Stock Incentive Plan that have not yet vested pursuant to their terms.
(5) Represents shares issued to Shiva Biomedical, LLC pursuant to the Shiva Contribution Agreement. Dr. Patel is a member of the Board of Shiva BioMedical, LLC, and as such could be deemed to be the beneficial owner of such shares. Sudhir Shah, a consultant to the Company and a member of our Cardiorenal Advisory Board, is President of Shiva BioMedical, LLC. Pursuant to the terms of the Shiva Contribution Agreement, we are currently obligated to issue additional shares of common stock to Shiva BioMedical, LLC sufficient to maintain its ownership percentage at 7.0% of the outstanding common stock on a fully diluted basis, until such time that the Company has raised $25 million through the sale of its equity securities or until an initial public offering, reverse merger or a sale of the Company. This obligation will expire upon completion of this offering.
(6) Includes 96,968 shares of non-voting common stock held by Dr. Pfaffle, which will convert into shares of our voting common stock on a one-for-one basis upon consummation of this offering.
(7) Does not include 721,500 shares of common stock underlying warrants that have been issued to Paramount BioCapital, Inc. as part compensation for its placement agent services for the Company in connection with the original issuance of the First Bridge Notes. These warrants will be cancelled prior to consummation of the offering. Also does not include 40,725 shares held by five trusts established for the benefit of Dr. Rosenwald’s children, or 777,680 shares held by four trusts established for the benefit of

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Dr. Rosenwald and his family, which are referenced in note 7 below as Dr. Rosenwald disclaims beneficial ownership of all of these shares, except to the extent of his pecuniary interest therein. Dr. Rosenwald’s brother is the trustee of the five trusts established for the benefit of Dr. Rosenwald’s children.
(8) Lester Lipschutz is the trustee of the four trusts established for the benefit of Dr.Rosenwald and his family, which own 777,680 shares of our common stock in the aggregate. Mr. Lipschutz may be deemed to beneficially own the shares held by the aforementioned trusts as he has sole control over the voting and disposition of any shares held by such trusts. Includes 9,697 shares of common stock owned individually by Mr. Lipschutz.
(9) Represents shares of common stock issued pursuant to the NDP License Agreement. Includes 213,562 shares of common stock currently held in escrow, which will be released to NDP in specified installments upon the achievement of certain regulatory and sales-based milestones with respect to the NDP Technology. Pursuant to the terms of a stockholder agreement with NDP, we are currently obligated to issue additional shares of common stock to NDP sufficient to maintain its ownership percentage at 5.0% of the outstanding common stock (7.0%, including the escrow shares) on a fully diluted basis, until such time that the Company has raised $25 million through the sale of its equity securities or until an initial public offering, reverse merger or a sale of the Company. This obligation will expire upon completion of this offering.

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DESCRIPTION OF CAPITAL STOCK

General

Upon the completion of this offering and filing of our amended and restated certificate of incorporation, our authorized capital stock will consist of          shares, of which (i)          shares will be designated as common stock, and (ii) 10,000,000 shares will be designated as preferred stock, par value $0.001 per share.

The following description of our capital stock are summaries and are qualified by reference to the amended and restated certificate of incorporation and amended and restated by-laws that will be in effect upon completion of this offering. Copies of these documents will be filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur upon the closing of this offering.

Units

Each Unit consists of two shares of common stock and a warrant to purchase one share of common stock. The Units will begin trading on or promptly after the date of this prospectus. Each of the common stock and warrants will trade separately within the first      trading days following the earlier to occur of the expiration of the underwriters’ over allotment option or its exercise in full.

Common Stock

As of November 24, 2009, there were 6,360,601 shares of common stock issued and outstanding, including the shares of common stock held in escrow for NDP pending achievement of certain milestones pursuant to the NDP License Agreement, that were held of record by 82 stockholders.

Holders of common stock are entitled to one vote per share on matters on which our stockholders vote. There are no cumulative voting rights. Subject to any preferential dividend rights of any outstanding shares of preferred stock, holders of common stock are entitled to receive dividends, if declared by our Board of Directors, out of funds that we may legally use to pay dividends. If we liquidate or dissolve, holders of common stock are entitled to share ratably in our assets once our debts and any liquidation preference owed to any then-outstanding preferred stockholders are paid. Our certificate of incorporation does not provide the common stock with any redemption, conversion or preemptive rights. All shares of common stock that are outstanding as of the date of this prospectus and, upon issuance and sale, all shares we are selling in this offering, will be fully-paid and nonassessable.

Warrants to Be Issued as Part of the Units

Each warrant entitles the registered holder to purchase one share of our common stock at a price equal to 110% of the offering price of the common stock underlying Units. The warrants may only be exercised for cash. The warrants will expire      years from the date of this prospectus at 5:00 p.m., New York City time. We may call the warrants issued as a part of the Units for redemption as follows:

at a price of $0.01 for each warrant at any time while the warrants are exercisable, so long as a registration statement relating to the common stock issuable upon exercise of the warrants is effective and current;
upon not less than      days prior written notice of redemption to each warrant holder; and
if, and only if, the reported last sale price of the common stock equals or exceeds $     per share for any 20 trading days within a 30 consecutive trading day period ending on the      business day prior to the notice of redemption to warrant holders.

If the foregoing conditions are satisfied and we call the warrants for redemption, each warrant holder will then be entitled to exercise his or her warrant prior to the date scheduled for redemption. However, there can be no assurance that the price of the common stock will exceed the call price or the warrant exercise price after the redemption call is made.

The warrants will be issued in registered form under a warrant agreement between           , as warrant agent, and us. You should review a copy of the warrant agreement, which has been filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants.

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The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances, including but not limited to in the event of a stock split, stock dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for the issuances of common stock or securities convertible or exercisable into common stock at a price below their respective exercise prices.

The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and received shares of common stock. After issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

No warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, we will not be required to net cash settle or cash settle the warrant exercise, the warrants may have no value, the market for the warrants may be limited and the warrants may expire worthless.

Underwriters’ Warrants

We have also agreed to issue to the underwriters warrants to purchase a number of shares of our common stock equal to an aggregate of 8% of the Units sold in this offering. The warrants will have an exercise price equal to 110% of the offering price of the Units sold in this offering and may be exercised on a cashless basis. The warrants are exercisable commencing six months after the effective date of the registration statement related to this offering, and will be exercisable for four and a half years thereafter. The warrants are not redeemable by us. The warrants also provide one demand registration of the shares of common stock underlying the warrants at our expense, an additional demand at the warrant holder’s expense and for unlimited “piggyback” registration rights at our expense with respect to the underlying shares of common stock during the five year period commencing six months after the effective date. The warrants and the            Units (including the shares of common stock and warrants underlying the Units) have been deemed compensation by the Financial Industry Regulatory Authority (“FINRA”) and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under the Rule) may not sell, transfer, assign, pledge, or hypothecate the warrants or the securities underlying the warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the date of this prospectus. Additionally, the option may not be sold transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180 day period) following the effective date of the registration statement except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners. The warrants will provide for adjustment in the number and price of such warrants (and the shares of common stock and warrants underlying such warrants) in the event of recapitalization, merger or other structural transaction to prevent mechanical dilution.

Non-Voting Common Stock

5,000,000 shares of our authorized capital stock are currently designated as Non-Voting Subordinated Class A Common Stock, par value $0.001 per share (“Non-Voting Common Stock”). The Non-Voting Common Stock will be automatically converted into common stock on a one-for-one basis upon the closing of this offering.

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The holders of Non-Voting Common Stock, except as otherwise required under Delaware law, are not entitled or permitted to vote on any matter required or permitted to be voted upon by the holders of common stock. Upon our liquidation, dissolution or winding up, after payment of all our debts and liabilities, and after payment in full of a $20 million preference amount to the holders of our common stock, the holders of our common stock and Non-Voting Common Stock (on an as-converted basis) will be entitled to share ratably in all of our assets that are legally available for distribution.

Preferred Stock

The Board of Directors has the authority at any time to establish the rights and preferences of, and issue up to, 10,000,000 shares of preferred stock, of which none currently have designation.

Convertible Notes

12% Notes

In July and September of 2007, we issued a series of convertible promissory notes in the aggregate principal amount of $8,645,000, referred to herein as the First Bridge Notes. In August 2008, we issued another series of convertible promissory notes in the aggregate principal amount of $2,100,000 on terms substantially the same as the First Bridge Notes, referred to herein as the Second Bridge Notes. In June 2009, we issued a convertible note in the principal amount of $1,000,000 to Galenica, on terms substantially the same as the First Bridge Notes and the Second Bridge Notes, referred to herein as the Galenica Note, and together with the First Bridge Notes and the Second Bridge Notes, as the 12% Notes. The 12% Notes are unsecured obligations of ours with a maturity date of July 31, 2010 and currently accrue interest at the rate of 12% per annum. The aggregate amount of accrued and unpaid interest under the 12% Notes as of September 30, 2009 was $2,019,911.

The outstanding principal amount of the 12% Notes, and all accrued interest thereon, will automatically convert into Units at a conversion price equal to at the lesser of (a) the lowest price at which our equity securities are sold in a Qualified Financing and (b) $30,000,000 divided by the number of shares of common stock outstanding immediately prior to the Qualified Financing (determined on a fully diluted basis), upon the terms and conditions on which such securities are issued in the Qualified Financing. For purposes of the 12% Notes, “Qualified Financing” means the closing of an equity financing or series of related equity financings by us resulting in aggregate gross cash proceeds (before commissions or other transaction expenses, and excluding any such proceeds resulting from any conversion of First Bridge Notes) to us of at least $10,000,000 minus the aggregate principal amount of Second Bridge Notes. This offering, if consummated, will be considered a Qualified Financing. Assuming an offering price of $       per Unit, the 12% Notes will automatically convert into          Units.

8% Notes

In October and November 2009, we issued another series of convertible promissory notes in the aggregate principal amount of $2,619,973, referred to herein as the 8% Notes. The 8% Notes are unsecured obligations of ours with a maturity date of October 29, 2011 and currently accrue interest at the rate of 8% per annum.

The outstanding principal amount of the 8% Notes, and all accrued interest thereon, will automatically convert into shares of common stock upon the completion of a Qualified IPO. For purposes hereof, “Qualified IPO” means the completion of an underwritten initial public offering of equity securities by us resulting in aggregate gross cash proceeds (before commissions or other expenses) to us of at least $10,000,000. This offering, if consummated, will be considered a Qualified IPO. Assuming an offering price of $       per Unit, the 8% Notes will automatically convert into          shares of common stock at a conversion price equal to 70% of the portion of the price of the Units sold in this offering that is allocated to the common stock.

Paramount Notes

From July 26, 2006 through September 30, 2009, PBS had loaned us an aggregate principal amount of $1,062,003 and from August 11, 2006 through September 30, 2009, the Family Trusts had loaned us an aggregate principal amount of $1,430,000. The loans from PBS are evidenced by the PBS Note and the loans

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from the Family Trusts are evidenced by the Family Trusts Note, which together with the PBS Note, are referred to herein as the Paramount Notes. As of September 30, 2009, $166,479, including accrued and unpaid interest, was outstanding under the PBS Note and $434,715, including accrued and unpaid interest, was outstanding under the Family Trusts Note. The Paramount Notes will mature on July 31, 2010 and all outstanding principal amount of the Paramount Notes, and all accrued interest thereon, will automatically convert into the securities issued in a Qualified Financing on the same terms as the 12% Notes. This offering, if consummated, will be considered a Qualified Financing. Assuming an offering price of $     per Unit, the Paramount Notes will automatically convert into          Units.

Currently Outstanding Warrants

All of the warrants described below are currently outstanding and none have been exercised.

12% Noteholder Warrants

In connection with the issuance of the First Bridge Notes, we issued seven-year warrants to their purchasers (the “First Bridge Warrants”). The First Bridge Warrants are currently exercisable and entitle the holders thereof to purchase that number of shares of common stock equal to 40% of the principal amount of the First Bridge Notes purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.

In connection with the issuance of the Second Bridge Notes, we issued seven-year warrants to their purchasers (the “Second Bridge Warrants”). The Second Bridge Warrants entitle the holders thereof to purchase that number of shares of common stock equal to 40% of the principal amount of the Second Bridge Notes purchased by them divided by the lowest price at which our equity securities are sold in a Qualified Financing at a per share exercise price equal to 110% of such lowest price paid, subject to adjustment as set forth in the Second Bridge Warrants. If a Qualified Financing does not occur on or before the second anniversary of the initial closing of the Second Bridge Notes offering, August 18, 2010, then the Second Bridge Warrants will be exercisable for that number of shares of common stock equal to 40% of the principal amount of the Second Bridge Notes purchased by the original holder divided by $1.00, at a per share exercise price of $1.00. For purposes of the Second Bridge Warrants, “Qualified Financing” has the same meaning as it does in connection with the 12% Notes.

The First Bridge Warrants and the Second Bridge Warrants will be cancelled prior to the completion of this offering.

8% Noteholder Warrants

In connection with the issuance of the 8% Notes, we issued seven-year warrants to the purchasers of the 8% Notes, referred to herein as the 8% Noteholder Warrants. The 8% Noteholder Warrants entitle the holders thereof to purchase a number of shares of common stock equal to 60% of the principal amount of the 8% Notes divided by the price at which our equity securities are sold in a Qualified IPO, at a per share exercise price equal to 110% of the offering price in the Qualified IPO, subject to adjustment as set forth in the warrant. If a Qualified IPO does not occur on or before the second anniversary of the closing of the offering of the 8% Noteholder Warrants, then each warrant will be exercisable for that number of shares of common stock equal to 60% of the principal amount of the note purchased by the original holder divided by $1.00, at a per share exercise price of $1.00. In the event of a sale of the Company (whether by merger, consolidation, sale or transfer of our capital stock or assets or otherwise) prior to, but not in connection with, a Qualified IPO, the 8% Noteholder Warrants will terminate immediately upon such sale without opportunity for exercise. Assuming an offering price of $       per Unit, the 8% Noteholder Warrants will entitle the holders thereof to purchase          shares of common stock at a conversion price equal to       .

First Bridge Placement Agent Warrants

Paramount received, as partial compensation for its services in connection with the offering of the First Bridge Notes, a warrant exercisable for such number of shares of common stock equal to 10% of the amount of the aggregate purchase price of the First Bridge Notes sold through Paramount ($7,215,000) divided by $1.00, or 721,500 shares, at a per share exercise price of $1.00.

Co-placement agents with respect the offering of the First Bridge Notes received, as partial compensation for their services, a warrant exercisable for such number of shares of common stock equal to 10% of the

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amount of the aggregate purchase price of the First Bridge Notes sold through the co-placement agents ($1,430,000) divided by $1.00, or 143,000 shares, at a per share exercise price of $1.00.

These warrants and the warrant issued to Paramount, which are collectively referred to herein as the First Bridge Placement Agent Warrants, will be cancelled prior to completion of this offering.

Consultant Warrants

Pursuant to a consulting agreement we entered into with Frank Prosl on January 30, 2008, as partial compensation for Mr. Prosl’s consulting services, we issued to Mr. Prosl a warrant to purchase 40,000 shares of our common stock at a purchase price of $1.36 per share, subject to adjustment.

In connection with a consulting agreement we entered into with Donald Consultants Ltd. on January 30, 2008, which agreement has since been terminated, we issued to Linda Donald a warrant to purchase 100,000 shares of our common stock at a purchase price of $1.36 per share, subject to adjustment.

These warrants are referred to herein as the “Consultant Warrants”.

Registration Rights

12% Notes and 8% Notes

Holders of          Units, after giving effect to the conversion of our outstanding 12% Notes upon completion of this offering, have rights, under the terms of the purchase agreements between us and these holders, to require us to file registration statements under the Securities Act, subject to limitations and restrictions, or request that their Units be covered by a registration statement that we are otherwise filing, subject to specified exceptions.

Similarly, holders of          shares of our common stock, after giving effect to the conversion of our outstanding 8% Notes upon completion of this offering, have rights, under the terms of the purchase agreements between us and these holders, to require us to file registration statements under the Securities Act, subject to limitations and restrictions, or request that their shares of common stock be covered by a registration statement that we are otherwise filing, subject to specified exceptions.

We refer to the Units or shares of common stock issuable upon conversion of our 12% Notes or 8% Notes, as the case may be, as registrable securities. The purchase agreements for our 12% Notes and 8% Notes do not provide for any liquidated damages, penalties or other rights in the event we do not file a registration statement. These rights will continue in effect following this offering.

Demand Registration Rights

At any time after 180 days following the effective date of this registration statement, subject to certain exceptions, (a) the holders of a majority of the registrable securities issuable upon the conversion of our 12% Notes have the right to demand that we file a registration statement covering the offering and sale of at least 51% of the registrable securities issuable upon the conversion of our 12% Notes then outstanding and (b) the holders of a majority of the registrable securities issuable upon the conversion of our 8% Notes have the right to demand that we file a registration statement covering the offering and sale of at least 51% of the registrable securities issuable upon the conversion of our 8% Notes then outstanding.

We have the ability to delay the filing of such registration statement under specified conditions, such as during the period starting with the date of filing of and ending on the date 180 days following the effective date of this offering or if our board of directors determines that it is advisable to delay such filing or if we are in possession of material nonpublic information that would be in our best interests not to disclose. Postponements at the discretion of our board of directors cannot exceed 90 days from the date of such determination by our board of directors. We are not obligated to file such registration statement on more than one occasion upon the request of the holders of a majority of the registrable securities issuable upon the conversion of our 12% Notes, and we are not obligated to file such registration statement on more than one occasion upon the request of the holders of a majority of the registrable securities issuable upon the conversion of our 8% Notes.

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Form S-3 Registration Rights

If we are eligible to file a registration statement on Form S-3, the holders of the registrable securities issuable upon the conversion of our 12% Notes and the holders of the registrable securities issuable upon the conversion of our 8% Notes each have the right, on one or more occasions, to request registration on Form S-3 of the sale of the registrable securities held by such holder provided such securities are anticipated to have an aggregate sale price (before deducting any underwriting discounts and commissions) of at least $5,000,000.

We have the ability to delay the filing of any such registration statement under the same conditions as described above under “Demand Registration Rights,” and we are not obligated to effect more than one registration of registrable securities on Form S-3 in any twelve-month period for the holders of the registrable securities issuable upon the conversion of our 12% Notes or more than one such registration for the holders of the registrable securities issuable upon the conversion of our 8% Notes.

Piggyback Registration Rights

The holders of the registrable securities described above have piggyback registration rights. Under these provisions, if we register any securities for public sale, including pursuant to any stockholder-initiated demand registration, these holders will have the right to include their shares in the registration statement, subject to customary exceptions. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement, and piggyback registration rights are also subject to the priority rights of stockholders having demand registration rights in any demand registration.

Expenses of Registration

We will pay all registration expenses related to any demand, Form S-3 or piggyback registration, other than underwriting discounts and commissions and any professional fees or costs of accounting, financial or legal advisors to any of the holders of registrable securities.

Indemnification

The purchase agreements for our 12% Notes and 8% Notes contain customary cross-indemnification provisions, under which we are obligated to indemnify the selling stockholders in the event of material misstatements or omissions in the registration statement attributable to us, and each selling stockholder is obligated to indemnify us for material misstatements or omissions in the registration statement due to information provided by such stockholder provided that such information was not changed or altered by us.

Other Existing Stockholders

Holders of            shares of our common stock, under the terms of the purchase agreements between Picton and these holders, have the right to require us to file registration statements under the Securities Act, subject to limitations and restrictions, or request that their shares of common stock be covered by a registration statement that we are otherwise filling, subject to specified exceptions.

If we are eligible to file a registration statement on Form S-3, the holders of these shares of common stock have the right, on one or more occasions, to request registration on Form S-3 of the sale of the shares of common stock held by such holder provided such shares are anticipated to have an aggregate sale price (before deducting any underwriting discounts and commissions) of at least $1,000,000. The holders of these shares of common stock also have piggyback registration rights if we register any securities for public sale, subject to customary exceptions.

Anti-Takeover Effects of Delaware Law and Our Corporate Charter Documents

Delaware Law

We are subject to the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit

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to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation’s voting stock. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

before the stockholder became interested, the Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
upon completion of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or
at or after the time the stockholder became interested, the business combination was approved by the Board of Directors of the corporation and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

Our Corporate Charter Documents

Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that are intended to enhance the likelihood of continuity and stability in our Board of Directors and in its policies. These provisions might have the effect of delaying or preventing a change in control and may make the removal of incumbent management more difficult even if such transactions could be beneficial to the interests of stockholders. These provisions will be described in an amendment to this registration statement.

Transfer Agent and Registrar

Upon the completion of this offering, the transfer agent and registrar for our Units, common stock and warrants will be         .

Listing

We intend to apply for listing our Units, as well as our common stock and warrants underlying the Units, on NYSE Amex. The Units will begin trading on or promptly after the date of this prospectus. Each of the common stock and warrants will trade separately within the first      trading days following the earlier to occur of the expiration of the underwriters’ over allotment option or its exercise in full.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and we cannot assure you that a significant public market for our common stock will develop or be sustained after this offering. As described below, no shares currently outstanding will be available for sale immediately after this offering due to certain contractual and securities law restrictions on resale. Sales of substantial amounts of our common stock in the public market after the restrictions lapse could cause the prevailing market price to decline and limit our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of          shares of common stock, assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of options or warrants to purchase common stock that were outstanding as of the date of this prospectus. The shares of common stock being sold in this offering will be freely tradable without restriction or further registration under the Securities Act.

The remaining          shares of common stock held by existing stockholders are restricted securities as that term is defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Section 4(1), or Rule 144 or 701 promulgated under the Securities Act, which rules are summarized below.

The following table shows approximately when the          shares of our common stock that are not being sold in this offering, but which will be outstanding when this offering is complete, will be eligible for sale in the public market:

   
Days After Date of this Prospectus   Shares Eligible for Sale   Comment
Upon Effectiveness        Shares sold in this offering
90 Days        Shares saleable under Rules 144 and 701 that are not subject to the lock-up
180 Days        Lock-up released, subject to extension; shares saleable under Rules 144 and 701

Resale of          of the restricted shares that will become available for sale in the public market starting 180 days after the effective date will be limited by volume and other resale restrictions under Rule 144 because the holders are our affiliates.

Rule 144

The availability of Rule 144 will vary depending on whether restricted shares are held by an affiliate or a non-affiliate. Under Rule 144 as in effect on the date of this prospectus, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days, an affiliate who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:

1% of the number of shares of common stock then outstanding, which will equal          shares immediately after this offering; and
the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

However, the six month holding period increases to one year in the event we have not been a reporting company for at least 90 days. In addition, any sales by affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and the availability of current public information about us.

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The volume limitation, manner of sale and notice provisions described above will not apply to sales by non-affiliates. For purposes of Rule 144, a non-affiliate is any person or entity who is not our affiliate at the time of sale and has not been our affiliate during the preceding three months. Once we have been a reporting company for 90 days, a non-affiliate who has beneficially owned restricted shares of our common stock for six months may rely on Rule 144 provided that certain public information regarding us is available. The six month holding period increases to one year in the event we have not been a reporting company for at least 90 days. However, a non-affiliate who has beneficially owned the restricted shares proposed to be sold for at least one year will not be subject to any restrictions under Rule 144 regardless of how long we have been a reporting company.

Rule 701

Under Rule 701, common stock acquired upon the exercise of certain currently outstanding options or pursuant to other rights granted under our stock plans may be resold, to the extent not subject to lock-up agreements, (a) by persons other than affiliates, beginning 90 days after the effective date of this offering, subject only to the manner-of-sale provisions of Rule 144, and (b) by affiliates, subject to the manner-of-sale, current public information and filing requirements of Rule 144, in each case, without compliance with the one-year holding period requirement of Rule 144. All Rule 701 shares are, however, subject to lock-up agreements and will only become eligible for sale upon the expiration of the contractual lock-up agreements. Maxim may release all or any portion of the securities subject to lock-up agreements.

Lock-Up Agreements

We and each of our officers, directors, and greater than     % stockholders have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Maxim. This 180-day restricted period will be automatically extended if: (1) during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.

In addition, the holders of our 12% Notes and our 8% Notes have agreed pursuant to the purchase agreements for our 12% Notes and our 8% Notes not to sell the Units or shares of our common stock they receive upon conversion of our 12% Notes or 8% Notes for a period of 180 days after the effective date of the registration statement of which this prospectus is a part.

Registration Rights

After the completion of this offering, the holders of          shares of our common stock and holders of          Units will be entitled to the registration rights described in the section titled “Description of Capital Stock — Registration Rights.” All such shares are covered by lock-up agreements. Following the expiration of the lock-up period, registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by our affiliates.

Form S-8 Registration Statements

Prior to the expiration of the lock-up period, we intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of our common stock that are issuable pursuant to our 2006 Stock Incentive Plan. See “Executive Compensation — Equity Compensation Plan Information” for additional information. Subject to the lock-up agreements described above and any applicable vesting restrictions, shares registered under these registration statements will be available for resale in the public market immediately upon the effectiveness of these registration statements, except with respect to Rule 144 volume limitations that apply to our affiliates.

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UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representative, Maxim Group LLC, referred to herein as Maxim, have severally agreed to purchase from us on a firm commitment basis the following respective number of Units at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:

 
Underwriters   Number of Units
Maxim Group LLC               

The underwriting agreement provides that the obligation of the underwriters to purchase all of the        Units being offered to the public is subject to specific conditions, including the absence of any material adverse change in our business or in the financial markets and the receipt of certain legal opinions, certificates and letters from us, our counsel and the independent auditors. Subject to the terms of the underwriting agreement, the underwriters will purchase all of the        Units being offered to the public, other than those covered by the over-allotment option described below, if any of these Units are purchased.

Over-Allotment Option

We have granted to the underwriters an option, exercisable not later than 45 days after the effective date of the registration statement, to purchase up to        additional Units at the public offering price less the underwriting discounts and commissions set forth on the cover of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the Units offered by this prospectus. The over-allotment option will only be used to cover the net syndicate short position resulting from the initial distribution. To the extent that the underwriters exercise this option, each of the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional Units as the number of Units to be purchased by it in the above table bears to the total number of Units offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional Units to the underwriters to the extent the option is exercised. If any additional Units are purchased, the underwriters will offer the additional Units on the same terms as those on which the other Units are being offered hereunder.

Commissions and Expenses

The underwriting discounts and commissions are 10% of the initial public offering price. We have agreed to pay the underwriters the discounts and commissions set forth below, assuming either no exercise or full exercise by the underwriters of the underwriters’ over-allotment option. In addition, we have agreed to pay to the underwriters a corporate finance fee equal to 1% of the gross proceeds of this offering as a non-accountable expense allowance.

We have been advised by the representative of the underwriters that the underwriters propose to offer the Units to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $     per Unit under the public offering price of $     per Unit. The underwriters may allow, and these dealers may re-allow, a concession of not more than $     per Unit to other dealers. After the initial public offering, the representative of the underwriters may change the offering price and other selling terms.

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. The underwriting discounts and commissions are equal to the public offering price per share less the amount per share the underwriters pay us for the shares.

     
  Fee per Unit (1)   Total Without
Exercise of
Over-Allotment
  Total With
Exercise of
Over-Allotment
Public offering price   $            $            $         
Discount   $            $            $         
Proceeds before expenses   $            $            $         

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(1) The fees do not include the over-allotment option granted to the underwriters, the corporate finance fee in the amount of 1.0% of the gross proceeds, or the warrants to purchase Units equal to 8% of the number of Units sold in the offering issuable to the underwriters at the closing.

We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, will be approximately $        , all of which are payable by us.

Underwriters’ Warrants

We have also agreed to issue to the underwriters warrants to purchase a number of our Units equal to an aggregate of 8% of the Units sold in this offering. The warrants will have an exercise price equal to 110% of the offering price of the Units sold in this offering and may be exercised on a cashless basis. The warrants are exercisable commencing six months after the effective date of the registration statement related to this offering, and will be exercisable for four and a half years thereafter. The warrants are not redeemable by us. The warrants also provide for one demand registration of the shares of common stock underlying the warrants at our expense, an additional demand at the warrant holder’s expense and unlimited “piggyback” registration rights at our expense with respect to the underlying shares of common stock during the five year period commencing six months after the closing date. The warrants and the          Units (including the shares of common stock and warrants underlying the Units) have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under the Rule) may not sell, transfer, assign, pledge, or hypothecate the warrants or the securities underlying the warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the date of this prospectus. Additionally, the option may not be sold transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180 day period) following the effective date of the registration statement except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners. The warrants will provide for adjustment in the number and price of such warrants (and the shares of common stock and warrants underlying such warrants) in the event of recapitalization, merger or other structural transaction to prevent mechanical dilution.

Lock-Up Agreements

We and each of our officers, directors, and greater than     % stockholders have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Maxim. This 180-day restricted period will be automatically extended if: (1) during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.

Pricing of this Offering

Prior to this offering there has been no public market for any of our securities. The public offering price of the Units and the terms of the warrants were negotiated between us and Maxim. Factors considered in determining the prices and terms of the Units, including the common stock and warrants underlying the Units, include:

the history and prospects of companies in our industry;
prior offerings of those companies;
our prospects for developing and commercializing our products;
our capital structure;

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an assessment of our management and their experience;
general conditions of the securities markets at the time of the offering; and
other factors as were deemed relevant.

However, although these factors were considered, the determination of our offering price is more arbitrary than the pricing of securities for an operating company in a particular industry since the underwriters are unable to compare our financial results and prospects with those of public companies operating in the same industry.

In connection with this offering, the underwriters may distribute prospectuses electronically. No forms of prospectus other than printed prospectuses and electronically distributed prospectuses that are printable in Adobe. PDF format will be used in connection with this offering.

The underwriters have informed us that they do not expect to confirm sales of Units offered by this prospectus to accounts over which they exercise discretionary authority without obtaining the specific approval of the account holder.

Price Stabilization, Short Positions and Penalty Bids

The underwriters may engage in over-allotment, stabilizing transactions, syndicate covering transactions, and penalty bids or purchasers for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934:

Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market.
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum;
Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

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Other Terms

We have also agreed that if following the successful completion of the offering, Maxim conducts a solicitation for the exercise of outstanding warrants at our written request, we will pay to Maxim a cash fee equal to 3% of the total proceeds received from the exercise of any and all warrants (other than any warrants held by Maxim or its affiliates) as a result of such solicitation by Maxim, provided that Maxim is designated as the soliciting broker on the exercise form of the warrant certificate evidencing the warrants so exercised.

The Underwriting Agreement will provide that we will permit Maxim to either (i) designate one individual who meets the independence criteria of NYSE Amex to serve on our Board of Directors for the three-year period following the closing of this offering or (ii) in the event that the individual designated by Maxim is not elected to our Board of Directors, have a representative of Maxim attend all meetings of our Board of Directors as an observer during such three-year period. Such director or observer, as the case may be, will attend meetings of our Board of Directors, receive all notices and other correspondence and communications sent by us to our directors, and such director will receive compensation equal to the highest compensation of other non-employee directors, excluding the Chairman of the Audit Committee.

In addition, we have agreed to grant to Maxim, upon the consummation of this offering, the right of first negotiation to co-manage any public underwriting or private placement of our debt or equity securities or the debt or equity securities of our subsidiaries and successors (excluding (i) shares issued under any compensation or stock option plan approved by our stockholders, (ii) shares issued by us in payment of the consideration for an acquisition or as part of strategic partnerships and transactions and (iii) conventional banking arrangements and commercial debt financing) which includes the right to underwrite or place a minimum of 50% of the securities to be sold therein, for a period of eighteen (18) months after completion of this offering. If Maxim fails to accept in writing any such proposal for such public or private sale within ten (10) days after receipt of a written notice from us containing such proposal, then Maxim will have no claim or right with respect to any such sale contained in any such notice. If, thereafter, such proposal is modified in any material respect, we will adopt the same procedure as with respect to the original proposed public or private sale, and Maxim shall have the right of first negotiation with respect to such revised proposal.

Although we are not under any contractual obligation to engage any of the underwriters to provide any services for us after this offering, and have no present intent to do so, any of the underwriters may, among other things, assist us in raising additional capital, as needs may arise in the future. If any of the underwriters provide services to us after this offering, we may pay such underwriter fair and reasonable fees that would be determined at that time in an arm’s length negotiation; provided that if no agreement will be entered into with any of the underwriters and no fees for such services will be paid to any of the underwriters prior to the date which is 90 days after the effective date of the registration statement, unless FINRA determines that such payment would not be deemed underwriters compensation in connection with this offering.

Indemnification

We have agreed to indemnify the underwriters against liabilities relating to the offering arising under the Securities Act, liabilities arising from breaches of some or all of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

Electronic Distribution

A prospectus in electronic format may be made available on the internet sites or through other online services maintained by one or more of the underwriters participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s web site and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.

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Relationships

Certain of the underwriters or their affiliates have provided from time to time and may in the future provide investment banking, lending, financial advisory and other related services to us and our affiliates for which they have received and may continue to receive customary fees and commissions.

LEGAL MATTERS

The validity of the shares of our common stock offered hereby will be passed upon for us by Olshan Grundman Frome Rosenzweig & Wolosky LLP, New York, New York. In connection with the offering of the Units, Loeb & Loeb LLP, New York, New York advised the underwriters with respect to certain United States securities law matters.

EXPERTS

J.H. Cohn LLP, our independent registered public accounting firm, has audited our balance sheets as of December 31, 2008 and 2007, and the related statements of operations, changes in stockholders’ deficiency and cash flows for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008, as set forth in their report, which includes an explanatory paragraph relating to our ability to continue as a going concern. We have included our financial statements in this prospectus and in this registration statement in reliance on J.H. Cohn LLP’s report given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under the Securities Act with respect to the securities to be sold in this offering. This prospectus does not contain all the information contained in the registration statement. For further information with respect to us and the securities to be sold in this offering, we refer you to the registration statement and the exhibits and schedules attached to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. When we make such statements, we refer you to the copies of the contracts or documents that are filed as exhibits to the registration statement because those statements are qualified in all respects by reference to those exhibits.

Upon the closing of this offering, we will be subject to the informational requirements of the Exchange Act and we intend to file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facility at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm.

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facility.

Our website address is www.cormedix.com. The information on, or accessible through, our website is not part of this prospectus.

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CORMEDIX, INC.
(A Development Stage Company)

 
  Page
Condensed Balance Sheets
September 30, 2009 (Unaudited) and December 31, 2008
    F-2  
Condensed Statements of Operations (Unaudited)
Nine Months Ended September 30, 2009 and 2008 and Period from July 28, 2006 (Inception) to September 30, 2009
    F-3  
Condensed Statement of Changes in Stockholders’ Deficiency (Unaudited)
Nine Months Ended September 30, 2009
    F-4  
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2009 and 2008 and Period from July 28, 2006 (Inception) to September 30, 2009
    F-5  
Notes to Unaudited Condensed Financial Statements     F-6 – F-9  

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CORMEDIX, INC.
(A Development Stage Company)
  
CONDENSED BALANCE SHEETS

   
  September 30,
2009
  December 31,
2008
(Note 1)
ASSETS
                 
Current assets:
                 
Cash   $ 24,093       1,380,012  
Other current assets     4,339       4,668  
Total current assets     28,432       1,384,680  
Office equipment, net     26,603       34,061  
Deferred financing costs, net     57,154       121,051  
Other assets     11,733       80,506  
Total assets   $ 123,922     $ 1,620,298  
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
                 
Current liabilities:
                 
Accounts payable and accrued expenses   $ 1,277,623     $ 822,068  
Note payable – Galenica, Ltd.     1,000,000        
Interest payable – Galenica, Ltd.     36,717        
Senior convertible notes     10,745,000        
Interest payable – senior convertible notes     1,983,194        
Notes payable – related parties     510,429        
Interest payable – related parties     90,765        
Total current liabilities     15,643,728       822,068  
Senior convertible notes, net           10,309,125  
Interest payable – senior convertible notes           1,094,428  
Note payable – Galenica, Ltd.           1,000,000  
Notes payable – related parties           344,679  
Interest payable – related parties           77,146  
Total liabilities     15,643,728       13,647,446  
Commitments
                 
Stockholders’ deficiency:
                 
Preferred stock, $.001 par value; 10,000,000 shares authorized; none Issued            
Common stock – Non-voting – Class A, $.001 par value; 5,000,000 shares authorized; 193,936 issued and outstanding     194       194  
Common stock – Class A, $.001 par value; 33,000,000 shares authorized; 5,079,077 issued and outstanding     5,079       5,079  
Common stock – Class B, $.001 par value; 1,600,000 shares authorized; 800,000 issued and escrowed     800       800  
Common stock – Class C, $.001 par value; 100,000 shares authorized; 50,000 issued and escrowed     50       50  
Common stock – Class D, $.001 par value; 100,000 shares authorized; 50,000 issued and escrowed     50       50  
Common stock – Class E, $.001 par value; 100,000 shares authorized; 50,000 issued and escrowed     50       50  
Common stock – Class F, $.001 par value; 100,000 shares authorized; 50,000 issued and escrowed     50       50  
Deferred stock issuances     (1,125 )       (1,125 )  
Additional paid-in capital     5,265,621       5,177,292  
Deficit accumulated during the development stage     (20,790,575 )       (17,209,588 )  
Total stockholders’ deficiency     (15,519,806 )       (12,027,148 )  
Total liabilities and stockholders’ deficiency   $ 123,922     $ 1,620,298  

 
 
See Notes to Unaudited Condensed Financial Statements.

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CORMEDIX, INC.
(A Development Stage Company)
  
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

     
  Nine Months
Ended
September 30,
2009
  Nine Months
Ended
September 30, 2008
  Period from
July 28, 2006
(Inception) to
September 30,
2009
Operating expenses:
                          
Research and development   $ 994,195     $ 2,508,358     $ 8,650,106  
General and administrative     1,090,386       1,286,567       4,699,733  
Loss from operations     (2,084,581 )       (3,794,925 )       (13,349,839 )  
Interest income     2,104       25,511       88,837  
Interest expense, including amortization of debt discount and deferred financing costs     (1,498,510 )       (3,648,417 )       (7,529,573 )  
Net loss   $ (3,580,987 )     $ (7,417,831 )     $ (20,790,575 )  
Basic and diluted net loss per common share   $ (0.70 )     $ (1.45 )        
Weighted average common shares outstanding – basic and diluted     5,147,700       5,111,134        

 
 
See Notes to Unaudited Condensed Financial Statements.

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CORMEDIX, INC.
(A Development Stage Company)
  
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY (Unaudited)
Nine Months Ended September 30, 2009

                   
                   
  Non-Voting
Common Stock – 
Class A
  Common Stock – 
Class A
  Common Stock
Class B – F
  Deferred
Stock
Issuance
  Additional
Paid-in
Capital
  Deficit
Accumulated
During the
Development
Stage
  Total
     Shares   Amount   Shares   Amount   Shares   Amount
Balance at January 1, 2009     193,936     $ 194       5,079,077     $ 5,079       1,000,000     $ 1,000     $ (1,125 )     $ 5,177,292     $ (17,209,588 )     $ (12,027,148 )  
Stock-based compensation                                                                    88,329                88,329  
Net loss                                                                             (3,580,987 )       (3,580,987 )  
Balance at September 30, 2009     193,936     $ 194       5,079,077     $ 5,079       1,000,000     $ 1,000     $ (1,125 )     $ 5,265,621     $ (20,790,575 )     $ (15,519,806 )  

 
 
See Notes to Unaudited Condensed Financial Statements.

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CORMEDIX, INC.
(A Development Stage Company)
  
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

     
  Nine Months
Ended
September 30,
2009
  Nine Months
Ended
September 30,
2008
  Period from
July 28, 2006
(Inception) to
September 30,
2009
Cash flows from operating activities:
                          
Net loss   $ (3,580,987 )     $ (7,417,831 )     $ (20,790,575 )  
Adjustments to reconcile net loss to net cash used in operating activities:
                          
Stock-based compensation     88,329       249,442       439,582  
Stock issued in connection with license agreement           328,948       328,948  
Stock issued in connection with a consulting agreement           7,721       7,721  
Amortization of deferred financing costs     123,532       979,900       1,659,275  
Amortization of debt discount     435,875       2,089,389       3,741,196  
Interest payable – Galenica, Ltd.     36,717             36,717  
Interest payable – senior convertible notes     888,766       566,190       1,983,194  
Expenses paid on behalf of the Company satisfied through the issuance of notes     750             52,003  
Interest payable – related party     13,619       12,937       90,765  
Depreciation     7,458       7,459       23,120  
Changes in operating assets and liabilities:
                          
Other current assets     329       (64,203 )       (4,339 )  
Other assets     68,773       500,580       (11,733 )  
Accounts payable and accrued expenses     455,555       (420,059 )       1,277,623  
Net cash used in operating activities     (1,461,284 )       (3,159,527 )       (11,166,503 )  
Cash flows from investing activities:
                          
Purchase of office and computer equipment                 (49,723 )  
Cash flows from financing activities:
                          
Proceeds from notes payable to related party     165,000             2,440,000  
Proceeds from senior convertible notes           2,100,000       10,745,000  
Proceeds from Galenica, Ltd. promissory note                 1,000,000  
Payments for deferred financing costs     (59,635 )       (219,133 )       (967,934 )  
Repayment of amounts loaned under related party notes                 (1,981,574 )  
Proceeds from receipt of stock subscriptions and issuances of common stock                 4,827  
Net cash provided by financing activities     105,365       1,880,867       11,240,319  
Net (decrease)/increase in cash     (1,355,919 )       (1,278,660 )       24,093  
Beginning of period     1,380,012       2,534,478        
End of period   $ 24,093     $ 1,255,818     $ 24,093  
Supplemental schedule of non-cash financing activities:
                          
Stock issued to technology finders and licensors   $     $ 125     $ 1,125  
Warrants issued to placement agent   $     $     $ 748,495  
Debt discount on senior convertible notes   $     $ 747,215     $ 3,741,196  
Cash paid for interest during the period   $     $     $ 18,425  

 
 
See Notes to Unaudited Condensed Financial Statements.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 1 — Organization, Business and Basis of Presentation:

Organization and Business:

CorMedix, Inc. (f/k/a Picton Holding Company, Inc.) (“CorMedix” or the “Company”) was incorporated in the State of Delaware on July 28, 2006. CorMedix is a development-stage biopharmaceutical company that seeks to fulfill selected, significant unmet medical needs in the therapeutic areas at the crossroads of cardiac and kidney (renal) disease. On January 18, 2007, the Company changed its name from Picton Holding Company, Inc. to CorMedix, Inc.

Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission for interim financial information. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the full year ending December 31, 2009 or for any subsequent period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company which are included elsewhere in this registration statement. The accompanying condensed consolidated balance sheet as of December 31, 2008 has been derived from the audited financial statements included elsewhere in this registration statement.

The Company’s primary activities since incorporation have been organizational activities, including recruiting personnel, establishing office facilities, acquiring licenses for its pharmaceutical compound pipeline, performing business and financial planning, performing research and development and raising funds through the issuance of debt and common stock. The Company has not generated any revenues and, accordingly, the Company is considered to be in the development stage.

The Company’s financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments through the normal course of business. For the nine months ended September 30, 2009 and the period from July 28, 2006 (inception) to September 30, 2009, the Company incurred net losses of $3,580,987 and $20,790,575, respectively. The Company has a stockholders’ deficiency and a working capital deficiency as of September 30, 2009 of $15,519,806 and $15,615,296, respectively. Management believes that the Company will continue to incur losses for the foreseeable future and will need additional equity or debt financing or will need to generate revenue from the licensing of its products or by entering into strategic alliances to be able to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms, or at all. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 2 — Summary of Significant Accounting Policies:

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 2 — Summary of Significant Accounting Policies:  – (continued)

Loss per common share:

Basic earnings (loss) per common share excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since the Company has only incurred losses, basic and diluted loss per share are the same. The amount of potentially dilutive securities excluded from the calculation was 5,822,813 and 1,500,313 shares of common stock being held in escrow, warrants and options at September 30, 2009 and 2008, respectively. Additionally, the amount of warrants that are potentially dilutive and are excluded from the calculation related to the issuance of senior convertible notes (see Note 9), based upon an exercise price of $1.00 (lowest possible conversion price), at September 30, 2009 and 2008 was 840,000 and 5,162,500, respectively.

Fair value measurements:

The carrying value of the senior convertible notes and related party notes approximate fair value due to the short-term nature of these items and the related interest rate approximates market rates. Since the senior convertible and related party notes have been recorded at carrying value there has been no change in the value between reporting periods.

Stock Based Compensation:

The Company accounts for stock options granted to employees according to the Financial Accounting Standards Board Accounting Standards Codification No. 718 (“ASC 718”), “Compensation — Stock Compensation”. Under ASC 718, share-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period on a straight-line basis.

The Company accounts for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method in accordance with ASC 718. The initial non-cash charge to operations for non-employee options with vesting are revalued at the end of each reporting period based upon the change in the fair value of the options and amortized to consulting expense over the related vesting period.

During the nine months ended September 30, 2009, there were no options granted.

Note 3 — Related Party Transactions:

Consulting Services:

Effective August 1, 2006, the Company began accruing monthly fees for consulting services at a rate of $25,000 per month payable to Paramount Corporate Development, LLC (“Paramount”), an affiliate of a significant stockholder of the Company. Consulting services expense was $0, $200,000 and $625,000 for the nine ended September 30, 2009 and 2008 and the period from July 28, 2006 (inception) to September 30, 2009, respectively. As of September 30, 2009, the Company had $75,000 payable to Paramount pursuant to this agreement; such amount is included in accrued expenses. This agreement was terminated as of August 31, 2008.

Notes Payable:

On July 28, 2006, CorMedix issued a 5% promissory note payable to Paramount BioSciences, LLC (“PBS”), an affiliate of a significant stockholder of the Company. This note and all accrued interest was to mature on June 15, 2009, or earlier if certain events occurred. The maturity date of this note was extended until July 31, 2010. The note was issued to PBS for expenses that PBS has paid on behalf of the Company.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 3 — Related Party Transactions:  – (continued)

As of September 30, 2009, the principal amount outstanding under this note is $165,000. Through November 24, 2009, the Company made additional borrowings under this note in the amount of $25,000.

On August 11, 2006, CorMedix issued a 5% promissory note payable to an entity related to the sole member of PBS. This note and all accrued interest was to mature on August 11, 2009, or earlier if certain events occur. The maturity date of this note was extended until July 31, 2010. As of September 30, 2009, the principal amount outstanding under this note is $344,679.

Note 4 — Stockholders’ Deficiency:

Common Stock:

During the nine months ended September 30, 2009 and 2008 and the period from July 28, 2006 (inception) to September 30, 2009, the Company recorded compensation expense, in connection with common stock issued to employees and technology finders each with a three-year vesting period, of $37,184, $45,489 and $167,436, respectively.

Common Stock Options and Warrants:

During the nine months ended September 30, 2008, the Company granted 235,000 options under the Plan to various employees, officers and directors with an exercise price of $1.05 per share. Each option granted during the nine months ended September 30, 2008 vests equally over a three-year period and has a ten year term. The Company recorded $51,145, $203,953 and $272,146 of compensation expense during the nine months ended September 30, 2009 and 2008 and the period from July 28, 2006 (inception) to September 30, 2009, respectively, in accordance with ASC 718.

There were no options or warrants issued for the nine months ended September 30, 2009.

A summary of the Company’s stock warrant activity under the Plan and related information is as follows:

       
  Nine Months Ended
September 30, 2009
  Nine Months Ended
September 30, 2008
     Shares   Weight
Average
Exercise
Price
  Shares   Weighted
Average
Exercise
Price
Outstanding at beginning of period     235,000     $ 1.05           $  
Granted         $       235,000     $ 1.05  
Outstanding at end of period     235,000     $ 1.05       235,000     $ 1.05  
Options exercisable     85,000     $ 1.05       6,667     $ 1.05  
Weighted-average fair value of options granted during the period            $              $ 0.87  

The weighted average remaining contractual life of stock options outstanding at September 30, 2009 is 8.84 years.

As of September 30, 2009, the total compensation expense related to non-vested options not yet recognized totaled $17,048, $66,259 and $15,597 for the three months ending December 31, 2009, years ending December 31, 2010 and 2011, respectively. The weighted-average vesting period over which the total compensation expense related to non-vested options not yet recognized at September 30, 2009 was approximately 1.42 years.

Note 5 — Senior Convertible Notes:

In connection with the 8% senior convertible notes that were issued in 2007, since a Qualified Financing, an equity financing transaction from which the Company receives proceeds of at least $10,000,000, has not

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 5 — Senior Convertible Notes:  – (continued)

taken place by July 31, 2009, each noteholder received warrants equal to 40% of the principal amount of the First Notes purchased divided by $1.00 at an exercise price of $1.00. In the aggregate, warrants to purchase 3,458,000 shares of common stock were issued with an exercise price of $1.00 in connection with this offering.

In addition, in connection with the placement warrants issued in conjunction with the senior convertible notes, since a Qualified Financing has not taken place by July 31, 2009, Paramount BioCapital Inc. (“PCI”), an affiliate of a significant stockholder of the Company, and the third party agents received warrants equal to 10% of the principal amount of the notes purchased divided by $1.00 at an exercise price of $1.00. In the aggregate, warrants to purchase 864,500 shares of common stock were issued with an exercise price of $1.00 in connection with this placement agent agreement.

Note 6 — Subsequent Events:

Exchange Agreement:

On October 6, 2009, the Company completed an Exchange Agreement with Shiva whereby the Licensor surrenders all rights to the shares issued to the Licensor under a license agreement in exchange for 7% of the outstanding Series A common stock as of the date of the Exchange Agreement.

Senior Convertible Notes:

During October and November 2009, the Company issued 8% senior convertible notes in connection with a private placement in the aggregate principal amount of $2,619,973 (the “Third Notes”). The Third Notes mature on October 29, 2011.

Upon the closing of an initial public offering of equity securities from which the Company receives proceeds of at least $10,000,000 (“Qualified IPO”), the Third Notes, plus all accrued interest, will automatically convert into the same securities issued in the equity financing transaction at a price per security equal to 70% of the lowest price paid per unit of securities in such Qualified IPO.

In addition, each noteholder received warrants to purchase a number of the Company’s common stock equal to 60% of the principal amount of the Third Notes purchased divided by the price at which equity securities of the Company are sold in a Qualified IPO (“IPO Price”). Each warrant issued as a result of a Qualified IPO would be exercisable at a price per share equal to 110% of the IPO Price and exercisable for a period of five years. If a Qualified IPO does not occur on or before October 29, 2011, then each warrant will be exercisable for that number of shares of common stock equal to 60% of the principal amount of the Third Notes purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.

In connection with the offering of the Third Notes a third party agent and the Company entered into a placement agency agreement dated September 4, 2009, pursuant to which the Company paid the third party agent cash commissions of $264,173 and for its services. The Company also has agreed to pay to the third party agent a commission on sales by the Company of securities on or prior to October 29, 2009 to the purchasers of the Third Notes who were introduced to the Company by the third party agent. The Company also granted the third party agent the right of first refusal to act as exclusive finder, placement agent or other similar agent in relation to any securities offerings on its behalf after closing of a Qualified IPO.

The Company evaluated subsequent events through November 24, 2009, the date of financial statement issuance.

F-9


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)

 
  Page
Report of Independent Registered Public Accounting Firm     F-11  
Balance Sheets
December 31, 2008 and 2007
    F-12  
Statements of Operations
Years Ended December 31, 2008 and 2007 and the Period from July 28, 2006 (Inception) to December 31, 2008
    F-13  
Statement of Changes in Stockholders’ Deficiency
Period from July 28, 2006 (Inception) to December 31, 2008
    F-14  
Statements of Cash Flows
Years Ended December 31, 2008 and 2007 and the Period from July 28, 2006 (Inception) to December 31, 2008
    F-15  
Notes to Financial Statements     F-16 – F-25  

F-10


 
 

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
CorMedix, Inc.

We have audited the accompanying balance sheets of CorMedix, Inc. (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, changes in stockholders’ deficiency and cash flows for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (Inception) to December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CorMedix, Inc. as of December 31, 2008 and 2007, and its results of operations and cash flows for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (Inception) to December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred a net loss of $8,996,745 for the year ended December 31, 2008 and, as of that date, had a deficit accumulated during the development stage of $17,209,588. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ J.H. Cohn LLP

Roseland, New Jersey
November 24, 2009

F-11


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
BALANCE SHEETS

   
  December 31,
2008
  December 31,
2007
ASSETS
                 
Current assets:
                 
Cash   $ 1,380,012       2,534,478  
Other current assets     4,668       12,055  
Total current assets     1,384,680       2,546,533  
Office equipment, net of accumulated depreciation of $15,662 and $5,717     34,061       44,006  
Deferred financing costs, net     121,051       1,009,951  
Other assets     80,506       512,313  
Total assets   $ 1,620,298     $ 4,112,803  
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
                 
Current liabilities:
                 
Accounts payable and accrued expenses   $ 822,068     $ 1,212,425  
Senior convertible notes, net of discount of $435,875 and $1,995,987     10,309,125       6,649,013  
Interest payable – senior convertible notes     1,094,428       242,760  
Notes payable – Galenica, Ltd.     1,000,000        —   
Notes payable – related parties     344,679       344,679  
Interest payable – related parties     77,146       59,865  
Total liabilities     13,647,446       8,508,742  
Commitments
                 
Stockholders’ deficiency:
                 
Preferred stock, $.001 par value; 10,000,000 shares authorized; none Issued      —         —   
Common stock – Non-voting – Class A, $.001 par value; 5,000,000 shares authorized 193,936 issued and outstanding     194       194  
Common stock – Class A, $.001 par value; 33,000,000 shares authorized 5,079,077 and 4,633,128 issued and outstanding, respectively     5,079       4,633  
Common stock – Class B, $.001 par value; 1,600,000 shares authorized 800,000 issued and escrowed     800       800  
Common stock – Class C, $.001 par value; 100,000 shares authorized 50,000 issued and escrowed     50       50  
Common stock – Class D, $.001 par value; 100,000 shares authorized 50,000 issued and escrowed     50       50  
Common stock – Class E, $.001 par value; 100,000 shares authorized 50,000 issued and escrowed     50       50  
Common stock – Class F, $.001 par value; 100,000 shares authorized 50,000 issued and escrowed     50       50  
Deferred stock issuances     (1,125 )       (1,000 )  
Additional paid-in capital     5,177,292       3,812,077  
Deficit accumulated during the development stage     (17,209,588 )       (8,212,843 )  
Total stockholders’ deficiency     (12,027,148 )       (4,395,939 )  
Total liabilities and stockholders’ deficiency   $ 1,620,298     $ 4,112,803  

 
 
See Notes to Financial Statements.

F-12


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
STATEMENTS OF OPERATIONS

     
  Year Ended
December 31,
2008
  Year Ended
December 31,
2007
  Period from
July 28, 2006
(Inception) to
December 31,
2008
Operating expenses:
                          
Research and development   $ 3,083,002     $ 3,820,429     $ 7,655,911  
General and administrative     1,732,602       1,667,056       3,609,347  
Loss from operations     (4,815,604 )       (5,487,485 )       (11,265,258 )  
Interest income     25,903       60,830       86,733  
Interest expense, including amortization of deferred financing costs and debt discounts     (4,207,044 )       (1,810,871 )       (6,031,063 )  
Net loss   $ (8,996,745 )     $ (7,237,526 )     $ (17,209,588 )  
Basic and diluted net loss per common share   $ (1.75 )     $ (1.51 )        
Weighted average common shares outstanding – basic and diluted     5,147,700       4,778,291        

 
 
See Notes to Financial Statements.

F-13


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
Period from July 28, 2006 (Inception) to December 31, 2008

                   
                   
  Non-Voting
Common
Stock – Class A
  Common
Stock – Class A
  Common
Stock Class B – F
  Deferred
Stock
Issuances
  Additional Paid-in Capital   Deficit
Accumulated
During the
Development
Stage
  Total
     Shares   Amount   Shares   Amount   Shares   Amount
Common stock issued to founders at $.001 per share in June 2006                       4,000,000     $ 4,000                                                  $ 4,000  
Common stock issued and held in escrow to licensor at $.001 per share in August 2006                                         1,000,000     $ 1,000     $ (1,000 )                          —   
Common stock issued to employee at $.001 per share in November 2006                       421,130       421                                                    421  
Stock-based compensation                                                                  $ 4,726                4,726  
Net loss                                                                           $ (975,317 )       (975,317 )  
Balance at December 31, 2006                       4,421,130       4,421       1,000,000       1,000       (1,000 )       4,726       (975,317 )       (966,170 )  
Common stock issued to employees at $.001 per share in January and March 2007                       211,998       212                                                    212  
Common stock issued to technology finders at $.001 per share in March 2007     193,936     $ 194                                                                      194  
Warrants issued in connection with senior convertible notes                                                                    748,495                748,495  
Debt discount on senior convertible notes                                                                    2,993,981                2,993,981  
Stock based compensation                                                                    64,875                64,875  
Net loss                                                                             (7,237,526 )       (7,237,526 )  
Balance at December 31, 2007     193,936       194       4,633,128       4,633       1,000,000       1,000       (1,000 )       3,812,077       (8,212,843 )       (4,395,939 )  
Common stock issued to licensor at $1.05 per share in January 2008                       313,283       314                                  328,634                328,948  
Common stock issued to licensor and held in escrow in January 2008                       125,313       125                         (125 )                          
Common stock issued to consultant at $1.05 per share in May 2008                       7,353       7                                  7,714                7,721  
Debt discount on senior convertible notes                                                                    747,215                747,215  
Stock-based compensation                                                                    281,652                281,652  
Net loss                                                                             (8,996,745 )       (8,996,745 )  
Balance at December 31, 2008     193,936     $ 194       5,079,077     $ 5,079       1,000,000     $ 1,000     $ (1,125 )     $ 5,177,292     $ (17,209,588 )     $ (12,027,148 )  

 
 
See Notes to Financial Statements.

F-14


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
STATEMENTS OF CASH FLOWS

     
  Year Ended
December 31,
2008
  Year Ended
December 31,
2007
  Period from
July 28, 2006
(Inception) to
December 31,
2008
Cash flows from operating activities:
                          
Net loss   $ (8,996,745 )     $ (7,237,526 )     $ (17,209,588 )  
Adjustments to reconcile net loss to net cash used in operating activities:
                          
Stock-based compensation     281,652       64,875       351,253  
Stock issued in connection with license agreement     328,948             328,948  
Stock issued in connection with a consulting agreement     7,721             7,721  
Amortization of deferred financing costs     1,030,768       504,975       1,535,743  
Amortization of debt discount     2,307,327       997,994       3,305,321  
Interest payable – senior convertible notes     851,668       242,760       1,094,428  
Expenses paid on behalf of the Company satisfied through the issuance of notes           6,654       51,253  
Interest payable – related party     17,281       46,717       77,146  
Depreciation     9,945       5,470       15,662  
Changes in operating assets and liabilities:
                          
Other current assets     7,387       (12,055 )       (4,668 )  
Other assets     431,807       (512,313 )       (80,506 )  
Accounts payable and accrued expenses     (390,357 )       1,045,514       822,068  
Net cash used in operating activities     (4,112,598 )       (4,846,935 )       (9,705,219 )  
Cash flows from investing activities:
                          
Purchase of office and computer equipment           (47,255 )       (49,723 )  
Cash flows from financing activities:
                          
Proceeds from notes payable to related party           1,500,000       2,275,000  
Proceeds from senior convertible notes     2,100,000       8,645,000       10,745,000  
Proceeds from Galenica, Ltd. promissory note     1,000,000             1,000,000  
Payments for deferred financing costs     (141,868 )       (766,431 )       (908,299 )  
Repayment of amounts loaned under related party notes           (1,981,574 )       (1,981,574 )  
Proceeds from receipt of stock subscriptions and issuances of common stock           406       4,827  
Net cash provided by financing activities     2,958,132       7,397,401       11,134,954  
Net (decrease)/increase in cash     (1,154,466 )       2,503,211       1,380,012  
Beginning of period     2,534,478       31,267        
End of period   $ 1,380,012     $ 2,534,478     $ 1,380,012  
Supplemental schedule of non-cash financing activities:
                          
Stock issued to technology finders and licensors   $ 125     $     $ 1,125  
Warrants issued to placement agent   $     $ 748,495     $ 748,495  
Debt discount on senior convertible notes   $ 747,215     $ 2,993,981     $ 3,741,196  
Cash paid for interest during the year   $     $ 18,425     $ 18,425  

 
 
See Notes to Financial Statements.

F-15


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 1 — Organization, Business and Basis of Presentation:

Organization and Business:

CorMedix, Inc. (f/k/a Picton Holding Company, Inc.) (“CorMedix” or the “Company”) was incorporated in the State of Delaware on July 28, 2006. CorMedix is a development stage biopharmaceutical company that seeks to fulfill selected, significant unmet medical needs in the therapeutic areas at the crossroads of cardiac and kidney (renal) disease. On January 18, 2007, the Company changed its name from Picton Holding Company, Inc. to CorMedix, Inc.

Basis of Presentation:

The Company’s primary activities since incorporation have been organizational activities, including recruiting personnel, establishing office facilities, acquiring licenses for its pharmaceutical compound pipeline, performing business and financial planning, performing research and development and raising funds through the issuance of debt and common stock. The Company has not generated any revenues and, accordingly, the Company is considered to be in the development stage.

The Company’s financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments through the normal course of business. For the year ended December 31, 2008 and the period from July 28, 2006 (inception) to December 31, 2008, the Company incurred net losses of $8,996,745 and $17,209,588, respectively. The Company has a stockholders’ deficiency as of December 31, 2008 of $12,027,148. Management believes that the Company will continue to incur losses for the foreseeable future and will need additional equity or debt financing or will need to generate revenue from the licensing of its products or by entering into strategic alliances to be able to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms, or at all. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company evaluated subsequent events through November 24, 2009, the date of financial statement issuance.

Note 2 — Summary of Significant Accounting Policies:

Cash:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its cash in bank deposit and other accounts, the balances of which, at times, may exceed federally insured limits.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Office Equipment:

Office equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the related assets of five years.

F-16


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 2 — Summary of Significant Accounting Policies:  – (continued)

Stock-Based Compensation:

The Company accounts for stock options granted to employees according to the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123(R) (“SFAS 123R”), “Share-Based-Payment”. Under SFAS 123R, share-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period on a straight-line basis.

The Company accounts for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method in accordance with SFAS 123R and Emerging Issues Task Force No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF No. 96-18”), The initial non-cash charge to operations for non-employee options with vesting are revalued at the end of each reporting period based upon the change in the fair value of the options and amortized to consulting expense over the related vesting period.

For the purpose of valuing options and warrants granted to employees, non-employees and directors and officers of the Company during the year ended December 31, 2008, the Company used the Black-Scholes option pricing model utilizing the assumptions noted in the following table. No options were issued during the year ended December 31, 2007. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards. The Company estimated the expected life of the options granted based on anticipated exercises in the future periods assuming the success of its business model as currently forecasted. The expected dividend yield reflects the Company’s current and expected future policy for dividends on its common stock. The expected stock price volatility for the Company’s stock options was calculated by examining historical volatilities for publicly traded industry peers as the Company does not have any trading history for its common stock. The Company will continue to analyze the expected stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available. Given the limited service period for its current employees, directors and officers and non-employees, as well as the senior nature of the roles of those employees and directors and officers, the Company currently estimates that it will experience no forfeitures for those options currently outstanding.

 
  2008
Risk-free interest rate     3.23 – 3.62 %  
Expected volatility     118.46 – 132.79 %  
Expected life of options in years     5  
Expected dividend yield     0 %  

Research and Development:

Research and development costs, including license fees, are expensed as incurred. License fee expense for the year ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008 was approximately $813,378, $25,000 and $1,358,668, respectively.

Income Taxes:

Under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” (“SFAS 109”), deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized

F-17


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 2 — Summary of Significant Accounting Policies:  – (continued)

in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.

Loss per Common Share:

Basic earnings (loss) per common share excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since the Company has only incurred losses, basic and diluted loss per share are the same. The amount of potentially dilutive securities excluded from the calculation was 1,500,313 and 1,000,000 shares of common stock being held in escrow, warrants and options at December 31, 2008 and 2007, respectively. Additionally, the amount of warrants that are potentially dilutive and are excluded from the calculation related to the issuance of senior convertible notes (see Note 9), based upon an exercise price of $1.00 (lowest possible conversion price), at December 31, 2008 and 2007 are 5,162,500 and 4,322,500, respectively.

Fair Value Measurements:

The carrying value of the senior convertible notes and related party notes approximate fair value due to the short-term nature of these items and the related interest rate approximates market rates. Since the senior convertible and related party notes have been recorded at carrying value there has been no change in the value between reporting periods.

Note 3 — Related Party Transactions:

Consulting Services:

Effective August 1, 2006, the Company began accruing monthly fees for consulting services at a rate of $25,000 per month to Paramount Corporate Development, LLC (“Paramount”), an affiliate of a significant stockholder of the Company. Consulting services expense was $200,000, $300,000 and $625,000 for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008, respectively. As of December 31, 2008, the Company had $75,000 payable to Paramount pursuant to this agreement; such amount is included in accrued expenses. This agreement was terminated as of August 31, 2008.

Notes Payable:

On July 28, 2006, CorMedix issued a 5% promissory note payable to Paramount BioSciences, LLC (“PBS”), an affiliate of a significant stockholder of the Company. This note and all accrued interest was to mature on June 15, 2009, or earlier if certain events occurred. The maturity date of this note was extended until July 31, 2010. The note was issued to PBS for expenses that PBS has paid on behalf of the Company. As of December 31, 2008, the principal amount outstanding under this note is $0. Through November 24, 2009, the Company made additional borrowings under this note in the amount of $190,000.

On August 11, 2006, CorMedix issued a 5% promissory note payable to an entity related to the sole member of PBS. This note and all accrued interest was to mature on August 11, 2009, or earlier if certain events occur. The maturity date of this note was extended until July 31, 2010. As of December 31, 2008 and 2007, the principal amount outstanding under this note is $344,679.

F-18


 
 

TABLE OF CONTENTS

CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 4 — Income Taxes:

There was no current or deferred income tax provision for the years ended December 31, 2008 and 2007.

The Company’s deferred tax assets as of December 31, 2008 and 2007 consist of the following:

   
  2008   2007
Net operating loss carryforwards – Federal   $ 4,722,000     $ 2,450,000  
Net operating loss carryforwards – state     833,000       432,000  
Totals     5,555,000       2,882,000  
Less valuation allowance     (5,555,000 )       (2,882,000 )  
Deferred tax assets   $     $  

At December 31, 2008, the Company had potentially utilizable Federal and state net operating loss tax carryforwards of approximately $13,890,000 expiring through 2028.

The utilization of the Company’s net operating losses may be subject to a substantial limitation due to the “change of ownership provisions” under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carryforwards before their utilization.

The effective tax rate varied from the statutory rate as follows:

   
  December 31,
     2008   2007
Statutory Federal tax rate     (34.0 )%       (34.0 )%  
State income tax rate (net of Federal)     (6.0 )%       (6.0 )%  
Debt discount amortization     10.0 %       6.0 %  
Effect of valuation allowance     30.0 %       34.0 %  
Effective tax rate     %       %  

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The net change in the total valuation allowance for the years ended December 31, 2008 and 2007 and for the period from July 28, 2006 (inception) to December 31, 2008 was $2,673,000, $2,493,000 and $5,555,000, respectively. The tax benefit assumed the Federal statutory tax rate of 34% and a state tax rate of 6% and has been fully offset by the aforementioned valuation allowance.

In July 2006, Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement 109” (“FIN 48”), was issued and is effective for nonpublic entities for fiscal years beginning after December 15, 2008. The Company adopted FIN 48 as of January 1, 2007.

Management believes that the Company does not have any tax positions that will result in a material impact on the Company’s financial statements because of the adoption of FIN 48. However management’s conclusion may be subject to adjustment at a later date based on factors including additional implementation guidance from the Financial Accounting Standards Board and ongoing analyses of tax laws, regulations and related Interpretations.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 5 — Commitments:

Operating Lease:

In May 2007, the Company signed an agreement to lease office space in New Jersey. The lease commenced on May 1, 2007 and was set to expire on April 30, 2010. This lease was amended on March 21, 2008 which increased the Company’s square footage, base rent and expiration to March 31, 2013. Rent expense pursuant to this lease for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008 was approximately $88,000, $47,000 and $135,000, respectively. At December 31, 2008, future rent commitments under this lease agreement total approximately $128,000, $132,000, $136,000, $140,000 and $35,000 for the years ending December 31, 2009, 2010, 2011, 2012 and 2013, respectively. Pursuant to the agreement, the lease may be cancelled upon three months notice, which notice was given in November 2009.

Employment Agreements:

The Company has employment agreements with certain key executives. At December 31, 2008, future employment contract commitments for such key executives total approximately $646,333 and $36,667 for the years ending December 31, 2009 and 2010, respectively.

Note 6 — Note Payable — Galenica Ltd.:

On December 10, 2008, the Company issued a promissory note to Galenica, Ltd. (“Galenica”) in the amount of $1,000,000, in connection with a purchase agreement, with no stated interest rate. As a result of the termination of a proposed purchase agreement between the Company and Galenica, on April 30, 2009 this promissory note was cancelled and reissued with the same principal amount, an interest rate of 8% and an expiration date of July 31, 2010. The terms of this new note are consistent with the terms of the senior convertible notes issued in August 2008 (see Note 9).

Note 7 — Stockholders’ Deficiency:

Common Stock:

During June 2006, the Company issued 4,000,000 shares of Class A Common Stock to its founders for proceeds of $4,000 or $.001 per share.

During July 2006, the Company issued 800,000 shares of Class B Common Stock, 50,000 shares of Class C Common Stock, 50,000 shares of Class D Common Stock, 50,000 shares of Class E Common Stock and 50,000 shares of Class F Common Stock in accordance with a license agreement at $.001 per share. Each of these stock issuances has been placed into escrow until certain clinical milestones are met, at which point the shares will be released to the licensor. During 2006, the Company recorded $1,000 in a contra-equity account for this common stock which was issued but is being held in escrow until achievement of certain future clinical milestones (see Note 8).

During November 2006, the Company issued 421,130 shares of Class A Common Stock to an employee in connection with an employment agreement for proceeds of $421 or $.001 per share which vest equally over a three year period. In connection with this stock issuance, the Company recorded compensation expense at $.22 per share for a total of $30,883, $30,883 and $66,913 of compensation expense for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008, respectively. As of December 31, 2008, the total compensation expense related to non-vested common stock not yet recognized is $25,736 for the year ending December 31, 2009.

During January and March 2007, the Company issued 211,998 shares of Class A Common Stock to employees in connection with employment agreements for proceeds of $212 or $.001 per share which vest equally over a three year period. In connection with this stock issuance, the Company recorded compensation expense at $.22 per share for a total of $15,547, $14,251 and $29,798 of compensation expense for the years

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 7 — Stockholders’ Deficiency:  – (continued)

ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008, respectively. As of December 31, 2008, the total compensation expense related to non-vested common stock not yet recognized is $15,547 and $1,296 for the years ending December 31, 2009 and 2010, respectively.

During March 2007, the Company issued 193,936 shares of Non-Voting Class A Common Stock to technology finders for proceeds of $194 or $.001 per share which vest equally over a three year period. In connection with this stock issuance, the Company recorded compensation expense at $.22 per share for a total of $14,222, $20,148 and $34,370 of compensation expense for the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (inception) to December 31, 2008, respectively. As of December 31, 2008, the total compensation expense related to non-vested common stock not yet recognized is $8,296 for the year ending December 31, 2009.

During January 2008, the Company issued 313,283 shares of Class A Common Stock in accordance with a license agreement at $1.05 per share. During 2008, the Company recorded $328,948 in research and development expense in connection with this issuance. In addition, the Company issued an additional 125,313 shares of Class A Common Stock in connection with a license agreement which are being held in escrow until various clinical milestones are achieved. During 2008, the Company recorded $125 in a contra-equity account for this common stock which was issued but is being held in escrow (see Note 8).

During May 2008, the Company issued 7,353 shares of Class A Common Stock to a consultant in lieu of payment for consulting services at $1.05 per share. During 2008, the Company recorded $7,721 in research and development expense in connection with this issuance.

Common Stock Options and Warrants:

In 2006, the Company established a stock incentive plan (the “Plan”) under which incentive stock, options and/or warrants may be granted to officers, directors, consultants and key employees of the Company for the purchase of up to 925,000 shares of common stock. The options have a maximum term of ten years, vest over a period to be determined by the Company’s Board of Directors and have an exercise price at or above fair market value on the date of grant.

There were no options issued for the period from July 28, 2006 to December 31, 2007.

During 2008, the Company granted 235,000 options under the Plan to various employees, officers and directors with an exercise price of $1.05 per share. Each option granted during 2008 vests equally over a three-year period and has a ten year term. The Company recorded $54,530 compensation expense during 2008 in accordance with SFAS 123R.

A summary of the Company’s stock options activity under the Plan and related information is as follows:

   
  2008
     Shares   Weighted
Average
Exercise
Price
Outstanding at beginning of year         $  
Granted     235,000     $ 1.05  
Outstanding at end of year     235,000     $ 1.05  
Options exercisable at end of year     6,667     $ 1.05  
Weighted-average fair value of options granted during the year            $ 0.87  

The weighted average remaining contractual life of stock options outstanding at December 31, 2008 is 9.59 years.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 7 — Stockholders’ Deficiency:  – (continued)

As of December 31, 2008, the total compensation expense related to non-vested options not yet recognized totaled $70,202, $68,269 and $17,608 for the years ending December 31, 2009, 2010 and 2011, respectively. The weighted-average vesting period over which the total compensation expense related to non-vested options not yet recognized at December 31, 2008 was approximately 2.17 years.

On January 30, 2008, the Company granted 140,000 warrants outside of the Plan in connection with consulting agreements with vesting based upon completion of certain consulting services. Each warrant was issued with an exercise price of $1.36 and a seven year term. As of June 30, 2008, each of the warrants became one hundred percent vested based upon the completion of the consulting services. During the year ended December 31, 2008, the Company recorded $166,471 of consulting expense in connection with the above mentioned warrants.

Note 8 — License Agreements:

On July 28, 2006, the Company entered into a contribution agreement (the “Shiva Contribution Agreement”) with Shiva Biomedical, LLC, a New Jersey limited liability company (“Shiva”), Shiva contributed to the Company its kidney products business and granted the Company an exclusive, worldwide license agreement for a patent estate covering proprietary formulations of the first “iron-trap pill” for kidney diseases, specifically deferiprone (the “Compound”), and a biomarker diagnostic test for measuring levels of labile iron (the “Test”). Specifically, the Company licensed treatment, formulation and dosing regimens and methods of using the Compound and the Test, for the treatment and diagnosis of diseases and disorders, and the corresponding United States and foreign patents and applications in all fields of use (collectively, the “Shiva Technology”). As consideration in part for the rights to the Shiva Technology, the Company paid Shiva an initial licensing fee of $500,000 and granted Shiva up to a 20% equity interest in the Company consisting of shares of the Company’s Series B, C, D, E and F Common Stock which were placed in escrow to be released upon the achievement of certain clinical milestones. In addition, the Company will be required to make substantial payments to Shiva upon the achievement of certain clinical and regulatory based milestones. In the event that the Shiva Technology is commercialized, the Company is obligated to pay to Shiva annual royalties based upon net sales of the product. In the event that the Company sublicenses the Shiva Technology to a third party, the Company is obligated to pay to Shiva a portion of the royalties, fees or other lump-sum payments it receives from the sublicense. During the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (Inception) to December 31, 2008, the Company expensed $0, $0 and $500,000, respectively.

In connection with the Shiva Contribution Agreement, on July 28, 2006, the Company entered into a Consulting Agreement with Dr. Sudir Shah, which was amended and restated on January 10, 2008 (the “Shah Consulting Agreement”). Pursuant to the Shah Consulting Agreement, as amended, for a period of one year commencing on January 10, 2008, Dr. Shah provides the Company with consulting services involving areas mutually agreed to by Dr. Shah and the Company for up to 40 hours per month and is serving on one of our Scientific Advisory Boards. This agreement has been renewed on a montlhly basis since its expiration on January 10, 2009 and is currently still in place. As compensation for Dr. Shah’s consulting services, the Company has paid Dr. Shah $7,000 per month, which fee will be increased to $12,000 per month if the Company consummates a sale of equity securities (excluding convertible debt instruments) or assets in a transaction or series of related transactions with gross proceeds of at least $10,000,000. During the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (Inception) to December 31, 2008, the Company expensed $84,000, $84,000 and $196,000, respectively.

On January 30, 2008, the Company entered into a License and Assignment Agreement (the “NDP License Agreement”) with ND Partners LLC, a Delaware limited liability company (“NDP”). Pursuant to the NDP License Agreement, NDP granted the Company exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting infections, a biocidal lock system and a

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 8 — License Agreements:  – (continued)

taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications (the “NDP Technology”). The Company acquired such licenses and patents through our assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann and Dr. Johannes Reinmueller. NDP also granted the Company exclusive licenses, with the right to grant sublicenses, to use and display certain trademarks in connection with the NDP Technology. As consideration in part for the rights to the NDP Technology, the Company paid NDP an initial licensing fee of $325,000 and granted NDP a 5% equity interest in the Company, consisting of 313,283 shares of the Company’s Series A Common Stock, subject to certain anti-dilution adjustments. In connection with this stock issuance, the Company recorded $328,948 of research and development expense in 2008. In addition, the Company is required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Such payments will be made in the form of shares of the Company’s Series A Common Stock currently held in escrow for NDP, and may amount to up to an additional 2% equity interest in the Company, consisting of 125,313 shares of the Company’s Series A Common Stock, subject to certain anti-dilution adjustments. During the years ended December 31, 2008 and 2007 and the period from July 28, 2006 (Inception) to December 31, 2008, the Company expensed $653,948, $0 and $653,948, respectively.

On January 30, 2008, the Company also entered into an Exclusive License and Consulting Agreement with Dr. Polaschegg (the “Polaschegg License Agreement”). The Polaschegg License Agreement replaced the original license agreement between NDP and Dr. Polaschegg that the Company was assigned and the Company assumed under the NDP License Agreement. Pursuant to the Polaschegg License Agreement, Dr. Polaschegg granted the Company an exclusive, worldwide license for a certain antimicrobial solution and certain taurolidine treatments and the corresponding United States patent applications (the “Polaschegg Technology”), and agreed to provide the Company with certain consulting services. As consideration for the rights to the Polaschegg Technology, the Company paid Dr. Polaschegg an initial payment of $5,000 and agreed to pay Dr. Polaschegg certain royalty payments ranging from 1% to 3% of the net sales of the Polaschegg Technology. The Polaschegg License Agreement also sets forth certain minimum royalty payments (on an annual basis) to be made to Dr. Polaschegg in connection with the Polaschegg Technology. As compensation for Dr. Polaschegg’s consulting services to be provided under the Polaschegg License Agreement, Dr. Polaschegg is being paid €200 per hour for services consisting of scientific work and €250 per hour for services consisting of legal work. During the year ended December 31, 2008 and the period from July 8, 2006 (Inception) to December 31, 2008, the Company expensed approximately $132,000 and $132,000, respectively.

Note 9 — Senior Convertible Notes:

During 2007, the Company issued 8% senior convertible notes in connection with a private placement in the aggregate principal amount of $8,645,000 (the “First Notes”). The First Notes were to mature on July 31, 2008. The First Notes maturity date was extended to July 31, 2009 at an increased interest rate of 10%. Subsequently, the First Notes maturity was further extended until July 31, 2010 at an increased interest rate of 12%.

Upon the closing of an equity financing transaction from which the Company receives proceeds of at least $10,000,000 (“Qualified Financing”), the Notes, plus all accrued interest, will automatically convert into the same securities issued in the equity financing transaction at a price per security equal to the lesser of the lowest price paid per unit of securities in such Qualified Financing or $30,000,000 divided by the number of shares of the Company’s common stock outstanding immediately prior to the Qualified Financing, determined on a fully diluted basis. The Notes will also automatically convert into equity securities of the Company immediately prior to a sale of the Company, as defined.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 9 — Senior Convertible Notes:  – (continued)

In addition, each noteholder received warrants to purchase a number of the Company’s common stock equal to 40% of the principal amount of the First Notes purchased divided by the greater of the lowest price paid for securities in a Qualified Financing or $1.00, if a Qualified Financing is not completed by July 31, 2009. Each warrant issued as a result of a Qualified Financing would be exercisable at a price per share equal to the greater of 110% of the price per share of the securities in the Qualified Financing or $1.00, if a Qualified Financing is not completed by July 31, 2009 the exercise price would be set at $1.00, and would be exercisable for a period of seven years. The Company allocated proceeds of $2,993,981 from the sale of the First Notes to the warrants, determined by using the Black-Scholes option pricing model, at the time of issuance which was recorded as a debt discount, and reduced the carrying values of the First Notes. As of December 31, 2008, the remaining unamortized debt discount is $0. Since a Qualified Financing has not taken place by July 31, 2009, each noteholder received warrants equal to 40% of the principal amount of the First Notes purchased divided by $1.00 at an exercise price of $1.00. In the aggregate, warrants to purchase 3,458,000 shares of common stock were issued with an exercise price of $1.00 in connection with this offering.

In connection with the offering of the First Notes, Paramount BioCapital, Inc. (“PCI”), an affiliate of a significant stockholder of the Company, and the Company entered into a placement agency agreement dated June 8, 2007, pursuant to which the Company paid PCI and third party agents cash commissions of $505,050 and $100,100, respectively, for their services. The Company also has agreed to pay to PCI a commission on sales by the Company of securities during the 18-month period subsequent to September 20, 2007 to the purchasers of the First Notes who were introduced to the Company by PCI. The Company also granted PCI the right of first refusal to act as exclusive finder, placement agent or other similar agent in relation to any securities offerings on its behalf during the 18-month period following September 20, 2007. This agreement terminated on March 20, 2009.

In addition, PCI and third party agents received warrants (the “Placement Warrants”) to purchase, at an exercise price of 110% of the lowest price paid for securities in a Qualified Financing, a number of shares of the Company’s common stock equal to 10% of the principal amount of the First Notes purchased divided by the lowest price paid for securities in a Qualified Financing prior to December 31, 2009. If the Qualified Financing does not occur on or before July 31, 2009, the Placement Warrants will be exercisable for a number of shares of the Company’s common stock equal to 10% of the principal amount of the First Notes purchased divided by $1.00, at a per share exercise price of $1.00 and are exercisable for seven years. The Company estimated the value of the warrants using the Black- Scholes option pricing model at approximately $748,000, currently recorded as deferred financing costs on the balance sheet as of December 31, 2008, which is being amortized to interest expense over the term of the First Notes. Since a Qualified Financing has not taken place by July 31, 2009, PCI and the third party agents received warrants equal to 10% of the principal amount of the First Notes purchased divided by $1.00 at an exercise price of $1.00. In the aggregate, warrants to purchase 864,500 shares of common stock were issued with an exercise price of $1.00 in connection with this placement agent agreement.

During August 2008, the Company issued 8% senior convertible notes in connection with a private placement in the aggregate principal amount of $2,100,000 (the “Second Notes”). The Second Notes were to mature on July 31, 2009. The Notes maturity date was extended to July 31, 2010 at an increased interest rate of 12%.

Upon the closing of an equity financing transaction from which the Company receives proceeds of at least $10,000,000 (“Qualified Financing”), the Notes, plus all accrued interest, will automatically convert into the same securities issued in the equity financing transaction at a price per security equal to the lesser of the lowest price paid per unit of securities in such Qualified Financing or $30,000,000 divided by the number of shares of the Company’s common stock outstanding immediately prior to the Qualified Financing, determined on a fully diluted basis. The Notes will also automatically convert into equity securities of the Company immediately prior to a sale of the Company, as defined.

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CORMEDIX, INC.
(A Development Stage Company)
  
NOTES TO FINANCIAL STATEMENTS

Note 9 — Senior Convertible Notes:  – (continued)

In addition, each noteholder received warrants to purchase a number of the Company’s common stock equal to 40% of the principal amount of the Second Notes purchased divided by the greater of the lowest price paid for securities in a Qualified Financing or $1.00, if a Qualified Financing is not completed prior to August 18, 2010. Each warrant issued as a result of a Qualified Financing would be exercisable at a price per share equal to the greater of 110% of the price per share of the securities in the Qualified Financing or $1.00, if a Qualified Financing does not take place prior to August 18, 2010 then the exercise price would be set at $1.00, and would be exercisable for a period of seven years. The Company allocated proceeds of $747,215 from the sale of the Second Notes to the warrants, determined by using the Black-Scholes option pricing model, at the time of issuance which was recorded as a debt discount, and reduced the carrying values of the Second Notes. As of December 31, 2008, the remaining unamortized debt discount is $435,875.

In connection with the offering of the Second Notes, PCI, a third party agent and the Company entered into a placement agency agreement dated January 22, 2008, pursuant to which the Company paid PCI cash commissions of $126,000 for its services. The Company also has agreed to pay to PCI and a third party agent a commission on sales by the Company of securities on or prior to January 18, 2009 to the purchasers of the Second Notes who were introduced to the Company by PCI and the third party agent. The Company also granted PCI and the third party agent the right of first refusal to act as exclusive finder, placement agent or other similar agent in relation to any securities offerings on its behalf on or prior to January 18, 2009. This agreement terminated on January 18, 2009.

Note 10 — Subsequent Events:

Exchange Agreement:

On October 6, 2009, the Company completed an Exchange Agreement with Shiva (the “Licensor”) whereby the Licensor surrenders all rights to the shares issued to the Licensor under a license agreement in exchange for 7% of the outstanding Series A common stock as of the date of the Exchange Agreement.

Senior Convertible Notes:

During October and November 2009, the Company issued 8% senior convertible notes in connection with a private placement in the aggregate principal amount of $2,619,973 (the “Third Notes”). The Third Notes mature on October 29, 2011.

Upon the closing of an initial public offering of equity securities from which the Company receives proceeds of at least $10,000,000 (“Qualified IPO”), the Third Notes, plus all accrued interest, will automatically convert into the same securities issued in the equity financing transaction at a price per security equal to 70% of the lowest price paid per unit of securities in such Qualified IPO.

In addition, each noteholder received warrants to purchase a number of the Company’s common stock equal to 60% of the principal amount of the Third Notes purchased divided by the price at which equity securities of the Company are sold in a Qualified IPO (“IPO Price”). Each warrant issued as a result of a Qualified IPO would be exercisable at a price per share equal to 110% of the IPO Price and exercisable for a period of five years. If a Qualified IPO does not occur on or before October 29, 2011, then each warrant will be exercisable for that number of shares of common stock equal to 60% of the principal amount of the Third Notes purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.

In connection with the offering of the Third Notes a third party agent and the Company entered into a placement agency agreement dated September 4, 2009, pursuant to which the Company paid the third party agent cash commissions of $264,173 and for its services. The Company also has agreed to pay to the third party agent a commission on sales by the Company of securities on or prior to October 29, 2009 to the purchasers of the Third Notes who were introduced to the Company by the third party agent. The Company also granted the third party agent the right of first refusal to act as exclusive finder, placement agent or other similar agent in relation to any securities offerings on its behalf after closing of a Qualified IPO.

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          Units

  
  
  

[GRAPHIC MISSING]

  
  
  
  
  



 

PROSPECTUS



 

  
  
  
  
  

Maxim Group LLC

  
  

          , 2010

  
  
  
  
  

Through and including          2010 (the 25 th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This obligation is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 


 
 

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PART II
  
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the various expenses (other than selling commissions and other fees to be paid to the underwriters) which will be paid by the Registrant in connection with the issuance and distribution of the securities being registered. With the exception of the SEC registration fee and the NASD filing fee, all amounts shown are estimates.

 
SEC registration fee   $ 1,004.40  
FINRA filing fee     2,300.00  
NYSE Amex listing fee and expenses     *  
Printing and engraving expenses     *  
Legal fees and expenses     *  
Accounting fees and expenses     *  
Transfer Agent and Registrar fees and expenses     *  
Miscellaneous     *  
Total   $ *  

* To be provided by amendment.

Item 14. Indemnification of Directors and Officers.

The amended and restated certificate of incorporation of the Registrant to be effective upon the completion of the offering described in the prospectus filed herewith will provide that the Registrant will indemnify, to the extent permitted by the DGCL, any person whom it may indemnify thereunder, including directors, officers, employees and agents of the Registrant. In addition, the Registrant’s amended and restated certificate of incorporation will eliminate, to the extent permitted by the DGCL, personal liability of directors to the Registrant and its stockholders for monetary damages for breach of fiduciary duty.

The Registrant’s authority to indemnify its directors and officers is governed by the provisions of Section 145 of the DGCL, as follows:

(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a

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manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.

(e) Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

(g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.

(h) For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of

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such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

(i) For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.

(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).

Pursuant to the Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement, the Registrant will agree to indemnify the Underwriters and the Underwriters will agree to indemnify the Registrant and its directors, officers and controlling persons against certain civil liabilities that may be incurred in connection with the offering, including certain liabilities under the Securities Act.

The Registrant will enter into indemnification agreements with each of its directors after the completion of the offering, whereby it will agree to indemnify each director and officer from and against any and all judgments, fines, penalties, excise taxes and amounts paid in settlement or incurred by such director or officer for or as a result of action taken or not taken while such director was acting in his capacity as a director or executive officer of the Registrant.

Item 15. Recent Sales of Unregistered Securities.

During the past three years, the following securities were sold by the Registrant without registration under the Securities Act of 1933, as amended (the “Securities Act”). All certificates representing the securities described herein and currently outstanding have been appropriately legended. The securities described below were deemed exempt from registration under the Securities Act in reliance upon Section 4(2), Regulation D or Regulation S of the Securities Act. There were no underwriters employed in connection with any of the transactions set forth in this Item 15. All of these securities, to the extent not included in this registration statement, are deemed restricted securities for purposes of the Securities Act. The terms of these securities are discussed in greater detail in the section of the prospectus entitled “Description of Capital Stock.”

1. In July and September of 2007, we issued the First Bridge Notes, in the aggregate principal amount of $8,645,000, and the First Bridge Warrants.
2. In August 2008, we issued the Second Bridge Notes, in the aggregate principal amount of $2,100,000, and the Second Bridge Warrants.
3. In April 2009, we issued the Galenica Note, in the principal amount of $1,000,000, to Galenica.
4. In October and November 2009, we issued the 8% Notes, in the aggregate principal amount of $2,619,973, and the 8% Noteholder Warrants.
5. On July 28, 2006, pursuant to the Shiva Contribution Agreement, we issued to Shiva 800,000 shares

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of Series B Common Stock, 50,000 shares of Series C Common Stock, 50,000 shares of Series D Common Stock, 50,000 shares of Series E Common Stock and 50,000 shares of Series F Common Stock.
6. On October 6, 2009, pursuant to the Common Stock Exchange and Stockholder Agreement by and between us and Shiva, we issued to Shiva 773,717 shares of common stock in exchange for all of its Series B – F Common Stock.
7. On January 30, 2008, pursuant to the NDP License Agreement, we issued to NDP 313,283 shares of common stock.
8. On January 30, 2008, pursuant to a consulting agreement, we issued to Mr. Prosl a warrant to purchase 40,000 shares of our common stock at a purchase price of $1.36 per share, subject to adjustment.
9. On January 30, 2008, pursuant to a consulting agreement, we issued to Linda Donald a warrant to purchase 100,000 shares of our common stock at a purchase price of $1.36 per share, subject to adjustment.
10. On August 11, 2006, we issued the Family Trusts Notes. Pursuant to the Family Trusts Notes, we borrowed an aggregate principal amount of $1,430,000 from August 11, 2006 through September 30, 2009.
11. On July 28, 2006, we issued the PBS Note. Pursuant to the PBS Note, we borrowed an aggregate principal amount of $1,062,003 from July 28, 2006 through September 30, 2009.
12. In July 2007, we issued to Paramount, in partial compensation for its services in connection with the offering of the First Bridge Notes, a warrant exercisable for 721,500 shares of common stock at a per share exercise price of $1.00.
13. In July 2007, we issued to Co-Placement Agents, in partial compensation for their services in connection with the offering of First Bridge Notes, a warrant exercisable for 143,000 shares of common stock at a per share exercise price of $1.00.

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Item 16. Exhibits and Financial Statements.

(a) Exhibits:

 
Number   Description of Exhibit
 1.1    Form of Underwriting Agreement.*
 3.1    Amended and Restated Certificate of Incorporation.
 3.2    By-laws.
 3.3    Form of Amended and Restated Certificate of Incorporation, to be effective upon the completion of the offering.*
 3.4    Form of Amended and Restated By-laws, to be effective upon the completion of the offering.*
 4.1    Specimen common stock certificate.*
 4.2    Specimen Unit certificate.*
 4.3    Specimen warrant certificate.*
 4.4    Form of warrant agreement.*
 4.5    Form of Unit option purchase agreement.*
 4.6    Common Stock Exchange and Stockholder Agreement, dated as of October 6, 2009, by and between CorMedix Inc. and Shiva Biomedical, LLC.
 4.7    Stockholder Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC.
 4.8    Form of Stock Purchase Agreement for former stockholders of Picton Pharmaceuticals, Inc.*
 4.9    Form of Amended and Restated PBS Note.*
 4.10    Form of Amended and Restated Family Trust Note.*
 4.11    Form of Note and Warrant Purchase Agreement for First Bridge Notes.
 4.12    Form of Amended & Restated First Bridge Note.
 4.13   Form of Note and Warrant Purchase Agreement for Second Bridge Notes.
 4.14   Form of Second Bridge Note.
 4.15   Convertible Promissory Note, dated April 30, 2009, issued to Galenica Ltd.
 4.16   Form of Note and Warrant Purchase Agreement for Third Bridge Notes.
 4.17   Form of Third Bridge Note.
 5.1    Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.*
10.1    Contribution Agreement, dated as of July 28, 2006, by and between Shiva Biomedical, LLC, Picton Pharmaceuticals, Inc., Picton Holding Company, Inc., and the stockholders of Picton Pharmaceuticals, Inc.*
10.2    Amendment to Contribution Agreement, dated as of October 6, 2009, by and between Shiva Biomedical, LLC and CorMedix, Inc.*
10.3    Amended and Restated Future Advance Promissory Note, dated as of September 30, 2009, issued by the Company in favor of Paramount Biosciences, LLC.
10.4    Amended and Restated Future Advance Promissory Note, dated as of September 30, 2009, issued by the Company in favor of The Lindsay A. Rosenwald Family Trusts Dated December 15, 2000.
10.5    License and Assignment Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC.*
10.6    Escrow Agreement, dated as of January 30, 2008, among the Company, ND Partners LLC and the Secretary of the Company, as Escrow Agent.
10.7    Exclusive License and Consulting Agreement, dated as of January 30, 2008, between the Company and Hans-Dietrich Polaschegg.*
10.8    2006 Stock Incentive Plan.
10.9    Amended and Restated Employment Agreement, dated as of November 25, 2009, between the Company and John Houghton.*
10.10   Employment Agreement, dated as of February 14, 2007, between the Company and Mark Houser, M.D.
10.11   Amended and Restated Consulting Agreement, dated as of January 10, 2008, between the Company and Sudhir V. Shah, M.D.
10.12   Consulting Agreement, dated as of January 30, 2008, between the Company and Frank Prosl.
23.1    Consent of J.H. Cohn LLP.

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Number   Description of Exhibit
23.2    Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP. (included in Exhibit 5.1)
24.1    Powers of Attorney (included on the signature page of this Registration Statement).

* To be filed by amendment.

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(c) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Summit, State of New Jersey on the 25 th day of November, 2009.

 
  CORMEDIX INC.
    

By:

/s/ John C. Houghton

Name: John C. Houghton
Title: President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John C. Houghton and Timothy Hofer as his true and lawful attorney-in-fact, each acting alone, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments to this registration statement, and any related registration statement filed pursuant to Rule 462(b) of the Act and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact or their substitutes, each acting along, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

   
Signature   Title   Date
/s/ Russel H. Ellison

Russel H. Ellison
  Chairman of the Board   November 25, 2009
/s/ John C. Houghton

John C. Houghton
  President, Chief Executive Officer and Director (Principal Executive Officer)   November 25, 2009
/s/ Stephen Pilatzke

Stephen Pilatzke
  Treasurer (Principal Financial and Accounting Officer)   November 25, 2009
/s/ Mahendra Patel

Mahendra Patel
  Director   November 25, 2009
/s/ Antony E. Pfaffle

Antony E. Pfaffle
  Director   November 25, 2009
/s/ Timothy Hofer

Timothy Hofer
  Director   November 25, 2009

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EXHIBIT INDEX

 
Number   Description of Exhibit
 1.1    Form of Underwriting Agreement.*
 3.1    Amended and Restated Certificate of Incorporation.
 3.2    By-laws.
 3.3    Form of Amended and Restated Certificate of Incorporation, to be effective upon the completion of the offering.*
 3.4    Form of Amended and Restated By-laws, to be effective upon the completion of the offering.*
 4.1    Specimen common stock certificate.*
 4.2    Specimen Unit certificate.*
 4.3    Specimen warrant certificate.*
 4.4    Form of warrant agreement.*
 4.5    Form of Unit option purchase agreement.*
 4.6    Common Stock Exchange and Stockholder Agreement, dated as of October 6, 2009, by and between CorMedix Inc. and Shiva Biomedical, LLC.
 4.7    Stockholder Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC.
 4.8    Form of Stock Purchase Agreement for former stockholders of Picton Pharmaceuticals, Inc.*
 4.9    Form of Amended and Restated PBS Note.*
 4.10    Form of Amended and Restated Family Trust Note.*
 4.11    Form of Note and Warrant Purchase Agreement for First Bridge Notes.
 4.12    Form of Amended & Restated First Bridge Note.
 4.13   Form of Note and Warrant Purchase Agreement for Second Bridge Notes.
 4.14   Form of Second Bridge Note.
 4.15   Convertible Promissory Note, dated April 30, 2009, issued to Galenica Ltd.
 4.16   Form of Note and Warrant Purchase Agreement for Third Bridge Notes.
 4.17   Form of Third Bridge Note.
 5.1    Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.*
10.1    Contribution Agreement, dated as of July 28, 2006, by and between Shiva Biomedical, LLC, Picton Pharmaceuticals, Inc., Picton Holding Company, Inc., and the stockholders of Picton Pharmaceuticals, Inc.*
10.2    Amendment to Contribution Agreement, dated as of October 6, 2009, by and between Shiva Biomedical, LLC and CorMedix, Inc.*
10.3    Amended and Restated Future Advance Promissory Note, dated as of September 30, 2009, issued by the Company in favor of Paramount Biosciences, LLC.
10.4    Amended and Restated Future Advance Promissory Note, dated as of September 30, 2009, issued by the Company in favor of The Lindsay A. Rosenwald Family Trusts Dated December 15, 2000.
10.5    License and Assignment Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC.*
10.6    Escrow Agreement, dated as of January 30, 2008, among the Company, ND Partners LLC and the Secretary of the Company, as Escrow Agent.
10.7    Exclusive License and Consulting Agreement, dated as of January 30, 2008, between the Company and Hans-Dietrich Polaschegg.*
10.8    2006 Stock Incentive Plan.

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Number   Description of Exhibit
10.9    Amended and Restated Employment Agreement, dated as of November 25, 2009, between the Company and John Houghton.*
10.10   Employment Agreement, dated as of February 14, 2007, between the Company and Mark Houser, M.D.
10.11   Amended and Restated Consulting Agreement, dated as of January 10, 2008, between the Company and Sudhir V. Shah, M.D.
10.12   Consulting Agreement, dated as of January 30, 2008, between the Company and Frank Prosl.
23.1    Consent of J.H. Cohn LLP.
23.2    Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP. (included in Exhibit 5.1)
24.1    Powers of Attorney (included on the signature page of this Registration Statement).

* To be filed by amendment.

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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CORMEDIX, INC.
 
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
 
CORMEDIX, INC., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “ DGCL ”),
 
DOES HEREBY CERTIFY:
 
1.         That the name of this corporation is CorMedix, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on July 28, 2006 under the name Picton Holding Company, Inc.
 
2.         That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
 
RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
 
FIRST: The name of the Corporation is “CorMedix, Inc.” (the “ Corporation ”).
 
SECOND: The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle 19808. The name of the registered agent of the Corporation at such address is Corporation Service Company.

THIRD: The purpose or purposes of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the DGCL.
 
FOURTH: The total number of shares of stock which this Corporation is authorized to issue is Fifty Million (50,000,000) shares, consisting of the following three classes: (i) Thirty-Five Million (35,000,000) shares of common stock, $0.001 par value per share (the “ Voting Common Stock ”), (ii) Five Million (5,000,000) shares of Non-Voting Subordinated Class A Common Stock, $0.001 par value per share (the “ Non-Voting Class A Common Stock ”), and (iii) Ten Million (10,000,000) shares of preferred stock, $0.001 par value per share (the “ Preferred Stock ”). The Voting Common Stock shall consist of one series comprised of 35,000,000 shares and is designated “Series A Common Stock.”
 
The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of a majority in voting power of the outstanding capital stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL.
 

Except as otherwise expressly provided herein, the shares of Non-Voting Class A Common Stock shall have the same powers, preferences, rights, qualifications, limitations and restrictions, on an as-converted basis, as the shares of Series A Common Stock.
 
1.     Liquidation .
 
(a)        Upon a Liquidation (as defined below), and subject to the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Voting Common Stock with respect to a Liquidation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of the Voting Common Stock shall be entitled to receive, out of the remaining assets of the Corporation available for distribution to its stockholders, an aggregate amount (the “ Preference Amount ”) equal to $20,000,000 before any distribution shall be made to the holders of Non-Voting Class A Common Stock, or any other class or series of capital stock of the Corporation that ranks junior to the Voting Common Stock. If upon any Liquidation the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of Voting Common Stock the full Preference Amount to which they shall be entitled, the holders of Voting Common Stock shall share pro rata in any distribution of assets in accordance with their respective Preference Amount.
 
(b)        Upon any Liquidation, after payment in full of the Preference Amount, the holders of shares of Voting Common Stock and Non-Voting Class A Common Stock (participating on an as converted basis as determined pursuant to Section 3 hereof) shall be entitled to share pro rata in the distribution of the remaining assets of the Corporation.
 
(c)        “ Liquidation ” means any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, other than any dissolution, liquidation or winding up in connection with any reincorporation of the Corporation in another jurisdiction. For the avoidance of doubt, (i) the sale of all or substantially all of the Corporation’s assets, (ii) the sale or transfer of the outstanding shares of capital stock of the Corporation, or (iii) the merger or consolidation of the Corporation with another person or entity, in the case of a transaction described in clauses (ii) and (iii) above, under circumstances which result in the holders of a majority of the voting power of outstanding capital stock of the Corporation, immediately prior to such transaction, owning less than a majority of the voting power of the outstanding capital stock of the Corporation or the surviving or resulting corporation or acquirer, as the case may be, immediately following such transaction (any of the transactions described in clauses (i) through (iii) above, a “ Sale ”) shall not be deemed to be a Liquidation hereunder, but may, if such transaction otherwise satisfies the criteria described in Section 3(a) below, constitute an Automatic Conversion Event (as defined in Section 3(a) below). In the event of a Sale that does not constitute an Automatic Conversion Event, the Corporation shall make appropriate provision to ensure that the applicable terms of this Article FOURTH survive any such transaction.
 
2.     Voting Rights; Other Rights .
 
The holders of the Voting Common Stock shall be entitled to one vote for each share of Voting Common Stock standing in such holder’s name on the transfer books of the Corporation.

 

The holders of Non-Voting Class A Common Stock, except as otherwise required under Delaware law, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation.
 
3.     Automatic Conversion of Non-Voting Class A Common Stock .
 
(a)        Upon the earliest to occur of the closing of an equity financing or series of related equity financings by the Corporation resulting in aggregate gross cash proceeds (before commissions or other expenses) to the Corporation of at least $5,000,000 (an “ Automatic Conversion Event ”), each share of Non-Voting Class A Common Stock then outstanding shall, by virtue of and simultaneously with the occurrence of such Automatic Conversion Event, without any further action by the Corporation or its stockholders, automatically convert into a number of fully paid and nonassessable shares of Series A Common Stock equal to the Conversion Rate (as defined below), as last adjusted and then in effect (the resulting number of shares of Series A Common Stock, the “ Conversion Shares ”). The “ Conversion Rate ” shall initially be one as of the date hereof and shall be subject to adjustment from time to time in accordance with Section 3(b) below.
 
(b)        The Conversion Rate shall be subject to adjustment from time to time as follows:
 
(i)       If, at any time after the filing date of this Amended and Restated Certificate of Incorporation, the number of shares of Series A Common Stock outstanding is increased by a stock dividend payable in shares of Series A Common Stock or by a subdivision or stock split of shares of Series A Common Stock without a comparable dividend, subdivision or stock split of the shares of Non-Voting Class A Common Stock, then, following the record date for the determination of holders of Series A Common Stock entitled to receive such stock dividend, subdivision or stock split, the Conversion Rate shall be appropriately increased, as necessary, so that the number of shares of Series A Common Stock issuable on conversion of each share of Non-Voting Class A Common Stock shall be increased in proportion to such increase in outstanding shares of Series A Common Stock. The provisions of this clause shall similarly apply to successive stock dividends, subdivisions or stock splits.
 
(ii)      If, at any time after the filing date of this Amended and Restated Certificate of Incorporation, the number of shares of Series A Common Stock outstanding is decreased by a combination or reverse stock split of the outstanding shares of Series A Common Stock without a comparable combination or reverse stock split of the shares of Non-Voting Class A Common Stock, then, following the record date for such combination or reverse stock split, the Conversion Rate shall be appropriately decreased, as necessary, so that the number of shares of Series A Common Stock issuable on conversion of each share of the Non-Voting Class A Common Stock shall be decreased in proportion to such decrease in outstanding shares of Series A Common Stock. The provisions of this clause shall similarly apply to successive combinations or reverse stock splits.
 
(iii)     Except in connection with a Liquidation, in the event of any capital reorganization of the Corporation, any reclassification of the stock of the Corporation (other than a change in par value or from no par value to par value or from par value to no par value or as a result of a stock dividend or subdivision, stock split, combination or reverse stock split), or any consolidation or merger of the Corporation, each share of Non-Voting Class A Common Stock shall after such reorganization, reclassification, consolidation, or merger be convertible into the kind and number of shares of stock or other securities or property of the Corporation or of the corporation resulting from such consolidation or surviving such merger to which the holder of the number of shares of Series A Common Stock deliverable (immediately prior to the time of such reorganization, reclassification, consolidation or merger) upon conversion of such share of Non-Voting Class A Common Stock would have been entitled upon such reorganization, reclassification, consolidation or merger. The provisions of this clause shall similarly apply to successive reorganizations, reclassifications, consolidations or mergers.
 


(iv)    All calculations under this paragraph shall be made to the nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10) of a share, as the case may be.
 
(c)         Procedures Applicable Upon Conversion .
 
(i)      As promptly as practicable after the occurrence of an event requiring automatic conversion and the delivery to the Corporation of the certificate or certificates formerly representing Non-Voting Class A Common Stock (“ Shares Subject to Conversion ”) which have been converted into shares of Series A Common Stock, in each case duly endorsed or assigned in blank to the Corporation (if required by it), the Corporation shall issue and deliver to or upon the written order of each holder of Shares Subject to Conversion, to the place designated by such holder, a certificate or certificates for that number of shares of Series A Common Stock equal to the number of Conversion Shares. Notwithstanding the foregoing, effective as of the occurrence of the event requiring conversion, the persons entitled to receive the shares of Series A Common Stock issuable upon conversion of the Shares Subject to Conversion shall be treated for all purposes as the record holder or holders of such shares of Series A Common Stock as of such time and the certificates formerly representing Shares Subject to Conversion shall, without any further act of the Corporation or its stockholders, be deemed for all purposes to represent the number of shares of Series A Common Stock into which the Shares Subject to Conversion formerly represented by such certificates have been converted.
 
(ii)      No fractional shares of Series A Common Stock shall be issued upon conversion of Shares Subject to Conversion. Upon conversion, instead of any fractional shares of Series A Common Stock which would otherwise be issuable upon conversion of any Shares Subject to Conversion, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to the then fair market value, as determined in good faith by the Board of Directors of the Corporation (the “ Board of Directors ”), of a share of Series A Common Stock multiplied by such fractional interest. Fractional interests shall not be entitled to dividends, and the holders of fractional interests shall not be entitled to any rights as stockholders of the Corporation in respect of such fractional interest.
 
(iii)     The Corporation shall reserve, and at all times from and after the filing date of this Amended and Restated Certificate of Incorporation up to and including the time of an Automatic Conversion Event keep reserved, free from preemptive rights, out of its authorized but unissued shares of Series A Common Stock, a sufficient number of shares of Series A Common Stock to provide for the automatic conversion of all outstanding shares of Non-Voting Class A Common Stock.
 


FIFTH: The Board of Directors shall have the power to adopt, amend, alter or repeal the by-laws.
 
SIXTH: No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director to the fullest extent of the law.
 
SEVENTH: Unless and except to the extent that the bylaws of the Corporation shall so require, the election of the directors of the Corporation need not be by written ballot.
 
EIGHTH: The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Amended and Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article EIGHTH.
 
*   *   *   *   *
 
3.         That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
 
4.         That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

 
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this Fifth day of October, 2009.
 
  CORMEDIX, INC.  
       
 
By:
/s/ John Houghton  
    John Houghton  
    President and Chief Executive Officer  
       
 
 




BYLAWS

of

PICTON HOLDING COMPANY, INC.


 
 
 
 
 
 

 

 
Table of Contents
 
      Page
       
ARTICLE I           OFFICES
1
 
Section 1.01
REGISTERED OFFICE
1
 
Section 1.02
PRINCIPAL OFFICE
1
 
Section 1.03
OTHER OFFICES
1
  ARTICLE II        MEETINGS OF STOCKHOLDERS
1
 
Section 2.01
ANNUAL MEETINGS
1
 
Section 2.02
SPECIAL MEETINGS
1
 
Section 2.03
PLACE OF MEETINGS
1
 
Section 2.04
NOTICE OF MEETINGS
1
 
Section 2.05
QUORUM
2
 
Section 2.06
ORGANIZATION
3
 
Section 2.07
ORDER OF BUSINESS
3
 
Section 2.08
VOTING
3
 
Section 2.09
LIST OF STOCKHOLDERS
4
 
Section 2.10
STOCK LEDGER
4
 
Section 2.11
INSPECTOR OF ELECTION
4
 
Section 2.12
STOCKHOLDER ACTION WITHOUT MEETINGS.
5
 
Section 2.13
RECORD DATE
5
ARTICLE III        BOARD OF DIRECTORS
6
 
Section 3.01
GENERAL POWERS
6
 
Section 3.02
NUMBER AND TERM
6
 
Section 3.03
ELECTION OF DIRECTORS
6
 
Section 3.04
RESIGNATION AND REMOVAL
6
 
Section 3.05
VACANCIES
6
 
Section 3.06
PLACE OF MEETING; TELEPHONE CONFERENCE MEETING
7
 
Section 3.07
FIRST MEETING
7
 
Section 3.08
REGULAR MEETINGS
7
 
Section 3.09
SPECIAL MEETINGS
7
 
Section 3.10
ORGANIZATION
8
 
Section 3.11
QUORUM AND ACTION
8
 
Section 3.12
ACTION BY CONSENT
8
 
Section 3.13
COMPENSATION
8
 
Section 3.14
COMMITTEES
8
 
Section 3.15
OFFICERS OF THE BOARD
9
 
Section 3.16
INTERESTED DIRECTORS
9
ARTICLE IV        OFFICERS
9
 
Section 4.01
OFFICERS
9
 
Section 4.02
ELECTION AND TERM
10
 
Section 4.03
SUBORDINATE OFFICERS
10
 
Section 4.04
REMOVAL AND RESIGNATION
10
 
Section 4.05
VACANCIES
10
 
Section 4.06
CHAIRMAN OF THE BOARD
10
 
Section 4.07
CHIEF EXECUTIVE OFFICER/CHIEF OPERATING OFFICER/OFFICE OF THE CHIEF EXECUTIVE.
10
 
Section 4.08
PRESIDENT
11
 
Section 4.09
VICE PRESIDENT.
11
 
Section 4.10
SECRETARY
11
 
Section 4.11
TREASURER
11
 
Section 4.12
ASSISTANT SECRETARIES
12
 
Section 4.13
ASSISTANT TREASURERS
12
 
Section 4.14
OTHER OFFICERS
12
 
Section 4.15
COMPENSATION
12
 
Section 4.16
VOTING SECURITIES OWNED BY THE CORPORATION
12
ARTICLE V         CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
13
 
Section 5.01
EXECUTION OF CONTRACTS
13
 
Section 5.02
CHECKS, DRAFTS, ETC
13
 
Section 5.03
DEPOSIT
13
 
 
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Table of Contents
(continued)
 
      Page
       
 
Section 5.04
GENERAL AND SPECIAL BANK ACCOUNTS
13
 
Section 5.05
AUDITS, ACCOUNTS AND REPORTS
13
 
Section 5.06
ACCESS
13
 
Section 5.07
FISCAL YEAR
14
 
Section 5.08
ACCOUNTING POLICY
14
 
Section 5.09
DIVIDENDS
14
ARTICLE VI       BOOKS AND RECORDS.
14
ARTICLE VI       SHARES AND THEIR TRANSFER
14
 
Section 7.01
CERTIFICATES FOR SHARES
14
 
Section 7.02
TRANSFER OF SHARES
15
 
Section 7.03
LOST, DESTROYED AND MUTILATED CERTIFICATES
15
 
Section 7.04
REGULATIONS
15
 
Section 7.05
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
16
 
Section 7.06
TRANSFER AGENTS AND REGISTRARS
16
ARTICLE VIII     INDEMNIFICATION
16
 
Section 8.01
POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION
16
 
Section 8.02
POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION
16
 
Section 8.03
AUTHORIZATION OF INDEMNIFICATION
17
 
Section 8.04
GOOD FAITH DEFINED
17
 
Section 8.05
INDEMNIFICATION BY A COURT
17
 
Section 8.06
EXPENSES PAYABLE IN ADVANCE
18
 
Section 8.07
NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
18
 
Section 8.08
INSURANCE
18
 
Section 8.09
CERTAIN DEFINITIONS
18
 
Section 8.10
SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
19
 
Section 8.11
LIMITATION ON INDEMNIFICATION
19
 
Section 8.12
INDEMNIFICATION OF EMPLOYEES AND AGENTS
19
 
Section 8.13
CONTRACT RIGHTS
19
 
Section 8.14
MODIFICATION
19
ARTICLE IX       MISCELLANEOUS
19
 
Section 9.01
WAIVER OF NOTICES
20
 
Section 9.02
LOANS AND GUARANTIES
20
 
Section 9.03
GENDER
20
 
Section 9.04
AMENDMENTS
20
 
Section 9.05
CERTIFICATE OF INCORPORATION
20
 
Section 9.06
RATIFICATION
20

 
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ARTICLE I

OFFICES

Section 1.01  REGISTERED OFFICE.  The registered office of PICTON HOLDING COMPANY, INC.   (the "Corporation"), in the State of Delaware is 2711 Centerville Road, Dover, DE 19901 and its registered agent at such address is Corporation Service Company.

Section 1.02  PRINCIPAL OFFICE. The principal office for the transaction of the business of the Corporation shall be at such location, within or without the State of Delaware, as shall be designated by the Board of Directors of the Corporation (the “Board”).

Section 1.03  OTHER OFFICES.  The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require.


ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01  ANNUAL MEETINGS.  Annual meetings of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution.

Section 2.02  SPECIAL MEETINGS.  Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the Board, or the Chairman of the Board, the Chief Executive Officer, the President or the Secretary of the Corporation or by a committee of the Board which, has been duly designated by the Board and whose powers and authority, as provided in a resolution of the Board or in these Bylaws, include the power to call such meetings, or by the holder or holders of greater than 50% of the then outstanding voting securities of the Corporation.

Section 2.03  PLACE OF MEETINGS.  All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meetings and specified in the respective notices or waivers of notice thereof.

Section 2.04  NOTICE OF MEETINGS.  Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him person­ally, or by depositing such notice in the United States mail or overnight delivery service, in a postage prepaid envelope, or by-hand delivery service, charges prepaid, directed to him at his address fur­nished by him to the Secretary of the Corporation for such pur­pose or, if he shall not have furnished to the Secretary his address for such purpose, then at his address last known to the Secretary, or by transmitting a notice thereof to him at such address by telegraph, telecopy, cable or wireless.  Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting shall also state the purpose or purposes for which the meeting is called.  Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken.
 
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A written waiver of notice, signed by a stockholder entitled to notice, whether signed before, at or after the time set for a given meeting, shall be deemed to satisfy the notice requirements set forth in the preceding paragraph for such stockholder with respect to such meeting.  Attendance of a stockholder in person or by proxy at a stockholders' meeting shall constitute the equivalent of a written waiver of notice by such stockholder for such meeting, except when such stockholder attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Whenever notice is required to be given to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve month period, have been mailed addressed to such person at his address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required.  Any action or meeting which shall have been taken or held without notice to such person shall have the same force and effect as if such notice had been duly given.  If any such person shall deliver to the Corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. No notice need be given to any person with whom communication is unlawful, nor shall there be any duty to apply for any permit or license to give notice to any such person.

Section 2.05  QUORUM.  Except as provided by law, the holders of record of a major­ity in voting interest of the shares of stock of the Corporation entitled to be voted, present in person or by proxy, shall con­stitute a quorum for the transaction of business at any meeting of the stock­holders of the Corporation or any adjournment thereof. The stockholders present at a duly called or held meet­ing at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.  In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at or to act as secretary of such meeting may adjourn such meeting from time to time.  At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called.
 
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Section 2.06  ORGANIZATION.  At each meeting of the stockholders, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence:

(a) the Chairman of the Board;

(b) if there is no Chairman of the Board or if the Chairman of the Board shall be absent from such meeting, the Chief Executive Officer or the President;

(c) if the Chairman of the Board, the Chief Executive Officer and the President shall be absent from such meeting, any other officer or director of the Corporation designated by the Board or the Executive Committee (if such a committee has been formed by the Board pursuant to these By-laws) to act as chairman of such meeting and to preside thereat; or

(d) a stockholder of record of the Corporation who shall be chosen as the chairman of such meeting by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat.

The Secretary or, if the Secretary is presiding over the meeting in accordance with the provisions of this Section or if he or she is absent from such meeting, the person (who shall be the Assistant Secretary, if an Assistant Secretary shall be present thereat) whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof.

Section 2.07  ORDER OF BUSINESS.  The order of business at each meeting of the stockholders shall be determined by the chairman of such meeting, but such order of business may be changed by a majority in voting interest of those present or by proxy at such meeting and entitled to vote thereat.

Section 2.08  VOTING.

(a)           At each meeting of the stockholders, each stockholder shall be entitled to vote in person or by proxy each share or fractional share of the stock of the Corpora­tion which has voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation:

(i)            on the date fixed pursuant to Section 2.13 as the record date for the determina­tion of stockholders entitled to notice of and to vote at such meeting, or

(ii)           if no such record date shall have been so fixed, then (A) at the close of business on the day next preced­ing the day on which notice of the meeting shall be given or (B) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held.

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(b)           Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes.  Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock.  Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.  Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware.

(c)           Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided , however , that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period.  The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy.  At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon.  The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwith­standing the withdrawal of enough stockholders to leave less than a quorum.  The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chair­man of the meeting.  On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and it shall state the number of shares voted.

Section 2.09  LIST OF STOCKHOLDERS.  The Secretary of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alpha­betical order, and showing the address of each stockholder and the number of shares registered in the name of each stock­holder.  Such list shall be open to the examination of any stock­holder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the entire duration thereof, and may be inspected by any stockholder who is present.

Section 2.10  STOCK LEDGER.  The stock ledger of the Corporation shall be the only evidence as to which the stockholders  are entitled to examine the stock ledger, the list required by Section 2.09 or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 2.11  INSPECTOR OF ELECTION.  The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof.  If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors.  In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat.  Each inspector so appointed shall first subscribe an oath faith­fully to execute the duties of an inspector at such meeting with strict impartiality and according to the best of his ability.  Such inspectors shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question.  Reports of the inspectors shall be in writing and subscribed and delivered by them to the Secretary of the Corpora­tion.  Inspectors need not be stockholders of the Corporation, and any officer of the Corporation may be an inspector on any question other than a vote for or against a proposal in which he shall have a material interest.  No director or candidate for the office of director shall act as an inspector of an election of directors.
 
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Section 2.12  STOCKHOLDER ACTION WITHOUT MEETINGS.  Except as may be otherwise provided by law or by the Certificate of Incorporation, any action required by the General Corporation Law of the State of Delaware to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.  Prompt notice of the taking of the corporate action with­out a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

Section 2.13  RECORD DATE.  In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date: (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; (ii) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board; and (iii) in the case of any other action, shall not be more than sixty days prior to such other action.  If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (ii) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and (iii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board may fix a new record date for the adjourned meeting.

 
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ARTICLE III

BOARD OF DIRECTORS

Section 3.01  GENERAL POWERS. The property, business and affairs of the Corporation shall be managed by or under the direction of the Board which may exercise all of the powers of the Corporation, except such as are, by the Certificate of Incorporation as amended from time to time, by these Bylaws or by law conferred upon or reserved to the stockholders.

Section 3.02  NUMBER AND TERM.  The Board shall initially consist of two members.  Thereafter, the number of directors that shall constitute the full Board shall be no fewer than one (1) and no greater than ten (10), as such number may be changed thereafter from time to time by resolution of the Board.  Directors need not be stock­holders of the Corporation.  Each director shall hold office until his or her term expires, his or her earlier death, a successor is elected and qualified or until the director resigns or is removed.

Section 3.03  ELECTION OF DIRECTORS.  The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greatest number of votes, up to the number of directors then to be elected, shall be the persons then elected.  The election of directors is subject to any provisions contained in the Certificate of Incorporation relating thereto, including any provisions for a classified board, if any.

Section 3.04  RESIGNATION AND REMOVAL.  Any director of the Corporation may resign at any time by giving written notice to the Board, the President or to the Secretary of the Corporation.  Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Except as otherwise provided by the Certificate of Incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares then entitled to vote at a meeting for the election of directors.

Section 3.05  VACANCIES.  Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum, or by a sole remaining director.  Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed.  No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office.
 
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Upon the resignation of one or more directors from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as pro­vided hereinabove in the filling of other vacancies.

Section 3.06  PLACE OF MEETING; TELEPHONE CONFERENCE MEETING. The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be desig­nated by the person or persons calling the meeting or in the notice or waiver of notice of any such meeting.  Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall consti­tute presence in person at such meeting.

Section 3.07  FIRST MEETING. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required.

Section 3.08  REGULAR MEETINGS.  Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine.  If any day fixed for a meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day which is not a legal holiday.  Except as provided by law, notice of regular meetings need not be given.

Section 3.09  SPECIAL MEETINGS.  Special meetings of the Board may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President, the Secretary or by any three directors, to be held at the principal office of the Corporation, or at such other place or places, within or without the State of Delaware, as the person or persons calling the meeting may designate.

Notice of the time and place of special meetings shall be given to each director either (i) by depositing such notice in the United States mail or overnight delivery service, in a postage prepaid envelope, or by-hand delivery service, charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held, or by transmitting a notice thereof to him at such address by email, telegraph, telecopy, cable or wireless, at least 48 hours prior to the time of the holding of such meeting; or (ii) by orally communicating the time and place of the special meeting to him at least 48 hours prior to the time of the holding of such meeting.  Either of the notices as above provided shall be due, legal and personal notice to such director.
 
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Section 3.10  ORGANIZATION.  At each meeting of the Board, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence: (a) the Chairman of the Board; (b) the President; or (c) any director chosen by a majority of the directors present thereat.  The Secretary or, in case of his or her absence, any person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present thereat) whom the chairman shall appoint, shall act as secretary of such meeting and keep the minutes thereof.

Section 3.11  QUORUM AND ACTION.  Except as otherwise provided in these Bylaws or by law, the presence of a majority of the authorized number of directors shall be required to consti­tute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present, subject to Section 3.15.  In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present.  Notice of any adjourned meeting need not be given.  The directors shall act only as a Board, and the individual directors shall have no power as such.

Section 3.12  ACTION BY CONSENT.  Any action required or permitted to be taken at any meeting of the Board or of any com­mittee thereof may be taken without a meeting if a written con­sent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. Such action by written consent shall have the same force and effect as the unanimous vote of such directors.

Section 3.13  COMPENSATION.  No stated salary need be paid to directors, as such, for their services but, as fixed and changed from time to time by resolution of the Board, the directors may receive directors' fees, compensation and reimbursement for expenses for attendance at directors' meetings, for serving on committees and for discharging their duties; provided , that noth­ing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

Section 3.14  COMMITTEES.  The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the dir­ectors of the Corporation.  The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.  Any such committee, to the extent permitted by law and provided by a resolution of the Board, shall have and may exer­cise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.
 
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Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for conduct of such committee’s business.  In the absence of such rules, each committee shall conduct its business, substantially in the same manner as the Board conducts its business pursuant to these Bylaws.  Unless otherwise provided by these Bylaws or any such rules or resolutions, notice of the time and place of each meeting of a committee shall be given to each member of such committee as provided in Section 3.09 of Article III of these Bylaws with respect to notices of special meetings of the Board.  Any such committee shall keep written minutes of its meetings and report the same to the Board when required.  Notwithstanding anything in these Bylaws to the contrary, no committee designated by the Board shall have the power or authority in reference to the following matters:  (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporation Law of the State of Delaware to be submitted to stockholders for approval or (ii) adopting, amending, altering or repealing any Bylaw of the Corporation.

Section 3.15  OFFICERS OF THE BOARD.  A Chairman of the Board or a Vice Chairman may be appointed from time to time by the Board and shall have such powers and duties as shall be desig­nated by the Board.

Section 3.16 INTERESTED DIRECTORS.  No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corpo­ration, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a finan­cial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or trans­action, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or trans­action by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are dis­closed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the disinterested stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.


ARTICLE IV

OFFICERS

Section 4.01  OFFICERS.  The officers of the Corporation shall be a Chief Executive Officer, President, a Secretary and a Treasurer.  The Corporation may also have, at the discretion of the Board, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers and such other officers as may be appointed in accordance with the provi­sions of Section 4.03 of these Bylaws.  One person may hold two or more offices, except that the Secretary may not also hold the office of President.  Officers need not be stockholders of the Corporation or citizens or residents of the United States of America.
 
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Section 4.02  ELECTION AND TERM.  The officers of the Corpora­tion, except such officers as may be appointed in accordance with the provisions of Section 4.03 or Section 4.05 of these Bylaws, shall be chosen annually by the Board, and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or until his successor shall be elected and qualified.

Section 4.03  SUBORDINATE OFFICERS.  The Board may appoint, or may authorize the Chief Executive Officer or the President to appoint, such other officers as the business of the Corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board or the Chief Executive Officer or the President from time to time may specify, and shall hold office until he shall resign or shall be removed or otherwise disqualified to serve.

Section 4.04  REMOVAL AND RESIGNATION.  Any officer may be removed, with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board, by the Chairman of the Board or the Chief Executive Officer or the President upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Board, the Chairman of the Board, the President or the Secretary of the Corporation.  Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be neces­sary to make it effective.

Section 4.05  VACANCIES.  A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the Bylaws for the regular appointments to such office.

Section 4.06  CHAIRMAN OF THE BOARD.  The Chairman of the Board, if any, shall preside at all meetings of the stockholders and the Board and exercise and perform such other powers and duties with respect to the adminis­tration of the business and affairs of the Corporation as may from time to time be assigned to him by the Board or as prescribed by these Bylaws.  The Chairman of the Board shall preside at all meetings of the Board.

Section 4.07  CHIEF EXECUTIVE OFFICER/CHIEF OPERATING OFFICER. The Chief Executive Officer and/or a Chief Operating Officer, if such an officer is appointed by the Board, shall individually or jointly, as the case may be, have general and active management of the property, business and affairs of the Corporation, subject to the supervision and control of the Board.  The Chief Executive Officer or the Chief Operating Officer, as the case may be, also shall have such powers and perform such other duties as prescribed from time to time by the Board.
 
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Section 4.08  PRESIDENT.  The President of the Corporation shall, subject to the control of the Board, have general supervision, direction and control of the business and affairs of the Corporation.  He shall have the general powers and duties of management usually vested in the president of a corporation, and shall have such other powers and duties with respect to the administration of the business and affairs of the Corporation as may from time to time be assigned to him by the Board or as prescribed by these Bylaws.

Section 4.09  VICE PRESIDENT.  The Vice President(s), if any, shall exercise and perform such powers and duties with respect to the administration of the business and affairs of the Corporation as from time to time may be assigned to each of them by the Chief Executive Officer or the President, by the Chairman of the Board, if any, by the Board or as is prescribed by the Bylaws.  In the absence or disability of the Chief Executive Officer or the President, the Vice Presidents, in order of their rank as fixed by the Board, or if not ranked, the Vice President desig­nated by the Board, shall perform all of the duties of the President and when so acting shall have all of the powers of and be subject to all the restrictions upon the Chief Executive Officer and the President.

Section 4.10  SECRETARY.  The Secretary shall keep, or cause to be kept, a book of minutes at the principal office for the transaction of the business of the Corporation, or such other place as the Board may order, of all meetings of directors and stockholders, with the time and place of holding, whether regular or special, and if special, how authorized and the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at stockholders' meetings and the proceedings thereof.

The Secretary shall keep, or cause to be kept, at the principal office for the transaction of the business of the Cor­poration or at the office of the Corporation's transfer agent, a share register, or a duplicate share register, showing the names of the stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates (or their uncertificated equivalents) issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation (or their uncertificated equivalents).

The Secretary shall give, or cause to be given, notice of all the meetings of the stockholders and of the Board required by these Bylaws or by law to be given, and he shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws.  If for any reason the Secretary shall fail to give notice of any special meeting of the Board called by one or more of the persons identified in Section 3.09 of these Bylaws, or if he shall fail to give notice of any special meeting of the stockholders called by one or more of the persons identified in Section 2.02 of these Bylaws, then any such person or persons identified in such sections may give notice of any such special meeting.

Section 4.11  TREASURER.  The Treasurer shall keep and maintain or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares.  Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of capital, shall be classi­fied according to source and shown in a separate account.  The books of account at all reasonable times shall be open to inspec­tion by any director.
 
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The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board. He shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the President, to the Chief Executive Officer and to the directors, whenever they request it, an account of all of his transactions as Treasurer and of the finan­cial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws.

Section 4.12 ASSISTANT SECRETARIES.  Except as may be otherwise pro­vided in these By-Laws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be as­signed to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

Section 4.13 ASSISTANT TREASURERS.  Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board, the Chief Executive Officer, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.  If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

Section 4.14 OTHER OFFICERS.  Such other offi­cers as the Board may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board.  The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

Section 4.15  COMPENSATION.  The compensation of the officers of the Corporation, if any, shall be fixed from time to time by the Board.

Section 4.16 VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chief Executive Officer, the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board may, by resolution, from time to time confer like powers upon any other person or persons.
 
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ARTICLE V

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

Section 5.01  EXECUTION OF CONTRACTS.  The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount.

Section 5.02  CHECKS, DRAFTS, ETC.  All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board.  Each such person shall give such bond, if any, as the Board may require.

Section 5.03  DEPOSIT.  All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, attorney or attorneys, of the Corporation to whom such power shall have been delegated by the Board.  For the purpose of deposit and for the purpose of collection for the account of the Corporation, the President, the Chief Executive Officer, any Vice President or the Treasurer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall be determined by the Board from time to time) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.

Section 5.04  GENERAL AND SPECIAL BANK ACCOUNTS.  The Board from time to time may authorize the opening and keeping of general and special bank accounts with such banks, trust compan­ies or other depositories as the Board may select or as may be selected by an officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board.  The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.

Section 5.05  AUDITS, ACCOUNTS AND REPORTS.    The books of account of the Company shall be audited at least once during each year by a firm of independent certified accountants.

Section 5.06  ACCESS.  All books and records of the Company shall be kept at the principal place of business of the Company.  Each shareholder may, at its own expense, after giving written notice to the Company, audit, investigate and familiarize itself with the operations of the Company using its own employees or such certified public accounting firm, qualified external auditor or other advisers as it may select.  The shareholders' rights under this Section 5.06, which shall include the right to make copies of any relevant documents, shall be exercised such that the actions of the shareholders or their respective agents do not interfere unreasonably with the operation of the Company in its ordinary course of business.
 
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Section 5.07  FISCAL YEAR.  The fiscal year of the Company shall end on December 31 of each year.

Section 5.08  ACCOUNTING POLICY.  The Company shall maintain accounting records, accounts and related financial statements in accordance with United States generally accepted accounting principles applied on a consistent basis.

Section 5.09 DIVIDENDS.  Dividends upon the capital stock of the Corporation, subject to the provi­sions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special meeting, and may be paid in cash, in property or in shares of capital stock.  Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board may modify or abolish any such reserve.


ARTICLE VI

BOOKS AND RECORDS .

The books and records of the Corporation may be kept at such place or places within or without the State of Delaware as the Board may from time to time determine; provided , however , that to the extent required by law, the Corporation shall keep at its office in the State of Delaware, or at the office of its transfer agent or registrar in the State of Delaware, a record containing the names and addresses of all stockholders of the Corporation, the number and class of shares held by each of them, and the dates when they respectively became owners of record of such shares.


ARTICLE VII

SHARES AND THEIR TRANSFER

Section 7.01. CERTIFICATES FOR SHARES.  The shares of stock of the Corporation shall be represented by certificates, or shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or a combination of both. To the extent that shares are represented by certificates, such certificates whenever authorized by the Board, shall be in such form as shall be approved by the Board.  The certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the Chairman of the Board or Vice Chairman of the Board, or by the President or any Vice President, and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Corporation, which may be a facsimile thereof.  Any or all such signatures may be facsimiles if countersigned by a transfer agent or registrar.  Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue.  The stock ledger and blank share certificates shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board.
 
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Section 7.02. TRANSFER OF SHARES.  Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation upon authorization by the registered holder thereof, or by such holder's attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, if any, and if such shares are represented by a certificate, upon surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power (or by proper evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. The person in whose name shares are registered on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however, that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

Section 7.03. LOST, DESTROYED AND MUTILATED CERTIFICATES.  The holder of any certificate representing any shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of such certificate; the Corporation may issue to such holder a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction; the Board, or a committee designated thereby, or the transfer agents and registrars for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 7.04. REGULATIONS.  The Board may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of stock of each class and series of the Corporation and may make such rules and take such action as it may deem expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated.
 
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Section 7.05  REPRESENTATION OF SHARES OF OTHER CORPORA­TIONS.  The Chief Executive Officer, President or any Vice President and the Secretary or any Assistant Secretary of this Corporation are authorized to vote, represent and exercise on behalf of this Corporation all rights incident to all shares of any other corporation or corporations standing in the name of this Corporation.  The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person author­ized so to do by proxy or power of attorney duly executed by said officers.

Section 7.06. TRANSFER AGENTS AND REGISTRARS..  The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

ARTICLE VIII

INDEMNIFICATION

8.01 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION.   Subject to the Certificate of Incorporation and Section 8.03, the Corpora­tion shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.   The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably be­lieved to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 8.02 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.  Subject to the Certificate of Incorporation and Section 8.03, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including reasonable attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper.
 
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Section 8.03 AUTHORIZATION OF INDEMNIFICATION.  Any indemnification under this Article VIII (un­less ordered by a court) shall be made by the Corpo­ration only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 8.01 or Section 8.02, as the case may be.  Such determination shall be made (i) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders who were not parties to such action, suit or proceeding.  To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including reasonable attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case.

Section 8.04 GOOD FAITH DEFINED.  For purposes of any determination under this Article VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with re­spect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corpo­ration or another enter­prise, or on informa­tion supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corpo­ration or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an apprais­er or other expert selected with reason­able care by the Corporation or another enterprise.  The term "another enterprise" as used in this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent.   The provisions of this Section 8.04 shall not be deemed to be exclusive or to limit in any way the circum­stances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 8.01 or 8.02, as the case may be.

Section 8.05 INDEMNIFICATION BY A COURT.  Not­withstanding any contrary determination in the specific case under Section 8.03, and notwith­standing the absence of any determination thereunder, any director or officer may apply to any court of compe­tent jurisdiction in the State of Delaware for indemni­fication to the extent otherwise permissible under Sections 8.01 and 8.02.  The basis of such indemnifica­tion by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances be­cause he has met the applicable standards of conduct set forth in Sections 8.01 or 8.02, as the case may be.  Neither a contrary determination in the specific case under Section 8.03 nor the ab­sence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct.  Notice of any application for indemnification pursuant to this Section 8.05 shall be given to the Corpora­tion promptly upon the filing of such application.   If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.
 
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Section 8.06 EXPENSES PAYABLE IN ADVANCE.  Ex­penses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposi­tion of such action, suit or pro­ceeding upon receipt of an undertaking by or on behalf of such director or offi­cer to repay such amount if it shall ultimately be deter­mined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII.

Section 8.07 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.  The indemnification and advancement of expens­es provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-Law, agreement, contract, vote of stockholders or disin­terest­ed directors or pursuant to the direction (howso­ever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 8.01 and 8.02 shall be made to the fullest extent permitted by law.  The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 8.01 or 8.02 but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise.

Section 8.08 INSURANCE.  The Corporation may purchase and maintain insurance on behalf of any person who is or was a direc­tor or officer of the Corporation, or is or was a direc­tor or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, part­nership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corpora­tion would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII.

Section 8.09 CERTAIN DEFINITIONS.  For purposes of this Article VIII, references to "the Corporation" shall include, in addi­tion to the resulting corporation, any constituent corpo­ration (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corpo­ration, part­nership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corpo­ration if its separate existence had continued.  For purposes of this Article VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall in­clude any service as a direc­tor, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably be­lieved to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best inter­ests of the Corporation" as referred to in this Article VIII.
 
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Section 8.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.  The indemnification and ad­vancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administra­tors of such a person.

Section 8.11 LIMITATION ON INDEMNIFICATION.  Notwithstanding anything contained in this Arti­cle VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be gov­erned by Section 8.05), the Corpo­ration shall not be obligat­ed to indem­nify any director or officer in con­nection with a pro­ceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board.

Section 8.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Arti­cle VIII to direc­tors and officers of the Corporation.

Section 8.13 CONTRACT RIGHTS.  With respect to any person made or threatened to be made a party to any proceeding by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another enterprise, the rights to indemnification and to the advancement of expenses conferred in this Article VIII shall be contract rights.

Section 8.14  MODIFICATION.  Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection hereunder of any indemnitee in respect of any act or omission occurring prior to the time of such repeal or modification.  In the event the General Corporation Law of the State of Delaware is amended after the date hereof to authorize corporate action further limiting or eliminating the personal liability of directors or officers, then the personal liability of a director or officer of the Corporation shall be further limited or eliminated to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.

ARTICLE IX

MISCELLANEOUS
 
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Section 9.01  WAIVER OF NOTICES.  Whenever notice is required to be given under any provision of these bylaws, the Certificate of Incorporation or by law, a written waiver, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when a person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless required by the Certificate of Incorporation.

Section 9.02  LOANS AND GUARANTIES.  The Corporation may lend money to, or guarantee any obligation of, and otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer who is a director, whenever, in the judgment of the Board, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation.  The loan, guaranty, or other assistance may be with or without interest, and may be unsecured or secured in such manner as the Board shall approve, including, without limitation, a pledge of shares of stock of the Corporation.

Section 9.03  GENDER.  All personal pronouns used in these Bylaws shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate.

Section 9.04  AMENDMENTS.  These Bylaws, or any of them, may be rescinded, altered, amended or repealed, and new Bylaws may be made (i) by the Board, by vote of a majority of the number of directors then in office as directors, acting at any meeting of the Board or (ii) by the stockholders, by the vote of a major­ity of the outstanding shares of voting stock of the Corporation, at an annual meeting of stockholders, without previous notice, or at any special meeting of stockholders; provided ; that notice of such proposed amendment, modification, repeal or adoption is given in the notice of special meeting; provided , however , that Section 2.02 of these Bylaws can only be amended if that Section as amended would not conflict with the Corporation's Certificate of Incorporation.  Any Bylaw made or altered by the stockholders may be altered or repealed by the Board or may be altered or repealed by the stockholders.

Section 9.05 CERTIFICATE OF INCORPORATION.  Notwithstanding anything to the contrary contained herein, if any provision contained in these Bylaws is inconsistent with or conflicts with a provision of the Certificate of Incorporation, such provision of these Bylaws shall be superseded by the inconsistent provision in the Certificate of Incorporation to the extent necessary to give effect to such provision in the Certificate of Incorporation.

Section 9.06  RATIFICATION.  Any transaction questioned in any stockholders’ derivative suit on the grounds of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, nondisclosure, miscomputation or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board or by the stockholders in case less than a quorum of directors are qualified, and, if so ratified, shall have the same force and effect as if the questioned transaction had been originally duly authorized, and said ratification shall be binding upon the Corporation and its stockholders, and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.

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CORMEDIX, INC.
 
COMMON STOCK EXCHANGE AND STOCKHOLDER AGREEMENT
 
This Common Stock Exchange and Stockholder Agreement (the “ Agreement ”) is made and entered into as of October 6, 2009, by and between CorMedix, Inc. , a Delaware corporation (the “ Company ”), and Shiva Biomedical, LLC , a limited liability company organized under the laws of New Jersey (the “ Holder ”).
 
Recitals
 
Whereas , the Company’s Board of Directors has approved and submitted to a vote of the Company’s stockholders the Amended and Restated Certificate of Incorporation in the form attached hereto as Exhibit A (the “ Restated Certificate ”);
 
Whereas, the Company issued (i) an aggregate of 800,000 shares of Series B Common Stock, par value $0.001 per share, of the Company (the “ Series B Common ”), (ii) an aggregate of 50,000 shares of Series C Common Stock, par value $0.001 per share, of the Company (the “ Series C Common ”), (iii) an aggregate of 50,000 shares of Series D Common Stock, par value $0.001 per share, of the Company (the “ Series D Common ”), (iv) an aggregate of 50,000 shares of Series E Common Stock, par value $0.001 per share, of the Company (the “ Series E Common ”) and (v) an aggregate of 50,000 shares of Series F Common Stock, par value $0.001 per share, of the Company (the “ Series F Common ” and, together with the Series B Common, the Series C Common, the Series D Common and the Series E Common, the “ Exchanged Securities ”) to Holder pursuant to that certain Contribution Agreement dated as of July 28, 2006 (the “ Prior Shiva Agreement ”);
 
Whereas , the Company and Holder are entering into an amendment to the Prior Shiva Agreement, dated on or about the date hereof (the “ Shiva Amendment ”), pursuant to which the Company has authorized the issuance of an aggregate of 773,717 shares (the “ New Securities ”) of its Series A Common Stock, par value $0.001 per share (the “ Series A Common ”) in exchange for the Exchanged Securities;
 
Whereas , Holder desires to exchange the Exchanged Securities for the New Securities; and
 
Whereas , the Company desires to issue and exchange the New Securities for the Exchanged Securities.
 
Agreement
 
Now, Therefore , in consideration of the foregoing recitals and the mutual promises, representations, warranties, and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
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1.   Agreement To Exchange.
 
1.1   Authorization and Issuance of Securities .   On or prior to the Closing (as defined in Section 2 below), the Company shall have authorized the issuance to Holder of the New Securities.  The New Securities shall have the rights, preferences, privileges and restrictions set forth in the Restated Certificate.
 
1.2   Exchange of Securities .   Subject to the terms and conditions of this Agreement, effective upon the Closing, Holder hereby surrenders, transfers and assigns the Exchanged Securities to the Company in exchange for the issuance of the New Securities, which New Securities represent no less than seven percent (7%) of the outstanding shares of Series A Common on the date hereof (after giving effect to (i) the surrender of the Exchanged Securities and the issuance of the New Securities, (ii) the assumed conversion of all outstanding securities convertible by their terms into shares of Series A Common on the date hereof and (iii) the assumed exercise of all outstanding securities exercisable by their terms for shares of Series A Common on the date hereof).
 
2.   Closing, Delivery And Payment.
 
2.1   Closing . The closing of the exchange of the New Securities for the Exchanged Securities under this Agreement (the “ Closing ”) shall take place at 1:00 p.m. Eastern time on the date the conditions set forth in Section 5 hereof has been satisfied at the offices of the Company, 86 Summit Avenue, Suite 301, Summit, New Jersey, or at such other time or place as the Company and Holder may mutually agree (such date is hereinafter referred to as the “ Closing Date ”).
 
2.2   Delivery .   At the Closing, subject to the terms and conditions hereof, the Company will deliver to Holder a certificate representing the number of shares of Series A Common to be received upon the exchange at the Closing by Holder, against the delivery of the Exchanged Securities, duly endorsed for transfer.
 
3.   Representations of the Company .   The Company hereby represents and warrants to Holder as follows:
 
3.1   Corporate Existence, Power and Authority .   The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Company has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Shiva Amendment and to carry out the provisions hereof and thereof.  All action on the Company’s part required for the lawful execution and delivery of this Agreement and the Shiva Amendment have been taken.  Upon their execution and delivery, this Agreement and the Shiva Amendment will be valid and binding obligations of the Company, enforceable in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.
 
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3.2   Series A Common .  The shares of Series A Common issued and delivered pursuant to this Agreement will be, upon receipt of the shares of Exchanged Securities exchanged therefor, duly authorized, validly issued, fully paid, and non-assessable.
 
3.3   Order, Action or Proceedings . The Company is not subject to any order and is not bound by any contract or other instrument that may have an adverse effect on the Company’s ability to comply with this Agreement and to deliver the New Securities free of any liens, encumbrances, claims or restrictions other than those described herein and pursuant to applicable securities laws, and there is no legal, administrative, regulatory or governmental proceeding or investigation (a “ Proceeding ”) pending, and no person or entity has threatened to commence any Proceeding, that may have such effect.  No event has occurred, and no claim, dispute or other condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such Proceeding against the Company or the New Securities.
 
4.   Representations of Holder .   Holder understands that the Series A Common has not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”).  Holder also understands that the New Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Holder’s representations contained in this Agreement.  Holder hereby represents and warrants to the Company as follows:
 
4.1   Title . Holder has good and valid title to the Exchanged Securities free of any liens, encumbrances, claims or restrictions.
 
4.2   Requisite Power and Authority . Holder has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Shiva Amendment and to carry out the provisions hereof and thereof.  All action on Holder’s part required for the lawful execution and delivery of this Agreement and the Shiva Amendment have been taken.  Upon their execution and delivery, this Agreement and the Shiva Amendment will be valid and binding obligations of Holder, enforceable in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.
 
4.3   Order, Action or Proceedings . Holder is not subject to any order and is not bound by any contract or other instrument that may have an adverse effect on Holder’s ability to comply with this Agreement and to deliver the Exchanged Securities free of any liens, encumbrances, claims or restrictions other than those described herein and pursuant to applicable securities laws, and there is no Proceeding pending, and no person or entity has threatened to commence any Proceeding, that may have such effect.  No event has occurred, and no claim, dispute or other condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such Proceeding against Holder or the Exchanged Securities.
 
4.4   Holder Bears Economic Risk . Holder has substantial experience in evaluating and investing in private placement transactions or securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.  Holder must bear the economic risk of this investment indefinitely unless the New Securities are registered pursuant to the Securities Act, or an exemption from registration, is available.  Holder understands that the Company has no present intention of registering the New Securities or any shares of its capital stock.  Holder also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Holder to transfer all or any portion of the New Securities under the circumstances, in the amounts or at the times that Holder might propose.
 
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4.5   Acquisition for Own Account . Holder is acquiring the New Securities for Holder’s own account for investment only, and not with a view towards their distribution.
 
4.6   Holder Can Protect Its Interest . Holder represents that by reason of its, or of its management’s business or financial experience, Holder has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement.  
 
4.7   Company Information . Holder has had an opportunity to discuss the Company’s business, management and financial affairs with directors, officers and management of the Company.  Holder has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of its investment.
 
4.8   Rule 144 . Holder acknowledges and agrees that the New Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.  Holder has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act, as in effect from time to time, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things; the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during the three-month period not exceeding specified limitations.
 
4.9   Residence . The office or offices of the Holder in which its investment decision was made is located at the address of the Holder set forth on the signature page hereto.
 
4.10   Ownership .   Holder does not own or have the right to acquire any other securities of the Company other than (i) the Exchanged Securities being exchanged hereunder and (ii) the New Securities to be issued hereunder.
 
5.   Conditions to Closing.
 
5.1   Mutual Conditions .  The obligations of each party to this Agreement at the Closing are subject to the satisfaction, at or prior to the Closing Date, of the following conditions:
 
(a)   On the Closing Date, the exchange and issuance of the New Securities shall be legally permitted by all laws to which the Holder and the Company are subject.
 
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(b)   The Restated Certificate shall have been filed with the Secretary of the State of the State of Delaware and shall continue to be in full force and effect as of the Closing Date.
 
(c)   Holder and the Company shall have executed and delivered the Shiva Amendment.
 
6.   Preemptive Rights.
 
6.1   Subsequent Offerings.   Subject to applicable securities laws, the Holder shall have a preemptive right to purchase its pro rata share of all Equity Securities (as defined in the Shiva Amendment) that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Exempted Securities (as defined in the Shiva Amendment).  The Holder’s pro rata share is equal to the ratio of (a) the number of shares of Series A Common then held by Holder (after giving effect to (i) the assumed conversion of all securities then held by Holder that are convertible by their terms into shares of Series A Common Stock on the date of determination and (ii) the assumed exercise of all securities then held by Holder that are exercisable by their terms for shares of Series A Common Stock on the date of determination) to (b) the number of shares of Series A Common Stock then outstanding immediately prior to the issuance of such Equity Securities (after giving effect to (i) the assumed conversion of all then-outstanding securities convertible by their terms into shares of Series A Common Stock on the date of determination and (ii) the assumed exercise of all then-outstanding securities exercisable by their terms for shares of Series A Common Stock on the date of determination).
 
6.2   Exercise of Rights.   If the Company proposes to issue any Equity Securities, it shall give the   Holder written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same.  The Holder shall have fifteen (15)   days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased.  Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to the Holder if such offer or sale would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.
 
6.3   Issuance of Equity Securities to Other Persons .  The Company shall have ninety (90)   days thereafter to sell the Equity Securities in respect of which the Holder’s rights were not exercised, at a price and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company’s notice to the Holder pursuant to Section 6.2 hereof.  If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 6.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Holder in the manner provided above.
 
6.4   Sale Without Notice.   In lieu of giving notice to the Holder prior to the issuance of Equity Securities as provided in Section 6.2, the Company may elect to give notice to the Holder within thirty (30) days after the issuance of Equity Securities.  Such notice shall describe the type, price and terms of the Equity Securities. The Holder shall have twenty (20) days from the date of receipt of such notice to elect to purchase up to the number of shares that would, if purchased by the Holder, maintain the Holder’s pro rata share (as set forth in Section 6.1) of the Company’s Equity Securities.  The closing of such sale shall occur within sixty (60) days of the date of notice to the Holder.
 
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6.5   Termination of Preemptive Rights.   The preemptive rights granted to Holder pursuant to this Section 6 shall terminate and be of no further force and effect upon the earlier of (i) the consummation of one or more equity financings following which the Qualifying Financing Amount (as defined in the Shiva Amendment) has been received by the Company, provided that the Holder’s rights under this Section 6 shall apply to the sale of Equity Securities up to and including the Qualifying Financing Amount; (ii) any Sale (as defined in the Restated Certificate), provided that the Holder’s rights under this Section 6 shall apply up to and including such Sale; (iii) any Reverse Merger (as defined in the Shiva Amendment), provided that the Holder’s rights under this Section 6 shall apply up to and including such Reverse Merger; or (iv) the Company’s first firm commitment underwritten public offering of its Series A Common Stock (or similar equity security for which the Series A Common Stock may be exchanged or recapitalized after the date hereof) registered under the Securities Act (the “ Initial Offering ”).
 
7.   Covenants of the Company.
 
7.1   Registration Rights.   If the Company shall issue any Equity Securities and grant to the purchasers of such Equity Securities registration rights, the Company shall grant the Holder pari passu registration rights applicable to the New Securities and any other shares of Series A Common Stock then held by Holder, subject to the terms, conditions and restrictions applied to the purchasers receiving such registration rights.
 
7.2   Liquidation Rights.   If the Company shall issue any Equity Securities having rights senior to the New Securities in respect of the receipt of a distribution or payment upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the Company shall grant the Holder pari passu liquidation rights applicable to the New Securities, subject to the terms, conditions and restrictions applied to the liquidation rights of the purchasers of such Equity Securities.  
 
7.3   Termination of Covenants.   The covenants of the Company contained in this Section 7 shall terminate and be of no further force and effect upon the earlier of (i) the consummation of one or more equity financings following which the Qualifying Financing Amount has been received by the Company; (ii) any Sale; (iii) any Reverse Merger; or (iv) the Company’s Initial Offering.  The Holder shall not assign any of its rights or the covenants contained in this Section 7 without the express prior written consent of the Company, and any attempted assignment of such rights or covenants by the Holder without such consent shall be void and of no effect.
 
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8.   Miscellaneous.
 
8.1   Governing Law . This Agreement shall be governed in all respects by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and performed entirely in Delaware.
 
8.2   Successors and Assigns .   Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the New Securities from time to time.
 
8.3   Entire Agreement .   This Agreement, the exhibit hereto and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.
 
8.4   Severability .   In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
 
8.5   Amendment and Waiver.
 
(a)   This Agreement may be amended or modified only upon the written consent of the Company and Holder.
 
(b)   The obligations of the Company and the rights of Holder under the Agreement may be waived only with the written consent of Holder.
 
8.6   Notices .   All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail or confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the Company or Holder at the addresses as set forth on the signature page hereof or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto.
 
8.7   Attorneys’ Fees .   In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
 
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8.8   Titles and Subtitles .   The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
 
8.9   Counterparts .   This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
 
8.10   Broker’s Fees .   Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein.  Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 8.10 being untrue.
 
8.11   Exculpation .   Holder acknowledges that it is not relying upon any person, firm, or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.  
 
8.12   Confidentiality . Each party hereto agrees that, except with the prior written consent of the other party, it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of the other parties to which such party has been or shall become privy by reason of this Agreement, discussions or negotiations relating to this Agreement, the performance of its obligations hereunder or the ownership of the Securities exchanged hereunder.  The provisions of this Section 8.12 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto.
 
8.13   Pronouns .   All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.
 
8.14   Further Assurances .   The parties hereto agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement.
 


[SIGNATURE PAGE FOLLOWS]
 

 
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In Witness Whereof, the parties hereto have executed this Common Stock Exchange and Stockholder Agreement as of the date set forth in the first paragraph hereof.
 
COMPANY:
 
CorMedix, Inc.
 
By: /s/ John Houghton                             
Name:  John Houghton
Title:    Chief Executive Officer
 
Address:  86 Summit Avenue, Suite 301
                 Summit, NJ 07901
Fax:    _________________________
 
 
 
 
HOLDER:
 
Shiva Biomedical, LLC
 
By:  /s/ Yashvant Patel                              
Name: Yashvant Patel                               
Title: Vice President                                  
Address:  10810 Executive Center Drive
   Danville Building, Suite 100
   Little Rock, AR 22211
Fax:    _________________________
 
 
 

[Common Stock Exchange and Stockholder Agreement Signature Page]
 

 
EXECUTION VERSION
 
CORMEDIX, INC.
 
STOCKHOLDER AGREEMENT
 
This Stockholder Agreement (the “ Agreement ”) is entered into as of the 30th day of January, 2008   by and between CorMedix, Inc. , a Delaware corporation (the “ Corporation ”) and ND Partners LLC , a Delaware limited liability company (the “ Investor ”).
 
Recitals
 
Whereas, pursuant to that certain Common Stock Subscription Agreement (the “ Subscription Agreement ”) of even date herewith,   the Investor has agreed to subscribe for and accept from the Corporation, shares of the Corporation’s Series A Common Stock   (the “ Common Stock ”);
 
Whereas, in connection with the execution of the Subscription Agreement, the parties desire to enter into this Agreement in order to grant certain preemptive rights, information rights and other rights to the Investor as set forth below.
 
Now, Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
SECTION 1.   GENERAL.  
 
1.1   Definitions.   As used in this Agreement the following terms shall have the following respective meanings:
 
(a)   “Board” means the Corporation’s Board of Directors.
 
(b)   Convertible Promissory Notes ” has the meaning set forth in Section 2.5(b).
 
(c)   Equity Securities ” means (i) any Common Stock, preferred stock or other security of the Corporation, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, preferred stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, preferred stock or other security or (iv) any such warrant or right.
 
(d)   Escrow Agreement ” means that certain Escrow Agreement, dated as of the date hereof by and among Investor, the Corporation and the Escrow Agent named therein.
 
(e)   Escrow Shares ” means the shares issued to Investor and held by the Escrow Agent pursuant to this Agreement, the Subscription Agreement and the Escrow Agreement.
 

 
(f)   Excluded Securities ” means the securities listed in Section 2.5.
 
(g)   Fully Diluted Capitalization ” shall have the meaning given in the Subscription Agreement.
 
(h)    “Initial Offering” means the Corporation’s first firm commitment underwritten public offering of its Common Stock registered under the Securities Act.
 
(i)   License Agreement ” means that certain License and Assignment Agreement dated as of  even date herewith by and between the Corporation and the Investor.
 
(j)   Qualifying Financing Amount ” means a total of $25,000,000 of cash raised by the Corporation after the date hereof through the issuance and sale, to parties other than the Investor, of Equity Securities or other securities convertible into Equity Securities in one or a series of transactions.
 
(k)   Register ,” “ registered ,” and “ registration   refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.
 
(l)     SEC ” means the Securities and Exchange Commission.
 
(m)   Securities Act   means the Securities Act of 1933, as amended.
 
(n)   Shares   means all shares of Common Stock issued to Investor, including Escrow Shares.
 
SECTION 2.   PREEMPTIVE RIGHTS.  
 
2.1   Subsequent Offerings.   Subject to applicable securities laws, the Investor shall have a preemptive right to purchase its pro rata share of all Equity Securities that the Corporation may, from time to time, propose to sell and issue after the date of this Agreement, other than the Excluded Securities.  The Investor’s pro rata share is equal to the ratio of (a) the number of Shares then issued to Investor to (b) the Fully Diluted Capitalization of the Corporation immediately prior to the issuance of such Equity Securities.  
 
2.2   Exercise of Rights.   If the Corporation proposes to issue any Equity Securities, it shall give the   Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Corporation proposes to issue the same.  The Investor shall have fifteen (15)   days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Corporation and stating therein the quantity of Equity Securities to be purchased.  Notwithstanding the foregoing, the Corporation shall not be required to offer or sell such Equity Securities to the Investor if such offer or sale would cause the Corporation to be in violation of applicable federal securities laws by virtue of such offer or sale.
 
2.3   Issuance of Equity Securities to Other Persons .  The Corporation shall have ninety (90)   days thereafter to sell the Equity Securities in respect of which the Investor’s rights were not exercised, at a price and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Corporation’s notice to the Investor pursuant to Section 2.2 hereof.  If the Corporation has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 2.2, the Corporation shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Investor in the manner provided above.
 
2.

 
2.4   Sale Without Notice.   In lieu of giving notice to the Investor prior to the issuance of Equity Securities as provided in Section 2.2, the Corporation may elect to give notice to the Investor within thirty (30) days after the issuance of Equity Securities.  Such notice shall describe the type, price and terms of the Equity Securities. The Investor shall have twenty (20) days from the date of receipt of such notice to elect to purchase up to the number of shares that would, if purchased by the Investor, maintain the Investor’s pro rata share (as set forth in Section 2.1) of the Corporation’s equity securities.  The closing of such sale shall occur within sixty (60) days of the date of notice to the Investor.
 
2.5   Excluded Securities.   The preemptive rights established by this Section 2 shall have no application to any of the following Equity Securities (the “ Excluded Securities ”):
 
(a)   all   shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like after the date hereof) issued or to be issued after the date hereof to employees, officers or directors of, or consultants or advisors to the Corporation or any subsidiary, pursuant to stock purchase or stock option plans or other compensatory arrangements that are approved by the stockholders of the Corporation;
 
(b)   stock issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement, excluding any Equity Securities issued upon conversion of those certain promissory notes of the Corporation outstanding as of the date of this Agreement and described in Section 7 of Schedule 3(c) and 3(e) to the Subscription Agreement (the “ Convertible Promissory Notes ”); and stock issued pursuant to any such rights or agreements granted after the date of this Agreement, so long as the preemptive rights established by this Section 2 were complied with, waived, or were inapplicable pursuant to any provision of this Section 2.5 with respect to the initial sale or grant by the Corporation of such rights or agreements;
 
(c)   any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination;
 
(d)   any Equity Securities issued in connection with any stock split, stock dividend or recapitalization by the Corporation;
 
(e)   any Equity Securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement, or debt financing from a bank or similar financial or lending institution;
 
3.

 
(f)   any Equity Securities that are issued by the Corporation pursuant to a registration statement filed under the Securities Act;
 
(g)   any Equity Securities issued in connection with strategic transactions involving the Corporation and other entities, including, without limitation (i) joint ventures, strategic alliances, or research and development collaborations, (ii) technology transfer, licensing or development arrangements or (iii) other than any other transactions involving third parties; provided that such transaction is not primarily for equity financing purposes; and
 
(h)   any Equity Securities issued to the Investor.
 
2.6   Termination of Preemptive Rights.   The rights granted to Investor pursuant to this Section 2 shall terminate and be of no further force and effect upon the earlier of (i) receipt by the Corporation of the Qualifying Financing Amount, provided , that Investor’s rights under Section 2.1 shall apply solely to the sale of Equity Securities up to and including the Qualifying Financing Amount and (ii) the termination of this Agreement pursuant to Section 5.12.  
 
SECTION 3.   COVENANTS OF THE CORPORATION.  
 
3.1   Basic Financial Information and Reporting.  
 
(a)   The Corporation will furnish the Investor a balance sheet of the Corporation when available to the Board, as at the end of such fiscal year, and a statement of income and a statement of cash flows of the Corporation, for such year, all prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein or as disclosed to the recipients thereof), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made, and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail.
 
(b)   As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Corporation, and in any event within forty-five (45)   days thereafter, a balance sheet of the Corporation as of the end of each such quarterly period, and a statement of income and a   statement of cash flows of the Corporation for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein or as disclosed to the recipients thereof), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.
 
(c)   The Corporation will furnish the Investor: (i) at least thirty (30) days prior to the beginning of each fiscal year an annual budget and operating plans for such fiscal year (and as soon as available, any subsequent written revisions thereto); and (ii) as soon as practicable after the end of each month, and in any event within twenty (20) days thereafter, a balance sheet of the Corporation as of the end of each such month, and a statement of income and a statement of cash flows of the Corporation for such month and for the current fiscal year to date, including a comparison to plan figures for such period, prepared in accordance with generally accepted accounting principles consistently applied (except as noted thereon), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.
 
4.

 
3.2   Inspection Rights.   The Investor shall have the right to visit and inspect any of the properties of the Corporation or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Corporation or any of its subsidiaries with its officers, and to review such information as is reasonably requested all at such reasonable times and as often as may be reasonably requested; provided, however, that the Corporation shall not be obligated under this Section 3.2 with respect to a competitor of the Corporation or with respect to information which the Board determines in good faith is confidential or attorney-client privileged and should not, therefore, be disclosed.  
 
3.3   Confidentiality of Records.   The Investor agrees to use the same degree of care as the Investor uses to protect its own confidential information to keep confidential any information furnished to such Investor hereof that the Corporation identifies as being confidential or proprietary (so long as such information is not in the public domain), except that the Investor may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent of the Investor as long as such partner, subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.3 or comparable restrictions; (ii) at such time as it enters the public domain through no fault of the Investor; (iii) that is communicated to it free of any obligation of confidentiality; (iv) that is developed by the Investor or its agents independently of and without reference to any confidential information communicated by the Corporation; or (v) as required by applicable law.  
 
3.4   Visitation Rights.   The Corporation shall allow one representative designated by the Investor to attend all meetings of the Board in a nonvoting capacity.  The Corporation shall give such representative copies of all notices, minutes, consents and other materials, financial or otherwise, which the Corporation provides to its Board; provided, however, that the Corporation reserves the right to exclude such representative from access to any material or meeting or portion thereof if the Board, in good faith, believes upon advice of counsel that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential information or for other similar reasons.  The decision of the Board with respect to the privileged or confidential nature of such information shall be final and binding.
 
3.5   Registration Rights.   If the Corporation shall issue any Equity Securities and grant to the purchasers of such Equity Securities registration rights, the Corporation shall grant the Investor pari passu registration rights applicable to the Shares, subject to the terms, conditions and restrictions applied to the purchasers receiving such registration rights.
 
3.6   Liquidation Rights.   If the Corporation shall issue any Equity Securities having rights senior to the Shares in respect of the receipt of a distribution or payment upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, the Corporation shall grant the Investor pari passu liquidation rights applicable to the Shares, subject to the terms, conditions and restrictions applied to the liquidation rights of the purchasers of such Equity Securities.  
 
5.

 
3.7   Adjustment to Issued Shares.   The Corporation shall issue to Investor the applicable number of Adjustment Shares and Adjustment Escrow Shares (as defined below) promptly following any issuance and sale of any Equity Securities, except for any Excluded Securities, provided, however, in the case of stock options, warrants, convertible promissory notes or other convertible securities where applicable conversion prices or exercise prices are not known at the time of issuance, the Corporation shall issue to Investor the applicable number of Adjustment Shares and Adjustment Escrow Shares at such time as the applicable conversion price or exercise price is determined (including, with respect to the Convertible Promissory Notes, if such conversion price is determined in connection with or after the transaction or series of transactions in which the Qualifying Financing Amount is received by the Corporation).  For purposes of this Agreement, “ Adjustment Shares ” shall mean the number of shares of Common Stock such that following the issuance of the Equity Securities, Investor’s then-outstanding shares of Common Stock (excluding any Escrow Shares and excluding any Equity Securities purchased by the Investor after the date hereof) shall represent a total of 5% of the Fully-Diluted Capitalization of the Corporation (excluding any Equity Securities purchased by the Investor after the date hereof), and “ Adjustment Escrow Shares ” shall mean the number of shares of Common Stock such that following the issuance of the Equity Securities, Investor’s Escrow Shares shall represent a total of 2% of the Fully-Diluted Capitalization of the Corporation (excluding any Equity Securities purchased by the Investor after the date hereof).  Within five (5) days of becoming obligated to issue such shares pursuant to this Section 3.7, (i) the Corporation shall deliver a certificate representing such number of Adjustment Shares to Investor and such shares shall be issued pursuant to the Subscription Agreement and (ii) the Corporation shall deliver a certificate representing such number of Adjustment Escrow Shares to Escrow Agent and thereupon such shares shall be Escrow Shares issued pursuant to the Subscription Agreement and subject to the terms of the Escrow Agreement.  The Adjustment Escrow Shares shall be deemed to be issued and outstanding shares of Corporation’s Common Stock from the times required to be issued pursuant to this Section 3.7.  The Escrow Shares shall be held by the Escrow Agent, until in accordance with, and upon the events described in Section 3 of the Escrow Agreement, the Escrow Agent shall release the applicable number of Escrow Shares from the Escrow Account (as defined in the Escrow Agreement), and deliver to Investor a certificate or certificates evidencing such number of Escrow Shares.
 
3.8   Termination of Covenants.   The covenants of the Corporation contained in Sections 3.1, 3.2 and 3.4 shall expire and terminate on such date that the Investor (or its affiliates) holds less than 50% of the Initial Subscriber Shares (as such term is defined in the Subscription Agreement).  The covenants of the Corporation contained in Sections 3.5-3.6 shall expire and terminate upon consummation of one or more financings in which the Qualifying Financing Amount is received by the Corporation. Except as is specifically stated in Section 3.7, the covenants of the Corporation contained in Section 3.7 shall expire and terminate upon receipt by the Corporation of the Qualifying Financing Amount in one or more financings, provided , that Investor’s rights under such section shall apply solely to the sale of Equity Securities up to and including the Qualifying Financing Amount.  The Investor shall not assign any of its rights or the covenants contained in Section 3 without the express prior written consent of the Corporation, and any attempted assignment of such rights or covenants by the Investor without such consent shall be void and of no effect.
 
 
SECTION 4.   RESTRICTIONS ON TRANSFER
 
6.

 
4.1   Restrictions on Transfer.  
 
(a)   Right of First Refusal. The Investor shall not sell, assign, pledge, or in any manner transfer any Shares or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, except by a transfer which meets the requirements set forth in this Section 4.1(a):
 
(i)   If the Investor desires to sell or otherwise transfer any of its Shares, it shall first give written notice thereof to the Corporation.  The notice shall name the proposed transferee and state the number of Shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed transfer.
 
(ii)   For fifteen (15) days following receipt of such notice, the Corporation shall have the option to purchase all (but not less than all) of the Shares specified in the notice at the price and upon the terms set forth in such notice; provided, however, that, with the consent of the Investor, the Corporation shall have the option to purchase a lesser portion of the Shares specified in said notice at the price and upon the terms set forth therein.  In the event of a gift, property settlement or other transfer in which the proposed transferee is not paying the full price for the Shares, and that is not otherwise exempted from the provisions of this Section 4.1(a), the price shall be deemed to be the fair market value of the stock at such time as determined in good faith by the Board.  In the event the Corporation elects to purchase all of the Shares or, with consent of the Investor, a lesser portion of the Shares, it shall give written notice to the Investor of its election and settlement for said Shares shall be made as provided below in paragraph (d).
 
(iii)   The Corporation may assign its rights hereunder.
 
(iv)   In the event the Corporation and/or its assignee(s) elect to acquire any of the Shares of the Investor as specified in said notice, the Secretary of the Corporation shall so notify the Investor and settlement thereof shall be made in cash within thirty (30) days after the Secretary of the Corporation receives said notice; provided that if the terms of payment set forth in the notice were other than cash against delivery, the Corporation and/or its assignee(s) shall pay for said Shares on the same terms and conditions set forth in said notice.
 
(v)   In the event the Corporation and/or its assignees(s) do not elect to acquire all of the Shares specified in the notice, the Investor may, subject to and in accordance with the provisions of Section 4.1(b), within the ninety (90) day period following the expiration of the option rights granted to the Corporation and/or its assignees(s) herein, transfer the Shares specified in said notice which were not acquired by the Corporation and/or its assignees(s) as specified in said notice.  All Shares so sold by the Investor shall continue to be subject to the provisions of this Agreement in the same manner as before the transfer.
 
(vi)   Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the provisions of this Section 4.1(a):
 
(1)   Investor’s bona fide pledge or mortgage of any Shares to a lender, provided that any subsequent transfer of said Shares by said institution shall be conducted in the manner set forth in this Agreement.
 
7.

 
(2)   A transfer of Shares by the Investor to its affiliates, provided that the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if it were the Investor hereunder.
 
(3)   A transfer of Shares to its members or former members of the Investor in accordance with their interest in the Investor; provided that the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were the Investor hereunder.
 
(4)   A transfer by a holder who holds Shares as a transferee pursuant to this Section 4.2(a) either during such holder’s lifetime or on death by will or intestacy to such holder’s spouse or children, or to a trust or other entity of which the holder or such holder’s spouse or children is a beneficiary/beneficial owner, or to an entity controlling, controlled by or under common control with such holder, provided that any such transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were the Investor hereunder.
 
(b)   The Investor agrees not to make any disposition of any shares of the Corporation held by the Investor unless such disposition complies with the terms of the Escrow Agreement and unless and until:
 
(i)   there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement and Section 4.2; or
 
(ii)   (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) the Investor shall have notified the Corporation of the proposed disposition and shall have furnished the Corporation with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Corporation, the Investor shall have furnished the Corporation with an opinion of counsel, reasonably satisfactory to the Corporation, that such disposition will not require registration of such shares under the Securities Act.  It is agreed that the Corporation will not require opinions of counsel for transactions made pursuant to Rule 144, except in unusual circumstances.
 
Notwithstanding the provisions of this subsection (b), no such restriction shall apply to a transfer by the Investor if it transfers shares to its members or former members in accordance with their interest in the Investor; provided that the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were the Investor hereunder.
 
(c)   Any sale or transfer, or purported sale or transfer, of securities of the Corporation shall be null and void unless the terms, conditions, and provisions of this Section 4.1 are strictly observed and followed.
 
(d)   Each certificate representing the Shares shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):
 
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ ACT ”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
 
8.

 
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDER AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE CORPORATION.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S).
 
(e)   The Corporation shall be obligated to reissue promptly unlegended certificates at the request of the Investor if the Corporation has completed its Initial Offering and the Investor shall have obtained an opinion of counsel (which counsel may be counsel to the Corporation) reasonably acceptable to the Corporation to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Investor is no longer subject to any restrictions hereunder.
 
(f)   Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Corporation of an order of the appropriate blue sky authority authorizing such removal.
 
4.2   “Market Stand-Off” Agreement.   The Investor hereby agrees that it shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any securities of the Corporation held by the Investor (other than those included in the registration) (i) during the 180-day period following the effective date of the Initial Offering (or such longer period as the underwriters or the Corporation shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation), and (ii) the 90-day period following the effective date of a registration statement of the Corporation filed under the Securities Act (or such longer period as the underwriters or the Corporation shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation); provided , that, with respect to (i) and (ii) above, all executive officers and directors of the Corporation and all holders of at least one percent (1%) of the Corporations’s voting securities   are bound by and have entered into similar agreements. The obligations described in this Section 4.2 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future.
 
9.

 
SECTION 5.   MISCELLANEOUS.  
 
5.1   Governing Law.   This Agreement shall be governed by and construed under the laws of the State of New York   in all respects as such laws are applied to agreements among New York residents entered into and to be performed entirely within New York, without reference to conflicts of laws or principles thereof.  The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in the Borough of Manhattan, County of New York.  
 
5.2   Successors and Assigns.   Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors, and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of Shares from time to time; provided, however , that prior to the receipt by the Corporation of adequate written notice of the transfer of any Shares specifying the full name and address of the transferee, the Corporation may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.
 
5.3   Entire Agreement.   This Agreement, the Subscription Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein.  Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.
 
5.4   Severability.   In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
 
5.5   Amendment and Waiver.   Except as otherwise expressly provided, this Agreement may be amended or modified, and the obligations of the Corporation and the rights of the Investor may be waived, only upon the written consent of the Corporation and the Investor.
 
10.

 
5.6   Delays or Omissions.   It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring.  It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party’s part of any breach, default or noncompliance under the Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.
 
5.7   Notices.   All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof hereto or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.
 
5.8   Attorneys’ Fees.   In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
 
5.9   Titles and Subtitles.   The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
 
5.10   Counterparts.   This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
 
5.11   Pronouns.   All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.
 
5.12   Termination.   This Agreement shall terminate and be of no further force or effect upon the earliest of: (i) the consummation of a merger, consolidation or other corporate transaction involving (directly or indirectly) the Corporation such that immediately after the consummation of such merger, consolidation or other corporate transaction, the stockholders of the Corporation immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving entity in such merger, consolidation or other corporate transaction in substantially the same proportions as their ownership of the outstanding voting securities of the Corporation immediately prior to such transaction; (ii) the Corporation’s Initial Offering; and (iii) the date upon which the Corporation merges with or otherwise becomes a wholly-owned subsidiary of a company that is subject to the public company reporting requirements of the Securities Exchange Act of 1934, as amended, or the equivalent reporting requirements of the Ontario Securities Commission, or that is listed on the London Stock Exchange main market, the Euronext markets, or AIM, provided , that the Investor’s obligations under Sections 3.3 and 4.2 shall continue and survive such termination.  
 
11.

 
[THIS SPACE INTENTIONALLY LEFT BLANK]
 
12.

 
In Witness Whereof, the parties hereto have executed this Stockholder Agreement as of the date set forth in the first paragraph hereof.
 
 
   
 
CORPORATION:
 
CORMEDIX, INC.
 
 
By:    /s/ Bruce Cooper                                                 
Name:   Bruce Cooper                                                    
Title:  CEO                                                                      
 
 

 
INVESTOR:
 
 
ND PARTNERS LLC
 
 
By:    /s/ Anastasios Parafestas                                               
Anastasios Parafestas, Managing Member of Spinnaker
Capital LLC, the Managing Member of ND Partners LLC
 
 
 
[SIGNATURE PAGE TO STOCKHOLDER AGREEMENT ]

 
Table Of Contents
 
   
Page
     
SECTION 1.
GENERAL
1
     
1.1
Definitions
1
     
SECTION 2.
PREEMPTIVE RIGHTS
2
     
2.1
Subsequent Offerings
2
     
2.2
Exercise of Rights
2
     
2.3
Issuance of Equity Securities to Other Persons
2
     
2.4
Sale Without Notice
3
     
2.5
Excluded Securities
3
     
2.6
Termination of Preemptive Rights
4
     
SECTION 3.
COVENANTS OF THE CORPORATION
4
     
3.1
Basic Financial Information and Reporting
4
     
3.2
Inspection Rights
5
     
3.3
Confidentiality of Records
5
     
3.4
Visitation Rights
5
     
3.5
Registration Rights
5
     
3.6
Liquidation Rights
5
     
3.7
Adjustment to Issued Shares
5
     
3.8
Termination of Covenants
6
     
SECTION 4.
RESTRICTIONS ON TRANSFER
6
     
4.1
Restrictions on Transfer
7
     
4.2
“Market Stand-Off” Agreement
9
     
SECTION 5.
MISCELLANEOUS
10
     
5.1
Governing Law
10
     
5.2
Successors and Assigns
10
     
5.3
Entire Agreement
10
     
5.4
Severability
10
     
5.5
Amendment and Waiver
10
     
5.6
Delays or Omissions
11
     
5.7
Notices
11
     
5.8
Attorneys’ Fees
11
 
i.

 
Table Of Contents
(CONTINUED)
 
   
Page
     
5.9
Titles and Subtitles
11
     
5.10
Counterparts
11
     
5.11
Pronouns
11
     
5.12
Termination
11
 
ii.

NOTE AND WARRANT PURCHASE AGREEMENT

This NOTE AND WARRANT PURCHASE AGREEMENT (this “ Agreement ”) is made as of the last date set forth on the signature page hereof between CORMEDIX INC. , a Delaware corporation having its principal place of business at 86 Summit Avenue, Suite 301, Summit, NJ 07901-3647 (the “ Company ”), and the undersigned (the “ Subscriber ”).

WITNESSETH:

WHEREAS, the Company has retained Paramount BioCapital, Inc. (the “ Placement Agent ”) to act as its exclusive placement agent, on a “best efforts, all or none” basis, in a private offering (the “ Offering ”) of convertible promissory notes in substantially the form attached hereto as Exhibit A (the “ Notes ”) included in the Minimum Offering (as defined below) and on a “best efforts” basis in the Offering of such Notes which will provide the Company with aggregate proceeds in excess of the Minimum Offering, and in connection therewith has authorized Paramount to engage one or more other firms to assist in finding qualified subscribers for the Notes (such other firms, if any, together with Paramount, the “ Placement Agent ”);

WHEREAS, the terms of the Offering are summarized in that certain Confidential Offering Memorandum dated June 15, 2007 (together with all amendments, supplements, exhibits and appendices thereto, the “ Memorandum ”);

WHEREAS, the Company desires to offer and sell a minimum of $500,000 aggregate principal amount of Notes (the “ Minimum Offering ”) and a maximum of $10,000,000 aggregate principal amount of Notes (the “ Maximum Offering ”), with an option in favor of the Placement Agent and the Company to offer up to an additional $2,000,000 aggregate principal amount of Notes (the “ Over-allotment ,” and together with the Maximum Offering, the “ Maximum Amount ”) (such amount of Notes actually issued, the “ Principal Loan Amount ”).  In addition to the Notes, each Subscriber will receive a seven-year warrant (the “ Warrant ”), in substantially the form attached hereto as Exhibit B , to purchase a number of shares of common stock, $0.001 par value per share (the “ Common Stock ”), of the Company equal to (i) 25% of the principal amount of the Notes purchased by it divided by the lowest price per share in an equity financing or series of related equity financings by the Company resulting in aggregate gross cash proceeds (before commissions or other expenses and excluding conversion of the Notes) to the Company of at least $10,000,000 minus the aggregate principal amount of the Second Bridge Notes (as defined herein) (a “ Qualified Financing ”) at which equity securities of the Company are sold (the “ Lowest Price Paid ”), if a Qualified Financing is consummated within one hundred eighty (180) days after the Initial Closing (as defined below) of this Offering (the “ Qualified Financing Date ”), or (ii) 40% of the principal amount of the Notes purchased by it divided by the Lowest Price Paid, if a Qualified Financing is not consummated on or before the Qualified Financing Date, in each case, at a per Warrant exercise price equal to 110% of the Lowest Price Paid.  Notwithstanding the foregoing, if a Qualified Financing does not occur on or before the second anniversary of the Initial Closing, then each Warrant will be exercisable for that number of shares of Common Stock equal to forty percent (40%) of the principal amount of the Note purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.  Notwithstanding the foregoing, upon a Sale of the Company (as defined in the Notes) or a Reverse Merger (as defined in the Notes), the Notes and Warrants shall be subject to certain terms and conditions, in each case as defined and described in detail in the Notes and Warrants.

 
 

 

WHEREAS, the Company desires to enter into this Agreement to issue and sell the Notes and the Subscriber desires to purchase the principal amount of Notes set forth on the signature page hereto on the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the promises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

I.            SUBSCRIPTION FOR NOTES AND REPRESENTATIONS BY SUBSCRIBER

1.1           Subject to the terms and conditions hereinafter set forth, the Subscriber hereby irrevocably subscribes for and agrees to purchase from the Company that portion of the aggregate principal amount of the Principal Loan Amount authorized to be issued by the Company set forth on the signature page hereto (the “ Subscriber Loan Amount ”).  The purchase price is payable by wire transfer of immediately available funds to:

Bank:
U.S. Bank Trust N.A.
ABA Number:
091000022
Further Credit to Account Name:
U.S. Bank and Trust Corp Trust Acct
Account #:
180121167365
Final Beneficiary Recipient/Subacct:
Paramount BioCapital & CorMedix
SEI/Subacct Number:
113203000
Reference:
[Investor Name]
Attention:
Andrea Friesen
 
651-495-3725 (phone)
 
651-495-8087 (fax)

Upon acceptance by the Placement Agent and the Company of subscriptions for an amount of Notes equal to at least the Minimum Offering, the Placement Agent and the Company shall have the right at any time thereafter, prior to the Offering Termination Date (as defined in Section 3.2), to effect an initial closing with respect to the Offering (the “ Initial Closing ”).  Thereafter, the Placement Agent and the Company shall continue to accept additional subscriptions for, and continue to have closings (together with the Initial Closing, each a “ Closing ” and the date thereof the “ Closing Date ”) with respect to subscriptions for Securities (as defined below) from new or existing investors from time to time and at any time up to the Offering Termination Date.

The Subscriber understands that the Company’s and the Placement Agent’s respective officers, directors, employees and/or affiliates may purchase Notes in this Offering, which purchases may be used to satisfy the Minimum Offering.  In addition, certain employees of the Placement Agent and its affiliates are current stockholders of the Company.

 
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1.2           The Subscriber recognizes that the purchase of the Notes involves a high degree of risk including, but not limited to, the following: (a) the Company remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds of the Offering; (b) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the Notes; (c) the Subscriber may not be able to liquidate its investment; (d) transferability of the Notes and the securities issuable upon conversion of the Notes and the Common Stock underlying the Warrant (sometimes hereinafter collectively referred to as the “ Securities ”) is extremely limited; (e) in the event of a disposition of the Securities, the Subscriber could sustain the loss of its entire investment; and (f) the Company has not paid any dividends on its capital stock since its inception and does not anticipate paying any dividends in the foreseeable future.  Without limiting the generality of the representations set forth in Section 1.5 below, the Subscriber represents that the Subscriber has carefully reviewed the section of the Memorandum captioned “Risk Factors.”

1.3           The Subscriber represents that the Subscriber is an “accredited investor” as such term is defined in Rule 501 of Regulation D (“ Regulation D ”) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), as indicated by the Subscriber’s responses to the questions contained in Article VII hereof, and that the Subscriber is able to bear the economic risk of an investment in the Securities.  If the Subscriber is a natural person, the Subscriber has reached the age of majority in the state or other jurisdiction in which the Subscriber resides, has adequate means of providing the for the Subscriber’s current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Securities for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.

1.4           The Subscriber hereby acknowledges and represents that (a) the Subscriber has sufficient knowledge and experience in business and financial matters, prior investment experience, including investment in securities that are non-listed, unregistered and/or not traded on a national securities exchange, or the Subscriber has employed the services of a “purchaser representative” (as defined in Rule 501 of Regulation D), attorney and/or accountant to read all of the documents furnished or made available by the Company both to the Subscriber and to all other prospective investors in the Securities in order to evaluate the merits and risks of such an investment on the Subscriber’s behalf; (b) the Subscriber recognizes the highly speculative nature of this investment; and (c) the Subscriber is able to bear the economic risk that the Subscriber hereby assumes.

1.5           The Subscriber hereby acknowledges receipt and careful review of this Agreement, the Note, the Warrant and the Memorandum (which includes the Risk Factors), including all exhibits thereto (collectively referred to as the “ Offering Materials ”) and hereby represents that the Subscriber has been furnished by the Company during the course of the Offering with all information regarding the Company, the terms and conditions of the Offering and any additional information that the Subscriber, its purchaser representative, attorney and/or accountant has requested or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the Company and the terms and conditions of the Offering.

 
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1.6           (a)           In making the decision to invest in the Securities, the Subscriber has relied solely upon the information provided by the Company in the Offering Materials.  To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Securities hereunder.  The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course of Subscriber’s consideration of an investment in the Securities other than the Offering Materials.  The Subscriber acknowledges and agrees that (i) the Company has prepared the Offering Materials and that no other person, including without limitation, the Placement Agent, has supplied any information for inclusion in the Offering Materials other than information furnished in writing to the Company by the Placement Agent specifically for inclusion in those parts of the Offering Materials relating specifically to the Placement Agent, (ii) the Placement Agent has no responsibility for the accuracy or completeness of the Offering Materials and (iii) the Subscriber has not relied upon the independent investigation or verification, if any, that may have been undertaken by the Placement Agent.

(b)           The Subscriber represents that (i) the Subscriber was contacted regarding the sale of the Securities by the Company or the Placement Agent (or an authorized agent or representative of the Company or the Placement Agent) with whom the Subscriber had a prior substantial pre-existing relationship and (ii) no Securities were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising.

1.7           The Subscriber hereby represents that the Subscriber, either by reason of the Subscriber’s business or financial experience or the business or financial experience of the Subscriber’s professional advisors (who are unaffiliated with and not compensated by the Company or any affiliate or selling agent of the Company, including the Placement Agent, directly or indirectly), has the capacity to protect the Subscriber’s own interests in connection with the transaction contemplated hereby.

1.8           The Subscriber hereby acknowledges that the Offering has not been reviewed by the United States Securities and Exchange Commission (the “ SEC ”) nor any state regulatory authority since the Offering is intended to be exempt from the registration requirements of Section 5 of the Securities Act pursuant to Regulation D promulgated thereunder.  The Subscriber understands that the Securities have not been registered under the Securities Act or under any state securities or “blue sky” laws and agrees not to sell, pledge, assign or otherwise transfer or dispose of the Securities unless they are registered under the Securities Act and under any applicable state securities or “blue sky” laws or unless an exemption from such registration is available.

 
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1.9           The Subscriber understands that the Securities have not been registered under the Securities Act or any state securities laws by reason of a claimed exemption under the provisions of the Securities Act and such state securities laws that depends, in part, upon the Subscriber’s investment intention. The Subscriber hereby represents that the Subscriber is purchasing the Securities for the Subscriber’s own account for investment and not with a view toward the resale or distribution to others.  The Subscriber, if an entity, further represents that it was not formed for the purpose of purchasing the Securities.

1.10         The Subscriber understands that there is no public market for the Securities and that no market may develop for any of such Securities.  The Subscriber understands that even if a public market develops for such Securities, Rule 144 (“ Rule 144 ”) promulgated under the Securities Act requires for non-affiliates, among other conditions, a one-year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act.  The Subscriber understands and hereby acknowledges that the Company is under no obligation to register any of the Securities under the Securities Act or any state securities or “blue sky” laws other than as set forth in Article V.

1.11         The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that such Securities have not been registered under the Securities Act or any state securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement.  The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such Securities. The legend to be placed on each certificate shall be in form substantially similar to the following:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE SKY LAWS”, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

1.12          The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber’s principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity.

1.13         The Subscriber represents that the Subscriber has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Securities.  This Agreement constitutes the legal, valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms.

 
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1.14           If the Subscriber is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, (a) it is authorized and qualified to invest in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so and (b) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

1.15           The Subscriber acknowledges that if he or she is a Registered Representative of a National Association of Securities Dealers, Inc. (the “ NASD ”) member firm, he or she must give such firm the notice required by NASD Rule 3050, receipt of which must be acknowledged by such firm in Section 7.4 below.

1.16           Subject to the provision below, the Subscriber hereby agrees that in the case of an initial offering of the Common Stock to the public pursuant to an effective registration statement under the Securities Act (the “ IPO ”), the Subscriber will not, without the prior written consent of the Company, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, the Registrable Securities (as defined in Section 5.1) purchased or acquired by the Subscriber for a period of up to 180 days from the effective date of the registration statement relating to the IPO and that the Subscriber will enter into an agreement with the Company or managing underwriter of the IPO to that effect.

1.17          (a)           The Subscriber agrees not to issue any public statement with respect to the Subscriber’s investment or proposed investment in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

 (b)           The Company agrees not to disclose the names, addresses or any other information about the Subscribers, except as required by law; provided, that the Company may use the name (but not the address) of the Subscriber in any registration statement filed pursuant to Article V in which the Subscriber’s shares are included and in any subsequent offering memorandum if the Subscriber beneficially owns five percent (5%) or more of the Company’s voting capital stock, on a fully-diluted or other basis, or otherwise as required by law.

1.18         The Subscriber represents and warrants that it has not engaged, consented to or authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement.  The Subscriber hereby agrees to indemnify and hold harmless the Company from and against all fees, commissions or other payments owing to any such person or firm acting on behalf of such Subscriber hereunder.

 
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1.19         The Subscriber agrees to hold the Company and its directors, officers, employees, affiliates, controlling persons and agents (including the Placement Agent and its officers, directors, employees, counsel, controlling persons and agents) and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses incurred by them as a result of (a) any sale or distribution of the Securities by the Subscriber in violation of the Securities Act or any applicable state or foreign securities or “blue sky” laws; or (b) any false representation or warranty or any breach or failure by the Subscriber to comply with any covenant made by the Subscriber in this Agreement (including the Confidential Investor Questionnaire contained in Article VII herein) or any other document furnished by the Subscriber to any of the foregoing in connection with this transaction; provided, however, that in no event shall any indemnity under this subsection 1.19 exceed the aggregate principal amount of Notes subscribed for by the Subscriber pursuant to this Agreement, except in the case of willful fraud by the Subscriber.

1.20         The Subscriber understands, acknowledges and agrees with the Company that this subscription may be rejected, in whole or in part, by the Company, in the sole and absolute discretion of the Company, at any time before the Closing Date notwithstanding prior receipt by the Subscriber of notice of acceptance of the Subscriber’s subscription.

1.21         The Subscriber acknowledges that the information contained in the Offering Materials or otherwise made available to the Subscriber is confidential and non-public and agrees that all such information shall be kept in confidence by the Subscriber and neither used by the Subscriber for the Subscriber’s personal benefit (other than in connection with this subscription) nor disclosed to any third party for any reason, notwithstanding that a Subscriber’s subscription may not be accepted by the Company; provided, however, that (a) the Subscriber may disclose such information to its affiliates and advisors who may have a need for such information in connection with providing advice to the Subscriber with respect to its investment in the Company so long as such affiliates and advisors have an obligation of confidentiality, and (b) this obligation shall not apply to any such information that (i) is part of the public knowledge or literature and readily accessible at the date hereof, (ii) becomes part of the public knowledge or literature and readily accessible by publication (except as a result of a breach of this provision) or (iii) is received from third parties without an obligation of confidentiality (except third parties who disclose such information in violation of any confidentiality agreements or obligations, including, without limitation, any subscription or other similar agreement entered into with the Company).

1.22         The Subscriber represents that no authorization, approval, consent or license of any person is required to be obtained for the purchase of the Securities by the Subscriber, other than as have been obtained and are in full force and effect.

1.23         The Subscriber represents that the representations, warranties and agreements of the Subscriber contained herein and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on the date hereof and as of the Closing Date on which the Subscriber purchases Notes as if made on and as of such date and shall survive the execution and delivery of this Agreement and the purchase of the Notes.  The Subscriber agrees that the Company and the Placement Agent shall be entitled to rely on the representations, warranties and agreements of the Subscriber contained herein.

 
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1.24         The Subscriber understands, acknowledges and agrees with the Company that, except as otherwise set forth herein, the subscription hereunder is irrevocable by the Subscriber, that, except as required by law, the Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Subscriber hereunder and that this Agreement and such other agreements shall survive the death or disability of the Subscriber and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.  If the Subscriber is more than one person, the obligations of the Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his/her heirs, executors, administrators, successors, legal representatives and permitted assigns.

1.25         The Subscriber understands, acknowledges and agrees with the Company that the Offering is intended to be exempt from the registration under the Securities Act by virtue of the provisions of Regulation D thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Subscriber.

II.
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

The Company hereby represents and warrants to the Subscriber that:

2.1            Organization, Good Standing and Qualification .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, operations, conditions (financial or otherwise), properties, assets or results of operations of the Company (a “ Material Adverse Effect ”).  The Company does not have any subsidiaries.

2.2            Capitalization and Voting Rights.   The authorized, issued and outstanding capital stock of the Company is as set forth in the Memorandum   and all issued and outstanding shares of the Company are validly issued, fully paid and nonassessable.  Except as set forth in the Memorandum, there are no outstanding options, warrants, agreements, convertible securities, preemptive rights or other rights to subscribe for or to purchase any shares of capital stock of the Company.  Except as set forth in the Offering Materials   and as otherwise required by law, there are no restrictions upon the voting or transfer of any of the shares of capital stock of the Company pursuant to the Company’s Certificate of Incorporation, as amended (the “ Certificate of Incorporation ”), By-Laws or other governing documents or any agreement or other instruments to which the Company is a party or by which the Company is bound.

 
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2.3            Authorization; Enforceability . The Company has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  All corporate action on the part of the Company, its directors and stockholders necessary for the (i) authorization, execution, delivery and performance of this Agreement by the Company; and (ii) authorization, sale, issuance and delivery of the Securities contemplated hereby and the performance of the Company’s obligations hereunder has been taken.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy.  The Notes, when issued and fully paid for in accordance with the terms of this Agreement, will be validly issued. Upon the issuance and delivery of the equity securities issuable upon conversion of the Notes in accordance with the terms thereof, such equity securities will be validly issued, fully paid and nonassessable.  The Common Stock issuable upon exercise of the Warrants, when issued in accordance with the terms of such Warrants, will be validly issued, full paid and non-assessable.  The issuance and sale of the Securities contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person which have not been waived in connection with this Offering.

2.4            No Conflict; Governmental Consents .

(a)           Except as would not reasonably be expected to have a Material Adverse Effect or have been waived, the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which the Company is bound, or of any provision of the Certificate of Incorporation or By-Laws of the Company, and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company.

(b)           No consent, approval, authorization or other order of any governmental authority or other third party is required to be obtained by the Company in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Securities, except as have been obtained or such filings as may be required to be made with the SEC and with any state or foreign blue sky or securities regulatory authority relating to an exemption from registration thereunder.

2.5            Licenses . Except as would not reasonably be expected to have a Material Adverse Effect, the Company has sufficient licenses, permits and other governmental authorizations currently required for the conduct of its business or ownership of properties and is in all material respects complying therewith.

2.6            Litigation .  The Company knows of no pending or threatened legal or governmental proceedings against the Company which (i) adversely questions the validity of this Agreement or any agreements related to the transactions contemplated hereby or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby or (ii) could, if there were an unfavorable decision, have a Material Adverse Effect. There is no action, suit, proceeding or investigation by the Company currently pending in any court or before any arbitrator or that the Company intends to initiate.

 
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2.7            Investment Company   The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

2.8            Placement Agent .  The Company has engaged, consented to and authorized the Placement Agent to act as agent of the Company in connection with the transactions contemplated by this Agreement.  The Company will pay the Placement Agent a commission in the form of both cash and warrants (the “ Placement Warrants ”) and will reimburse the Placement Agent’s reasonable out-of-pocket expenses incurred in connection with the Offering up to $100,000, and the Company agrees to indemnify and hold harmless the Subscribers from and against all fees, commissions or other payments owing by the Company to the Placement Agent or any other person or firm acting on behalf of the Company hereunder.

2.9            Financial Statements . The financial statements of the Company included in Appendix D to the Memorandum (the “ Financial Statements ”) fairly present in all material respects the financial condition and position of the Company at the dates and for the periods indicated; and have been prepared in conformity with generally accepted accounting principles in the United States (“ GAAP ”) consistently applied throughout the periods covered thereby, except as may be otherwise specified in such Financial Statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  Since the date of the most recent balance sheet included as part of the Financial Statements, there has not been to the Company’s knowledge: (i) any change in the assets, liabilities, financial condition   or operations of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect; or (ii) any other event or condition of any character that, either individually or cumulatively, would reasonably be expected to have a Material Adverse Effect, except for the expenses incurred in connection with the transactions contemplated by this Agreement.

2.10            Title to Properties and Assets; Liens, Etc . The Company has good and marketable title to its properties and assets, including the properties and assets reflected in the most recent balance sheet included in the Financial Statements, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent; (b) liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company; (c) those that have otherwise arisen in the ordinary course of business; and (d) those that would not reasonably be expected to have a Material Adverse Effect.  The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound.

 
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2.11          Patents and Trademarks .  Except as would not reasonably be expected to have a Material Adverse Effect or as disclosed in the Memorandum, to the Company’s knowledge, (i) the Company owns or possesses adequate licenses or other rights to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, manufacturing processes, formulae, trade secrets, licenses, customer lists and know how (collectively, “ Intellectual Property ”) , (ii) the Company has not received any communications alleging that the Company has violated or, by conducting its business as conducted, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights or processes of any other person or entity, nor is the Company aware of any basis therefore and (iii) no claim is pending or, to the Company’s knowledge after due inquiry, threatened to the effect that any Intellectual Property owned or licensed by the Company, or which the Company otherwise has the right to use, is invalid or unenforceable by the Company.

2.12          Obligations to Related Parties . Except as disclosed in the Memorandum or as would not reasonably be expected to have a Material Adverse Effect, there are no obligations of the Company to officers, directors, stockholders, or employees of the Company other than (a) for payment of salary or other compensation for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company, (c) standard indemnification provisions in the certificate of incorporation and by-laws, and (d) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).  Except as may be disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

2.13          Employee Relations; Employee Benefit Plans . The Company is not a party to any collective bargaining agreement or a union contract.  The Company believes that its relations with its employees are good.  No executive officer (as defined in Rule 501(f) of the Securities Act) of the Company has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company.  The Company is in compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Except as disclosed in the Memorandum, the Company does not maintain any compensation or benefit plan, agreement, arrangement or commitment (including, but not limited to, “employee benefit plans”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) for any present or former employees, officers or directors of the Company or with respect to which the Company has liability or makes or has an obligation to make contributions, other than any such plans, agreements, arrangements or commitments made generally available to the Company’s employees.

 
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2.14          Environmental Laws .  To the best of its knowledge, the Company (i) is in compliance with any and all Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

2.15          Tax Status .  To the best of the Company’s knowledge, the Company (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

2.16          Absence of Certain Changes .  Since the date of the Memorandum, there has been no change in the business, operations, conditions (financial or otherwise), prospects, assets or results of operations of the Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
 
2.17          Ranking of Notes; Issuance of New Debt .  On the Closing Date, the Notes will rank pari passu with all of the Company’s existing indebtedness.  Following the Closing Date, as long as any Note remains outstanding, the Company will not, without the prior written consent of the holders of Notes evidencing at least sixty-six and two-thirds percent (66 ⅔%) of the Principal Loan Amount then outstanding, incur indebtedness for borrowed money (“New Debt”) in favor of any person or entity (each a “New Lender”) which indebtedness is secured or otherwise senior in priority to any Note issued to any subscriber pursuant to this Agreement or any substantially similar agreement.  No consent of the holders of Notes will be required for issuances by the Company of unsecured indebtedness that ranks pari passu with, or junior to, the Notes.     For purposes of this Section 2.17 only, the term “Notes” shall include the Notes, the Second Bridge Notes and the Galenica Note together and the term “Principal Loan Amount” shall include the aggregate principal amount of the Notes, the Second Bridge Notes and the Galenica Note.
 
2.18          Disclosure .  The information set forth in the Offering Materials as of the date hereof contains no untrue statement of a material fact nor omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

 
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III.            TERMS OF SUBSCRIPTION

3.1           The minimum purchase that may be made by any prospective investor shall be $50,000 aggregate principal amount of Notes.  Subscriptions for investment below the minimum investment may be accepted at the discretion of the Placement Agent and the Company.  The Company and the Placement Agent reserve the right to reject any subscription made hereby, in whole or in part, in their sole discretion.  The Company’s agreement with each Subscriber is a separate agreement and the sale of the Securities to each Subscriber is a separate sale.

3.2           Pending the sale of the Securities, all funds paid hereunder shall be deposited by the Company in escrow with US Bank Trust NA, having a branch at 100 Wall Street, Suite 1600, New York, New York 10005.  This Offering will terminate on the earlier of (i) the Company’s acceptance of subscriptions for the Maximum Amount, or (ii) July 31, 2007, unless terminated at an earlier time or extended by the mutual agreement of the Placement Agent and the Company without notice to prospective investors for up to an additional sixty (60) days(the “ Offering Termination Date ”).  The Company reserves the right to withdraw or cancel this Offering and to accept or reject any subscription in whole or in part, in its sole discretion.  The Subscriber hereby authorizes and directs the Company and the Placement Agent to direct the Escrow Agent to return any funds for unaccepted subscriptions to the same account from which the funds were drawn, without interest, including any customer account maintained with the Placement Agent.

3.3           At any time after the Company has received subscriptions and related funds for the Minimum Offering, but prior to the Offering Termination Date, the Company may conduct a Closing and may conduct subsequent Closings on an interim basis until the Maximum Amount has been obtained or until the Offering Termination Date.  Each Closing shall occur at the offices of the Placement Agent at 787 Seventh Avenue, 48 th Floor, New York, NY 10019.

3.4           The Note and Warrant purchased by the Subscriber pursuant to this Agreement will be prepared for delivery to the Subscriber promptly following the Closing at which such purchase takes place. The Subscriber hereby authorizes and directs the Company to deliver the Note and Warrant purchased by the Subscriber pursuant to this Agreement directly to the Subscriber’s account maintained by the Placement Agent, if any, or, if no such account exists, to the residential or business address indicated on the signature page hereto.

IV.            CONDITIONS TO OBLIGATIONS OF THE PARTIES

4.1           In addition to the Company’s right to reject, in whole or in part, any subscription at any time before the Closing Date, the Company’s obligation to issue the Securities at each Closing to the applicable Subscriber is subject to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of the Company to the extent permitted by law:

 
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(a)            Representations and Warranties Correct .  The representations and warranties made by each Subscriber in Article I hereof shall be true and correct in all material respects.

(b)            Covenants .  All covenants, agreements and conditions contained in this Agreement to be performed by such Subscriber on or prior to the date of such Closing shall have been performed or complied with in all material respects.

(c)            No Legal Order Pending .  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d)            No Law Prohibiting or Restricting Such Sale .  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities (except as otherwise provided in this Agreement).

4.2           The Subscriber’s obligation to purchase the Securities at the Closing at which such purchase is to be consummated is subject to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of each Subscriber to the extent permitted by law:

(a)            Representations and Warranties Correct .  The representations and warranties made by the Company in Article II hereof shall be true and correct in all material respects.

(b)            Covenants .  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the date of such Closing shall have been performed or complied with in all material respects.

(c)            No Legal Order Pending .  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d)            No Law Prohibiting or Restricting Such Sale .  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities (except as otherwise provided in this Agreement).

(e)            Legal Opinion .  The Placement Agent shall have received an opinion of counsel to the Company addressed to the Subscribers (which the Placement Agent may be permitted to rely on as if it were addressed to it) containing certain opinions to be substantially in the form attached hereto as Exhibit C , which opinion will be subject to standard qualifications and assumptions.

 
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(f)            Officer’s Certificate . The Placement Agent shall have received an Officer’s Certificate addressed to the Subscribers, signed by the authorized officer of the Company and dated as of the Closing.  The certificate shall state, among other things, that the representations and warranties contained herein and in the Offering Materials are true and accurate in all material respects at such Closing Date with the same effect as though expressly made at such Closing Date and the Placement Agent shall be entitled to rely on such representations of the Company in the Offering Materials as if they were made directly to the Placement Agent.

V.            REGISTRATION RIGHTS

5.1           Definitions.    As used in this Agreement, the following terms shall have the following meanings.

(a)           The term “ Holder ” shall mean any holder of Registrable Securities.

(b)           The terms “ register ”, “ registered ” and “ registration ” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or order of effectiveness of such registration statement or document.

(c)           The term “ Registrable Securities ” shall mean (i) the shares of equity securities issuable upon conversion of the Notes sold in the Offering (or any successor security) and upon conversion of the Second Bridge Notes and the Galenica Note; (ii) the shares of equity securities issuable upon exercise of the Warrants and the Second Bridge Warrants; and (iii) any shares of equity securities issuable (or issuable upon the conversion or exercise of any warrant, right or other security that is issued) pursuant to a dividend or other distribution with respect to or in replacement of any Securities; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (A) have not been disposed of pursuant to a registration statement declared effective by the SEC; (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale; (C) are held by a Holder or a permitted transferee of a Holder pursuant to Section 5.11; and (D) may not be disposed of under Rule 144 under the Securities Act without restriction.

(d)           The term “ Trading Event ” means the first date on which the Company’s Common Stock trades on a national securities exchange or an Over-the-Counter Bulletin Board.

(e)           The term “ Second Bridge Note Financing ” means the offer and sale in a private placement of Second Bridge Notes in an amount of up to $6,000,000 (including over-allotment) and the Second Bridge Warrants.

(f)           The term “ Second Bridge Notes ” means any convertible promissory notes issued or sold to purchasers in the Second Bridge Note Financing.

 
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(g)           The term “ Second Bridge Warrants ” means any warrants exercisable for shares of Common Stock issued or sold to purchasers in the Second Bridge Financing.

(h)           The term “Galenica Note” means the convertible promissory note issued by the Company to Galenica Ltd. in exchange for the promissory note dated as of December 10, 2008 in the principal amount of $1,000,000.

5.2            Piggyback Registration .

(a)           The Company agrees that if, at any time, and from time to time, after the earlier to occur of (i) an initial public offering of the Company’s equity securities pursuant to a registration statement declared effective by the Securities and Exchange Commission (“IPO”) and (ii) a Trading Event, the Board of Directors of the Company (the “ Board ”) shall authorize the filing of a registration statement under the Securities Act (other than the filing of a registration statement pursuant to the IPO or a registration statement on Form S-8, Form S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Company shall: (A) promptly notify each Holder that such registration statement will be filed and that the Registrable Securities then held by such Holder will be included in such registration statement at such Holder’s request; (B) cause such registration statement to cover all of such Registrable Securities issued to such Holder for which such Holder requests inclusion; (C) use reasonable best efforts to cause such registration statement to become effective as soon as practicable; and (D) take all other reasonable action necessary under any Federal or state law or regulation of any governmental authority to permit all such Registrable Securities that have been issued to such Holder to be sold or otherwise disposed of, and will maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for such Holder to promptly effect the proposed sale or other disposition.

(b)           Notwithstanding any other provision of this Section 5.2, the Company may at any time, abandon or delay any registration commenced by the Company.  In the event of such an abandonment by the Company, the Company shall not be required to continue registration of shares requested by the Holder for inclusion and the Holder shall retain the right to request inclusion of shares as set forth above.

5.3            Demand Registration .

(a)            Registration on Request .

(i)           The Company agrees that, at any time, and from time to time, but at least 180 days after the earlier to occur of (i) an IPO and (ii) a Trading Event, Holders of a majority of the Registrable Securities may make a written request that the Company effect the registration under the Securities Act of outstanding Registrable Securities; provided that such requested registration would cover at least 51% of the Registrable Securities owned by all the Holders at such time; and provided , further, that the Holders shall be entitled to no more than one such demand registration.

 
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(ii)           The Company further agrees that if, at any time, and from time to time, after the Company has qualified for the use of Form S-3 or any successor form,  one or more of the Holders desire to effect the registration under the Securities Act on Form S-3 or any successor form (“ Short-Form Registration ”) of outstanding Registrable Securities, such Holder(s) may make a written request that the Company effect a Short-Form Registration; provided that the aggregate price to the public of the shares as to which such registration is requested (based on the then current market price and before deducting underwriting discounts and commissions) would equal or exceed $5,000,000. It is understood and agreed that the Holders may make good faith requests for Short-Form Registrations on an unlimited number of occasions; provided further , that the Company shall not be required to effect more than one Short Form Registration in any 12-month period.

(iii)           Each request made by one or more of the Holders pursuant to subsections (i) or (ii) above (the “ Initiating Holders ”) will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Following receipt of any such request, the Company shall promptly notify all Holders other than the Initiating Holders of receipt of such request and the Company shall use best efforts to file, within 60 days of such request, the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register in the request by the Initiating Holders (and in all notices received by the Company from such other Holders within 30 days after the giving of such notice by the Company), to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities to be registered. If such method of disposition shall be an underwritten public offering, the Holders of a majority of the shares of Registrable Securities to be sold in such offering may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed.  The Holders will be permitted to withdraw Registrable Securities from a registration at any time prior to the effective date of such registration; provided the remaining number of shares of Registrable Securities subject to a requested registration is not less than the minimum amount required pursuant to this Section 5.3.

 
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(b)            Limitations on Demand Registration . Notwithstanding Section 5.3(a), the Company shall not be obligated to file a registration statement relating to a registration request pursuant to this Section 5.3 at any time during the 180-day period immediately following the effective date of any registration statement filed by the Company (other than on Form S-8 or S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities); and if the Board determines, in its good faith judgment, that the Company (i) should not file any registration statement otherwise required to be filed pursuant to Section 5.3 or (ii) should withdraw any such previously filed registration statement because the Board determines, in its good faith judgment, that the Company is in the possession of material nonpublic information required to be disclosed in such registration statement or an amendment or supplement thereto, the disclosure of which in such registration statement would be materially disadvantageous to the Company (a   Disadvantageous Condition ”), the Company shall be entitled to postpone for the shortest reasonable period of time (but not exceeding 90 days from the date of the determination), the filing of such registration statement or, if such registration statement has already been filed, may suspend or withdraw such registration statement and shall promptly give the Holders written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay.  Upon the receipt of any such notice, such Holders shall forthwith discontinue use of the prospectus contained in such registration statement and, if so directed by the Company, shall deliver to the Company all copies of the prospectus then covering such Registrable Securities current at the time of receipt of such notice (or, if no registration statement has yet been filed, all drafts of the prospectus covering such Registrable Securities).  If any Disadvantageous Condition shall cease to exist, the Company shall promptly notify the Holders to such effect.  If any registration statement shall have been withdrawn, the Company shall, at such time as it is possible or, if earlier, at the end of the 90-day period following such withdrawal, file a new registration statement covering the Registrable Securities that were covered by such withdrawn registration statement. The Company’s right to delay a request for registration or to withdraw a registration statement pursuant to this Section 5.3 may not be exercised more than once in any one-year period.

5.4            Registration Procedures . Whenever required under this Article V to include Registrable Securities in a Company registration statement, the Company shall, as expeditiously as reasonably possible:

(a)           Use reasonable best efforts to (i) cause such registration statement to become effective, and (ii) cause such registration statement to remain effective until the earliest to occur of (A) such date as the sellers of Registrable Securities (the “ Holders ”) have completed the distribution described in the registration statement and (B) such time that all of such Registrable Securities are no longer, by reason of Rule 144(k) under the Act, required to be registered for the sale thereof by such Holders.  The Company will also use its reasonable best efforts to, during the period that such registration statement is required to be maintained hereunder, file such post-effective amendments and supplements thereto as may be required by the Securities Act and the rules and regulations thereunder or otherwise to ensure that the registration statement does not contain any untrue statement of material fact or omit to state a fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading; provided, however, that if applicable rules under the Securities Act governing the obligation to file a post-effective amendment permits, in lieu of filing a post-effective amendment that (i) includes any prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the Company may incorporate by reference information required to be included in (i) and (ii) above to the extent such information is contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement. In the event that the Company becomes qualified for the use of Form S-3 or any successor form at a time when any registration statement on any other Form which includes Registrable Securities is required to be maintained hereunder, the Company shall, upon the request of any Selling Holder, subject to Section 5.5, (i) as expeditiously as reasonably possible, use reasonable best efforts to cause a Short-Form Registration covering such Registrable Securities to become effective and (ii) comply with each of the other requirements of this Section 5.4 which may applicable thereto. Upon the effectiveness of such Short-Form Registration, the Company shall be relieved of its obligations hereunder to keep in effect the registration statement which initially covered the Registrable Securities included in such Short-Form Registration.

 
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(b)           Prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(c)           Furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus as amended or supplemented from time to time, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d)           Use reasonable best efforts to register and qualify the securities covered by such registration statement under such other federal or state securities laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

(e)           In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering.  Each selling Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

(f)           Notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, (i) when the registration statement or any post-effective amendment and supplement thereto has become effective; (ii) of the issuance by the SEC of any stop order or the initiation of proceedings for that purpose (in which event the Company shall make every effort to obtain the withdrawal of any order suspending effectiveness of the registration statement at the earliest possible time or prevent the entry thereof); (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iv) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing (and each Holder agrees to suspend any trading under the Registration Statement until such condition is abated).

(g)           Cause all such Registrable Securities registered hereunder to be listed on each securities exchange or quotation service on which similar securities issued by the Company are then listed or quoted or, if no such similar securities are listed or quoted on a securities exchange or quotation service, apply for qualification and use reasonable best efforts to qualify such Registrable Securities for inclusion on a national securities exchange or the Over-the-Counter Bulletin Board.

 
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(h)           Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(i)           Cooperate with the selling Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold, which certificates will not bear any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, shall request at least two business days prior to any sale of the Registrable Securities to the underwriters.
 
5.5            Furnish Information .  It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Article V with respect to the Registrable Securities of any Holder that such Holder shall furnish to the Company such information regarding the Holder, the Registrable Securities held by the Holder, and the intended method of disposition of such securities as shall be reasonably required by the Company to effect the registration of such Holder’s Registrable Securities.
 
5.6            Registration Expenses .  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to registrations pursuant to Sections 5.2 or 5.3 for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto (“ Registration Expenses ”), but excluding underwriting discounts and commissions relating to Registrable Securities and excluding any professional fees or costs of accounting, financial or legal advisors to any of the Holders.

5.7            Underwriting Requirements .  In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under Section 5.2 to include any of the Holders’ Registrable Securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company.  If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling Holders according to the total amount of securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such selling Holders).  For purposes of the preceding parenthetical concerning apportionment, for any selling Holder who is a holder of Registrable Securities and is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling Holder”, and any pro-rata reduction with respect to such “selling Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “selling Holder”, as defined in this sentence.

 
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5.8            Delay of Registration .  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Article V.

5.9            Indemnification .  In the event that any Registrable Securities are included in a registration statement under this Article V:

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, or any rule or regulation promulgated under the Securities Act, or the Exchange Act, and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 5.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person or a violation of any provision of this Agreement by a Holder.


 
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(b)           To the extent permitted by law, each Selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration or a violation of any provision of this Agreement by a Holder; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 5.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided , however , that the indemnity agreement contained in this Section 5.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided , further, that, in no event shall any indemnity under this Section 5.9(b) exceed the greater of the cash value of the (i) gross proceeds from the offering received by such Holder or (ii) such Holder’s investment pursuant to this Agreement as set forth on the signature page attached hereto.

(c)           Promptly after receipt by an indemnified party under this Section 5.9 of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 5.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel selected by the indemnifying party and approved by the indemnified party (whose approval shall not be unreasonably withheld); provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 5.9, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5.9.

(d)           If the indemnification provided for in this Section 5.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

 
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(e)           Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f)           The obligations of the Company and Holders under this Section 5.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Article V, and otherwise.

5.10          Reports Under Securities Exchange Act of 1934 .  With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

(a)           make and keep public information available, as those terms are understood and defined in Rule 144, at all times after 90 days after the effective date of the IPO  or Trading Event by the Company;

(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

5.11          Permitted Transferees .  The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under this Article V may be assigned in full by a Holder in connection with a transfer by such Holder of its Registrable Securities if: (a) such transferee agrees to comply with the terms and provisions of this Agreement; (b) such transfer is otherwise in compliance with this Agreement; (c) such transfer is otherwise effected in accordance with applicable securities laws; and (d) such Holder transfers at least 51% of its shares of Registrable Securities to the transferee.  Except as specifically permitted by this Section 5.11, the rights of a Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited.

5.12          Termination of Registration Rights .  The right of any Holder to request or demand inclusion in any registration pursuant to Section 5.2 and Section 5.3 shall terminate if all shares of Registrable Securities held by such Holder may immediately be sold under Rule 144(k) without restriction.

 
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VI.            MISCELLANEOUS

6.1           Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed as follows:

if to the Company, to it at:

CorMedix Inc.
86 Summit Avenue, Suite 301
Summit, NJ 07901-3647
Facsimile:  (908) 522-9199
Attn:  President

With a copy to:

Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, NY 10022
Facsimile: (212) 451-2222
Attn: Yehuda Markovits, Esq.

Paramount BioCapital, Inc.
787 Seventh Avenue, 48 th Floor
New York, NY 10019
Facsimile:  (212) 554-4355
Attn: Basil Christakos

if to the Subscriber, to the Subscriber’s address indicated on the signature page of this Agreement.

Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received.

6.2           Except as otherwise expressly provided herein, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) with the written consent of the Company and (a) subscribers holding Notes evidencing at least sixty six and two-thirds percent (66 ⅔%) of the then outstanding Principal Loan Amount of the Notes issued pursuant to this Agreement and substantially similar agreements, so long as the Notes are outstanding; and (b) holders of sixty six and two-thirds percent (66 ⅔%) of the Registrable Securities issued upon conversion of the Notes, if the Notes are no longer outstanding.  Any amendment or waiver effected in accordance with this Section 6.2 shall be binding upon the Subscriber and the Company (even if the Subscriber does not consent to such amendment or waiver), and upon the effectuation of each such amendment or waiver, the Company shall promptly give written notice thereof to the Subscriber if the Subscriber has not previously consented thereto in writing. Notwithstanding the foregoing, Sections 2.17, 5.1(c) and 5.1(e), (f), (g) and (h) of this Agreement shall not be amended nor the observance of any term thereof waived without the written consent of (x) subscribers holding Notes and, Second Bridge Notes and the Galenica Note evidencing at least sixty-six and two-thirds percent (66⅔%), of the outstanding aggregate principal amount of the Notes, the Second Bridge Notes and the Galenica Note, so long as the Notes, the Second Bridge Notes and the Galenica Note are outstanding; and (y) holders of sixty-six and two-thirds percent (66⅔%), in the aggregate, of the Registrable Securities issued upon conversion of the Notes, the Second Bridge Notes and the Galenica Note, if the Notes, the Second Bridge Notes and the Galenica Note are no longer outstanding.

 
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6.3           Subject to the provisions of Section 5.11, this Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.  This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

6.4           Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Notes as herein provided, subject, however, to the right hereby reserved by the Company to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers.

6.5           NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS SITTING IN THE BOROUGH OF MANHATTAN, COUNTY OF NEW YORK.  THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

6.6           The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.  If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

 
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6.7           It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

6.8           The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

6.9           This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

6.10         Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement, except (a) for the holders of Registrable Securities; (b) for the Placement Agent pursuant to Sections 1.6(a), 1.12, and 1.24 hereof, (c) for the indemnified parties (including without limitation the Placement Agent and its sub agents, if any) pursuant to Section 5.9 hereof; and (d) that the Placement Agent may rely upon the representations and acknowledgements of the Subscriber in Articles I and VII hereof and the representations and warranties of the Company in Article II hereof.

Remainder of Page Intentionally Left Blank .

 
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VII.            CONFIDENTIAL INVESTOR QUESTIONNAIRE

7.1           The Subscriber represents and warrants that he, she or it comes within one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that category.  ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL except as otherwise required by law.  The undersigned agrees to furnish any additional information which the Company deems necessary in order to verify the answers set forth below.

Category A ____
The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.
   
 
Explanation:  In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities.  Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property .
   
Category B ____
The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year.
    
Category C ____
The undersigned is a director or executive officer of the Company which is issuing and selling the Securities.
   
Category D ____
The undersigned is a bank; a savings and loan association; insurance company; registered investment company; registered business development company; licensed small business investment company (“SBIC”); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 or (c) is a self directed plan with investment decisions made solely by persons that are accredited investors. ( describe entity )
   
   

 
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Category E ____
The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940. ( describe entity )
   
   
   
Category F ____
The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Notes and with total assets in excess of $5,000,000.( describe entity )
   
   
   
Category G ____
The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, where the purchase is directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the Act.
   
Category H ____
The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories.  If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement.  ( describe entity )
   
   
Category I ____
The undersigned is not within any of the categories above and is therefore not an accredited investor.

The undersigned agrees that the undersigned will notify the Company at any time on or prior to the Closing Date in the event that the representations and warranties in this Agreement shall cease to be true, accurate and complete.

 
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7.2            SUITABILITY . ( please answer each question )

(a)  For an individual Subscriber, please describe your current employment, including the company by which you are employed and its principal business:
 




 
(b)  For an individual Subscriber, please describe any college or graduate degrees held by you:
 



 
(c)  For all Subscribers, please list types of prior investments:
 



 
(d)           For all Subscribers, please state whether you have you participated in other private placements before:

YES_______                                   NO_______

(e) If your answer to question 8.2(d) above was “YES”, please indicate frequency of such prior participation in private placements of:
 
 
Public
  Private
 
Public or Private
  
Companies
 
Companies
  
Biopharmaceutical Companies
           
Frequently
______________    ______________    ______________ 
Occasionally
______________    ______________    ______________ 
Never
______________   ______________    ______________ 

(f) For individual Subscribers, do you expect your current level of income to significantly decrease in the foreseeable future:

YES_______                                   NO_______

 
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(g)  For trust, corporate, partnership and other institutional Subscribers, do you expect your total assets to significantly decrease in the foreseeable future:

YES_______                                   NO_______

(h)  For all Subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you:

YES_______                                   NO_______

(i)  For all Subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which you seek to subscribe?

YES_______                                   NO_______

(j)  For all Subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

YES_______                                   NO_______

7.3            MANNER IN WHICH TITLE IS TO BE HELD . ( circle one )

  (a)         Individual Ownership
  (b)         Community Property
  (c)         Joint Tenant with Right of
  Survivorship (both parties
  must sign)
  (d)         Partnership*
  (e)         Tenants in Common
  (f)          Company*
  (g)         Trust*
  (h)         Other

*If Securities are being subscribed for by an entity, the attached Certificate of Signatory must also be completed.

7.4            NASD AFFILIATION .

Are you affiliated or associated with an NASD member firm (please check one):

Yes _________                                                      No __________

If Yes, please describe:
_________________________________________________________
_________________________________________________________

 
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*If Subscriber is a Registered Representative with an NASD member firm, have the following acknowledgment signed by the appropriate party:

The undersigned NASD member firm acknowledges receipt of the notice required by NASD Rule 3050.
 
         
       
Name of NASD Member Firm
     
         
By:
   
Date:
 
 
Authorized Officer
     

7.5           The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in the Confidential Investor Questionnaire contained in this Article VIII and such answers have been provided under the assumption that the Company will rely on them.

Signature:
 
   
   
 
(If purchased jointly)
   
Print Name:
 
   
   
 
(If purchased jointly)
   
Date:
 

 
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AGGREGATE PRINCIPAL AMOUNT OF NOTES = $ _______________ (TOTAL INVESTMENT)

     
Signature
 
Signature (if purchasing jointly)
     
     
Name Typed or Printed
 
Name Typed or Printed
     
     
Entity Name
 
Entity Name
     
     
Address
 
Address
     
     
City, State and Zip Code
 
City, State and Zip Code
     
     
Telephone-Business
 
Telephone—Business
     
     
Telephone-Residence
 
Telephone—Residence
     
     
Facsimile-Business
 
Facsimile—Business
     
     
Facsimile-Residence
 
Facsimile—Residence
     
     
Tax ID # or Social Security #
 
Tax ID # or Social Security #

Name in which securities should be issued:                                                                                      

Dated:                                            , 200__

 

 

This Note and Warrant Purchase Agreement is agreed to and accepted as of ___________________________   , 200__.

CORMEDIX INC.
 
By:
 
Name:  Bruce Cooper, M.D.
Title:  President and Chief Executive Officer

 

 

CERTIFICATE OF SIGNATORY

(To be completed if Securities are
being subscribed for by an entity)

I,___________________________________________, am the___________________________________________ of __________________________________________ (the “Entity”).

I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Note and Warrant Purchase Agreement and to purchase and hold the Securities, and certify further that the Note and Warrant Purchase Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ________ day of _________________,______

 
(Signature)

 

 
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.
AMENDED & RESTATED CONVERTIBLE PROMISSORY NOTE

 
Summit, NJ
$___________
____________  ___, 2008, originally issued on _______  __, 2007

1.            Principal and Interest

CORMEDIX INC. (the “ Company ”), a Delaware corporation, for value received, hereby promises to pay to the order of ______________________, or his, her 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 ____________ dollars ($___________), together with interest as set forth below.

The Company promises to pay interest on the unpaid principal amount from the date hereof until July 31, 2009 at the rate of ten percent (10%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable law, and from August 1, 2009 until such principal amount is paid in full at the rate of twelve percent (12%) per annum, 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) during the Initial Term or the Extended Term, the interest rate on this Note shall be increased to fourteen percent (14%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable law. 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.

 

 

This Note is being issued pursuant to that certain Note and Warrant Purchase Agreement between the Company and the Holder, dated as of _________  ___, 2007 and amended on the date hereof (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 June 15, 2007 and Supplement No. 1 to the Memorandum dated August 14, 2007 (such notes shall be collectively referred to as the “ Bridge Notes ”).  The Bridge Notes, the Second Bridge Notes and the Galenica Note (each as defined in the Purchase Agreement) rank pari passu in right of payment with all other existing indebtedness of the Company and, pursuant to Section 2.17 of the Purchase Agreement, no new indebtedness which is secured or senior in right of payment to the Bridge Notes, the Second Bridge Notes and the Galenica Note may be issued by the Company without the consent of the holders of Bridge Notes, the holders of Second Bridge Notes and the holder of the Galenica Note collectively, consenting together as one group, representing at least sixty-six and two-thirds percent (66 ⅔%) of the aggregate principal amount of all outstanding Bridge Notes, Second Bridge Notes and the Galenica Note.  No consent of the holders of Bridge Notes, Second Bridge Notes or the Galenica Note 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, the Second Bridge Notes and the Galenica Note.

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 Bridge Notes or the Second Bridge Notes) of at least $10,000,000 minus the aggregate principal amount of the Second 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 Second 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 or to the Placement Agent in connection with the sale of the Bridge Notes or to the Second Bridge Warrants (as defined in the Purchase Agreement).

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.

 
2

 

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.            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

 
3

 

(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 (w) all Bridge Notes plus (x) all Second Bridge Notes plus (y) the Galenica Note 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:
 
(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:

 
4

 

(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 =   
  {
A
}
- A
B

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 =  
1  -  
( A  x  B )
}
C

For purposes of the foregoing formula:

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

B = 50%; and

C = the aggregate principal amount of all Bridge Notes, Second Bridge Notes, the Galenica Note 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.

 
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(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.  In the case of notice to either party, copies should be sent to Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, NY 10022, Facsimile: (212) 451-2222, Attn: Yehuda Markovits, Esq.

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.

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.

 
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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.

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 ⅔%) of the then outstanding aggregate principal amount of the Bridge Notes, the Second Bridge Notes and the Galenica Note, 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 Second Bridge Note, the holder of the Galenica Note, each future holder of all such Bridge Notes, Second Bridge Notes or the Galenica Note, 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, Second Bridge Notes or the Galenica Note.  Pursuant to Section 2.17 of the Purchase Agreements and Section 1 of the Bridge Notes, the Second Bridge Notes and the Galenica Note, the Company may incur additional indebtedness that ranks in priority junior to, or pari passu with, the Bridge Notes, the Second Bridge Notes and the Galenica Note without obtaining the consent of any holder of Bridge Notes, Second Bridge Notes or the Galenica Note.  The Company shall promptly give notice to all holders of outstanding Bridge Notes of any amendment effected in accordance with this Section 11.

*  *  *  *  *
 
7

 
ISSUED as of the date first above written.

 
CORMEDIX INC.
     
 
By:
   
 
Name:
Bruce Cooper, M.D.
 
Title:
President and Chief Executive Officer
 
 
8

 
 
NOTE AND WARRANT PURCHASE AGREEMENT

This NOTE AND WARRANT PURCHASE AGREEMENT (this “ Agreement ”) is made as of the last date set forth on the signature page hereof between CORMEDIX INC. , a Delaware corporation having its principal place of business at 86 Summit Avenue, Suite 301, Summit, NJ 07901-3647 (the “ Company ”), and the undersigned (the “ Subscriber ”).

WITNESSETH:

WHEREAS, the Company has retained Dundee Securities Inc. and Paramount BioCapital, Inc. (the “ Placement Agents ”) to act as its co-exclusive placement agents, on a “best efforts, all or none” basis, in a private offering (the “ Offering ”) of convertible promissory notes in substantially the form attached hereto as Exhibit A (the “ Notes ”) included in the Minimum Offering (as defined below) and on a “best efforts” basis in the Offering of such Notes which will provide the Company with aggregate proceeds in excess of the Minimum Offering, and in connection therewith has authorized the Placement Agents to engage one or more other firms to assist in finding qualified subscribers for the Notes and the term “Placement Agents,” as used herein, shall be deemed to include such other firms, if any;

WHEREAS, the terms of the Offering are summarized in that certain Confidential Offering Memorandum dated August 5, 2008 (together with all amendments, supplements, exhibits and appendices thereto, the “ Memorandum ”);

WHEREAS, in July and September 2007, the Company issued (a) a series of like convertible promissory notes in the aggregate principal amount of $8,645,000 (collectively, the “ First Bridge Notes ”) and (b) warrants exercisable for shares of the Company’s common stock (collectively, the “ First Bridge Warrants ”);

WHEREAS, the Company desires to offer and sell a minimum of $500,000 aggregate principal amount of Notes (the “ Minimum Offering ”) and a maximum of $5,000,000 aggregate principal amount of Notes (the “ Maximum Offering ”), with an option in favor of the Placement Agents and the Company to offer up to an additional $1,000,000 aggregate principal amount of Notes (the “ Over-allotment ,” and together with the Maximum Offering, the “ Maximum Amount ”) (such amount of Notes actually issued, the “ Principal Loan Amount ”).  In addition to the Notes, each Subscriber will receive a seven-year warrant (the “ Warrant ”), in substantially the form attached hereto as Exhibit B , to purchase a number of shares of common stock, $0.001 par value per share (the “ Common Stock ”), of the Company equal to (i) 25% of the principal amount of the Notes purchased by it divided by the lowest price per share in an equity financing or series of related equity financings by the Company resulting in aggregate gross cash proceeds (before commissions or other expenses and excluding conversion of the First Bridge Notes) to the Company of at least $10,000,000 minus the aggregate principal amount of the  Notes (a “ Qualified Financing ”) at which equity securities of the Company are sold (the “ Lowest Price Paid ”), if a Qualified Financing is consummated within one hundred eighty (180) days after the Initial Closing (as defined below) of this Offering (the “ Qualified Financing Date ”), or (ii) 40% of the principal amount of the Notes purchased by it divided by the Lowest Price Paid, if a Qualified Financing is not consummated on or before the Qualified Financing Date, in each case, at a per Warrant exercise price equal to 110% of the Lowest Price Paid.  Notwithstanding the foregoing, if a Qualified Financing does not occur on or before the second anniversary of the Initial Closing, then each Warrant will be exercisable for that number of shares of Common Stock equal to forty percent (40%) of the principal amount of the Note purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.  Notwithstanding the foregoing, upon a Sale of the Company (as defined in the Notes) or a Reverse Merger (as defined in the Notes), the Notes and Warrants shall be subject to certain terms and conditions, in each case as defined and described in detail in the Notes and Warrants.

 

 

WHEREAS, the Company desires to enter into this Agreement to issue and sell the Notes and the Subscriber desires to purchase the principal amount of Notes set forth on the signature page hereto on the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the promises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

I.            SUBSCRIPTION FOR NOTES AND REPRESENTATIONS BY SUBSCRIBER

1.1           Subject to the terms and conditions hereinafter set forth, the Subscriber hereby irrevocably subscribes for and agrees to purchase from the Company that portion of the aggregate principal amount of the Principal Loan Amount authorized to be issued by the Company set forth on the signature page hereto (the “ Subscriber Loan Amount ”).  The purchase price is payable by wire transfer of immediately available funds to:

Bank:
U.S. Bank, N.A.
ABA Number:
091000022
Further Credit to Account Name:
U.S. Bank Corp Trust Acct
Account #:
180121167365
Final Beneficiary Recipient/Subacct:
Paramount, Dundee, CorMedix
SEI/Subacct Number:
128138000
Reference:
[Investor Name]
Attention:
Stefan Ronchetti
 
651-495-3725 (phone)
 
651-495-8087 (fax)

Upon acceptance by the Placement Agents and the Company of subscriptions for an amount of Notes equal to at least the Minimum Offering, the Placement Agents and the Company shall have the right at any time thereafter, prior to the Offering Termination Date (as defined in Section 3.2), to effect an initial closing with respect to the Offering (the “ Initial Closing ”).  Thereafter, the Placement Agents and the Company shall continue to accept additional subscriptions for, and continue to have closings (together with the Initial Closing, each a “ Closing ” and the date thereof the “ Closing Date ”) with respect to subscriptions for Securities (as defined below) from new or existing investors from time to time and at any time up to the Offering Termination Date.

 
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The Subscriber understands that the Company’s and the Placement Agents’ respective officers, directors, employees and/or affiliates may purchase Notes in this Offering, which purchases may be used to satisfy the Minimum Offering.  In addition, certain employees of Paramount BioCapital, Inc., one the Placement Agents, and its affiliates are current stockholders of the Company.

1.2           The Subscriber recognizes that the purchase of the Notes involves a high degree of risk including, but not limited to, the following: (a) the Company remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds of the Offering; (b) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the Notes; (c) the Subscriber may not be able to liquidate its investment; (d) transferability of the Notes and the securities issuable upon conversion of the Notes and the Common Stock underlying the Warrant (sometimes hereinafter collectively referred to as the “ Securities ”) is extremely limited; (e) in the event of a disposition of the Securities, the Subscriber could sustain the loss of its entire investment; and (f) the Company has not paid any dividends on its capital stock since its inception and does not anticipate paying any dividends in the foreseeable future.  Without limiting the generality of the representations set forth in Section 1.5 below, the Subscriber represents that the Subscriber has carefully reviewed the section of the Memorandum captioned “Risk Factors.”

1.3           The Subscriber represents that the Subscriber is an “accredited investor” as such term is defined in Rule 501 of Regulation D (“ Regulation D ”) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), as indicated by the Subscriber’s responses to the questions contained in Article VII hereof, and that the Subscriber is able to bear the economic risk of an investment in the Securities.  If the Subscriber is a natural person, the Subscriber has reached the age of majority in the state or other jurisdiction in which the Subscriber resides, has adequate means of providing the for the Subscriber’s current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Securities for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.

1.4           The Subscriber hereby acknowledges and represents that (a) the Subscriber has sufficient knowledge and experience in business and financial matters, prior investment experience, including investment in securities that are non-listed, unregistered and/or not traded on a national securities exchange, or the Subscriber has employed the services of a “purchaser representative” (as defined in Rule 501 of Regulation D), attorney and/or accountant to read all of the documents furnished or made available by the Company both to the Subscriber and to all other prospective investors in the Securities in order to evaluate the merits and risks of such an investment on the Subscriber’s behalf; (b) the Subscriber recognizes the highly speculative nature of this investment; and (c) the Subscriber is able to bear the economic risk that the Subscriber hereby assumes.

 
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1.5           The Subscriber hereby acknowledges receipt and careful review of this Agreement, the Note, the Warrant and the Memorandum (which includes the Risk Factors), including all exhibits thereto (collectively referred to as the “ Offering Materials ”) and hereby represents that the Subscriber has been furnished by the Company during the course of the Offering with all information regarding the Company, the terms and conditions of the Offering and any additional information that the Subscriber, its purchaser representative, attorney and/or accountant has requested or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the Company and the terms and conditions of the Offering.

1.6           (a)           In making the decision to invest in the Securities, the Subscriber has relied solely upon the information provided by the Company in the Offering Materials.  To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Securities hereunder.  The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course of Subscriber’s consideration of an investment in the Securities other than the Offering Materials.  The Subscriber acknowledges and agrees that (i) the Company has prepared the Offering Materials and that no other person, including without limitation, any of the Placement Agents, has supplied any information for inclusion in the Offering Materials other than information furnished in writing to the Company by the Placement Agents specifically for inclusion in those parts of the Offering Materials relating specifically to the Placement Agents, (ii) the Placement Agents have no responsibility for the accuracy or completeness of the Offering Materials and (iii) the Subscriber has not relied upon the independent investigation or verification, if any, that may have been undertaken by the Placement Agents.

(b)           The Subscriber represents that (i) the Subscriber was contacted regarding the sale of the Securities by the Company or the Placement Agents (or an authorized agent or representative of the Company or the Placement Agents) with whom the Subscriber had a prior substantial pre-existing relationship and (ii) no Securities were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising.

1.7           The Subscriber hereby represents that the Subscriber, either by reason of the Subscriber’s business or financial experience or the business or financial experience of the Subscriber’s professional advisors (who are unaffiliated with and not compensated by the Company or any affiliate or selling agent of the Company, including the Placement Agents, directly or indirectly), has the capacity to protect the Subscriber’s own interests in connection with the transaction contemplated hereby.

1.8           The Subscriber hereby acknowledges that the Offering has not been reviewed by the United States Securities and Exchange Commission (the “ SEC ”) nor any state regulatory authority since the Offering is intended to be exempt from the registration requirements of Section 5 of the Securities Act pursuant to Regulation D promulgated thereunder.  The Subscriber understands that the Securities have not been registered under the Securities Act or under any state securities or “blue sky” laws and agrees not to sell, pledge, assign or otherwise transfer or dispose of the Securities unless they are registered under the Securities Act and under any applicable state securities or “blue sky” laws or unless an exemption from such registration is available.

 
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1.9           The Subscriber understands that the Securities have not been registered under the Securities Act or any state securities laws by reason of a claimed exemption under the provisions of the Securities Act and such state securities laws that depends, in part, upon the Subscriber’s investment intention. The Subscriber hereby represents that the Subscriber is purchasing the Securities for the Subscriber’s own account for investment and not with a view toward the resale or distribution to others.  The Subscriber, if an entity, further represents that it was not formed for the purpose of purchasing the Securities.

1.10         The Subscriber understands that there is no public market for the Securities and that no market may develop for any of such Securities.  The Subscriber understands that even if a public market develops for such Securities, Rule 144 (“ Rule 144 ”) promulgated under the Securities Act requires for non-affiliates, among other conditions, a six-month holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act.  The Subscriber understands and hereby acknowledges that the Company is under no obligation to register any of the Securities under the Securities Act or any state securities or “blue sky” laws other than as set forth in Article V.

1.11         The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that such Securities have not been registered under the Securities Act or any state securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement.  The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such Securities. The legend to be placed on each certificate shall be in form substantially similar to the following:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE SKY LAWS”, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

1.12         The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber’s principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity.

 
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1.13         The Subscriber represents that the Subscriber has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Securities.  This Agreement constitutes the legal, valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms.

1.14         If the Subscriber is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, (a) it is authorized and qualified to invest in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so and (b) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

1.15         The Subscriber acknowledges that if he or she is a Registered Representative of the Financial Industry Regulatory Authority (“ FINRA ”) member firm, he or she must give such firm the notice required by FINRA Rule 3050, receipt of which must be acknowledged by such firm in Section 7.3 below.

1.16         Subject to the provision below, the Subscriber hereby agrees that in the case of an initial offering of the Common Stock to the public pursuant to an effective registration statement under the Securities Act (the “ IPO ”), the Subscriber will not, without the prior written consent of the Company, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, the Registrable Securities (as defined in Section 5.1) purchased or acquired by the Subscriber for a period of up to 180 days from the effective date of the registration statement relating to the IPO and that the Subscriber will enter into an agreement with the Company or managing underwriter of the IPO to that effect.

1.17         (a)           The Subscriber agrees not to issue any public statement with respect to the Subscriber’s investment or proposed investment in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

(b)           The Company agrees not to disclose the names, addresses or any other information about the Subscribers, except as required by law; provided, that the Company may use the name (but not the address) of the Subscriber in any registration statement filed pursuant to Article V in which the Subscriber’s shares are included and in any subsequent offering memorandum if the Subscriber beneficially owns five percent (5%) or more of the Company’s voting capital stock, on a fully-diluted or other basis, or otherwise as required by law.

1.18         The Subscriber represents and warrants that it has not engaged, consented to or authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement.  The Subscriber hereby agrees to indemnify and hold harmless the Company from and against all fees, commissions or other payments owing to any such person or firm acting on behalf of such Subscriber hereunder.

 
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1.19         The Subscriber agrees to hold the Company and its directors, officers, employees, affiliates, controlling persons and agents (including the Placement Agents and its officers, directors, employees, counsel, controlling persons and agents) and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses incurred by them as a result of (a) any sale or distribution of the Securities by the Subscriber in violation of the Securities Act or any applicable state or foreign securities or “blue sky” laws; or (b) any false representation or warranty or any breach or failure by the Subscriber to comply with any covenant made by the Subscriber in this Agreement (including the Confidential Investor Questionnaire contained in Article VII herein) or any other document furnished by the Subscriber to any of the foregoing in connection with this transaction; provided, however, that in no event shall any indemnity under this subsection 1.19 exceed the aggregate principal amount of Notes subscribed for by the Subscriber pursuant to this Agreement, except in the case of willful fraud by the Subscriber.

1.20         The Subscriber understands, acknowledges and agrees with the Company that this subscription may be rejected, in whole or in part, by the Company, in the sole and absolute discretion of the Company, at any time before the Closing Date notwithstanding prior receipt by the Subscriber of notice of acceptance of the Subscriber’s subscription.

1.21         The Subscriber acknowledges that the information contained in the Offering Materials or otherwise made available to the Subscriber is confidential and non-public and agrees that all such information shall be kept in confidence by the Subscriber and neither used by the Subscriber for the Subscriber’s personal benefit (other than in connection with this subscription) nor disclosed to any third party for any reason, notwithstanding that a Subscriber’s subscription may not be accepted by the Company; provided, however, that (a) the Subscriber may disclose such information to its affiliates and advisors who may have a need for such information in connection with providing advice to the Subscriber with respect to its investment in the Company so long as such affiliates and advisors have an obligation of confidentiality, and (b) this obligation shall not apply to any such information that (i) is part of the public knowledge or literature and readily accessible at the date hereof, (ii) becomes part of the public knowledge or literature and readily accessible by publication (except as a result of a breach of this provision) or (iii) is received from third parties without an obligation of confidentiality (except third parties who disclose such information in violation of any confidentiality agreements or obligations, including, without limitation, any subscription or other similar agreement entered into with the Company).

1.22         The Subscriber represents that no authorization, approval, consent or license of any person is required to be obtained for the purchase of the Securities by the Subscriber, other than as have been obtained and are in full force and effect.

1.23         The Subscriber represents that the representations, warranties and agreements of the Subscriber contained herein and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on the date hereof and as of the Closing Date on which the Subscriber purchases Notes as if made on and as of such date and shall survive the execution and delivery of this Agreement and the purchase of the Notes.  The Subscriber agrees that the Company and the Placement Agents shall be entitled to rely on the representations, warranties and agreements of the Subscriber contained herein.

 
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1.24         The Subscriber understands, acknowledges and agrees with the Company that, except as otherwise set forth herein, the subscription hereunder is irrevocable by the Subscriber, that, except as required by law, the Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Subscriber hereunder and that this Agreement and such other agreements shall survive the death or disability of the Subscriber and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.  If the Subscriber is more than one person, the obligations of the Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his/her heirs, executors, administrators, successors, legal representatives and permitted assigns.

1.25         The Subscriber understands, acknowledges and agrees with the Company that the Offering is intended to be exempt from the registration under the Securities Act by virtue of the provisions of Regulation D thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Subscriber.

II.
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

The Company hereby represents and warrants to the Subscriber that:

2.1            Organization, Good Standing and Qualification .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, operations, conditions (financial or otherwise), properties, assets or results of operations of the Company (a “ Material Adverse Effect ”).  The Company does not have any subsidiaries.

2.2            Capitalization and Voting Rights.   The authorized, issued and outstanding capital stock of the Company is as set forth in the Memorandum   and all issued and outstanding shares of the Company are validly issued, fully paid and nonassessable.  Except as set forth in the Memorandum, there are no outstanding options, warrants, agreements, convertible securities, preemptive rights or other rights to subscribe for or to purchase any shares of capital stock of the Company.  Except as set forth in the Offering Materials   and as otherwise required by law, there are no restrictions upon the voting or transfer of any of the shares of capital stock of the Company pursuant to the Company’s Certificate of Incorporation, as amended (the “ Certificate of Incorporation ”), By-Laws or other governing documents or any agreement or other instruments to which the Company is a party or by which the Company is bound.

 
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2.3            Authorization; Enforceability . The Company has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  All corporate action on the part of the Company, its directors and stockholders necessary for the (i) authorization, execution, delivery and performance of this Agreement by the Company; and (ii) authorization, sale, issuance and delivery of the Securities contemplated hereby and the performance of the Company’s obligations hereunder has been taken.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy.  The Notes, when issued and fully paid for in accordance with the terms of this Agreement, will be validly issued. Upon the issuance and delivery of the equity securities issuable upon conversion of the Notes in accordance with the terms thereof, such equity securities will be validly issued, fully paid and nonassessable.  The Common Stock issuable upon exercise of the Warrants, when issued in accordance with the terms of such Warrants, will be validly issued, full paid and non-assessable.  The issuance and sale of the Securities contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person which have not been waived in connection with this Offering.

2.4            No Conflict; Governmental Consents .

(a)           Except as would not reasonably be expected to have a Material Adverse Effect or have been waived, the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which the Company is bound, or of any provision of the Certificate of Incorporation or By-Laws of the Company, and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company.

(b)           No consent, approval, authorization or other order of any governmental authority or other third party is required to be obtained by the Company in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Securities, except as have been obtained or such filings as may be required to be made with the SEC and with any state or foreign blue sky or securities regulatory authority relating to an exemption from registration thereunder.

2.5            Licenses . Except as would not reasonably be expected to have a Material Adverse Effect, the Company has sufficient licenses, permits and other governmental authorizations currently required for the conduct of its business or ownership of properties and is in all material respects complying therewith.

 
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2.6            Litigation .  The Company knows of no pending or threatened legal or governmental proceedings against the Company which (i) adversely questions the validity of this Agreement or any agreements related to the transactions contemplated hereby or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby or (ii) could, if there were an unfavorable decision, have a Material Adverse Effect. There is no action, suit, proceeding or investigation by the Company currently pending in any court or before any arbitrator or that the Company intends to initiate.

2.7            Investment Company   The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

2.8            Placement Agents .  The Company has engaged, consented to and authorized the Placement Agents to act as agents of the Company in connection with the transactions contemplated by this Agreement.  The Company will pay the Placement Agent a commission and will reimburse each Placement Agent’s reasonable out-of-pocket expenses incurred in connection with the Offering up to $40,000, and the Company agrees to indemnify and hold harmless the Subscribers from and against all fees, commissions or other payments owing by the Company to the Placement Agents or any other person or firm acting on behalf of the Company hereunder.

2.9            Financial Statements . The financial statements of the Company included in Appendix D to the Memorandum (the “ Financial Statements ”) fairly present in all material respects the financial condition and position of the Company at the dates and for the periods indicated; and have been prepared in conformity with generally accepted accounting principles in the United States (“ GAAP ”) consistently applied throughout the periods covered thereby, except as may be otherwise specified in such Financial Statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  Since the date of the most recent balance sheet included as part of the Financial Statements, there has not been to the Company’s knowledge: (i) any change in the assets, liabilities, financial condition   or operations of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect; or (ii) any other event or condition of any character that, either individually or cumulatively, would reasonably be expected to have a Material Adverse Effect, except for the expenses incurred in connection with the transactions contemplated by this Agreement.

2.10          Title to Properties and Assets; Liens, Etc . The Company has good and marketable title to its properties and assets, including the properties and assets reflected in the most recent balance sheet included in the Financial Statements, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent; (b) liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company; (c) those that have otherwise arisen in the ordinary course of business; and (d) those that would not reasonably be expected to have a Material Adverse Effect.  The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound.

 
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2.11          Patents and Trademarks .  Except as would not reasonably be expected to have a Material Adverse Effect or as disclosed in the Memorandum, to the Company’s knowledge, (i) the Company owns or possesses adequate licenses or other rights to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, manufacturing processes, formulae, trade secrets, licenses, customer lists and know how (collectively, “ Intellectual Property ”) , (ii) the Company has not received any communications alleging that the Company has violated or, by conducting its business as conducted, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights or processes of any other person or entity, nor is the Company aware of any basis therefore and (iii) no claim is pending or, to the Company’s knowledge after due inquiry, threatened to the effect that any Intellectual Property owned or licensed by the Company, or which the Company otherwise has the right to use, is invalid or unenforceable by the Company.

2.12          Obligations to Related Parties . Except as disclosed in the Memorandum or as would not reasonably be expected to have a Material Adverse Effect, there are no obligations of the Company to officers, directors, stockholders, or employees of the Company other than (a) for payment of salary or other compensation for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company, (c) standard indemnification provisions in the certificate of incorporation and by-laws, and (d) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).  Except as may be disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

2.13          Employee Relations; Employee Benefit Plans . The Company is not a party to any collective bargaining agreement or a union contract.  The Company believes that its relations with its employees are good.  No executive officer (as defined in Rule 501(f) of the Securities Act) of the Company has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company.  The Company is in compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Except as disclosed in the Memorandum, the Company does not maintain any compensation or benefit plan, agreement, arrangement or commitment (including, but not limited to, “employee benefit plans”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) for any present or former employees, officers or directors of the Company or with respect to which the Company has liability or makes or has an obligation to make contributions, other than any such plans, agreements, arrangements or commitments made generally available to the Company’s employees.

 
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2.14          Environmental Laws .  To the best of its knowledge, the Company (i) is in compliance with any and all Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

2.15          Tax Status .  To the best of the Company’s knowledge, the Company (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

2.16          Absence of Certain Changes .  Since the date of the Memorandum, there has been no change in the business, operations, conditions (financial or otherwise), prospects, assets or results of operations of the Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
 
2.17          Ranking of Notes; Issuance of New Debt .  On the Closing Date, the Notes will rank pari passu with all of the Company’s existing indebtedness.  Following the Closing Date, as long as any Note remains outstanding, the Company will not, without the prior written consent of the holders of Notes evidencing at least sixty-six and two-thirds percent (66 ⅔%) of the Principal Loan Amount then outstanding, incur indebtedness for borrowed money (“New Debt”) in favor of any person or entity (each a “New Lender”) which indebtedness is secured or otherwise senior in priority to any Note issued to any subscriber pursuant to this Agreement or any substantially similar agreement.  No consent of the holders of Notes will be required for issuances by the Company of unsecured indebtedness that ranks pari passu with, or junior to, the Notes.  For purposes of this Section 2.17 only, the term “Notes” shall include the Notes, the First Bridge Notes and the Galenica Note together and the term “Principal Loan Amount” shall include the aggregate principal amount of the Notes, the First Bridge Notes, and the Galenica Note.
 
 
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2.18          Disclosure .  The information set forth in the Offering Materials as of the date hereof contains no untrue statement of a material fact nor omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

III.            TERMS OF SUBSCRIPTION

3.1           The minimum purchase that may be made by any prospective investor shall be $50,000 aggregate principal amount of Notes.  Subscriptions for investment below the minimum investment may be accepted at the discretion of the Placement Agents and the Company.  The Company and the Placement Agents reserve the right to reject any subscription made hereby, in whole or in part, in their sole discretion.  The Company’s agreement with each Subscriber is a separate agreement and the sale of the Securities to each Subscriber is a separate sale.

3.2           Pending the sale of the Securities, all funds paid hereunder shall be deposited by the Company in escrow with U.S. Bank, N.A., having a branch at 100 Wall Street, Suite 1600, New York, New York 10005.  This Offering will terminate on the earlier of (i) the Company’s acceptance of subscriptions for the Maximum Amount, or (ii) September 30, 2008, unless terminated at an earlier time or extended by the mutual agreement of the Placement Agents and the Company without notice to prospective investors for up to an additional sixty (60) days(the “ Offering Termination Date ”).  The Company reserves the right to withdraw or cancel this Offering and to accept or reject any subscription in whole or in part, in its sole discretion.  The Subscriber hereby authorizes and directs the Company and the Placement Agents to direct the Escrow Agent to return any funds for unaccepted subscriptions to the same account from which the funds were drawn, without interest, including any customer account maintained with the Placement Agents.

3.3           At any time after the Company has received subscriptions and related funds for the Minimum Offering, but prior to the Offering Termination Date, the Company may conduct a Closing and may conduct subsequent Closings on an interim basis until the Maximum Amount has been obtained or until the Offering Termination Date.  Each Closing shall occur at the offices of Paramount BioCapital, Inc. at 787 Seventh Avenue, 48 th Floor, New York, NY 10019.

3.4           The Note and Warrant purchased by the Subscriber pursuant to this Agreement will be prepared for delivery to the Subscriber promptly following the Closing at which such purchase takes place. The Subscriber hereby authorizes and directs the Company to deliver the Note and Warrant purchased by the Subscriber pursuant to this Agreement directly to the Subscriber’s account maintained by the Placement Agents, if any, or, if no such account exists, to the residential or business address indicated on the signature page hereto.

 
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IV.            CONDITIONS TO OBLIGATIONS OF THE PARTIES

4.1          In addition to the Company’s right to reject, in whole or in part, any subscription at any time before the Closing Date, the Company’s obligation to issue the Securities at each Closing to the applicable Subscriber is subject to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of the Company to the extent permitted by law:

(a)            Representations and Warranties Correct .  The representations and warranties made by each Subscriber in Article I hereof shall be true and correct in all material respects.

(b)            Covenants .  All covenants, agreements and conditions contained in this Agreement to be performed by such Subscriber on or prior to the date of such Closing shall have been performed or complied with in all material respects.

(c)            No Legal Order Pending .  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d)            No Law Prohibiting or Restricting Such Sale .  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities (except as otherwise provided in this Agreement).

4.2          The Subscriber’s obligation to purchase the Securities at the Closing at which such purchase is to be consummated is subject to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of each Subscriber to the extent permitted by law:

(a)            Representations and Warranties Correct .  The representations and warranties made by the Company in Article II hereof shall be true and correct in all material respects.

(b)            Covenants .  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the date of such Closing shall have been performed or complied with in all material respects.

(c)            No Legal Order Pending .  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d)            No Law Prohibiting or Restricting Such Sale .  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities (except as otherwise provided in this Agreement).

 
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(e)            Legal Opinion .  The Placement Agents shall have received an opinion of counsel to the Company addressed to the Subscribers (which the Placement Agents may be permitted to rely on as if it were addressed to them) containing certain opinions to be substantially in the form attached hereto as Exhibit C , which opinion will be subject to standard qualifications and assumptions.

(f)            Officer’s Certificate . The Placement Agents shall have received an Officer’s Certificate addressed to the Subscribers, signed by the authorized officer of the Company and dated as of the Closing.  The certificate shall state, among other things, that the representations and warranties contained herein and in the Offering Materials are true and accurate in all material respects at such Closing Date with the same effect as though expressly made at such Closing Date and the Placement Agents shall be entitled to rely on such representations of the Company in the Offering Materials as if they were made directly to the Placement Agents.

V.            REGISTRATION RIGHTS

5.1           Definitions.    As used in this Agreement, the following terms shall have the following meanings.

(a)           The term “ Holder ” shall mean any holder of Registrable Securities.

(b)           The terms “ register ”, “ registered ” and “ registration ” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or order of effectiveness of such registration statement or document.

(c)           The term “ Registrable Securities ” shall mean (i) the shares of equity securities issuable upon conversion of the Notes sold in the Offering (or any successor security) and upon conversion of the First Bridge Notes and the Galenica Note; (ii) the shares of equity securities issuable upon exercise of the Warrants and the First Bridge Warrants; and (iii) any shares of equity securities issuable (or issuable upon the conversion or exercise of any warrant, right or other security that is issued) pursuant to a dividend or other distribution with respect to or in replacement of any Securities; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (A) have not been disposed of pursuant to a registration statement declared effective by the SEC; (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale; (C) are held by a Holder or a permitted transferee of a Holder pursuant to Section 5.11; and (D) may not be disposed of under Rule 144 under the Securities Act without restriction.

(d)           The term “ Trading Event ” means the first date on which the Company’s Common Stock trades on a national securities exchange or an Over-the-Counter Bulletin Board.

 
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The term “ Galenica Note ” means the convertible promissory note issued by the Company to Galenica Ltd. in exchange for the promissory note dated as of December 10, 2008 in the principal amount of $1,000,000.

5.2           Piggyback Registration .

(a)           The Company agrees that if, at any time, and from time to time, after the earlier to occur of (i) an initial public offering of the Company’s equity securities pursuant to a registration statement declared effective by the Securities and Exchange Commission (“IPO”) and (ii) a Trading Event, the Board of Directors of the Company (the “ Board ”) shall authorize the filing of a registration statement under the Securities Act (other than the filing of a registration statement pursuant to the IPO or a registration statement on Form S-8, Form S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Company shall: (A) promptly notify each Holder that such registration statement will be filed and that the Registrable Securities then held by such Holder will be included in such registration statement at such Holder’s request; (B) cause such registration statement to cover all of such Registrable Securities issued to such Holder for which such Holder requests inclusion; (C) use reasonable best efforts to cause such registration statement to become effective as soon as practicable; and (D) take all other reasonable action necessary under any Federal or state law or regulation of any governmental authority to permit all such Registrable Securities that have been issued to such Holder to be sold or otherwise disposed of, and will maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for such Holder to promptly effect the proposed sale or other disposition.

(b)           Notwithstanding any other provision of this Section 5.2, the Company may at any time, abandon or delay any registration commenced by the Company.  In the event of such an abandonment by the Company, the Company shall not be required to continue registration of shares requested by the Holder for inclusion and the Holder shall retain the right to request inclusion of shares as set forth above.

5.3           Demand Registration .

(a)            Registration on Request .

(i)           The Company agrees that, at any time, and from time to time, but at least 180 days after the earlier to occur of (i) an IPO and (ii) a Trading Event, Holders of a majority of the Registrable Securities may make a written request that the Company effect the registration under the Securities Act of outstanding Registrable Securities; provided that such requested registration would cover at least 51% of the Registrable Securities owned by all the Holders at such time; and provided , further, that the Holders shall be entitled to no more than one such demand registration.

 
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(ii)          The Company further agrees that if, at any time, and from time to time, after the Company has qualified for the use of Form S-3 or any successor form,  one or more of the Holders desire to effect the registration under the Securities Act on Form S-3 or any successor form (“ Short-Form Registration ”) of outstanding Registrable Securities, such Holder(s) may make a written request that the Company effect a Short-Form Registration; provided that the aggregate price to the public of the shares as to which such registration is requested (based on the then current market price and before deducting underwriting discounts and commissions) would equal or exceed $5,000,000. It is understood and agreed that the Holders may make good faith requests for Short-Form Registrations on an unlimited number of occasions; provided further , that the Company shall not be required to effect more than one Short Form Registration in any 12-month period.

(iii)         Each request made by one or more of the Holders pursuant to subsections (i) or (ii) above (the “ Initiating Holders ”) will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Following receipt of any such request, the Company shall promptly notify all Holders other than the Initiating Holders of receipt of such request and the Company shall use best efforts to file, within 60 days of such request, the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register in the request by the Initiating Holders (and in all notices received by the Company from such other Holders within 30 days after the giving of such notice by the Company), to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities to be registered. If such method of disposition shall be an underwritten public offering, the Holders of a majority of the shares of Registrable Securities to be sold in such offering may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed.  The Holders will be permitted to withdraw Registrable Securities from a registration at any time prior to the effective date of such registration; provided the remaining number of shares of Registrable Securities subject to a requested registration is not less than the minimum amount required pursuant to this Section 5.3.

(b)            Limitations on Demand Registration . Notwithstanding Section 5.3(a), the Company shall not be obligated to file a registration statement relating to a registration request pursuant to this Section 5.3 at any time during the 180-day period immediately following the effective date of any registration statement filed by the Company (other than on Form S-8 or S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities); and if the Board determines, in its good faith judgment, that the Company (i) should not file any registration statement otherwise required to be filed pursuant to Section 5.3 or (ii) should withdraw any such previously filed registration statement because the Board determines, in its good faith judgment, that the Company is in the possession of material nonpublic information required to be disclosed in such registration statement or an amendment or supplement thereto, the disclosure of which in such registration statement would be materially disadvantageous to the Company (a   Disadvantageous Condition ”), the Company shall be entitled to postpone for the shortest reasonable period of time (but not exceeding 90 days from the date of the determination), the filing of such registration statement or, if such registration statement has already been filed, may suspend or withdraw such registration statement and shall promptly give the Holders written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay.  Upon the receipt of any such notice, such Holders shall forthwith discontinue use of the prospectus contained in such registration statement and, if so directed by the Company, shall deliver to the Company all copies of the prospectus then covering such Registrable Securities current at the time of receipt of such notice (or, if no registration statement has yet been filed, all drafts of the prospectus covering such Registrable Securities).  If any Disadvantageous Condition shall cease to exist, the Company shall promptly notify the Holders to such effect.  If any registration statement shall have been withdrawn, the Company shall, at such time as it is possible or, if earlier, at the end of the 90-day period following such withdrawal, file a new registration statement covering the Registrable Securities that were covered by such withdrawn registration statement. The Company’s right to delay a request for registration or to withdraw a registration statement pursuant to this Section 5.3 may not be exercised more than once in any one-year period.

 
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5.4            Registration Procedures . Whenever required under this Article V to include Registrable Securities in a Company registration statement, the Company shall, as expeditiously as reasonably possible:

(a)           Use reasonable best efforts to (i) cause such registration statement to become effective, and (ii) cause such registration statement to remain effective until the earliest to occur of (A) such date as the sellers of Registrable Securities (the “ Holders ”) have completed the distribution described in the registration statement and (B) such time that all of such Registrable Securities are no longer, by reason of Rule 144(k) under the Securities Act, required to be registered for the sale thereof by such Holders.  The Company will also use its reasonable best efforts to, during the period that such registration statement is required to be maintained hereunder, file such post-effective amendments and supplements thereto as may be required by the Securities Act and the rules and regulations thereunder or otherwise to ensure that the registration statement does not contain any untrue statement of material fact or omit to state a fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading; provided, however, that if applicable rules under the Securities Act governing the obligation to file a post-effective amendment permits, in lieu of filing a post-effective amendment that (i) includes any prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the Company may incorporate by reference information required to be included in (i) and (ii) above to the extent such information is contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement. In the event that the Company becomes qualified for the use of Form S-3 or any successor form at a time when any registration statement on any other Form which includes Registrable Securities is required to be maintained hereunder, the Company shall, upon the request of any Selling Holder, subject to Section 5.5, (i) as expeditiously as reasonably possible, use reasonable best efforts to cause a Short-Form Registration covering such Registrable Securities to become effective and (ii) comply with each of the other requirements of this Section 5.4 which may applicable thereto. Upon the effectiveness of such Short-Form Registration, the Company shall be relieved of its obligations hereunder to keep in effect the registration statement which initially covered the Registrable Securities included in such Short-Form Registration.

 
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(b)           Prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(c)           Furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus as amended or supplemented from time to time, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d)          Use reasonable best efforts to register and qualify the securities covered by such registration statement under such other federal or state securities laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

(e)           In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering.  Each selling Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

(f)           Notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, (i) when the registration statement or any post-effective amendment and supplement thereto has become effective; (ii) of the issuance by the SEC of any stop order or the initiation of proceedings for that purpose (in which event the Company shall make every effort to obtain the withdrawal of any order suspending effectiveness of the registration statement at the earliest possible time or prevent the entry thereof); (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iv) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing (and each Holder agrees to suspend any trading under the Registration Statement until such condition is abated).

(g)           Cause all such Registrable Securities registered hereunder to be listed on each securities exchange or quotation service on which similar securities issued by the Company are then listed or quoted or, if no such similar securities are listed or quoted on a securities exchange or quotation service, apply for qualification and use reasonable best efforts to qualify such Registrable Securities for inclusion on a national securities exchange or the Over-the-Counter Bulletin Board.

 
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(h)           Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(i)           Cooperate with the selling Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold, which certificates will not bear any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, shall request at least two business days prior to any sale of the Registrable Securities to the underwriters.
 
5.5           Furnish Information . It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Article V with respect to the Registrable Securities of any Holder that such Holder shall furnish to the Company such information regarding the Holder, the Registrable Securities held by the Holder, and the intended method of disposition of such securities as shall be reasonably required by the Company to effect the registration of such Holder’s Registrable Securities.
 
5.6           Registration Expenses .  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to registrations pursuant to Sections 5.2 or 5.3 for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto (“ Registration Expenses ”), but excluding underwriting discounts and commissions relating to Registrable Securities and excluding any professional fees or costs of accounting, financial or legal advisors to any of the Holders.

5.7           Underwriting Requirements .  In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under Section 5.2 to include any of the Holders’ Registrable Securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company.  If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling Holders according to the total amount of securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such selling Holders).  For purposes of the preceding parenthetical concerning apportionment, for any selling Holder who is a holder of Registrable Securities and is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling Holder”, and any pro-rata reduction with respect to such “selling Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “selling Holder”, as defined in this sentence.

 
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5.8           Delay of Registration .  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Article V.

5.9           Indemnification .  In the event that any Registrable Securities are included in a registration statement under this Article V:

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, or any rule or regulation promulgated under the Securities Act, or the Exchange Act, and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 5.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person or a violation of any provision of this Agreement by a Holder.

(b)           To the extent permitted by law, each Selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration or a violation of any provision of this Agreement by a Holder; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 5.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided , however , that the indemnity agreement contained in this Section 5.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided , further, that, in no event shall any indemnity under this Section 5.9(b) exceed the greater of the cash value of the (i) gross proceeds from the offering received by such Holder or (ii) such Holder’s investment pursuant to this Agreement as set forth on the signature page attached hereto.

 
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(c)           Promptly after receipt by an indemnified party under this Section 5.9 of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 5.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel selected by the indemnifying party and approved by the indemnified party (whose approval shall not be unreasonably withheld); provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 5.9, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5.9.

(d)           If the indemnification provided for in this Section 5.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e)           Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 
22

 

(f)           The obligations of the Company and Holders under this Section 5.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Article V, and otherwise.

5.10         Reports Under Securities Exchange Act of 1934 .  With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

(a)           make and keep public information available, as those terms are understood and defined in Rule 144, at all times after 90 days after the effective date of the IPO  or Trading Event by the Company;

(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

5.11         Permitted Transferees .  The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under this Article V may be assigned in full by a Holder in connection with a transfer by such Holder of its Registrable Securities if: (a) such transferee agrees to comply with the terms and provisions of this Agreement; (b) such transfer is otherwise in compliance with this Agreement; (c) such transfer is otherwise effected in accordance with applicable securities laws; and (d) such Holder transfers at least 51% of its shares of Registrable Securities to the transferee.  Except as specifically permitted by this Section 5.11, the rights of a Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited.

5.12         Termination of Registration Rights .  The right of any Holder to request or demand inclusion in any registration pursuant to Section 5.2 and Section 5.3 shall terminate if all shares of Registrable Securities held by such Holder may immediately be sold under Rule 144 without restriction.

 
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VI.         MISCELLANEOUS

6.1           Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed as follows:

if to the Company, to it at:

CorMedix Inc.
86 Summit Avenue, Suite 301
Summit, NJ 07901-3647
Facsimile:  (908) 522-9199
Attn:  President

With a copy to:

Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, NY 10022
Facsimile: (212) 451-2222
Attn: Yehuda Markovits, Esq.

Paramount BioCapital, Inc.
787 Seventh Avenue, 48 th Floor
New York, NY 10019
Facsimile:  (212) 554-4355
Attn: Legal/Compliance

if to the Subscriber, to the Subscriber’s address indicated on the signature page of this Agreement.

Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received.

6.2           Except as otherwise expressly provided herein, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) with the written consent of the Company and (a) subscribers holding Notes evidencing at least sixty six and two-thirds percent (66 ⅔%) of the then outstanding Principal Loan Amount of the Notes issued pursuant to this Agreement and substantially similar agreements, so long as the Notes are outstanding; and (b) holders of sixty six and two-thirds percent (66 ⅔%) of the Registrable Securities issued upon conversion of the Notes, if the Notes are no longer outstanding.  Any amendment or waiver effected in accordance with this Section 6.2 shall be binding upon the Subscriber and the Company (even if the Subscriber does not consent to such amendment or waiver), and upon the effectuation of each such amendment or waiver, the Company shall promptly give written notice thereof to the Subscriber if the Subscriber has not previously consented thereto in writing.  Notwithstanding the foregoing, Sections 2.17, 5.1(c) and 5.1(e) of this Agreement shall not be amended nor the observance of any term thereof waived without the written consent of (x) subscribers holding Notes, First Bridge Notes and the Galenica Note evidencing at least sixty-six and two-thirds percent (66⅔%), of the outstanding aggregate principal amount of the Notes, the First Bridge Notes and the Galenica Note, so long as the Notes, the First Bridge Notes and the Galenica Note are outstanding; and (y) holders of sixty-six and two-thirds percent (66⅔%), in the aggregate, of the Registrable Securities issued upon conversion of the Notes, the First Bridge Notes and the Galenica Note, if the Notes, the First Bridge Notes and the Galenica Note are no longer outstanding.

 
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6.3           Subject to the provisions of Section 5.11, this Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.  This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

6.4           Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Notes as herein provided, subject, however, to the right hereby reserved by the Company to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers.

6.5           NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS SITTING IN THE BOROUGH OF MANHATTAN, COUNTY OF NEW YORK.  THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

6.6           The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.  If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

 
25

 

6.7           It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

6.8           The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

6.9           This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

6.10         Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement, except (a) for the holders of Registrable Securities; (b) for the Placement Agents pursuant to Sections 1.6(a), 1.12, and 1.24 hereof, (c) for the indemnified parties (including without limitation the Placement Agents and their sub agents, if any) pursuant to Section 5.9 hereof; and (d) that the Placement Agents may rely upon the representations and acknowledgements of the Subscriber in Articles I and VII hereof and the representations and warranties of the Company in Article II hereof.

Remainder of Page Intentionally Left Blank .

 
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VII.       CONFIDENTIAL INVESTOR QUESTIONNAIRE

7.1            ALL INVESTORS - The undersigned represents and war rants as indicated below by the undersigned s mark :
 
A.         Individual investors :  (Please mark one or more of the following statements)
 
1._____
I certify that I am an accredited investor because I have had individual income (exclusive of any income earned by my spouse) of more than $200,000 in each of the most recent two years and I reasonably expect to have an individual income in excess of $200,000 for the current year.
 
2._____
I certify that I am an accredited investor because I have had joint income with my spouse in excess of $300,000 in each of the most recent two years and reasonably expect to have joint income with my spouse in excess of $300,000 for the current year.
 
3._____
I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a joint net worth, in excess of $1,000,000.
 
4._____
I am a director or executive officer of CorMedix Inc.
 
B.
Partnerships, corporations, trusts or other entities :  (Please mark one of the following seven statements).  The undersigned hereby certifies that it is an accredited investor because it is:
 
1._____
an employee benefit plan whose total assets exceed $5,000,000;
 
2._____
an employee benefit plan whose investments decisions are made by a plan fiduciary which is either a bank, savings and loan association or an insurance company (as defined in Section 3(a) of the Securities Act) or an investment adviser registered as such under the Investment Advisers Act of 1940;
 
3._____
a self-directed employee benefit plan, including an Individual Retirement Account, with investment decisions made solely by persons that are accredited investors;
 
4._____
an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000;
 
5._____
a corporation, partnership, limited liability company, limited liability partnership, other entity or similar business trust, not formed for the specific purpose of acquiring the Notes, with total assets excess of $5,000,000;
 
6._____
a trust, not formed for the specific purpose of acquiring the Notes, with total assets exceed $5,000,000, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Notes; or
 
 
27

 

7._____
an entity (including a revocable grantor trust but other than a conventional trust) in which each of the equity owners qualifies as an accredited investor.
 
7.2            EUROPEAN ECONOMIC AREA (“ EEA” ) INVESTORS - The undersigned further represents and warrants as indicated below by the undersigned s mark :
 
A.       Please mark one of the following statements:
 
either
 
1._____The undersigned hereby certifies that it is a Qualified Investor for the purposes of Directive 2003/71/EC because it is a person falling within Article 2.1(e)(i), (ii) or (iii) of such directive or a person authorized by a jurisdiction in the EEA to be considered as a qualified investor for the purposes of such directive;
 
or
 
2.__________The undersigned hereby certifies that it is not a Qualified Investor for the purposes of Directive 2003/71/EC.
 
B.        Please mark one of the following statements.
 
1._____The undersigned hereby certifies that it is acting on its own account and not for the account of or otherwise on behalf of any person or persons; or
 
2._____The undersigned is in the United Kingdom and is a Qualified Investor for the purposes of Directive 2003/71/EC and is acting as an agent in the circumstances contemplated in section 86(2) of the United Kingdom Financial Services and Markets Act 2000.
 
C.        Please mark the following statement:
 
1._____The undersigned hereby certifies that it has not received any recommendation from the Placement Agents nor any person acting on their behalf in relation to the purchase of the Securities.
 
D.        Please mark one of the following statements:
 
1._____The undersigned hereby certifies that it is not in the United Kingdom.
 
2._____The undersigned hereby certifies that it is a person falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”).
 
3._____The undersigned hereby certifies that it is a person falling within Article 49(2)(a) to the (d) of the FPO.
 
 
28

 

7.3            ALL INVESTORS - The undersigned furt her represents and warrants as indicated below by the undersigned s mark :
 
FINRA AFFILIATION .

Are you affiliated or associated with an FINRA member firm:

Yes _________                         No __________

If Yes, please describe:
 



 
*If subscriber is a Registered Representative with an FINRA member firm, have the following acknowledgment signed by the appropriate party:

The undersigned FINRA member firm acknowledges receipt of the notice required by NASD Rule 3050.
 
   
Name of FINRA Member Firm
   
By:
  
 
Authorized Officer
   
Date:
  
 
7.4           ALL INVESTORS   - Indicate manner in which title is to be held   (circle one)

 
(a)
Individual Ownership
 
(b)
Community Property
 
(c)
Joint Tenant with Right of
Survivorship (both parties must sign)
 
(d)
Partnership
 
(e)
Tenants in Common
 
(f)
Corporation
 
(g)
Limited Liability Company
 
(h)
Trust
 
(i)
Other

 
29

 

7.5            ALL INVESTORS - Please answer each question .

SUITABILITY

(a)  For an individual Subscriber, please describe your current employment, including the company by which you are employed and its principal business:
 






(b)  For an individual Subscriber, please describe any college or graduate degrees held by you:
 





(c)  For all Subscribers, please list types of prior investments:
 





(d)  For all Subscribers, please state whether you have you participated in other private placements before:

YES_______                                                      NO_______

(e) If your answer to question 7.5(d) above was “YES”, please indicate frequency of such prior participation in private placements of:

   
Public
   
Private
   
Public or Private
 
   
Companies
   
Companies
   
Biopharmaceutical Companies
 
                   
Frequently
                       
Occasionally
                       
Never
                       

(f) For individual Subscribers, do you expect your current level of income to significantly decrease in the foreseeable future:

YES_______                                                      NO_______

 
30

 

(g)  For trust, corporate, partnership and other institutional Subscribers, do you expect your total assets to significantly decrease in the foreseeable future:

YES_______                                                      NO_______

(h)  For all Subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you:

YES_______                                                      NO_______

(i)  For all Subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which you seek to subscribe?

YES_______                                                      NO_______

(j)  For all Subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

YES_______                                                      NO_______
 
7.6           The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in the Confidential Investor Questionnaire contained in this Article VII and such answers have been provided under the assumption that the Company will rely on them.

Signature:  
   
   
 
   
 
(If purchased jointly)
   
Print Name:
   
   
 
   
 
(If purchased jointly)
   
Date:
   

 
31

 

AGGREGATE PRINCIPAL AMOUNT OF NOTES = $__________________ (TOTAL INVESTMENT)

  
 
  
Signature
 
Signature (if purchasing jointly)
     
  
 
  
Name Typed or Printed
 
Name Typed or Printed
     
  
 
  
Entity Name
 
Entity Name
     
  
 
  
Address
 
Address
     
  
 
  
City, State and Zip Code
 
City, State and Zip Code
     
  
 
  
Telephone-Business
 
Telephone—Business
     
  
 
  
Telephone-Residence
 
Telephone—Residence
     
  
 
  
Facsimile-Business
 
Facsimile—Business
     
  
 
  
Facsimile-Residence
 
Facsimile—Residence
     
  
 
  
Tax ID # or Social Security #
 
Tax ID # or Social Security #
 
Name in which securities should be issued: ______________________________________
 
Dated:      _______________ , 200_
 
 

 

This Note and Warrant Purchase Agreement is agreed to and accepted as of ___________________________   , 200__.

CORMEDIX INC.
   
By:
   
Name:  
Bruce Cooper, M.D.
Title:
President and Chief Executive Officer
 
 

 

CERTIFICATE OF SIGNATORY

(To be completed if Securities are
being subscribed for by an entity)

I,____________________________, am the____________________________ of __________________________________________ (the “Entity”).

I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Note and Warrant Purchase Agreement and to purchase and hold the Securities, and certify further that the Note and Warrant Purchase Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ________ day of _________________,______

 
(Signature)
 
 

 

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
$___________
____________ ___, 200__

1.            Principal and Interest

CORMEDIX INC. (the “ Company ”), a Delaware corporation, for value received, hereby promises to pay to the order of ______________________, or his, her 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 ____________ dollars ($___________), together with interest as set forth below.

The Company promises to pay interest on the unpaid principal amount from the date hereof until July 31, 2009 at the rate of ten percent (10%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable law, and from August 1, 2009 until such principal amount is paid in full at the rate of twelve percent (12%) per annum, 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) during the Initial Term or the Extended Term, the interest rate on this Note shall be increased to fourteen percent (14%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable law. 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.

 

 

This Note is being issued pursuant to that certain Note and Warrant Purchase Agreement between the Company and the Holder, dated as of the date hereof (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, the First Bridge Notes and the Galenica Note (each as defined in the Purchase Agreement) rank pari passu in right of payment with all other existing indebtedness of the Company and, pursuant to Section 2.17 of the Purchase Agreement, no new indebtedness which is secured or senior in right of payment to the Bridge Notes, the First Bridge Notes and the Galenica Note may be issued by the Company without the consent of the holders of Bridge Notes, the holders of First Bridge Notes and the holder of the Galenica Note collectively, consenting together as one group, representing at least sixty-six and two-thirds percent (66 ⅔%) of the aggregate principal amount of all outstanding Bridge Notes, First Bridge Notes and the Galenica Note.  No consent of the holders of Bridge Notes, First Bridge Notes or the Galenica Note 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, the First Bridge Notes and the Galenica Note.

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.

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.

 
2

 

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.            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

 
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(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 (w) all Bridge Notes plus (x) all First Bridge Notes plus (y) the Galenica Note 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:
 
(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:

 
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(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 =   
 { 
A
 }
 - A
B

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 =  
  1  -    
{  
( A  x  B )
  }
C

For purposes of the foregoing formula:

A = the aggregate principal amount of all Bridge Notes, First Bridge Notes, the Galenica Note 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, the Galenica Note 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.

 
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(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.  In the case of notice to either party, copies should be sent to Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, NY 10022, Facsimile: (212) 451-2222, Attn: Yehuda Markovits, Esq.

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.

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.

 
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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.

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 ⅔%) of the then outstanding aggregate principal amount of the Bridge Notes, the First Bridge Notes and the Galenica Note, 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, the holder of the Galenica Note, each future holder of all such Bridge Notes, First Bridge Notes or the Galenica Note, 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, First Bridge Notes or the Galenica Note.  Pursuant to Section 2.17 of the Purchase Agreements and Section 1 of the Bridge Notes, the First Bridge Notes and the Galenica Note, the Company may incur additional indebtedness that ranks in priority junior to, or pari passu with, the Bridge Notes, the First Bridge Notes and the Galenica Note without obtaining the consent of any holder of Bridge Notes, First Bridge Notes or the Galenica Note.  The Company shall promptly give notice to all holders of outstanding Bridge Notes of any amendment effected in accordance with this Section 11.

*  *  *  *  *
 
7


ISSUED as of the date first above written.
     
 
CORMEDIX INC.
     
 
By:
   
 
Name:
Bruce Cooper, M.D.
 
Title:
President and Chief Executive Officer

 
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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.

 
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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.
 
*  *  *  *  *

 


 
8

 

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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NOTE AND WARRANT PURCHASE AGREEMENT

This NOTE AND WARRANT PURCHASE AGREEMENT (this “ Agreement ”) is made as of the last date set forth on the signature page hereof between CORMEDIX INC. , a Delaware corporation having its principal place of business at 86 Summit Avenue, Suite 301, Summit, NJ 07901-3647 (the “ Company ”), and the undersigned (the “ Subscriber ”).

WITNESSETH:

WHEREAS, the Company has retained Maxim Group LLC (the “ Placement Agent ”) to act as its exclusive placement agent, on a “best efforts, all or none” basis, in a private offering (the “ Offering ”) of convertible promissory notes in substantially the form attached hereto as Exhibit A (the “ Notes ”) included in the Minimum Offering (as defined below) and on a “best efforts” basis in the Offering of such Notes which will provide the Company with aggregate proceeds in excess of the Minimum Offering, and in connection therewith has authorized the Placement Agent to engage one or more other firms to assist in finding qualified subscribers for the Notes and the term “Placement Agent,” as used herein, shall be deemed to include such other firms, if any;

WHEREAS, the terms of the Offering are summarized in that certain Confidential Offering Memorandum dated October 2, 2009 (together with all amendments, supplements, exhibits and appendices thereto, the “ Memorandum ”);

WHEREAS, the Company desires to offer and sell a minimum of $500,000 aggregate principal amount of Notes (the “ Minimum Offering ”) and a maximum of $2,000,000 aggregate principal amount of Notes (the “ Maximum Offering ”), with an option in favor of the Placement Agent and the Company to offer up to an additional $300,000 aggregate principal amount of Notes (the “ Over-allotment ,” and together with the Maximum Offering, the “ Maximum Amount ”) (such amount of Notes actually issued, the “ Principal Loan Amount ”).  In addition to the Notes, each Subscriber will receive a five-year warrant (the “ Warrant ”), in substantially the form attached hereto as Exhibit B , to purchase a number of shares of common stock, $0.001 par value per share (the “ Common Stock ”), of the Company equal to 60% of the principal amount of the Notes purchased by it divided by the price at which equity securities of the Company are sold (the “ IPO Price ”) in an underwritten initial public offering of equity securities by the Company resulting in aggregate gross cash proceeds (before commissions or other expenses) to the Company of at least $10,000,000 (a “ Qualified IPO ”), at a per Warrant exercise price equal to 110% of the IPO Price.  Notwithstanding the foregoing, if a Qualified IPO does not occur on or before the second anniversary of the Initial Closing, then each Warrant will be exercisable for that number of shares of Common Stock equal to sixty percent (60%) of the principal amount of the Note purchased by the original holder divided by $1.00, at a per share exercise price of $1.00.

WHEREAS, the Company desires to enter into this Agreement to issue and sell the Notes and the Subscriber desires to purchase the principal amount of Notes set forth on the signature page hereto on the terms and conditions set forth herein; and

 

 

NOW, THEREFORE, in consideration of the promises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

I.            SUBSCRIPTION FOR NOTES AND REPRESENTATIONS BY SUBSCRIBER

1.1           Subject to the terms and conditions hereinafter set forth, the Subscriber hereby irrevocably subscribes for and agrees to purchase from the Company that portion of the aggregate principal amount of the Principal Loan Amount authorized to be issued by the Company set forth on the signature page hereto (the “ Subscriber Loan Amount ”).  The purchase price is payable by wire transfer of immediately available funds to:

Bank:
 
JPMorgan Chase, N.A.
ABA Number:
 
021 000 021
Account #:
 
323-838685
Account Name:
 
American Stock Transfer & Trust Company, LLC
   
as Agent for CorMedix
Reference:
 
[Investor Name]
Attention:
 
Marianne Rotundo
 
  
(718) 921-8235 (phone)  

Upon acceptance by the Placement Agent and the Company of subscriptions for an amount of Notes equal to at least the Minimum Offering, the Placement Agent and the Company shall have the right at any time thereafter, prior to the Offering Termination Date (as defined in Section 3.2), to effect an initial closing with respect to the Offering (the “ Initial Closing ”).  Thereafter, the Placement Agent and the Company shall continue to accept additional subscriptions for, and continue to have closings (together with the Initial Closing, each a “ Closing ” and the date thereof the “ Closing Date ”) with respect to subscriptions for Securities (as defined below) from new or existing investors from time to time and at any time up to the Offering Termination Date.

The Subscriber understands that the Company’s and the Placement Agent’s respective officers, directors, employees and/or affiliates may purchase Notes in this Offering, which purchases may be used to satisfy the Minimum Offering.

1.2           The Subscriber recognizes that the purchase of the Notes involves a high degree of risk including, but not limited to, the following: (a) the Company remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds of the Offering; (b) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the Notes; (c) the Subscriber may not be able to liquidate its investment; (d) transferability of the Notes and the securities issuable upon conversion of the Notes and the Common Stock underlying the Warrant (sometimes hereinafter collectively referred to as the “ Securities ”) is extremely limited; (e) in the event of a disposition of the Securities, the Subscriber could sustain the loss of its entire investment; and (f) the Company has not paid any dividends on its capital stock since its inception and does not anticipate paying any dividends in the foreseeable future.  Without limiting the generality of the representations set forth in Section 1.5 below, the Subscriber represents that the Subscriber has carefully reviewed the section of the Memorandum captioned “Risk Factors.”

 
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1.3           The Subscriber represents that the Subscriber is an “accredited investor” as such term is defined in Rule 501 of Regulation D (“ Regulation D ”) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), as indicated by the Subscriber’s responses to the questions contained in Article VII hereof, and that the Subscriber is able to bear the economic risk of an investment in the Securities.  If the Subscriber is a natural person, the Subscriber has reached the age of majority in the state or other jurisdiction in which the Subscriber resides, has adequate means of providing the for the Subscriber’s current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Securities for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.

1.4           The Subscriber hereby acknowledges and represents that (a) the Subscriber has sufficient knowledge and experience in business and financial matters, prior investment experience, including investment in securities that are non-listed, unregistered and/or not traded on a national securities exchange, or the Subscriber has employed the services of a “purchaser representative” (as defined in Rule 501 of Regulation D), attorney and/or accountant to read all of the documents furnished or made available by the Company both to the Subscriber and to all other prospective investors in the Securities in order to evaluate the merits and risks of such an investment on the Subscriber’s behalf; (b) the Subscriber recognizes the highly speculative nature of this investment; and (c) the Subscriber is able to bear the economic risk that the Subscriber hereby assumes.

1.5           The Subscriber hereby acknowledges receipt and careful review of this Agreement, the Note, the Warrant and the Memorandum (which includes the Risk Factors), including all exhibits thereto (collectively referred to as the “ Offering Materials ”) and hereby represents that the Subscriber has been furnished by the Company during the course of the Offering with all information regarding the Company, the terms and conditions of the Offering and any additional information that the Subscriber, its purchaser representative, attorney and/or accountant has requested or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the Company and the terms and conditions of the Offering.

1.6           (a)           In making the decision to invest in the Securities, the Subscriber has relied solely upon the information provided by the Company in the Offering Materials.  To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Securities hereunder.  The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course of Subscriber’s consideration of an investment in the Securities other than the Offering Materials.  The Subscriber acknowledges and agrees that (i) the Company has prepared the Offering Materials and that no other person, including without limitation, the Placement Agent, has supplied any information for inclusion in the Offering Materials other than information furnished in writing to the Company by the Placement Agent specifically for inclusion in those parts of the Offering Materials relating specifically to the Placement Agent, (ii) the Placement Agent has no responsibility for the accuracy or completeness of the Offering Materials and (iii) the Subscriber has not relied upon the independent investigation or verification, if any, that may have been undertaken by the Placement Agent.

 
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(b)           The Subscriber represents that (i) the Subscriber was contacted regarding the sale of the Securities by the Company or the Placement Agent (or an authorized agent or representative of the Company or the Placement Agent) with whom the Subscriber had a prior substantial pre-existing relationship and (ii) no Securities were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising.

1.7           The Subscriber hereby represents that the Subscriber, either by reason of the Subscriber’s business or financial experience or the business or financial experience of the Subscriber’s professional advisors (who are unaffiliated with and not compensated by the Company or any affiliate or selling agent of the Company, including the Placement Agent, directly or indirectly), has the capacity to protect the Subscriber’s own interests in connection with the transaction contemplated hereby.

1.8           The Subscriber hereby acknowledges that the Offering has not been reviewed by the United States Securities and Exchange Commission (the “ SEC ”) nor any state regulatory authority since the Offering is intended to be exempt from the registration requirements of Section 5 of the Securities Act pursuant to Regulation D promulgated thereunder.  The Subscriber understands that the Securities have not been registered under the Securities Act or under any state securities or “blue sky” laws and agrees not to sell, pledge, assign or otherwise transfer or dispose of the Securities unless they are registered under the Securities Act and under any applicable state securities or “blue sky” laws or unless an exemption from such registration is available.

1.9           The Subscriber understands that the Securities have not been registered under the Securities Act or any state securities laws by reason of a claimed exemption under the provisions of the Securities Act and such state securities laws that depends, in part, upon the Subscriber’s investment intention. The Subscriber hereby represents that the Subscriber is purchasing the Securities for the Subscriber’s own account for investment and not with a view toward the resale or distribution to others.  The Subscriber, if an entity, further represents that it was not formed for the purpose of purchasing the Securities.

 
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1.10           The Subscriber understands that there is no public market for the Securities and that no market may develop for any of such Securities.  The Subscriber understands that even if a public market develops for such Securities, Rule 144 (“ Rule 144 ”) promulgated under the Securities Act requires for non-affiliates, in the case of a company that has filed periodic reports with the SEC under the Exchange Act for a period of 90 days prior to the proposed sale, among other conditions, a six-month holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act.  If the Company has not made such filings, such Securities will be subject to a one-year holding period, among other restrictions, before they can be resold under Rule 144.  The Subscriber understands and hereby acknowledges that the Company is under no obligation to register any of the Securities under the Securities Act or any state securities or “blue sky” laws other than as set forth in Article V.

1.11           The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that such Securities have not been registered under the Securities Act or any state securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement.  The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such Securities. The legend to be placed on each certificate shall be in form substantially similar to the following:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE SKY LAWS”, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

1.12           The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber’s principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity.

1.13           The Subscriber represents that the Subscriber has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Securities.  This Agreement constitutes the legal, valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms.

1.14           If the Subscriber is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, (a) it is authorized and qualified to invest in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so and (b) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

1.15           The Subscriber acknowledges that if he or she is a Registered Representative of the Financial Industry Regulatory Authority (“ FINRA ”) member firm, he or she must give such firm the notice required by FINRA Rule 3050, receipt of which must be acknowledged by such firm in Section 7.3 below.

 
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1.16           Subject to the provision below, the Subscriber hereby agrees that in the case of an initial offering of the Common Stock to the public pursuant to an effective registration statement under the Securities Act (the “ IPO ”), the Subscriber will not, without the prior written consent of the Company, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, the Registrable Securities (as defined in Section 5.1) purchased or acquired by the Subscriber for a period of up to 180 days from the effective date of the registration statement relating to the IPO and that the Subscriber will enter into an agreement with the Company or managing underwriter of the IPO to that effect.

1.17           (a)           The Subscriber agrees not to issue any public statement with respect to the Subscriber’s investment or proposed investment in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

   (b)           The Company agrees not to disclose the names, addresses or any other information about the Subscribers, except as required by law; provided, that the Company may use the name (but not the address) of the Subscriber in any registration statement filed pursuant to Article V in which the Subscriber’s shares are included and in any subsequent offering memorandum if the Subscriber beneficially owns five percent (5%) or more of the Company’s voting capital stock, on a fully-diluted or other basis, or otherwise as required by law.

1.18           The Subscriber represents and warrants that it has not engaged, consented to or authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement.  The Subscriber hereby agrees to indemnify and hold harmless the Company from and against all fees, commissions or other payments owing to any such person or firm acting on behalf of such Subscriber hereunder.

1.19           The Subscriber agrees to hold the Company and its directors, officers, employees, affiliates, controlling persons and agents (including the Placement Agent and its officers, directors, employees, counsel, controlling persons and agents) and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses incurred by them as a result of (a) any sale or distribution of the Securities by the Subscriber in violation of the Securities Act or any applicable state or foreign securities or “blue sky” laws; or (b) any false representation or warranty or any breach or failure by the Subscriber to comply with any covenant made by the Subscriber in this Agreement (including the Confidential Investor Questionnaire contained in Article VII herein) or any other document furnished by the Subscriber to any of the foregoing in connection with this transaction; provided, however, that in no event shall any indemnity under this subsection 1.19 exceed the aggregate principal amount of Notes subscribed for by the Subscriber pursuant to this Agreement, except in the case of willful fraud by the Subscriber.

 
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1.20           The Subscriber understands, acknowledges and agrees with the Company that this subscription may be rejected, in whole or in part, by the Company, in the sole and absolute discretion of the Company, at any time before the Closing Date notwithstanding prior receipt by the Subscriber of notice of acceptance of the Subscriber’s subscription.

1.21           The Subscriber acknowledges that the information contained in the Offering Materials or otherwise made available to the Subscriber is confidential and non-public and agrees that all such information shall be kept in confidence by the Subscriber and neither used by the Subscriber for the Subscriber’s personal benefit (other than in connection with this subscription) nor disclosed to any third party for any reason, notwithstanding that a Subscriber’s subscription may not be accepted by the Company; provided, however, that (a) the Subscriber may disclose such information to its affiliates and advisors who may have a need for such information in connection with providing advice to the Subscriber with respect to its investment in the Company so long as such affiliates and advisors have an obligation of confidentiality, and (b) this obligation shall not apply to any such information that (i) is part of the public knowledge or literature and readily accessible at the date hereof, (ii) becomes part of the public knowledge or literature and readily accessible by publication (except as a result of a breach of this provision) or (iii) is received from third parties without an obligation of confidentiality (except third parties who disclose such information in violation of any confidentiality agreements or obligations, including, without limitation, any subscription or other similar agreement entered into with the Company).

1.22           The Subscriber represents that no authorization, approval, consent or license of any person is required to be obtained for the purchase of the Securities by the Subscriber, other than as have been obtained and are in full force and effect.

1.23           The Subscriber represents that the representations, warranties and agreements of the Subscriber contained herein and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on the date hereof and as of the Closing Date on which the Subscriber purchases Notes as if made on and as of such date and shall survive the execution and delivery of this Agreement and the purchase of the Notes.  The Subscriber agrees that the Company and the Placement Agent shall be entitled to rely on the representations, warranties and agreements of the Subscriber contained herein.

1.24           The Subscriber understands, acknowledges and agrees with the Company that, except as otherwise set forth herein, the subscription hereunder is irrevocable by the Subscriber, that, except as required by law, the Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Subscriber hereunder and that this Agreement and such other agreements shall survive the death or disability of the Subscriber and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.  If the Subscriber is more than one person, the obligations of the Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his/her heirs, executors, administrators, successors, legal representatives and permitted assigns.

 
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1.25         The Subscriber understands, acknowledges and agrees with the Company that the Offering is intended to be exempt from the registration under the Securities Act by virtue of the provisions of Regulation D thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Subscriber.

II.
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

The Company hereby represents and warrants to the Subscriber that:

2.1            Organization, Good Standing and Qualification .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, operations, conditions (financial or otherwise), properties, assets or results of operations of the Company (a “ Material Adverse Effect ”).  The Company does not have any subsidiaries.

2.2            Capitalization and Voting Rights.   The authorized, issued and outstanding capital stock of the Company is as set forth in the Memorandum   and all issued and outstanding shares of the Company are validly issued, fully paid and nonassessable.  Except as set forth in the Memorandum, there are no outstanding options, warrants, agreements, convertible securities, preemptive rights or other rights to subscribe for or to purchase any shares of capital stock of the Company.  Except as set forth in the Offering Materials   and as otherwise required by law, there are no restrictions upon the voting or transfer of any of the shares of capital stock of the Company pursuant to the Company’s Certificate of Incorporation, as amended (the “ Certificate of Incorporation ”), By-Laws or other governing documents or any agreement or other instruments to which the Company is a party or by which the Company is bound.

2.3            Authorization; Enforceability . The Company has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  All corporate action on the part of the Company, its directors and stockholders necessary for the (i) authorization, execution, delivery and performance of this Agreement by the Company; and (ii) authorization, sale, issuance and delivery of the Securities contemplated hereby and the performance of the Company’s obligations hereunder has been taken.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy.  The Notes, when issued and fully paid for in accordance with the terms of this Agreement, will be validly issued. Upon the issuance and delivery of the equity securities issuable upon conversion of the Notes in accordance with the terms thereof, such equity securities will be validly issued, fully paid and nonassessable.  The Common Stock issuable upon exercise of the Warrants, when issued in accordance with the terms of such Warrants, will be validly issued, full paid and non-assessable.  The issuance and sale of the Securities contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person which have not been waived in connection with this Offering.

 
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2.4           No Conflict; Governmental Consents .

(a)           Except as would not reasonably be expected to have a Material Adverse Effect or have been waived, the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which the Company is bound, or of any provision of the Certificate of Incorporation or By-Laws of the Company, and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company.

(b)           No consent, approval, authorization or other order of any governmental authority or other third party is required to be obtained by the Company in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Securities, except as have been obtained or such filings as may be required to be made with the SEC and with any state or foreign blue sky or securities regulatory authority relating to an exemption from registration thereunder.

2.5            Licenses . Except as would not reasonably be expected to have a Material Adverse Effect, the Company has sufficient licenses, permits and other governmental authorizations currently required for the conduct of its business or ownership of properties and is in all material respects complying therewith.

2.6            Litigation .  The Company knows of no pending or threatened legal or governmental proceedings against the Company which (i) adversely questions the validity of this Agreement or any agreements related to the transactions contemplated hereby or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby or (ii) could, if there were an unfavorable decision, have a Material Adverse Effect. There is no action, suit, proceeding or investigation by the Company currently pending in any court or before any arbitrator or that the Company intends to initiate.

2.7            Investment Company   The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

 
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2.8            Placement Agent .  The Company has engaged, consented to and authorized the Placement Agent to act as agent of the Company in connection with the transactions contemplated by this Agreement.  The Company will pay the Placement Agent a commission, and the Company agrees to indemnify and hold harmless the Subscribers from and against all fees, commissions or other payments owing by the Company to the Placement Agent or any other person or firm acting on behalf of the Company hereunder.

2.9            Financial Statements . The financial statements of the Company included in Appendix D to the Memorandum (the “ Financial Statements ”) fairly present in all material respects the financial condition and position of the Company at the dates and for the periods indicated; and have been prepared in conformity with generally accepted accounting principles in the United States (“ GAAP ”) consistently applied throughout the periods covered thereby, except as may be otherwise specified in such Financial Statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  Since the date of the most recent balance sheet included as part of the Financial Statements, there has not been to the Company’s knowledge: (i) any change in the assets, liabilities, financial condition   or operations of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect; or (ii) any other event or condition of any character that, either individually or cumulatively, would reasonably be expected to have a Material Adverse Effect, except for the expenses incurred in connection with the transactions contemplated by this Agreement.

2.10            Title to Properties and Assets; Liens, Etc . The Company has good and marketable title to its properties and assets, including the properties and assets reflected in the most recent balance sheet included in the Financial Statements, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent; (b) liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company; (c) those that have otherwise arisen in the ordinary course of business; and (d) those that would not reasonably be expected to have a Material Adverse Effect.  The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound.

2.11            Patents and Trademarks .  Except as would not reasonably be expected to have a Material Adverse Effect or as disclosed in the Memorandum, to the Company’s knowledge, (i) the Company owns or possesses adequate licenses or other rights to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, manufacturing processes, formulae, trade secrets, licenses, customer lists and know how (collectively, “ Intellectual Property ”) , (ii) the Company has not received any communications alleging that the Company has violated or, by conducting its business as conducted, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights or processes of any other person or entity, nor is the Company aware of any basis therefore and (iii) no claim is pending or, to the Company’s knowledge after due inquiry, threatened to the effect that any Intellectual Property owned or licensed by the Company, or which the Company otherwise has the right to use, is invalid or unenforceable by the Company.

 
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2.12            Obligations to Related Parties . Except as disclosed in the Memorandum or as would not reasonably be expected to have a Material Adverse Effect, there are no obligations of the Company to officers, directors, stockholders, or employees of the Company other than (a) for payment of salary or other compensation for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company, (c) standard indemnification provisions in the certificate of incorporation and by-laws, and (d) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).  Except as may be disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

2.13            Employee Relations; Employee Benefit Plans . The Company is not a party to any collective bargaining agreement or a union contract.  The Company believes that its relations with its employees are good.  No executive officer (as defined in Rule 501(f) of the Securities Act) of the Company has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company.  The Company is in compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Except as disclosed in the Memorandum, the Company does not maintain any compensation or benefit plan, agreement, arrangement or commitment (including, but not limited to, “employee benefit plans”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) for any present or former employees, officers or directors of the Company or with respect to which the Company has liability or makes or has an obligation to make contributions, other than any such plans, agreements, arrangements or commitments made generally available to the Company’s employees.

2.14            Environmental Laws .  To the best of its knowledge, the Company (i) is in compliance with any and all Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 
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2.15            Tax Status .  To the best of the Company’s knowledge, the Company (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

2.16            Absence of Certain Changes .  Since the date of the Memorandum, there has been no change in the business, operations, conditions (financial or otherwise), prospects, assets or results of operations of the Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.
 
2.17            Ranking of Notes; Issuance of New Debt .  On the Closing Date, the Notes will rank pari passu with all of the Company’s existing indebtedness.  Following the Closing Date, as long as any Note remains outstanding, the Company will not, without the prior written consent of the holders of Notes evidencing at least sixty-six and two-thirds percent (66 ⅔%) of the Principal Loan Amount then outstanding, incur indebtedness for borrowed money (“New Debt”) in favor of any person or entity (each a “New Lender”) which indebtedness is secured or otherwise senior in priority to any Note issued to any subscriber pursuant to this Agreement or any substantially similar agreement.  No consent of the holders of Notes will be required for issuances by the Company of unsecured indebtedness that ranks pari passu with, or junior to, the Notes.
 
2.18            Disclosure .  The information set forth in the Offering Materials as of the date hereof contains no untrue statement of a material fact nor omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

III.            TERMS OF SUBSCRIPTION

3.1           The minimum purchase that may be made by any prospective investor shall be $50,000 aggregate principal amount of Notes.  Subscriptions for investment below the minimum investment may be accepted at the discretion of the Placement Agent and the Company.  The Company and the Placement Agent reserve the right to reject any subscription made hereby, in whole or in part, in their sole discretion.  The Company’s agreement with each Subscriber is a separate agreement and the sale of the Securities to each Subscriber is a separate sale.

 
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3.2           Pending the sale of the Securities, all funds paid hereunder shall be deposited by the Company in escrow with American Stock Transfer & Trust Company, LLC, having an office at 59 Maiden Lane-Plaza Level, New York, New York 10038.  This Offering will terminate on the earlier of (i) the Company’s acceptance of subscriptions for the Maximum Amount, or (ii) October 31, 2009, unless terminated at an earlier time or extended by the mutual agreement of the Placement Agent and the Company without notice to prospective investors for up to an additional sixty (60) days(the “ Offering Termination Date ”).  The Company reserves the right to withdraw or cancel this Offering and to accept or reject any subscription in whole or in part, in its sole discretion.  The Subscriber hereby authorizes and directs the Company and the Placement Agent to direct the Escrow Agent to return any funds for unaccepted subscriptions to the same account from which the funds were drawn, without interest, including any customer account maintained with the Placement Agent.

3.3           At any time after the Company has received subscriptions and related funds for the Minimum Offering, but prior to the Offering Termination Date, the Company may conduct a Closing and may conduct subsequent Closings on an interim basis until the Maximum Amount has been obtained or until the Offering Termination Date.  Each Closing shall occur at the offices of the Placement Agent at 405 Lexington Avenue, New York, NY 10174.

3.4           The Note and Warrant purchased by the Subscriber pursuant to this Agreement will be prepared for delivery to the Subscriber promptly following the Closing at which such purchase takes place. The Subscriber hereby authorizes and directs the Company to deliver the Note and Warrant purchased by the Subscriber pursuant to this Agreement directly to the Subscriber’s account maintained by the Placement Agent, if any, or, if no such account exists, to the residential or business address indicated on the signature page hereto.

IV.            CONDITIONS TO OBLIGATIONS OF THE PARTIES

4.1          In addition to the Company’s right to reject, in whole or in part, any subscription at any time before the Closing Date, the Company’s obligation to issue the Securities at each Closing to the applicable Subscriber is subject to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of the Company to the extent permitted by law:

(a)            Representations and Warranties Correct .  The representations and warranties made by each Subscriber in Article I hereof shall be true and correct in all material respects.

(b)            Covenants .  All covenants, agreements and conditions contained in this Agreement to be performed by such Subscriber on or prior to the date of such Closing shall have been performed or complied with in all material respects.

(c)            No Legal Order Pending .  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d)            No Law Prohibiting or Restricting Such Sale .  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities (except as otherwise provided in this Agreement).

 
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4.2         The Subscriber’s obligation to purchase the Securities at the Closing at which such purchase is to be consummated is subject to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of each Subscriber to the extent permitted by law:

(a)            Representations and Warranties Correct .  The representations and warranties made by the Company in Article II hereof shall be true and correct in all material respects.

(b)            Covenants .  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the date of such Closing shall have been performed or complied with in all material respects.

(c)            No Legal Order Pending .  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d)            No Law Prohibiting or Restricting Such Sale .  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities (except as otherwise provided in this Agreement).

(e)            Legal Opinion .  The Placement Agent shall have received an opinion of counsel to the Company addressed to the Subscribers (which the Placement Agent may be permitted to rely on as if it were addressed to them) containing certain opinions to be substantially in the form attached hereto as Exhibit C , which opinion will be subject to standard qualifications and assumptions.

(f)            Officer’s Certificate . The Placement Agent shall have received an Officer’s Certificate addressed to the Subscribers, signed by the authorized officer of the Company and dated as of the Closing.  The certificate shall state, among other things, that the representations and warranties contained herein and in the Offering Materials are true and accurate in all material respects at such Closing Date with the same effect as though expressly made at such Closing Date and the Placement Agent shall be entitled to rely on such representations of the Company in the Offering Materials as if they were made directly to the Placement Agent.

V.            REGISTRATION RIGHTS

5.1          Definitions.        As used in this Agreement, the following terms shall have the following meanings.

(a)           The term “ Holder ” shall mean any holder of Registrable Securities.

 
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(b)           The terms “ register ”, “ registered ” and “ registration ” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or order of effectiveness of such registration statement or document.

(c)           The term “ Registrable Securities ” shall mean (i) the shares of equity securities issuable upon conversion of the Notes sold in the Offering (or any successor security); (ii) the shares of equity securities issuable upon exercise of the Warrants; and (iii) any shares of equity securities issuable (or issuable upon the conversion or exercise of any warrant, right or other security that is issued) pursuant to a dividend or other distribution with respect to or in replacement of any Securities; provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (A) have not been disposed of pursuant to a registration statement declared effective by the SEC; (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale; (C) are held by a Holder or a permitted transferee of a Holder pursuant to Section 5.11; and (D) may not be disposed of under Rule 144 under the Securities Act without restriction.

(d)           The term “ Trading Event ” means the first date on which the Company’s Common Stock trades on a national securities exchange or an Over-the-Counter Bulletin Board.

5.2          Piggyback Registration .

(a)           The Company agrees that if, at any time, and from time to time, after the earlier to occur of (i) an initial public offering of the Company’s equity securities pursuant to a registration statement declared effective by the Securities and Exchange Commission (“IPO”) and (ii) a Trading Event, the Board of Directors of the Company (the “ Board ”) shall authorize the filing of a registration statement under the Securities Act (other than the filing of a registration statement pursuant to the IPO or a registration statement on Form S-8, Form S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Company shall: (A) promptly notify each Holder that such registration statement will be filed and that the Registrable Securities then held by such Holder will be included in such registration statement at such Holder’s request; (B) cause such registration statement to cover all of such Registrable Securities issued to such Holder for which such Holder requests inclusion; (C) use reasonable best efforts to cause such registration statement to become effective as soon as practicable; and (D) take all other reasonable action necessary under any Federal or state law or regulation of any governmental authority to permit all such Registrable Securities that have been issued to such Holder to be sold or otherwise disposed of, and will maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for such Holder to promptly effect the proposed sale or other disposition.

 
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(b)           Notwithstanding any other provision of this Section 5.2, the Company may at any time, abandon or delay any registration commenced by the Company.  In the event of such an abandonment by the Company, the Company shall not be required to continue registration of shares requested by the Holder for inclusion and the Holder shall retain the right to request inclusion of shares as set forth above.

5.3          Demand Registration .

(a)           Registration on Request .

(i)           The Company agrees that, at any time, and from time to time, but at least 180 days after the earlier to occur of (i) an IPO and (ii) a Trading Event, Holders of a majority of the Registrable Securities may make a written request that the Company effect the registration under the Securities Act of outstanding Registrable Securities; provided that such requested registration would cover at least 51% of the Registrable Securities owned by all the Holders at such time; and provided , further, that the Holders shall be entitled to no more than one such demand registration.

(ii)           The Company further agrees that if, at any time, and from time to time, after the Company has qualified for the use of Form S-3 or any successor form,  one or more of the Holders desire to effect the registration under the Securities Act on Form S-3 or any successor form (“ Short-Form Registration ”) of outstanding Registrable Securities, such Holder(s) may make a written request that the Company effect a Short-Form Registration; provided that the aggregate price to the public of the shares as to which such registration is requested (based on the then current market price and before deducting underwriting discounts and commissions) would equal or exceed $5,000,000. It is understood and agreed that the Holders may make good faith requests for Short-Form Registrations on an unlimited number of occasions; provided further , that the Company shall not be required to effect more than one Short Form Registration in any 12-month period.

(iii)           Each request made by one or more of the Holders pursuant to subsections (i) or (ii) above (the “ Initiating Holders ”) will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Following receipt of any such request, the Company shall promptly notify all Holders other than the Initiating Holders of receipt of such request and the Company shall use best efforts to file, within 60 days of such request, the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register in the request by the Initiating Holders (and in all notices received by the Company from such other Holders within 30 days after the giving of such notice by the Company), to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities to be registered. If such method of disposition shall be an underwritten public offering, the Holders of a majority of the shares of Registrable Securities to be sold in such offering may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed.  The Holders will be permitted to withdraw Registrable Securities from a registration at any time prior to the effective date of such registration; provided the remaining number of shares of Registrable Securities subject to a requested registration is not less than the minimum amount required pursuant to this Section 5.3.

 
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(b)            Limitations on Demand Registration . Notwithstanding Section 5.3(a), the Company shall not be obligated to file a registration statement relating to a registration request pursuant to this Section 5.3 at any time during the 180-day period immediately following the effective date of any registration statement filed by the Company (other than on Form S-8 or S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities). If the Board determines, in its good faith judgment, that the Company (i) should not file any registration statement otherwise required to be filed pursuant to Section 5.3 or (ii) should withdraw any such previously filed registration statement because, in either case, the Board determines, in its good faith judgment, that the Company is in the possession of material nonpublic information required to be disclosed in such registration statement or an amendment or supplement thereto, the disclosure of which in such registration statement would be materially disadvantageous to the Company (a   Disadvantageous Condition ”), the Company shall be entitled to postpone for the shortest reasonable period of time (but not exceeding 90 days from the date of the determination), the filing of such registration statement or, if such registration statement has already been filed, may suspend or withdraw such registration statement and shall promptly give the Holders written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay.  Upon the receipt of any such notice, such Holders shall forthwith discontinue use of the prospectus contained in such registration statement and, if so directed by the Company, shall deliver to the Company all copies of the prospectus then covering such Registrable Securities current at the time of receipt of such notice (or, if no registration statement has yet been filed, all drafts of the prospectus covering such Registrable Securities).  If any Disadvantageous Condition shall cease to exist, the Company shall promptly notify the Holders to such effect.  If any registration statement shall have been withdrawn, the Company shall, at such time as it is possible or, if earlier, at the end of the 90-day period following such withdrawal, file a new registration statement covering the Registrable Securities that were covered by such withdrawn registration statement. The Company’s right to delay a request for registration or to withdraw a registration statement pursuant to this Section 5.3 may not be exercised more than once in any one-year period.

5.4            Registration Procedures . Whenever required under this Article V to include Registrable Securities in a Company registration statement, the Company shall, as expeditiously as reasonably possible:

 
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(a)           Use reasonable best efforts to (i) cause such registration statement to become effective, and (ii) cause such registration statement to remain effective until the earliest to occur of (A) such date as the sellers of Registrable Securities (the “ Holders ”) have completed the distribution described in the registration statement and (B) such time that all of such Registrable Securities are no longer, by reason of Rule 144(k) under the Securities Act, required to be registered for the sale thereof by such Holders.  The Company will also use its reasonable best efforts to, during the period that such registration statement is required to be maintained hereunder, file such post-effective amendments and supplements thereto as may be required by the Securities Act and the rules and regulations thereunder or otherwise to ensure that the registration statement does not contain any untrue statement of material fact or omit to state a fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading; provided, however, that if applicable rules under the Securities Act governing the obligation to file a post-effective amendment permits, in lieu of filing a post-effective amendment that (i) includes any prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the Company may incorporate by reference information required to be included in (i) and (ii) above to the extent such information is contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement. In the event that the Company becomes qualified for the use of Form S-3 or any successor form at a time when any registration statement on any other Form which includes Registrable Securities is required to be maintained hereunder, the Company shall, upon the request of any Selling Holder, subject to Section 5.5, (i) as expeditiously as reasonably possible, use reasonable best efforts to cause a Short-Form Registration covering such Registrable Securities to become effective and (ii) comply with each of the other requirements of this Section 5.4 which may applicable thereto. Upon the effectiveness of such Short-Form Registration, the Company shall be relieved of its obligations hereunder to keep in effect the registration statement which initially covered the Registrable Securities included in such Short-Form Registration.

(b)           Prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(c)           Furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus as amended or supplemented from time to time, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d)           Use reasonable best efforts to register and qualify the securities covered by such registration statement under such other federal or state securities laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

(e)           In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering.  Each selling Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

 
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(f)           Notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, (i) when the registration statement or any post-effective amendment and supplement thereto has become effective; (ii) of the issuance by the SEC of any stop order or the initiation of proceedings for that purpose (in which event the Company shall make every effort to obtain the withdrawal of any order suspending effectiveness of the registration statement at the earliest possible time or prevent the entry thereof); (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iv) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing (and each Holder agrees to suspend any trading under the Registration Statement until such condition is abated).

(g)           Cause all such Registrable Securities registered hereunder to be listed on each securities exchange or quotation service on which similar securities issued by the Company are then listed or quoted or, if no such similar securities are listed or quoted on a securities exchange or quotation service, apply for qualification and use reasonable best efforts to qualify such Registrable Securities for inclusion on a national securities exchange or the Over-the-Counter Bulletin Board.

(h)           Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(i)           Cooperate with the selling Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold, which certificates will not bear any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, shall request at least two business days prior to any sale of the Registrable Securities to the underwriters.
 
5.5            Furnish Information .  It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Article V with respect to the Registrable Securities of any Holder that such Holder shall furnish to the Company such information regarding the Holder, the Registrable Securities held by the Holder, and the intended method of disposition of such securities as shall be reasonably required by the Company to effect the registration of such Holder’s Registrable Securities.
 
5.6            Registration Expenses .  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to registrations pursuant to Sections 5.2 or 5.3 for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto (“ Registration Expenses ”), but excluding underwriting discounts and commissions relating to Registrable Securities and excluding any professional fees or costs of accounting, financial or legal advisors to any of the Holders.

 
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5.7            Underwriting Requirements .  In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under Section 5.2 to include any of the Holders’ Registrable Securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company.  If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling Holders according to the total amount of securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such selling Holders).  For purposes of the preceding parenthetical concerning apportionment, for any selling Holder who is a holder of Registrable Securities and is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling Holder”, and any pro-rata reduction with respect to such “selling Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “selling Holder”, as defined in this sentence.

5.8            Delay of Registration .  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Article V.

5.9            Indemnification .  In the event that any Registrable Securities are included in a registration statement under this Article V:

  (a)           To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, or any rule or regulation promulgated under the Securities Act, or the Exchange Act, and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 5.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person or a violation of any provision of this Agreement by a Holder.

 
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(b)           To the extent permitted by law, each Selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration or a violation of any provision of this Agreement by a Holder; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 5.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided , however , that the indemnity agreement contained in this Section 5.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided , further, that, in no event shall any indemnity under this Section 5.9(b) exceed the gross proceeds from the offering received by such Holder.

(c)           Promptly after receipt by an indemnified party under this Section 5.9 of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 5.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel selected by the indemnifying party and approved by the indemnified party (whose approval shall not be unreasonably withheld); provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 5.9, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5.9.

 
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(d)           If the indemnification provided for in this Section 5.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e)           Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f)           The obligations of the Company and Holders under this Section 5.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Article V, and otherwise.

5.10         Reports Under Securities Exchange Act of 1934 .  With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

(a)           make and keep public information available, as those terms are understood and defined in Rule 144, at all times after 90 days after the effective date of the IPO  or Trading Event by the Company;

(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.


 
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5.11            Permitted Transferees .  The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under this Article V may be assigned in full by a Holder in connection with a transfer by such Holder of its Registrable Securities if: (a) such transferee agrees to comply with the terms and provisions of this Agreement; (b) such transfer is otherwise in compliance with this Agreement; (c) such transfer is otherwise effected in accordance with applicable securities laws; and (d) such Holder transfers at least 51% of its shares of Registrable Securities to the transferee.  Except as specifically permitted by this Section 5.11, the rights of a Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited.

5.12            Termination of Registration Rights .  The right of any Holder to request or demand inclusion in any registration pursuant to Section 5.2 and Section 5.3 shall terminate if all shares of Registrable Securities held by such Holder may immediately be sold under Rule 144 without restriction.

VI.            MISCELLANEOUS

6.1           Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed as follows:

if to the Company, to it at:

CorMedix Inc.
86 Summit Avenue, Suite 301
Summit, NJ 07901-3647
Facsimile:  (908) 522-9199
Attn:  President

With a copy to:

Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, NY 10022
Facsimile: (212) 451-2222Attn: Yehuda Markovits, Esq.

if to the Placement Agent, to it at:

Maxim Group LLC
405 Lexington Avenue
New York, NY 10174Facsimile:  (212) 895-3783
Attn: Andrew Scott

With a copy to:

Loeb & Loeb LLP

 
23

 

345 Park Avenue
New York, NY 10154
Facsimile: (212) 504-3013
Attn: Mitchell S. Nussbaum, Esq.

if to the Subscriber, to the Subscriber’s address indicated on the signature page of this Agreement.

Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received.

6.2           Except as otherwise expressly provided herein, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) with the written consent of the Company and (a) subscribers holding Notes evidencing at least sixty six and two-thirds percent (66 ⅔%) of the then outstanding Principal Loan Amount of the Notes issued pursuant to this Agreement and substantially similar agreements, so long as the Notes are outstanding; and (b) holders of sixty six and two-thirds percent (66 ⅔%) of the Registrable Securities issued upon conversion of the Notes, if the Notes are no longer outstanding.  Any amendment or waiver effected in accordance with this Section 6.2 shall be binding upon the Subscriber and the Company (even if the Subscriber does not consent to such amendment or waiver), and upon the effectuation of each such amendment or waiver, the Company shall promptly give written notice thereof to the Subscriber if the Subscriber has not previously consented thereto in writing.

6.3           Subject to the provisions of Section 5.11, this Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.  This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

6.4           Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Notes as herein provided, subject, however, to the right hereby reserved by the Company to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers.

6.5           NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS SITTING IN THE BOROUGH OF MANHATTAN, COUNTY OF NEW YORK.  THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

 
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6.6           The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.  If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

6.7           It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

6.8           The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

6.9           This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

6.10           Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement, except (a) for the holders of Registrable Securities; (b) for the Placement Agent pursuant to Sections 1.6(a), 1.12, and 1.24 hereof, (c) for the indemnified parties (including without limitation the Placement Agent and its sub agents, if any) pursuant to Section 5.9 hereof; and (d) that the Placement Agent may rely upon the representations and acknowledgements of the Subscriber in Articles I and VII hereof and the representations and warranties of the Company in Article II hereof.

Remainder of Page Intentionally Left Blank .

 
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VII.            CONFIDENTIAL INVESTOR QUESTIONNAIRE

7.1            ALL INVESTORS - The undersigned represents and warrants as indicated below by the undersigned s mark :
 
A.            Individual investors :  (Please mark one or more of the following statements)
 
1.______
I certify that I am an accredited investor because I have had individual income (exclusive of any income earned by my spouse) of more than $200,000 in each of the most recent two years and I reasonably expect to have an individual income in excess of $200,000 for the current year.
 
2.______
I certify that I am an accredited investor because I have had joint income with my spouse in excess of $300,000 in each of the most recent two years and reasonably expect to have joint income with my spouse in excess of $300,000 for the current year.
 
3.______
I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a joint net worth, in excess of $1,000,000.
 
4.______
I am a director or executive officer of CorMedix Inc.
 
B.
Partnerships, corporations, trusts or other entities :  (Please mark one of the following seven statements).  The undersigned hereby certifies that it is an accredited investor because it is:
 
1.____
an employee benefit plan whose total assets exceed $5,000,000;
 
2.____
an employee benefit plan whose investments decisions are made by a plan fiduciary which is either a bank, savings and loan association or an insurance company (as defined in Section 3(a) of the Securities Act) or an investment adviser registered as such under the Investment Advisers Act of 1940;
 
3.____
a self-directed employee benefit plan, including an Individual Retirement Account, with investment decisions made solely by persons that are accredited investors;
 
4.____
an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000;
 
5.____
a corporation, partnership, limited liability company, limited liability partnership, other entity or similar business trust, not formed for the specific purpose of acquiring the Notes, with total assets excess of $5,000,000;
 
6.____
a trust, not formed for the specific purpose of acquiring the Notes, with total assets exceed $5,000,000, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Notes; or

 
26

 
 
7.____
an entity (including a revocable grantor trust but other than a conventional trust) in which each of the equity owners qualifies as an accredited investor.
 
7.2            EUROPEAN ECONOMIC AREA (“ EEA” ) INVESTORS - The undersigned further repres ents and warrants as indicated below by the undersigned s mark :
 
A.           Please mark one of the following statements:
 
either
 
1.              The undersigned hereby certifies that it is a Qualified Investor for the purposes of Directive 2003/71/EC because it is a person falling within Article 2.1(e)(i), (ii) or (iii) of such directive or a person authorized by a jurisdiction in the EEA to be considered as a qualified investor for the purposes of such directive;
 
or
 
2.                       The undersigned hereby certifies that it is not a Qualified Investor for the purposes of Directive 2003/71/EC.
 
B.           Please mark one of the following statements.
 
1.              The undersigned hereby certifies that it is acting on its own account and not for the account of or otherwise on behalf of any person or persons; or
 
2.             The undersigned is in the United Kingdom and is a Qualified Investor for the purposes of Directive 2003/71/EC and is acting as an agent in the circumstances contemplated in section 86(2) of the United Kingdom Financial Services and Markets Act 2000.
 
C.           Please mark the following statement:
 
1.             The undersigned hereby certifies that it has not received any recommendation from the Placement Agent nor any person acting on their behalf in relation to the purchase of the Securities.
 
D.           Please mark one of the following statements:
 
1.             The undersigned hereby certifies that it is not in the United Kingdom.
 
2.             The undersigned hereby certifies that it is a person falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”).
 
3.             The undersigned hereby certifies that it is a person falling within Article 49(2)(a) to the (d) of the FPO.

 
27

 
 
7.3            ALL INVESTORS - The undersigned further represents and warrants as indicated below by the undersigned s mark :
 
FINRA AFFILIATION .

Are you affiliated or associated with an FINRA member firm:

Yes _________                                                      No __________

If Yes, please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________

*If subscriber is a Registered Representative with an FINRA member firm, have the following acknowledgment signed by the appropriate party:

The undersigned FINRA member firm acknowledges receipt of the notice required by NASD Rule 3050.

  
Name of FINRA Member Firm
 
By:
  
 
Authorized Officer
   
Date:   

7.4            ALL INVESTORS   - Indicate manner in which title is to be held   (circle one)

(a)
Individual Ownership
(b)
Community Property
(c)
Joint Tenant with Right of
 
Survivorship (both parties
 
must sign)
(d)
Partnership
(e)
Tenants in Common
(f)
Corporation
(g)
Limited Liability Company
(h)
Trust
(i)
Other

 
28

 

7.5            ALL INVESTORS - Please answer each question .

SUITABILITY

(a)  For an individual Subscriber, please describe your current employment, including the company by which you are employed and its principal business:
 






 
(b)  For an individual Subscriber, please describe any college or graduate degrees held by you:
 




 
(c)  For all Subscribers, please list types of prior investments:
 




 
(d)           For all Subscribers, please state whether you have you participated in other private placements before:

YES_______                                                      NO_______

(e) If your answer to question 7.5(d) above was “YES”, please indicate frequency of such prior participation in private placements of:

   
Public
 
Private
 
Public or Private
   
Companies
 
Companies
 
Biopharmaceutical Companies
             
Frequently
           
Occasionally
           
Never
  
 
  
 
  
 

(f) For individual Subscribers, do you expect your current level of income to significantly decrease in the foreseeable future:

YES_______                                                      NO_______

 
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(g)  For trust, corporate, partnership and other institutional Subscribers, do you expect your total assets to significantly decrease in the foreseeable future:

YES_______                                                      NO_______


(h)  For all Subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you:

YES_______                                                      NO_______

(i)  For all Subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which you seek to subscribe?

YES_______                                                      NO_______

(j)  For all Subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

YES_______                                                      NO_______

7.6           The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in the Confidential Investor Questionnaire contained in this Article VII and such answers have been provided under the assumption that the Company will rely on them.

Signature:
  
   
 
  
 
(If purchased jointly)
   
Print Name:
  
   
 
  
 
(If purchased jointly)
   
Date:
 

 
30

 

AGGREGATE PRINCIPAL AMOUNT OF NOTES = $                             (TOTAL INVESTMENT)

 
  
Signature
 
Signature (if purchasing jointly)
     
  
 
  
Name Typed or Printed
 
Name Typed or Printed
     
  
 
  
Entity Name
 
Entity Name
     
  
 
  
Address
 
Address
     
  
 
  
City, State and Zip Code
 
City, State and Zip Code
     
  
 
  
Telephone-Business
 
Telephone—Business
     
  
 
  
Telephone-Residence
 
Telephone—Residence
     
  
 
  
Facsimile-Business
 
Facsimile—Business
     
  
 
  
Facsimile-Residence
 
Facsimile—Residence
     
  
 
  
Tax ID # or Social Security # 
 
Tax ID # or Social Security #
     
Name in which securities should be issued:
  
  

Dated:                                                , 200__

 

 

This Note and Warrant Purchase Agreement is agreed to and accepted as of ___________________________   , 200__.

CORMEDIX INC.
 
By:
 
Name:  Bruce Cooper, M.D.
Title:    President and Chief Executive Officer

 

 

CERTIFICATE OF SIGNATORY

(To be completed if Securities are
being subscribed for by an entity)

I,____________________________, am the____________________________ of __________________________________________ (the “Entity”).

I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Note and Warrant Purchase Agreement and to purchase and hold the Securities, and certify further that the Note and Warrant Purchase Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ________ day of _________________,______

  
(Signature)

 

 
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
$___________
____________   ___, 200__

1.            Principal and Interest

CORMEDIX INC. (the “ Company ”), a Delaware corporation, for value received, hereby promises to pay to the order of ______________________, or his, her 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 ____________ dollars ($___________), 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 October 29, 2011; 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.

 

 

This Note is being issued pursuant to that certain Note and Warrant Purchase Agreement between the Company and the Holder, dated as of the date hereof (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 October 6, 2009 and Supplement No. 1 to the Memorandum dated November 2, 2009 (such notes shall be collectively referred to as the “ Bridge Notes ”).  The Bridge Notes rank pari passu in right of payment with all other existing indebtedness of the Company and, pursuant to Section 2.17 of the Purchase Agreement, no new indebtedness which is secured or senior in right of payment to the Bridge Notes may be issued by the Company without the consent of the holders of Bridge Notes representing at least sixty-six and two-thirds percent (66 ⅔%) of the aggregate principal amount of all outstanding Bridge Notes.  No consent of the holders of 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.

2.            Conversion .

2.1           (a)           All unpaid principal and unpaid accrued interest on this Note shall be automatically converted into the Company’s non-derivative equity securities (the “ Securities ”) issued in an underwritten initial public offering by the Company of equity securities resulting in aggregate gross cash proceeds (before commissions or other expenses) to the Company of at least $10,000,000 (a “ Qualified IPO ”), at a conversion price equal to 70% of the price at which non-derivative equity securities of the Company are sold in a Qualified IPO, and upon such other terms, conditions and agreements as may be applicable in such Qualified IPO (determined on a fully diluted basis) (the “ Conversion Price ”).

(b)           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 or all or substantially all of the Company’s assets determined on a consolidated basis, 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 IPO.  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.            Prepayment .  This Note may not be prepaid at any time, in whole or in part, prior to its maturity.

 
2

 

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.  In the case of notice to either party, copies should be sent to Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, NY 10022, Facsimile: (212) 451-2222, Attn: Yehuda Markovits, Esq.

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.

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.

 
3

 

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.

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 ⅔%) of the then outstanding aggregate principal amount of the Bridge Notes, 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 future holder of all such 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.  Pursuant to Section 2.17 of the Purchase Agreements and Section 1 of the Bridge Notes, the Company may incur additional indebtedness that ranks in priority junior to, or pari passu with, the Bridge Notes without obtaining the consent of any holder of 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.

*  *  *  *  *
 
 
4

 
 
ISSUED as of the date first above written.

 
CORMEDIX INC.
     
 
By:
 
 
Name:
John Houghton
 
Title:
President and Chief Executive Officer

 
5

 

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.

AMENDED AND RESTATED

FUTURE ADVANCE PROMISSORY NOTE

Summit, NJ

$169,729.45
September 30, 2009

Recitals

A.           In consideration of certain services provided by Paramount Biosciences, LLC (“ PBS ”) to CorMedix Inc., a Delaware corporation (the “ Company ”), the Company made that certain FUTURE ADVANCE PROMISSORY NOTE, dated as of July 28, 2006 and amended on June 15, 2007 (as amended, the “ Existing Promissory Note ”) in favor of PBS.

B.           As of the date hereof, the unpaid principal balance of the Existing Promissory Note was $165,000.00, and the amount of accrued and unpaid interest thereon was $729.45, including accrued and unpaid interest, was outstanding under the Existing Promissory Note.

C.           Each party desires to add the entire amount of such accrued and unpaid interest to the principal balance of the Existing Promissory Note and to amend and restate the Existing Promissory Note on the terms and subject to the conditions contained herein.

Agreements

 
1.
Principal and Interest

The Company, for value received, hereby promises to pay to the order of PBS, 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 Hundred Sixty Nine Thousand Seven Hundred Twenty Nine dollars and Forty Five cents ($169,729.45), together with interest as set forth below.

 
1

 

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 promissory note (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 this 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, and any such default shall continue for a period of five (5) business days after the Company receives written notice thereof.

This Note shall rank pari passu in right of payment with all other existing indebtedness of the Company, including (a) the future advance promissory note between the Company and The Lindsay A. Rosenwald Family Trusts Dated December 15, 2000, dated August 11, 2006, as amended on June 15, 2007 and July 22, 2008 and amended and restated on the date hereof (as amended, the “ Trusts Note ”), (b) the series of convertible promissory notes issued by the Company in connection with an offering described in the Company’s Confidential Offering Memorandum dated June 15, 2007 and Supplement No. 1 thereto dated August 14, 2007 (such notes, as amended to date, shall be collectively referred to as the “ First Bridge Notes ”), (c) the series of convertible promissory notes issued by the Company in connection with an offering described in the Company’s Confidential Offering Memorandum dated August 5, 2008 (such notes, as amended to date, shall be collectively referred to as the “ Second Bridge Notes ” and collectively with the First Bridge Notes, the “ Bridge Notes ”), and (d) the convertible promissory note in the principle amount of $1,000,000 dated as of April 30, 2009 issued by the Company to Galenica Ltd., on terms substantially the same as the Bridge Notes (the “ Galenica Note ”). No consent of the Holder 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, this Note.

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 Second 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 ”).

 
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(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 by (ii) the number of shares of Common Stock then outstanding, on a fully diluted basis, without giving effect to the warrants issued in connection with the Bridge Notes or to the warrants issued to Paramount BioCapital, Inc., as placement agent in connection with the sale of the First Bridge Notes.

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 this Note shall be converted without any further action by the Holder and whether or not this 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 this 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.

 
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3.
Prepayment .

3.1           Other than as provided in Section 3.2 hereof, this Note 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 this 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 (w) this Note plus (x) the Trusts Note plus (y) all Bridge Notes plus (z) the Galenica Note, 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.

 
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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:

(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:

(w)       “ 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).

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

 
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Applicable Percentage =
 
For purposes of the foregoing formula:

A = the aggregate principal amount of this Note, the Trusts Note, all Bridge Notes and the Galenica Note outstanding immediately prior to the Sale of the Company;
 
B = 50%; and
 
C = the aggregate principal amount of this Note, the Trusts Note, all Bridge Notes and the Galenica Note then outstanding.

(y) “ 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.

(z) “ 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.

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 this 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 this Note transferred as above provided shall bear an appropriate restrictive legend, except that this 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.

 
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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.

11.          Amendment . Any term of this Note may be amended with the written consent of the Company and the Holder hereof.

*  *  *  *  *

 


 
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IN WITNESS WHEREOF , this Amended and Restated Future Advance Promissory Note is executed by the parties hereto as of the day and year first above written.

 
CORMEDIX INC.
 
 
 
By: /s/ John Houghton               
Name: John Houghton
Title: President and Chief Executive Officer
 
 
PARAMOUNT BIOSCIENCES, LLC
 
 
 
By: /s/ Lindsay A. Rosenwald, M.D.     
Name: Lindsay A. Rosenwald, M.D.
Title: Sole Member

 
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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.

AMENDED AND RESTATED

FUTURE ADVANCE PROMISSORY NOTE

Summit, NJ

$434,714.66
September 30, 2009

Recitals

A.            In consideration of certain services provided by The Lindsay A. Rosenwald Family Trusts Dated December 15, 2000 (the “ Trusts” ) to CorMedix Inc., a Delaware corporation (the “ Company ”), the Company made that certain FUTURE ADVANCE PROMISSORY NOTE, dated as of August 11, 2006 and amended on June 15, 2007 and July 22, 2008 (as amended, the “ Existing Promissory Note ”) in favor of the Trusts.

B.            As of the date hereof, the unpaid principal balance of the Existing Promissory Note was $344,678.73, and the amount of accrued and unpaid, interest thereon was $90,035.93, including accrued and unpaid interest was outstanding under the Existing Promissory Note.

C.            Each party desires to add the entire amount of such accrued and unpaid interest to the principal balance of the Existing Promissory Note and to amend and restate the Existing Promissory Note on the terms and subject to the conditions contained herein.

Agreements

 
1.
Principal and Interest

The Company, for value received, hereby promises to pay to the order of the Trusts, 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 Four Hundred Thirty Four Thousand Seven Hundred Fourteen dollars and Sixty Six cents ($434,714.66), together with interest as set forth below.

 
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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 promissory note (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 this 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, and any such default shall continue for a period of five (5) business days after the Company receives written notice thereof.

This Note shall rank pari passu in right of payment with all other existing indebtedness of the Company, including (a) the future advance promissory note between the Company and Paramount BioSciences, LLC, dated July 28, 2006, as amended on June 15, 2007 and amended and restated on the date hereof (as amended, the “ PBS Note ”), (b) the series of convertible promissory notes issued by the Company in connection with an offering described in the Company’s Confidential Offering Memorandum dated June 15, 2007 and Supplement No. 1 thereto dated August 14, 2007 (such notes, as amended to date, shall be collectively referred to as the “ First Bridge Notes ”), (c) the series of convertible promissory notes issued by the Company in connection with an offering described in the Company’s Confidential Offering Memorandum dated August 5, 2008 (such notes, as amended to date, shall be collectively referred to as the “ Second Bridge Notes ” and collectively with the First Bridge Notes, the “ Bridge Notes ”), and (d) the convertible promissory note in the principle amount of $1,000,000 dated as of April 30, 2009 issued by the Company to Galenica Ltd., on terms substantially the same as the Bridge Notes (the “ Galenica Note ”). No consent of the Holder 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, this Note.

 
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 Second 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 ”).

 
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(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 by (ii) the number of shares of Common Stock then outstanding, on a fully diluted basis, without giving effect to the warrants issued in connection with the Bridge Notes or to the warrants issued to Paramount BioCapital, Inc., as placement agent in connection with the sale of the First Bridge Notes.

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 this Note shall be converted without any further action by the Holder and whether or not this 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 this 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.

 
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3.
Prepayment .

3.1           Other than as provided in Section 3.2 hereof, this Note 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 this 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 (w) this Note plus (x) the PBS Note plus (y) all Bridge Notes plus (z) the Galenica Note, 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:

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

(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:

(w)            “ 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).

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

Applicable Percentage =


 
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For purposes of the foregoing formula:

A = the aggregate principal amount of this Note, the PBS Note, all Bridge Notes and the Galenica Note outstanding immediately prior to the Sale of the Company;
 
B = 50%; and
 
C = the aggregate principal amount of this Note, the PBS Note, all Bridge Notes and. the Galenica Note then outstanding.

(y)     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.

(z)     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.

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 this 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 this Note transferred as above provided shall bear an appropriate restrictive legend, except that this 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.

11.         Amendment . Any term of this Note may be amended with the written consent of the Company and the Holder hereof.

*  *  *  *  *
 

 
7

 

IN WITNESS WHEREOF , this Amended and Restated Future Advance Promissory Note is executed by the parties hereto as of the day and year first above written.



CORMEDIX INC.
 
 
By: /s/ John Houghton            
Name: John Houghton
Title: President and Chief Executive Officer
 
 
THE LINDSAY A. ROSENWALD FAMILY
TRUSTS DATED DECEMBER 15, 2000
 
 
By:   /s/ Jon Rosenwald            
Name: Jon Rosenwald
Title:  Trustee

 
8

 


ESCROW AGREEMENT

This Escrow Agreement (“ Agreement ”) is made and entered into as of this 30th day of January, 2008, by and among: CorMedix, Inc. , a Delaware corporation (the “ Corporation ”), ND Partners LLC , a Delaware   limited liability company (the “ Subscriber ”) and the Secretary of the Corporation (the “ Escrow Agent ”).

Recitals

A.  The Corporation and the Subscriber have entered into a Common Stock Subscription Agreement dated as of the date hereof (the “ Subscription Agreement ”), pursuant to which the Corporation is issuing shares of Common Stock to the Subscriber in consideration for the Subscriber’s performance under a License and Assignment Agreement dated as of even date therewith (the “ License Agreement ”).

B.  The Subscription Agreement contemplates the establishment of an escrow arrangement to secure rights of Subscriber to shares of Common Stock upon the achievement of certain milestones.

Agreement

The parties, intending to be legally bound, agree as follows:

Section 1.    Defined Terms.

1.1  Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings given to them in the Subscription Agreement and the License Agreement, as applicable.

Section 2.  Escrow.

2.1  Shares and Stock Powers Placed in Escrow.   Upon execution of the Subscription Agreement, in accordance with Section 1(b) of the Subscription Agreement, (a) the Corporation shall issue certificates for shares of Common Stock registered in the name of Subscriber, evidencing the shares of Common Stock to be held in escrow on behalf of the Subscriber in accordance with this Agreement, and (b) the Subscriber shall deliver to the Corporation five “assignments separate from certificate” (“ Stock Powers ”) endorsed by Subscriber.  The shares of Common Stock being held in escrow pursuant to this Agreement (the “ Escrow Shares ”) shall collectively constitute an escrow fund (the “ Escrow Fund ”) to secure the rights of Subscriber to receive certain shares of Common Stock pursuant to the Subscription Agreement.  The Escrow Agent agrees to accept delivery of the Escrow Fund and to hold the Escrow Fund in an escrow account (the “ Escrow Account ”), subject to the terms and conditions of this Agreement.
 


 
2.2  Voting of Escrow Shares.   The record owner of the Escrow Shares shall be entitled to exercise all voting rights with respect to such Escrow Shares.

2.3  Dividends, Etc.   The Corporation and the Subscriber agree among themselves, for the benefit of the Corporation and the Escrow Agent, that any shares of the Corporation’s stock or other property (including ordinary cash dividends) distributable or issuable (whether by way of dividend, stock split or otherwise) in respect of or in exchange for any Escrow Shares (including pursuant to or as a part of a merger, consolidation, acquisition of property or stock, reorganization or liquidation involving the Corporation) shall not be distributed or issued to the beneficial owners of such Escrow Shares, but rather shall be distributed or issued to and held by the Escrow Agent in the Escrow Account as part of the Escrow Fund.  Any securities or other property (including ordinary cash dividends) received by the Escrow Agent in respect of any Escrow Shares held in escrow as a result of any stock split or combination of shares of Common Stock, payment of a stock dividend or other stock distribution in or on shares of Common Stock, or change of Common Stock into any other securities pursuant to or as a part of a merger, consolidation, acquisition of property or stock, reorganization or liquidation involving the Corporation, or otherwise, shall be held by the Escrow Agent as, and shall be included within the definition of, Escrow Shares.

2.4  Transferability.   The interests of the Subscriber in the Escrow Account and in the Escrow Shares shall not be assignable or transferable, other than by operation of law.  No assignment or transfer of any of such interests by operation of law shall be recognized or given effect until the Corporation and the Escrow Agent shall have received written notice of such assignment or transfer.

2.5  Fractional Shares.   No fractional shares of Common Stock or other securities shall be retained in or released from the Escrow Account pursuant to this Agreement.  In connection with any release of Escrow Shares from the Escrow Account, the Corporation and the Escrow Agent shall be permitted to “round down” or to follow such other rounding procedures as the Corporation reasonably determines to be appropriate in order to avoid retaining any fractional shares in the Escrow Account and in order to avoid releasing any fractional shares from the Escrow Account.

2.6  Trust Fund.   The Escrow Fund shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of the Subscriber or of any party hereto.  The Escrow Agent shall hold and safeguard the Escrow Fund until the Termination Date.

Section 3.    Release of Escrow Shares.

3.1  Within five business days after each Milestone Date (as defined below), the Escrow Agent shall distribute or cause to be distributed to the Subscriber at its business address 25% of the original number of Escrow Shares (or other property held in the Escrow Account), if any, held on such Milestone Date.
 


 
3.2  The distributions described in Section 3.1 above shall occur on the following dates (each a “ Milestone Date ”):

(a)            The date of the first commercial sale of a Licensed Product in the United States.

(b)            The date of the first commercial sale of a Licensed Product in the European Union.

(c)            The date 30 days after the end of the first calendar quarter during which aggregate, lifetime Net Sales of all Licensed Products exceed $200,000,000.

(d)            The date 30 days after the end of the first calendar quarter during which aggregate, lifetime Net Sales of all Licensed Products exceed $500,000,000.

3.3  If any Escrowed Shares (or other property held in the Escrow Account) have not been delivered to the Subscriber pursuant to Section 3.1 by December 31, 2022 (or, subject to Section 6, such earlier date if the License Agreement is terminated), the Escrow Agent shall, on such date, distribute or cause to be distributed to the Corporation at its business address the total number of such Escrow Shares (or other property held in the Escrow Account) for cancellation.  The Subscriber will have no further right, title or interest to such Escrowed Shares distributed to the Corporation in accordance with this Section 3.3.

3.4  The Escrow Agent is not the stock transfer agent for the Common Stock.  Accordingly, whenever a distribution of a number of shares of Common Stock is to be made, the Escrow Agent must requisition the appropriate number of shares from such stock transfer agent, delivering to it the appropriate stock certificates.  For purposes of this Agreement, the Escrow Agent shall be deemed to have delivered Common Stock to the Subscriber when the Escrow Agent has delivered such certificates to such stock transfer agent with instructions to deliver it to the Subscriber.

Section 4.  Stock Splits.

4.1  All numbers contained in, and all calculations required to be made pursuant to, this Agreement with respect to the Escrow Shares shall be adjusted as appropriate to reflect any stock split, reverse stock split, stock dividend or similar transaction effected by the Corporation after the date hereof.

Section 5.  Limitation of Escrow Agent’s Liability.

5.1  The Escrow Agent undertakes to perform such duties as are specifically set forth in this Agreement only and shall have no duty under any other agreement or document, and no implied covenants or obligations shall be read into this Agreement against the Escrow Agent.  The Escrow Agent shall incur no liability with respect to any action taken by him or for any inaction on his part in reliance upon any notice, direction, instruction, consent, statement or other document believed by him in good faith to be genuine and duly authorized, nor for any other action or inaction except for his own gross negligence or willful misconduct.  In all questions arising under this Agreement, the Escrow Agent may rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based upon such advice the Escrow Agent shall not be liable to anyone.  In no event shall the Escrow Agent be liable for incidental, punitive or consequential damages, except for in the case of gross negligence or willful misconduct by the Escrow Agent.
 


 
5.2  The Corporation and the Subscriber hereby agree to indemnify the Escrow Agent for, and hold him harmless against, any loss, liability or expense incurred without negligence or willful misconduct on the part of Escrow Agent, arising out of or in connection with the Escrow Agent carrying out his duties hereunder.  This right of indemnification, compensation and reimbursement shall survive the termination of this Agreement, and the resignation of the Escrow Agent.

Section 6.   Termination.   This Agreement shall terminate on the Termination Date.  The “ Termination Date ” shall be the earlier of (i) the date that all Escrowed Shares have been released and distributed to either the Subscriber or the Corporation in accordance with Section 3 above or the (ii) the termination of the License Agreement.  Notwithstanding the foregoing, if the License Agreement is terminated by the Corporation pursuant to Article 11.4 of the License Agreement, then this Agreement shall survive such termination until the date described in clause (i) of the preceding sentence; provided, that Escrowed Shares shall continue to be released and distributed in accordance with Section 3 hereof solely with respect to products the manufacture, use or sale of which would infringe one or more issued patents licensed pursuant to the Exclusive License and Consulting Agreement between Subscriber and Hans-Dietrich Polaschegg, dated as of April 29, 2005.

Section 7.   Successor Escrow Agent.   In the event the individual serving as Escrow Agent is no longer serving as the secretary of the Corporation, or if the Escrow Agent becomes unavailable or unwilling to continue as escrow agent under this Agreement, the Escrow Agent may resign and be discharged from his duties and obligations hereunder by giving his written resignation to the parties to this Agreement.  Such resignation shall take effect not less than 30 days after it is given to all parties hereto.  In any such event, the Corporation may appoint a successor Escrow Agent, who may be the successor secretary of the Corporation, if applicable.  The successor Escrow Agent shall, without further acts, be vested with all the estates, property rights, powers and duties of the predecessor Escrow Agent as if originally named as Escrow Agent herein.  The Escrow Agent shall act in accordance with written instructions from the Corporation as to the transfer of the Escrow Fund to a successor escrow agent.

Section 8.  Miscellaneous.

8.1  Attorneys’ Fees .   In any action at law or suit in equity to enforce or interpret this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.


 
8.2   Notices .  Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received (a) when delivered by hand, or (b) two business days after sent by registered mail or, by courier or express delivery service, or by facsimile, to the address or facsimile telephone number set forth below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto):

if to the Corporation:

CorMedix, Inc.
86 Summit Avenue, Suite 301
Summit, NJ 07901
Attn: President

Telephone: (908) 517-9500
Facsimile: (908) 522-9199

if to the Subscriber:

ND Partners LLC
One Joy Street
Boston, MA 02108
Attention:  Anastasios Parafestas

With a copy to:

BRL Law Group LLC
31 St. James Avenue, Suite 850
Boston, MA 02116

Telephone:  (617) 399-6931
Facsimile:  (617) 399-6930

if to the Escrow Agent:

Corporate Secretary
CorMedix, Inc.
86 Summit Avenue, Suite 301
Summit, NJ 07901
Attention: Secretary

Telephone: (212) 554-4388
Facsimile: (908) 522-9199

With a copy to:
 


Paramount BioSciences, LLC
787 Seventh Avenue
48th Floor
New York, NY 10019
Attention: Tim Hofer

Telephone: (212) 489-0428

8.3   Headings .   The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

8.4  Counterpar ts .   This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.

8.5  Applicable Law; Jurisdiction .   This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.  In any action between the parties arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement: (a) each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state and federal courts located in the Borough of Manhattan, County of New York; (b) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court located in the Borough of Manhattan, County of New York; (c) each of the parties irrevocably waives the right to trial by jury; and (d) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepaid, to the address at which such party is to receive notice in accordance with Section 8.2.

8.6  Successors and Assigns .   This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and each of their respective permitted successors and assigns, if any.  The Subscriber may not assign its rights under this Agreement without the express prior written consent of the Corporation, and any attempted assignment of this Agreement or any of such rights by the Subscriber without such consent shall be void and of no effect.

8.7  Waiver .   No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.  No party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
 


 
8.8  Amendment .   This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of all of the parties hereto.

8.9  Severability .   Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.  If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.  In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

8.10  Parties in Interest . Except as expressly provided herein, none of the provisions of this Agreement, express or implied, is intended to provide any rights or remedies to any person other than the parties hereto and their respective successors and assigns, if any.

8.11  Entire Agreement .   This Agreement and the other agreements referred to herein set forth the entire understanding of the parties hereto relating to the subject matter hereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof.

8.12  Waiver of Jury Trial.   Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any action arising out of or related to this Agreement or the transactions contemplated hereby.

8.13 Tax Reporting Information and Certification of Tax Identification Numbers.

(a)  The parties hereto agree that, for tax reporting purposes, all interest on or other income, if any, attributable to the Escrow Fund or any other amount held in escrow by the Escrow Agent pursuant to this Agreement shall be allocable to the Subscriber.

(b)  The Corporation and the Subscriber agree to provide the Escrow Agent with certified tax identification numbers for each of them by furnishing appropriate forms W-9 (or Forms W-8, in the case of non-U.S. persons) and any other forms and documents that the Escrow Agent may reasonably request (collectively, “ Tax Reporting Documentation ”) to the Escrow Agent within 30 days after the date hereof.  The parties hereto understand that, if such Tax Reporting Documentation is not so furnished to the Escrow Agent, the Escrow Agent shall be required by the Code to withhold a portion of any interest or other income earned on the investment of monies or other property held by the Escrow Agent pursuant to this Agreement, and to immediately remit such withholding to the Internal Revenue Service.
 


 
8.14  Cooperation.   The Subscriber agrees to cooperate fully with the Corporation and the Escrow Agent and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by the Corporation or the Escrow Agent to evidence or reflect the transactions contemplated by this Agreement and to carry out the intent and purposes of this Agreement.

8.15 Construction.

(a)  For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.

(b)  The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c)  As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d)  Except as otherwise indicated, all references in this Agreement to “Sections” and “Exhibits” are intended to refer to Sections of this Agreement and Exhibits to this Agreement.
 


 
In Witness Whereof, the parties have duly caused this Agreement to be executed as of the day and year first above written.
 
 
 
Corporation:
   
   
 
CORMEDIX, INC.
   
 
By:  /s/ Bruce Cooper                                           
 
Name:  Bruce Cooper                                              
 
Title:  CEO                                                               
   
   
   
 
Subscriber:
   
   
 
ND PARTNERS LLC
   
 
By:    /s/ Anastasios Parafestas                     
 
Anastasios Parafestas, managing member
of Spinnaker Capital, LLC, the managing
member of ND Partners LLC
   
   
   
   
 
Escrow Agent:
   
   
 
SECRETARY,   CORMEDIX, INC.
   
 
By:  /s/ Timothy Hofer                                       
 
Name:  Timothy Hofer                                         
 
Title:  Secretary                                                   

 

PICTON HOLDING COMPANY, INC.

2006 Stock Incentive Plan

1.            Purpose .  The purpose of the 2006 Stock Incentive Plan (the “ Plan ”) of PICTON HOLDING COMPANY, INC. (the “ Company ”) is to increase shareholder value and to advance the interests of the Company by furnishing a variety of economic incentives (“ Incentives ”) designed to attract, retain and motivate employees, directors, officers and consultants.  Incentives may consist of opportunities to purchase or receive shares of Series A Common Stock, $0.001 par value, of the Company (“ Common Stock ”), on terms determined under this Plan.

2.            Administration .

2.1           The Plan shall be administered by a committee of the Board of Directors of the Company (the “ Committee ”).  The Committee shall consist of not less than two directors of the Company who shall be appointed from time to time by the board of directors of the Company.  Each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “ Exchange Act ”), and an “outside director” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”).  The Committee shall have complete authority to determine all provisions of all Incentives awarded under the Plan (as consistent with the terms of the Plan), to interpret the Plan, and to make any other determination which it believes necessary and advisable for the proper administration of the Plan.  The Committee’s decisions on matters relating to the Plan shall be final and conclusive on the Company and its participants.  No member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Incentives granted under the Plan.  The Committee will also have the authority under the Plan to amend or modify the terms of any outstanding Incentives in any manner; provided, however, that the amended or modified terms are permitted by the Plan as then in effect and that any recipient of an Incentive adversely affected by such amended or modified terms has consented to such amendment or modification.  No amendment or modification to an Incentive, however, whether pursuant to this Section 2 or any other provisions of the Plan, will be deemed to be a re-grant of such Incentive for purposes of this Plan.  If at any time there is no Committee, then for purposes of the Plan the term “Committee” shall mean the Company’s Board of Directors.

2.2           In the event of (i) any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, divestiture (including a spin-off) or any other similar change in corporate structure or capitalization, (ii) any purchase, acquisition, sale or disposition of all or substantially all of the assets or a substantial business or (iii) any other similar occurrence, in each case with respect to the Company or any other affiliate of the Company whose performance is relevant to the grant or vesting of an Incentive, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) may, without the consent of any affected participant, amend or modify the vesting criteria of any outstanding Incentive that is based in whole or in part on the financial performance of the Company (or any subsidiary or division thereof) or such other entity so as equitably to reflect such event, with the desired result that the criteria for evaluating such financial performance of the Company or such other entity will be substantially the same (in the sole discretion of the Committee or the board of directors of the surviving corporation) following such event as prior to such event; provided, however, that the amended or modified terms are permitted by the Plan as then in effect.
 


 
3.            Eligible Participants .  Employees of the Company or its subsidiaries (including officers and employees of the Company or its subsidiaries), directors and consultants, advisors or other independent contractors who provide services to the Company or its subsidiaries (including members of the Company’s scientific advisory board) shall become eligible to receive Incentives under the Plan when designated by the Committee.  Participants may be designated individually or by groups or categories (for example, by pay grade) as the Committee deems appropriate.  Participation by officers of the Company or its subsidiaries and any performance objectives relating to such officers must be approved by the Committee.  Participation by others and any performance objectives relating to others may be approved by groups or categories (for example, by pay grade) and authority to designate participants who are not officers and to set or modify such targets may be delegated.

4.            Types of Incentives .  Incentives under the Plan may be granted in any one or a combination of the following forms:  (a) Incentive Stock Options and Nonstatutory Stock Options (Section 6); (b) stock awards (Section 7); (c) restricted stock (Section 7); and (d) performance shares (Section 8).  Incentive Stock Options may only be granted to employees of the Company.  Officers and directors who are not also employees of the Company may not be granted Incentive Stock Options.

 5.            Shares Subject to the Plan .

5.1.            Number of Shares .  Subject to adjustment as provided in Section 10.6, the number of shares of Common Stock which may be issued under the Plan shall not exceed 925,000 shares of Common Stock.  Of such aggregate number of shares of Common Stock that may be issued under the Plan, the maximum number of shares that may be issued as Incentive Stock Options under Section 422 of the Code is 925,000.  Any shares of Common Stock available for issuance as Incentive Stock Options may be alternatively issued as other types of Incentives under the Plan.  Shares of Common Stock that are issued under the Plan or that are subject to outstanding Incentives will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan.  No individual may be granted Incentives under the Plan with respect to more than 300,000 shares of Common Stock in any year.

5.2.            Cancellation .  In the event that a stock option granted hereunder expires or is terminated or canceled unexercised or unvested as to any shares of Common Stock, such shares may again be issued under the Plan either pursuant to stock options or otherwise.  In the event that shares of Common Stock are issued as restricted stock or pursuant to a stock award and thereafter are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such forfeited and reacquired shares may again be issued under the Plan, either as restricted stock, pursuant to stock awards or otherwise.  The Committee may also determine to cancel, and agree to the cancellation of, stock options in order to make a participant eligible for the grant of a stock option at a lower price than the option to be canceled.
 


 
6.            Stock Options .  A stock option is a right to purchase shares of Common Stock from the Company.  The Committee may designate whether an option is to be considered an Incentive Stock Option or a Nonstatutory Stock Option.  To the extent that any Incentive Stock Option granted under the Plan ceases for any reason to qualify as an “Incentive Stock Option” for purposes of Section 422 of the Code, such Incentive Stock Option will continue to be outstanding for purposes of the Plan but will thereafter be deemed to be a Nonstatutory Stock Option.  Each stock option granted by the Committee under this Plan shall be subject to the following terms and conditions:

6.1.            Price .  The option price per share shall be determined by the Committee, subject to adjustment under Section 10.6.

6.2.            Number .  The number of shares of Common Stock subject to the option shall be determined by the Committee, subject to adjustment as provided in Section 10.6.

6.3.            Duration and Time for Exercise .  Subject to earlier termination as provided in Section 10.4, the term of each stock option shall be determined by the Committee but shall not exceed ten years from the date of grant.  Each stock option shall become exercisable at such time or times during its term as shall be determined by the Committee at the time of grant.  The Committee may accelerate the exercisability of any stock option.

6.4.            Manner of Exercise .  Subject to the conditions contained in this Plan and in the agreement with the recipient evidencing such option, a stock option may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of shares of Common Stock to be purchased and accompanied by the full purchase price for such shares.  The exercise price shall be payable (a) in United States dollars upon exercise of the option and may be paid by cash; uncertified or certified check; bank draft; (b) at the discretion of the Committee, by delivery of shares of Common Stock that are already owned by the participant in payment of all or any part of the exercise price, which shares shall be valued for this purpose at the Fair Market Value on the date such option is exercised; or (c) following the date that the Company’s stock becomes publicly traded, in accordance with procedures previously approved by the Committee, through the sale of the shares of Common Stock acquired on exercise of a stock option through a bank or broker-dealer to whom the participant has submitted an irrevocable notice of exercise and irrevocable instructions to deliver promptly to the Company the amount of sale proceeds to pay the exercise price for such shares together with, if requested by the Company, the amount of any Federal, state, local or foreign withholding taxes payable by the participant in connection with such exercise.  The shares of Common Stock delivered by the participant pursuant to Section 6.4(b) must have been held by the participant for a period of not less than six months prior to the exercise of the option, unless otherwise determined by the Committee.  Prior to the issuance of shares of Common Stock upon the exercise of a stock option, a participant shall have no rights as a shareholder.  Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to such stock options as to which there is a record date preceding the date the participant becomes the holder of record of such shares, except as the Committee may determine in its discretion.
 


 
6.5.            Incentive Stock Options .  Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options which are intended to qualify as Incentive Stock Options (as such term is defined in Section 422 of the Code):

(a)           The aggregate Fair Market Value (determined as of the time the option is granted) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any participant during any calendar year (under the Plan and any other incentive stock option plans of the Company or any subsidiary or parent corporation of the Company) shall not exceed $100,000.  The determination will be made by taking incentive stock options into account in the order in which they were granted.

(b)           Any Incentive Stock Option certificate authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain all provisions required in order to qualify the options as Incentive Stock Options.

(c)           All Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by board of directors or the date this Plan was approved by the Company’s shareholders.

(d)           Unless sooner exercised, all Incentive Stock Options shall expire no later than 10 years after the date of grant.  No Incentive Stock Option may be exercisable after ten (10) years from its date of grant (five (5) years from its date of grant if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company).

(e)           The exercise price for Incentive Stock Options shall be not less than 100% of the Fair Market Value of one share of Common Stock on the date of grant; provided that the exercise price shall be 110% of the Fair Market Value if, at the time the Incentive Stock Option is granted, the participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company.
 


 
7.            Stock Awards and Restricted Stock .  A stock award consists of the transfer by the Company to a participant of shares of Common Stock, without other payment therefor, as additional compensation for services to the Company.  The participant receiving a stock award will have all voting, dividend, liquidation and other rights with respect to the shares of Common Stock issued to a participant as a stock award under this Section 7 upon the participant becoming the holder of record of such shares.  A share of restricted stock consists of shares of Common Stock which are sold or transferred by the Company to a participant at a price determined by the Committee (which price shall be at least equal to the minimum price required by applicable law for the issuance of a share of Common Stock) and subject to restrictions on their sale or other transfer by the participant, which restrictions and conditions may be determined by the Committee as long as such restrictions and conditions are not inconsistent with the terms of the Plan.  The transfer of Common Stock pursuant to stock awards and the transfer and sale of restricted stock shall be subject to the following terms and conditions:

7.1.            Number of Shares .  The number of shares to be transferred or sold by the Company to a participant pursuant to a stock award or as restricted stock shall be determined by the Committee.

7.2.            Sale Price .  The Committee shall determine the price, if any, at which shares of restricted stock shall be sold or granted to a participant, which may vary from time to time and among participants and which may be below the Fair Market Value of such shares of Common Stock at the date of sale.

7.3.            Restrictions .  All shares of restricted stock transferred or sold hereunder shall be subject to such restrictions as the Committee may determine, including, without limitation any or all of the following:

(a)           a prohibition against the sale, transfer, pledge or other encumbrance of the shares of restricted stock, such prohibition to lapse at such time or times as the Committee shall determine (whether in annual or more frequent installments, at the time of the death, disability or retirement of the holder of such shares, or otherwise);

(b)           a requirement that the holder of shares of restricted stock forfeit, or (in the case of shares sold to a participant) resell back to the Company at his or her cost (or, if lower, the then Fair Market Value of such shares), all or a part of such shares in the event of termination of his or her employment or consulting engagement during any period in which such shares are subject to restrictions; or

(c)           such other conditions or restrictions as the Committee may deem advisable.

7.4.            Escrow .  In order to enforce the restrictions imposed by the Committee pursuant to Section 7.3, the participant receiving restricted stock shall enter into an agreement with the Company setting forth the conditions of the grant.  Shares of restricted stock shall be registered in the name of the participant and deposited, together with a stock power endorsed in blank, with the Company.  Each such certificate shall bear a legend in substantially the following form:
 

 
The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the 2006 Stock Incentive Plan of PICTON HOLDING COMPANY, INC. (the “Company”), and an agreement entered into between the registered owner and the Company.  A copy of the 2006 Stock Incentive Plan and the agreement is on file in the office of the secretary of the Company.

7.5.            End of Restrictions .  Subject to Section 10.5, at the end of any time period during which the shares of restricted stock are subject to forfeiture and restrictions on transfer, such shares will be delivered free of all restrictions to the participant or to the participant’s legal representative, beneficiary or heir.

7.6.            Shareholder .  Subject to the terms and conditions of the Plan, each participant receiving restricted stock shall have all the rights of a shareholder with respect to shares of stock during any period in which such shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such shares.  Dividends paid in cash or property other than Common Stock with respect to shares of restricted stock shall be paid to the participant currently.  Unless the Committee determines otherwise in its sole discretion, any dividends or distributions (including regular quarterly cash dividends) paid with respect to shares of Common Stock subject to the restrictions set forth above will be subject to the same restrictions as the shares to which such dividends or distributions relate.  In the event the Committee determines not to pay dividends or distributions, the Committee will determine in its sole discretion whether any interest will be paid on such dividends or distributions.  In addition, the Committee in its sole discretion may require such dividends and distributions to be reinvested (and in such case the participant consents to such reinvestment) in shares of Common Stock that will be subject to the same restrictions as the shares to which such dividends or distributions relate.

8.            Performance Shares .  A performance share consists of an award which shall be paid in shares of Common Stock, as described below.  The grant of a performance share shall be subject to such terms and conditions as the Committee deems appropriate, including the following:

8.1.            Performance Objectives .  Each performance share will be subject to performance objectives for the Company or one of its operating units to be achieved by the participant before the end of a specified period.  The number of performance shares granted shall be determined by the Committee and may be subject to such terms and conditions, as the Committee shall determine.  If the performance objectives are achieved, each participant will be paid in shares of Common Stock or cash as determined by the Committee.  If such objectives are not met, each grant of performance shares may provide for lesser payments in accordance with formulas established in the award.
 

 
8.2.            Not Shareholder .  The grant of performance shares to a participant shall not create any rights in such participant as a shareholder of the Company, until the payment of shares of Common Stock with respect to an award.

8.3.            No Adjustments .  No adjustment shall be made in performance shares granted on account of cash dividends which may be paid or other rights which may be issued to the holders of Common Stock prior to the end of any period for which performance objectives were established.

8.4.            Expiration of Performance Share .  If any participant’s employment or consulting engagement with the Company is terminated for any reason other than normal retirement, death or disability prior to the achievement of the participant’s stated performance objectives, all the participant’s rights on the performance shares shall expire and terminate unless otherwise determined by the Committee.  In the event of termination of employment or consulting by reason of death, disability, or normal retirement, the Committee, in its own discretion may determine what portions, if any, of the performance shares should be paid to the participant.

9.            Change of Control .

9.1            Change in Control .  For purposes of this Section 9, a “ Change in Control ” of the Company will mean the following:

(a)           the sale, lease, exchange or other transfer, directly or indirectly, of substantially all of the assets of the Company (in one transaction or in a series of related transactions) to a person or entity that is not controlled by the Company;

(b)           the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company;

(c)           if any person becomes after the effective date of the Plan the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i) 20% or more, but not 50% or more, of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors, unless the transaction resulting in such ownership has been approved in advance by the Continuing Directors (as defined below), or (ii) 50% or more of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the Continuing Directors); provided that a traditional institutional or venture capital financing transaction shall be excluded from this definition;

(d)           a merger or consolidation to which the Company is a party if the shareholders of the Company immediately prior to effective date of such merger or consolidation have “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act), immediately following the effective date of such merger or consolidation, of securities of the surviving corporation representing (i) 50% or more, but less than 80%, of the combined voting power of the surviving corporation’s then outstanding securities ordinarily having the right to vote at elections of directors, unless such merger or consolidation has been approved in advance by the Continuing Directors, or (ii) less than 50% of the combined voting power of the surviving corporation’s then outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the Continuing Directors); or
 


 
(e)           after the date the Company’s securities are first sold in a registered public offering, the Continuing Directors cease for any reason to constitute at least a majority of the Board.

9.2            Continuing Directors .  For purposes of this Section 9, “ Continuing Directors ” of the Company will mean any individuals who are members of the Board on the effective date of the Plan and any individual who subsequently becomes a member of the Board whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Continuing Directors (either by specific vote or by approval of the Company’s proxy statement in which such individual is named as a nominee for director without objection to such nomination).

9.3            Acceleration of Incentives .  Without limiting the authority of the Committee under the Plan, if a Change in Control of the Company occurs whereby the acquiring entity or successor to the Company does not assume the Incentives or replace them with substantially equivalent incentive awards (as determined by the Committee in its reasonable discretion), unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive at the time of grant, then, as of the date of the Change of Control (a) all outstanding options will vest and will become immediately exercisable in full and, subject to Section 9.4, will remain exercisable for the remainder of their terms, regardless of whether the participant to whom such options have been granted remains in the employ or service of the Company or any subsidiary of the Company or any acquiring entity or successor to the Company; (b) the restrictions on all shares of restricted stock awards shall lapse immediately; and (c) all performance shares shall be deemed to be met and payment made immediately.

9.4            Cash Payment for Options .  If a Change in Control of the Company occurs, then the Committee, if approved by the Committee in its sole discretion either in an agreement evidencing an option at the time of grant or at any time after the grant of an option, and without the consent of any participant affected thereby, may determine that:

 
(a)
some or all participants holding outstanding options will receive, with respect to some or all of the shares of Common Stock subject to such options, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the excess of the Fair Market Value of such shares immediately prior to the effective date of such Change in Control of the Company over the exercise price per share of such options; and
 

 
 
(b)
any options as to which, as of the effective date of any such Change in Control, the Fair Market Value of the shares of Common Stock subject to such options is less than or equal to the exercise price per share of such options, shall terminate as of the effective date of any such Change in Control.

 
If the Committee makes a determination as set forth in subparagraph (a) of this Section 9.4, then as of the effective date of any such Change in Control of the Company such options will terminate as to such shares and the participants formerly holding such options will only have the right to receive such cash payment(s).  If the Committee makes a determination as set forth in subparagraph (b) of this Section 9.4, then as of the effective date of any such Change in Control of the Company such options will terminate, become void and expire as to all unexercised shares of Common Stock subject to such options on such date, and the participants formerly holding such options will have no further rights with respect to such options.

10.            General .

10.1.          Effective Date .  The Plan will become effective upon approval by the Company’s board of directors.

10.2.          Duration .  The Plan shall remain in effect until all Incentives granted under the Plan have either been satisfied by the issuance of shares of Common Stock or the payment of cash or been terminated under the terms of the Plan and all restrictions imposed on shares of Common Stock in connection with their issuance under the Plan have lapsed.  No Incentives may be granted under the Plan after the tenth anniversary of the date the Plan is approved by the shareholders of the Company.

10.3.          Non-transferability of Incentives .  Except, in the event of the holder’s death, by will or the laws of descent and distribution to the limited extent provided in the Plan or the Incentive, unless approved by the Committee, no stock option, restricted stock or performance award may be transferred, pledged or assigned by the holder thereof, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise, and the Company shall not be required to recognize any attempted assignment of such rights by any participant.  During a participant’s lifetime, an Incentive may be exercised only by him or her or by his or her guardian or legal representative.

10.4.          Effect of Termination or Death .  In the event that a participant ceases to be an employee of or consultant to the Company, or the participant’s other service with the Company is terminated, for any reason, including death, any Incentives may be exercised or shall expire at such times as may be determined by the Committee in its sole discretion in the agreement evidencing an Incentive.  Notwithstanding the other provisions of this Section 10.4, except as may be set forth in an agreement evidencing an Incentive, upon a participant’s termination of employment or other service with the Company and all subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time on or after the date of grant, including following such termination), cause options (or any part thereof) then held by such participant to become or continue to become exercisable and/or remain exercisable following such termination of employment or service and Restricted Stock Awards, Performance Shares and Stock Awards then held by such participant to vest and/or continue to vest or become free of transfer restrictions, as the case may be, following such termination of employment or service, in each case in the manner determined by the Committee; provided, however, that no Incentive may remain exercisable or continue to vest beyond its expiration date.  Any Incentive Stock Option that remains unexercised more than one (1) year following termination of employment by reason of death or disability (as defined in Section 22(e)(3) of the Code) or more than three (3) months following termination for any reason other than death or disability will thereafter be deemed to be a Nonstatutory Stock Option.
 


 
10.5.          Additional Conditions .  Notwithstanding anything in this Plan to the contrary: (a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of award of any Incentive or the issuance of any shares of Common Stock pursuant to any Incentive, require the recipient of the Incentive, as a condition to the receipt thereof or to the receipt of shares of Common Stock issued pursuant thereto, to deliver to the Company a written representation of present intention to acquire the Incentive or the shares of Common Stock issued pursuant thereto for his or her own account for investment and not for distribution; and (b) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Incentive or the shares of Common Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the award of any Incentive, the issuance of shares of Common Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such shares of Common Stock shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.  Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to any Incentives granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), and any applicable state or foreign securities laws or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable.  The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.  The Committee may restrict the rights of participants to the extent necessary to comply with Section 16(b) of the Exchange Act, the Internal Revenue Code or any other applicable law or regulation. The grant of an Incentive award pursuant to the Plan shall not limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.
 


 
10.6.          Adjustment .  In the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall be substituted for each of the shares of Common Stock then subject to the Plan, including shares subject to restrictions, options, or achievement of performance share objectives, the number and kind of shares of stock or other securities to which the holders of the shares of Common Stock will be entitled pursuant to the transaction.  In the event of any recapitalization, reclassification, stock dividend, stock split, combination of shares or other similar change in the corporate structure of the Company or capitalization of the Company, the exercise price of an outstanding Incentive and the number of shares of Common Stock then subject to the Plan, and the maximum number of shares with respect to which Incentives may be granted in any year, including shares subject to restrictions, options or achievements of performance shares, shall be adjusted in proportion to the change in outstanding shares of Common Stock in order to prevent dilution or enlargement of the rights of the participants.  In the event of any such adjustments, the purchase price of any option, the performance objectives of any Incentive, and the shares of Common Stock issuable pursuant to any Incentive shall be adjusted as and to the extent appropriate, in the discretion of the Committee, to provide participants with the same relative rights before and after such adjustment.

10.7.          Incentive Plans and Agreements .  Except in the case of stock awards, the terms of each Incentive shall be stated in a plan or agreement approved by the Committee.  The Committee may also determine to enter into agreements with holders of options to reclassify or convert certain outstanding options, within the terms of the Plan, as Incentive Stock Options or as Nonstatutory Stock Options.

10.8.          Withholding .

(a)           The Company shall have the right to (i) withhold and deduct from any payments made under the Plan or from future wages of the participant (or from other amounts that may be due and owing to the participant from the Company or a subsidiary of the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all foreign, federal, state and local withholding and employment-related tax requirements attributable to an Incentive, or (ii) require the participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to an Incentive.  At any time when a participant is required to pay to the Company an amount required to be withheld under applicable income tax laws in connection with a distribution of Common Stock or upon exercise of an option, the participant may satisfy this obligation in whole or in part by electing (the “ Election ”) to have the Company withhold from the distribution shares of Common Stock having a value up to the minimum amount required to be withheld.  The value of the shares to be withheld shall be based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined (“ Tax Date ”).
 


 
(b)           Each Election must be made prior to the Tax Date.  The Committee may disapprove of any Election, may suspend or terminate the right to make Elections, or may provide with respect to any Incentive that the right to make Elections shall not apply to such Incentive.  An Election is irrevocable.

(c)           If a participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act, then an Election is subject to the following additional restrictions:

(1)           No Election shall be effective for a Tax Date which occurs within six months of the grant or exercise of the award, except that this limitation shall not apply in the event death or disability of the participant occurs prior to the expiration of the six-month period.

(2)           The Election must be made either six months prior to the Tax Date or must be made during a period beginning on the third business day following the date of release for publication of the Company’s quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date.

(d)           If the option granted to a participant hereunder is an Incentive Stock Option, and if the participant sells or otherwise disposes of any of the shares of Common Stock acquired pursuant to the Incentive Stock Option on or before the later of (1) the date two years after the date of grant, or (2) the date one year after the date of exercise, the participant shall immediately notify the Company in writing of such disposition.  The participant agrees that the participant may be subject to income tax withholding by the Company on the compensation income recognized by the participant from the early disposition by payment in cash or out of the current earnings paid to the participant.

10.9.          No Continued Employment, Engagement or Right to Corporate Assets .  No participant under the Plan shall have any right, because of his or her participation, to continue in the employ of the Company for any period of time or to any right to continue his or her present or any other rate of compensation.  Nothing contained in the Plan shall be construed as giving an employee, a consultant, such persons’ beneficiaries or any other person any equity or interests of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person.

10.10.        Deferral Permitted .  Payment of cash or distribution of any shares of Common Stock to which a participant is entitled under any Incentive shall be made as provided in the Incentive.  Subject to the limitations specified in Section 409A of the Code, payment may be deferred at the option of the participant if provided in the Incentive.
 


 
10.11.        Amendment of the Plan .  The Board may amend, suspend or discontinue the Plan at any time; provided, however, that no amendments to the Plan will be effective without approval of the shareholders of the Company if shareholder approval of the amendment is then required pursuant to Section 422 of the Code, the regulations promulgated thereunder or the rules of any stock exchange or Nasdaq or similar regulatory body.  No termination, suspension or amendment of the Plan may adversely affect any outstanding Incentive without the consent of the affected participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under the Plan.

 
10.12.        Definition of Fair Market Value . For purposes of this Plan, the “ Fair Market Value ” of a share of Common Stock at a specified date shall, unless otherwise expressly provided in this Plan, be the amount which the Committee or the board of directors of the Company determines in good faith in the exercise of its reasonable discretion to be 100% of the fair market value of such a share as of the date in question; provided, however, that notwithstanding the foregoing, if such shares are listed on a U.S. securities exchange or are quoted on the Nasdaq National Market System or Nasdaq SmallCap Stock Market (“ Nasdaq ”), then Fair Market Value shall be determined by reference to the last sale price of a share of Common Stock on such U.S. securities exchange or Nasdaq on the applicable date. If such U.S. securities exchange or Nasdaq is closed for trading on such date, or if the Common Stock does not trade on such date, then the last sale price used shall be the one on the date the Common Stock last traded on such U.S. securities exchange or Nasdaq.

10.13         Breach of Confidentiality, Assignment of Inventions, or Non-Compete Agreements .  Notwithstanding anything in the Plan to the contrary, in the event that a participant materially breaches the terms of any confidentiality, assignment of inventions, or non-compete agreement entered into with the Company or any subsidiary of the Company, whether such breach occurs before or after termination of such participant’s employment or other service with the Company or any subsidiary, the Committee in its sole discretion may immediately terminate all rights of the participant under the Plan and any agreements evidencing an Incentive then held by the participant without notice of any kind.

10.13         Governing Law .  The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of New York, notwithstanding the conflicts of laws principles of any jurisdictions.

10.14         Successors and Assigns .  The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the participants in the Plan.

10.15         Lock-up Agreement .  Each recipient of securities here­under agrees, in connection with the first registration with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended, of the public sale of the Company's Common Stock, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as the Company or the underwriters, as the case may be, shall specify.  Each such recipient agrees that the Company may instruct its transfer agent to place stop-transfer notations in its records to enforce this Section.  Each such recipient agrees to execute a form of agreement reflecting the foregoing restrictions as requested by the underwriters managing such offering.
 

 
11.16         Nature of Payments .  Incentives shall be special incentive payments to the participants and shall not be taken into account in computing the amount of salary or compensation of a participant for purposes of determining any pension, retirement, death or other benefit under (a) any pension, retirement, profit-sharing, bonus, insurance or other employee benefit plan of the Company or any subsidiary or (b) any agreement between (i) the Company or any subsidiary and (ii) a participant, except as such plan or agreement shall otherwise expressly provide.

11.17         Non-Uniform Determinations .  The Committee’s determinations under the Plan need not be uniform and may be made by the Committee selectively among persons who receive, or are eligible to receive, Incentives, whether or not such persons are similarly situated.  Without limiting the generality of the foregoing, the Committee shall be entitled to enter into non-uniform and selective Incentive agreements as to (a) the identity of the participants, (b) the terms and provisions of Incentives and (c) the treatment of terminations of employment or service.

11.18         Reservation of Shares .  The Company, during the term of this Plan, will at all times reserve and keep available such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan.





EMPLOYMENT AGREEMENT
 
This Agreement, dated as of February 14, 2007 (this Agreement ), is between CORMEDIX INC. , a Delaware corporation with principal executive offices at 787 Seventh Avenue, 48 th Floor, New York, New York 10019 (the   Company ), and Mark Houser, M.D., residing at 8 Barlow Drive, Califon, NJ 07830 (the Employee ).

WIT NESSET H:

WHEREAS , the Company desires to employ the Employee as Chief Medical Officer of the Company, a nd the Employee desires to serve the Company in those capacities, upon the terms and subject to the conditions contained in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

1.    Employment .

(a) Services . The Employee will be employed by the Company as its Chief Medical Officer. The Employee will report to the Chief Executive Officer of the Company and shall perform such duties as are consistent with his posi tion as Chief Medical Officer (the Services ). The Employee agrees to perform such duties faithfully, to devote all of his working time, attention and energies to the business of the Company, and while he remains employed, not to engage in any other busine ss activity that is in conflict with his duties and obligations to the Company without the prior written consent of the Chief Executive Officer of the Company and the Board of Directors of the Company (the Board ).

(b) Acceptance . Employee hereby accepts s uch employment and agrees to render the Services.

2.    Term . The Employee s employment under this Agreement (as it may be extended, the Term ) shall commence on March 1, 2007 (the Commencement Date ) and shall continue for a term of three (3) years, unless sooner terminated pursuant to Section 8 below; provided, however, that the Term shall be extended automatically for additional one-year periods unless one party shall advise the other in writing at least sixty (60) days before the initial expiration of the Term or an anniversary date thereof that this Agreement shall no longer be so extended. Notwithstanding anything to the contrary contained herein, Sections 5, 6 and 9 shall survive the expiration or termination hereof.

3.    Best Efforts; Place of Performan ce .

(a) The Employee shall devote substantially all of his business time, attention and energies to the business and affairs of the Company and shall use his best efforts to advance the best interests of the Company and shall not during the Term be active ly engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, that will interfere with the performance by the Employee of his duties   hereunder or the Employee s availabi lity to perform such duties or that will adversely affect, or negatively reflect upon, the Company.


 
 

 

(b) The duties to be performed by the Employee hereunder shall be performed primarily at the principal office of the Company in the New York, New York metr opolitan area, subject to reasonable travel requirements on behalf of the Company, or such other place as the Board may reasonably designate. Notwithstanding the foregoing, the Company may be relocated to another area or city within the United States with c onsent of the Board.

4.    Compensation . As full compensation for the performance by the Employee of his duties under this Agreement, the Company shall pay the Employee as follows:

(a)         Base Salary . The Company shall pay Employee a salary (the Base Salary ) equal to Two Hundred Twenty Thousand Dollars ($220,000.00) per year. Payment shall be made in accordance with the Company s normal payroll practices. The Board of Directors shall annually review the Base Salary to determine whether an increase in the amou nt thereof is warranted.

(b)         Annual Milestone Bonus . At the discretion of the Board, the   Employee shall receive an annual bonus based on Employee s performance during each calendar year during the Term (the A nnual Milestone  Bonus ) in an amount of up to thirty percent (30%) of his Base Salary (pro rated for any partial calendar year of service), based on the attainment by the Employee of certain financial, clinical development and business milestones (the Milestones ). Mile stones for each calendar year shall be established by the Chief Executive Officer, in conjunction with the Board, after consultation with the Employee, not more than sixty (60) days following the beginning of each calendar year. The Annual Milestone Bonus   shall be payable in cash as a lump-sum   payment no later than seventy-five (75) days after the end of each calendar year.

(c)         Restricted Shares . As additional compensation for the Services to be rendered by the Employee pursuant to this Agreement, the Compa ny shall issue and sell to the Employee a number of restricted shares of common stock, par value $0.001 (the Common Stock ), of the Company (the Restricted Shares ) representing two percent (2.0%) of   the outstanding Common Stock of the Company (excluding certain shares of Common Stock issued to management of the Company). The aggregate purchase price for the Restricted Shares shall equal One Hundred Six Dollars ($106), which the Company represents is equal to the fair market value of those Restricted Shar e s as of the date of purchase. The Restricted Shares, to the extent unvested, shall be held in escrow at Paramount BioSciences, LLC. On each anniversary of the Commencement Date, one-third (33.3%) of the original number of Restricted Shares, subject to stock splits, subdivisions, or other similar transactions, shall vest, subject to the terms of this Agreement, and the Escrow Agent shall release such vested shares to the Employee. In connection with such grant, the Employee shall enter into the Company s stan dard restricted stock agreement attached hereto as Exhibit A and the escrow agreement attached hereto as Exhibit B which will incorporate the foregoing provisions regarding the lapsing of the risk of forfeiture with respect to the Restricted Shares and the relevant provisions contained in Section 9   below. No Restricted Shares granted hereunder shall vest unless the Employee is a current employee of the Company, unless specifically stated herein.

 
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(d)         Withholding . The Company shall withhold all applicable federal, state and local taxes and social security and such other amounts as may be required by law from all amounts payable to the Employee under this Section 4.

(e)         Expenses . The Company shall reimburse the Employee for all normal, usual and necessary expenses incurred by the Employee in furtherance of the business and affairs of the Company, including reasonable travel and entertainment, upon timely receipt by the Company of appropriate vouchers or other proof of the Employee s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by the Company.

(f)         Other Benefits . The Employee shall be entitled to all rights and benefits for which he shall be eligible under any benefit or other plans (including, without limitation, dental, medical, medical reimbursement and hospital plans, pension plans, employee stock purchase plans, profit sharing plans, bonus plans,   prescription drug reimbursement plans, short and long term disability plans, life insurance and other so-called fringe benefits) as the Company shall make available to its senior executives from time to time. In addition, until such time as the Company e stablishes, and Employee becomes eligible to participate in, a benefits program, the Company (i) shall reimburse the Employee for his actual and documented costs incurred in maintaining his current insurance plans pursuant to COBRA; and (ii) shall reimbur s e the Employee for his actual and documented costs incurred in obtaining short and long term disability insurance on terms substantially similar to those provided by such previous employer, provided that the amounts reimbursed pursuant to the foregoing cl a uses (i) and (ii) shall not exceed One Thousand Five Hundred Dollars ($1,500) in the aggregate per month.

(g)         Vacation . The Employee shall be entitled to a vacation of four (4) weeks per annum, in addition to holidays observed by the Company, to be taken in accordance with the Company s employee policies, and subject to the requirement that no more than two weeks be taken consecutively and that all vacation is subject to the prior approval of the Chief Executive Officer. Subject to the Company s vacation po licy as in effect from time to time, the Employee may not be entitled to carry any vacation forward to the next year of employment and may not receive any compensation for unused vacation days.

5.    Confidential Information and Inventions .

(a)         The Employee recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information owned by the Company, its affiliates or third parties with whom the Company or any such affiliates has an obligation of confidenti a lity. Accordingly, during and after the Term, the Employee agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, a n y Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its affiliates. Confidential and Proprietary Information shall include, but shall not be limited to, confidential or proprietar y scientific or technical information, data,   formulas and related concepts, business plans (both curr ent and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotion s , credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company. The Employee expressly acknowledges the trade secret status of the Confidential and Pro p rietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. The Employee agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not   to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company s offices at any time during his e mployment by the Company, except as required in the execution of the Employee s duties to the Company. The Employee agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, r ecords, invoices, technical and business policies, computer programs or disks) thereof in his possession to the Company upon request and in any event as soon as practicable following his termination of employment.

 
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(b)         Except with prior written auth or izati on by the Company, the Employee agrees not to disclose or publish any of the Confidential and Proprietary Information , or any confidential, scientific, technical or business info rm ation of any other party to whom the Company or any of its affiliates owes a n obligation of confidence, at any time during or after his employment with the Company.

(c)         T he Employee agrees that all inventions, discoveries, improvements and patentable or copyrightable works ( Inventions ) initiated, conceived or made by him, eithe r alone or in conjunction with others, during the Te rm that relate to the business of the Company shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent pe rm itted by law, shall be works made for hire as that te rm is defined in the United States Copyright Act (17 U.S. C .A., Section 101). The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual prope rt y or other rights in connection therewith. The Emplo yee hereby assigns to the Company all right, title and interest he may have or acquire in all such Inventions; provided, however, that the Board may in its sole discretion agree to waive the Company s rights pursuant to this Section 5(c) with respect to an y Invention. The Employee further agrees to assist the Company in every proper way (but at the Company s expense) to obtain and from time to time enforce patents, copyrights or other rights on such Inventions in any and all countries, and to that end the E mployee will execute all documents necessary:

(i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when s o obtained or vested to renew and restore the same; and

(ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogo us protection.

 
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(d)         The Employee acknowledges that while performing the Services under this Agreement the Employee may locate, identify and/or evaluate patented or patentable inventions having commercial potential in the fields of pharmacy, pha rmaceutical, biotechnology, healthcare, technology and other fields which may be of potential interest to the Company or one of its affiliates (the Third Party Inventions ). The Employee understands, acknowledges and agrees that all rights to, interests i n or opportunities regarding, all Third-Party Inventions identified by the Company, any of its affiliates or either of the foregoing persons officers, directors, employees (including the Employee), agents or consultants during the Term shall be and remain the sole and exclusive property of the Company or such affiliate and the Employee shall have no rights whatsoever to such Third-Party Inventions and will not pursue for himself or for others any transaction relating to the Third-Party Inventions which is   not on behalf of the Company.

(e)       Employee agrees that he will promptly disclose to the Company, or any persons designated by the Company, all improvements and Inventions made or conceived or reduced to practice or learned by him, either alone or jointly with others, during the Term.

(f)        The provisions of this Section 5 shall survive any termination of this Agreement.

6.     Non-Competition, Non-Solicitation and Non-Disparagement.

(a)       The Employee understands and recognizes that his services to the Company are special and unique and that in the course of performing such services the Employee will have access to and knowledge of Confidential and Proprietary Information and the Employee agrees that, during the Term and for a period of six (6) months thereafte r , he shall not in any manner, directly or indirectly, on behalf of himself or any person, firm, partnership, joint venture, corporation or other business entity ( Person ), enter into or engage in any business which is engaged in any business directly or i ndirectly competitive with the business of the Company (a Subsequent Employer ), either as an individual for his own account, or as a p artner , joint venturer, owner, executive, employee, independent contractor, principal, agent, consultant, salesperson, of ficer, director or shareholder of a Person in a business competitive with the Company, within the geographic area of the Company s business, which is deemed by the parties hereto to be the United States; provided, however, that the Employee may enter into or engage in any Subsequent Employer as long as the Employee does not provide services to that portion or portions of such Subsequent Employer s business that is directly or indirectly competitive with the business of the Company. The Employee acknowledges that, due to the unique nature of the Company s business, the loss of any of its clients or business flow or the improper use of its Confidential and Proprietary Information could create significant instability and cause substantial damage to the Company and its affiliates and therefore the Company has a strong legitimate business interest in protecting the continuity of its business interests and the restriction herein agreed to by the Employee narrowly and fairly serves such an important and critical bu s iness interest of the Company. For purposes of this Agreement, the Company shall be deemed to be actively engaged in the development and commercialization of therapeutics (including d ru gs, medical devices and vaccines) for those indications in which the Com pany or any of its direct or indirect subsidiaries is actively engaged or has taken reasonable steps to become engaged at the time of the termination of the Employee s employment or during the two   year period prior thereto. Notwithstanding the foregoing, nothing contained in this Section 6(a) shall be deemed to prohibit the Employee from acquiring or holding, solely for investment, publicly traded securities of any corporation, some or all of the a c tivities of which are competitive with the business of the Company so long as such securities do not, in the aggregate, constitute more than three percent (3%) of any class or series of outstanding securities of such corporation.

 
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(b)         The Employee hereby a cknowledges and agrees that the covenant against competition provided for pursuant to Section 6(a) is reasonable with respect to its duration, geographic area and scope. If, at the time of enforcement of this Section 6, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the parties hereto agree that the maximum duration, scope or geographic area legally permissible under such circumstances will be substituted for the duration, scope or area stated here i n.

(c)         During the Term and for a period of six (6) months thereafter, the Employee shall not, directly or indirectly, without the prior written consent of the Company:

(i) solicit or induce any employee of the Company or any of its affiliates to leave th e employ of the Company or any such affiliate; or hire for any purpose any employee of the Company or any affiliate or any employee who has left the employment of the Company or any affiliate within one year of the termination of such employee s employment with the Company or any such affiliate or at any time in violation of such employee s non-competition agreement with the Company or any such affiliate; or

(ii) solicit or accept employment or be retained by any Person who, at any time during the Term of this Agreement, was an agent, client or customer of the Company where his position will be related to the business of the Company; or

(iii) solicit or accept the business of any agent, client or customer of the Company with respect to products or services similar to those provided or supplied by the Company.

(d)         The Company and the Employee each agree that both during the Term and at all times thereafter, neither party shall directly or indirectly disparage, whether or not true, the name or reputation of t he other party or any of its affiliates, including but not limited to, any officer, director, employee or shareholder of the Company or any of its affiliates.

(e)         In the event that the Employee breaches any provisions of Section 5 or this Section 6 or the re is a threatened breach, then, in addition to any other rights which the Company may have, the Company shall (i) be entitled, without the posting of a bond or other security, to injunctive relief to enforce the restrictions contained in such Sections an d (ii) have the right to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments and other benefits (collectively Benefits ) derived or received by the Employee as a result of any transaction constituting a breach of any of the provisions of Sections 5 or 6 and the Employee hereby agrees to account for and pay over such Benefits to the Company. The Company and the Employee agree that any such action for injunctive or equitable relief shall be h eard in a state or federal court situated in the County and   State of New York and each of the parties hereto agrees to accept service of   process by registered or certified mail and to otherwise consent to the personal jurisdiction of such courts. The Employee agrees that in an action pursuant to Sections 5 or 6, tha t if the Company makes a prima facie showing that the Employee has violated or apparently intends to violate any of the provisions of Sections 5 or 6, the Company need not prove either damage or irreparable injury in order to obtain injunctive relief.


 
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(f)         Each of the rights and remedies enumerated in Section 6(e) shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to the Company at law or in equity. In the event that an actual proceeding is brought in equity to enforce the provisions of Section 5 or this Section 6, the Employee shall not urge as a defense that there is an adequate remedy at law nor shall the Company be prevented from seeking any other remedies which may be available.

(g)         The provisions of this Section 6 shall survive any termination of this Agreement.

7.     Representations and Warranties by the Employee .

The Employee hereby represents and warrants to the Company as follows:

(i) Neither the execution or delivery of this Agreement nor the perf or mance by the Employee of his duties and other obligations hereunder violate or will violate any statute, law, determination or award, or conflict with or constitute a default or breach o f any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which the Employee is a party or by which he is bound.

(ii) Employee will not use any confidential information or trade secrets of any third party in his employment by the Company in violation of the terms of the agreements under which he had access to or knowledge of such confidential information or trade secrets.

(iii) The Employee has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the Employee enforceable against him in accor dance with its terms. No approvals or consents of any persons or entities are required for the Employee to execute and deliver this Agreement or perform his duties and other obligations hereunder.

8.     Termination . The Employee s employment hereunder shall be terminated upon the Employee s death and may be terminated as follows:

(a)             The Employee s employment hereunder may be terminated by the Company for Cause. Any of the following actions by the Employee shall constitute Cause :

(i) The willful failure, disregard or refusal by the Employee to perform his duties hereunder;

 
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(ii) Any willful, intentional or grossly negligent act by the Employee having the effect of injuring, in a material way (whether financial or otherwise and as determined in good-faith by the Company), the business or reputation of the Company or any of its affiliates, including but not limited to, any officer, director, executive or shareholder of the Company or any of its affiliates;

(iii) Willful misconduct by the Employee in respect of the duties or obligations of the Employee under this Agreement, including, without limitation, insubordination with respect to directions received by the Employee from the Chief Executive Officer or the Board;

(iv) The Employee s conviction of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea);

(v) The determination by the Company, after a reasonable and good-faith investigation by the Company following an allegation by an employee, contractor or customer of the Company, that the Employee engaged in some form of harassment prohibited by law (inc l uding, without limitation, age, sex or race discrimination);

(vi) Any misappropriation or embezzlement of the property of the Company or its affiliates (whether or not a misdemeanor or felony);

(vii) Breach by the Employee of any of the provisions of Sec tions 5, 6 or 7 of this Agreement; or

(viii) Breach by the Employee of any provision of this Agreement other than those contained in Sections 5, 6 or 7 which is not cured by the Employee within thirty (30) days after notice thereof is given to the Employe e by the Company.

(b) The Employee s employment hereunder may be te r minated by the Company due to the Employee s Disability. For purposes of this Agreement, a te rm ination for Disability   shall occur (i) when the Company has provided a written termination notice to the Employee supported by a written statement from a reputable independent physician to the effect that the Employee shall have become so physically or mentally incapacitated as to be unable to resume, within the ensuing six (6) months, his emp l oyment hereunder by reason of physical or mental illness or injury, or (ii) upon rendering of a written termination notice by the Company after the Employee has been unable to substantially perform his duties hereunder for 60 or more consecutive days, or m ore than 90 days in any consecutive twelve month period, by reason of any physical or mental illness or injury. For purposes of this Section 8(b), the Employee agrees to make himself available and to cooperate in any reasonable examination by a reputable i ndependent physician retained by the Company.

(c) The Employee s employment hereunder may be terminated by the Board upon the occurrence of a Change of Control. For purposes of this Agreement, Change of Control   means, following the Commencement Date:

 
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(i) the acquisition by any Person (including a group of Persons within the meaning of Section l3(d)(3) or l4(d)(2) of the Exchange Act) of beneficial ownership of any capital stock of the Company, if, after such acquisition, such Person benefici ally owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Vot ing Securities ); or

(ii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a Business Combinatio n ), unless, immediately following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially o wn, directly or indirectly, more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the resulting or acquiring corporation in such Business Combination (which shall include, w ithout limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the Outsta nding Company Voting Securities immediately prior to such Business Combination.

(d)         The Employee s employment hereunder may be terminated by the Employee with or without Good Reason. For purposes of this Agreement, Good Reason   shall mean: (i) any reduct ion by the Company of the Employee s compensation or benefits payable hereunder (it being understood that a reduction of benefits applicable to all employees of the Company, including the Employee, shall not be deemed a reduction of the Employee s compensa tion package for purposes of this definition), (ii) any relocation of the place of employment of the Employee more than thirty (30) miles from the New York, New York city limits and more than sixty (60) miles from the Employee s address listed herein and l ocated outside the state of New Jersey; and (iii) any material adverse change in his title, duties or responsibilities.

(e)         The Employee s employment may be terminated by the Company for any reason or no reason.

9. Compensation upon Termination .

(a)         If   the Employee s employment is terminated as a result of his death or Disability, the Company shall pay to the Employee or to the Employee s estate, as applicable, his Base Salary and any accrued but unpaid Annual Milestone Bonus and expense reimbursement am ounts through the date of his death or Disability. All Restricted Shares and stock options held by the Employee (the Stock Options ) that are scheduled to vest on the next succeeding anniversary of the Commencement Date shall be accelerated and deemed to have vested as of the termination date. All Restricted Shares and Stock Options that have not vested (or been deemed pursuant to the immediately preceding sentence to have vested) as of the date of termination shall be forfeited to the Company as of such d ate.

 
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(b)         If the Employee s employment is terminated by the Company for Cause or by the Employee other than for Good Reason, then the Company shall pay to the Employee his Base Salary and unreimbursed expenses through the date of his termination and the Employee shall have no further entitlement to any other compensation or b e nefits from the Company. All Restricted Shares and Stock Options that have not vested as of the date of termination shall be forfeited to the Company as of such date.

(c)         If   the Employee s employment is terminated by the Company (or its successor) within t hirty (30) days prior to or sixty (60) days following the occurrence of a Change of Control and on the date of termination pursuant to Section 8(c) the fair market value of the Company s Common Stock, in the aggregate, as determined in good faith by the Bo ard on the date of such Change of Control, is less than two (2) times the amount the Company has raised in gross proceeds through the sale of Equity Securities, then the Company (or its successor, as applicable) shall continue to pay to the Employee his B a se Salary and benefits for a period of three (3) months following such termination as well as any expense reimbursement amounts owed through the date of termination, and, notwithstanding any provision of this Agreement to the contrary, all non-competition   and non-solicitation obligations of the Employee under Section 6 of this Agreement shall last for three (3) months. All Restricted Shares and Stock Options that are scheduled to vest on the next succeeding anniversary of the Commencement Date shall be acc e lerated and deemed to have vested as of the termination date. All Restricted Shares and Stock Options that have not vested (or been deemed pursuant to the immediately preceding sentence to have vested) as of the date of termination shall be forfeited to t h e Company as of such date. As used herein,   Equity Securities   shall mean shares of Common Stock, preferred stock, options, warrants or other rights to purchase Common Stock or securities or evidences of indebtedness convertible into or exchangeable for sha res of Common Stock.

(d)         I f   the Employee s employment is terminated by the Company other than as a result of the Employee s death or Disability and other than for reasons specified in Sections 9(b) or (c) (including, without limitation, any termination as a result of the Company s nonrenewal of this Agreement), or by the Employee for Good Reason, then the Company shall (i) continue to pay to the Employee his Base Salary for a period of six (6) months following such termination, (ii) pay the Employee any exp ense reimbursement amounts owed through the date of termination, and (iii) all Restricted Shares and Stock Options that are scheduled to vest during the Te r m shall be accelerated and deemed to have vested as of the termination date. The Company s obligation under clause (i) of this Section 9(d) shall be subject to offset by any amounts otherwise received by the Employee from any employment during the six (6) month period following the termination of his employment.

(e)         This Section 9 sets forth the only obl igations of the Company with respect to the termination of the Employee s employment with the Company, and the Employee acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not expressly provided in Section 9.

(f)         Notwithstanding anything in this Agreement or any other agreement between the Employee and the Company to the contrary, in the event that the Company dete r mines that the provisions of Section 280G of the Internal Revenue Code of 1986, as   a mended (the Code ), relating to excess parachute payments (as defined in the Code) shall be applicable to any payment or benefit received or to be received by Employee, then the total amount of   payments or benefits payable to Emp loyee shall be reduced to the largest amount such that the provisions of Section 280G of the Code relating to excess parachute payments shall no longer be applicable. Should such a reduction be required, the Company shall determine which payment or benef it to reduce or eliminate.

 
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(g)         The provisions of this Section 9 shall survive any termination of this Agreement.

10.   Compliance with Code Section 409A .

(a)         If any payment, compensation or other benefit provided to the Employee in connection with his emp loyment termination is determined, in whole or in part, to constitute nonqualified deferred compensation within the meaning of Section 409A of the Code ( Section 409A ) and the Employee is a specified employee as defined in Section 409A(2)(B)(i), no part of such payments shall be paid before the day that is six (6) months plus one (1) day after the termination date (the New Payment Date ). The aggregate of any payments that otherwise would have been paid to the Employee during the period between the term ination date and the New Payment Date shall be paid to the Employee in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time   period originally scheduled, in accordance with the terms of this Agreement.

(b)         The parties acknowledge and agree that the interpretation of Section 409A and its application to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations become available. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to the Employee that would be deemed to constitute nonqualified deferred compensation within the meaning of Section 409A are intended to comply with Section 409A. If, however, any such benefit or payment is deemed to not comply with Section 409A, the Company and the Employee agree to renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) so th a t either (i) Section 409A will not apply or (ii) compliance with Section 409A will be achieved; provided, however, that any resulting renegotiated terms shall provide to the Employee the after-tax economic equivalent of what otherwise has been provided to   the Employee pursuant to the terms of this Agreement, and provided further, that any deferral of payments or other benefits shall be only for such time period as may be required to comply with Section 409A.

11.   Miscellaneous .

(a)         This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of   New York, without giving effect to its principles of conflicts of laws.


 
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(b)         Any dispute arising out of, or relating to, this Agreement or the breach thereof (other tha n Sections 5 or 6 hereof), or regarding the interpretation thereof, shall be finally   settled by arbitration conducted in New York City in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect before a single arbitrator appointed in accordance with such rules. Judgment upon any award rendered therein may be entered and enforcement obtained thereon in any court having jurisdiction. The arbitrator shall have authority t o grant any form of appropriate relief, whether legal or equitable in nature, including specific performance. For the purpose of any judicial proceeding to enforce such award or incidental to such arbitration or to compel arbitration and for purposes of S e ctions 5 and 6 hereof, the parties hereby submit to the exclusive jurisdiction of the Supreme Court of the State of   New York, New York County, or the United States District Co urt for the Southern District of New York, and agree that service of process in such arbitration or co urt proceedings shall be satisfactorily made upon it if sent by registered mail addressed to it at the address referred to below in paragraph (i) of this Se ction 11 below. The costs of such arbitration shall be borne proportionate to the f inding of fault as determined by the arbitrator. Judgment on the arbitration award may be entered by any court of competent jurisdiction.

(c)         This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and permitted assigns.

(d)         This Agreement, and the Employee s rights and obligations hereunder, may not be assigned by the Employee. The Company may assign its rights, together with its obligations, hereunder in connectio n with any sale, transfer or other disposition of all or substantially all of its business or assets.

(e)         This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.

(f)         T he failure of either   party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms , conditions and provision s shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either pa rt y shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.

(g)         All notices, demands or other communications desired or required to be given by any party to any other party hereto shall be in writing and shall be deemed effectively given upon (i) personal delivery to the party to be notified, (ii) upon confirmation of receipt of telecopy or   other electronic facsimile transmission, (iii) one business day after deposit with a reputable overnight courier, prepaid for priority overnight delivery, or (iv) five days after deposit with the United States Post Office, postage prepaid, in each case to   such party at the address set forth on the signature page hereto, or to such other addresses and to the attention of such other individuals as any pa rt y shall have designated to the other parties by notice given in the foregoing manner.

(h)         This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof. No representation, promi s e or inducement has been made by either party that is not embodied in this   Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

 
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(i)         As used in this Agreement, affiliate of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person.

(j)         The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

(k)        This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrume nt.
 
( l )         As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural, shall be deemed to include the others whenever and wherever the context so requires. Additionally, unless the context requires otherwise, or is not exclu sive.

[ Remainder of   Page Intentionally Left Blank   Signature Page Follows ]


 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.


CORMEDIX INC.

 
By: /s/ Bruce Cooper, M.D.     
Name: Bruce Cooper, M.D.
Title: President and Chief Executive Officer


EMPLOYEE


/s/ M ark   Houser, M.D.            
M ark   Houser, M.D.

 
 

 

CORMEDIX INC.
AMENDED AND RESTATED
CONSULTING AGREEMENT WITH
SUDHIR V. SHAH, M.D.
 
This Consulting Agreement (this “Agreement”) between CorMedix Inc. (the “Company”) and Sudhir V. Shah, M.D., FACP (the “Consultant”), dated as of January 10, 2008, amends and restates in its entirety the Consulting Agreement dated as of July 28, 2006 between the Company (which was then named “Picton Holding Company, Inc.”) and the Consultant (the “Existing Agreement”).
 
In consideration of the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree as follows:
 
1.
University Policies . Reference is made to the policies to which Consultant is subject as a result of his engagement with the University Of Arkansas For Medical Sciences (the “University”) and his obligations to the University thereunder (the “University Policies”). It is the intention of the Company and the Consultant that the services to be performed by the Consultant hereunder be consistent with such Policies and in entering into this Agreement Consultant has complied with any and all University Policies related to the performance of services to industry.
 
2.
Consulting and Other Services . Subject to the terms and conditions set forth in this Agreement, Consultant shall provide to the Company the following services:
 
a. 
Consulting Services . The Consultant’s consulting services to be rendered hereunder (the “Consulting Services”) will involve those areas mutually agreed to by and between the Consultant and the Company. The Company hereby retains the Consultant as a consultant to the Company to perform the following services for the Company, and the Consultant hereby agrees to perform the following services for the Company:
 
i. 
The Consultant shall spend up to 40 hours per month consulting for the Company under this Agreement. Consulting services will be rendered in person and/or over the telephone or otherwise. Consultant shall attend all meetings of the Company’s Scientific Advisory Board, at such times and places as the Company may request, which may include weekends.
 
ii. 
Consultant shall serve as a member of the Company’s Scientific Advisory Board for at least one year from the date of this Agreement.
 
iii. 
The Consultant may from time to time be unavailable to attend meetings or perform other consulting duties, due to other prior obligations including but not limited to teaching and other academic duties and attending scientific conferences, and such unavailability shall not be considered a breach of this Agreement if the Consultant gives the Company reasonable notice of such unavailability.
 

 
3.
Cash Compensation . Consultant will receive cash compensation for his services hereunder as provided in the attached Schedule A.
 
4.
Expenses . The Company will reimburse the Consultant for any actual expenses incurred by the Consultant while rendering services under this Agreement so long as the expenses in excess of $500 are pre-approved in writing by the Company and are reasonable and necessary. Such expenses shall include reasonable and necessary travel, lodging and meals in connection with services performed under this Agreement. Requests for reimbursement shall be in a form reasonably acceptable to the Company.
 
5.
Confidentiality and Noncompetition Provisions . Consultant agrees that some restrictions on his activities during and after his consulting service are necessary to protect the goodwill, Confidential Information (as hereinafter defined) and other legitimate interests of the Company:
 
a. 
Proprietary Information . Consultant agrees to be bound by the following:

i. 
The Consultant recognizes that in performance under this Agreement he will have contact with information of substantial value to the Company that is not generally known outside the Company and that gives the Company an advantage over its competitors who do not know or use it, including, but not limited to, techniques, designs, drawings, processes, inventions, developments, equipment, prototypes, slides, customer information and business, scientific and financial information relating to the business, products, practices or techniques of the Company. The Consultant agrees to regard and preserve as confidential such information.
 
ii. 
The Consultant will not, at any time (except as authorized by the Company), divulge or disclose, directly or indirectly, to any person, firm, association or corporation other than bona fide employees of the Company or any affiliate of the Company, acting in that capacity, or use for his own benefit or gain or any purpose other than the performance of services hereunder, any Confidential Information (as hereinafter defined), of the Company or any of its affiliates. “Confidential Information” means any knowledge, or data concerning the business, technology or affairs of the Company or any affiliate of the Company including any inventions, discoveries, improvements, products, processes, technology, trade secrets, know-how, designs, formulas, or any other confidential material, data, information or instructions, technical or otherwise, owned by the Company or any affiliate of the Company.
 
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iii. 
All documents, data, records, apparatus, equipment and other physical property produced by the Consultant or others in connection with the Consultant’s activities pursuant to this Agreement or which are furnished to the Consultant by the Company shall be and remain the sole property of the Company and shall be returned promptly to the Company as and when requested by the Company.
 
b.
The limitations imposed by this Section 5 shall not apply to (i) information which at the time of disclosure to Consultant is in the public domain or already possessed by the Consultant, (ii) information which becomes available to the public at any time, other than as a result of acts by the Consultant in violation of this Agreement, (iii) information which is lawfully required to be disclosed to any governmental agency or is otherwise required to be disclosed by law and (iv) information disclosed to the Consultant in good faith by a  third party who has an independent right to such information and who discloses the same to the Consultant.
 
c.
Non-Disclosure of Third Party Proprietary Information . Consultant will not, during his consulting service with the Company under this Agreement, improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer, or other person or entity with whom he has an agreement or duty to keep in confidence information acquired by him in confidence, if any.
 
d.
Remedies . Consultant agrees that the Company shall, in addition to any other remedies available to it, be entitled to preliminary and permanent injunctive relief against any breach by Consultant of the covenants contained in this Section 5, without having to post bond.
 
6. 
Inventions .
 
a.
Subject to this Section 6, Consultant agrees that any Inventions (as defined below) shall be the property of the Company and its assigns and shall be treated as works made for hire. Consultant agrees to assign, and does hereby assign, to the Company all right, title and interest in and to all such Inventions. As used herein, “Inventions” includes all inventions,  improvements, biological materials, know-how, data and other subject matter (whether or not patented or patentable, and including all intellectual property rights therein) developed, made, conceived, reduced to practice, discovered or learned by Consultant, solely or jointly with others, in the course of providing the Consulting Services.
 
b.
Consultant agrees to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in any Invention and any intellectual property rights therein in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any intellectual property rights therein.
 
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7. 
Term and Termination . This Agreement shall be in effect for [one (1) year] commencing on the date hereof subject to earlier termination as set forth in this Section 7. The Company may terminate the Consultant’s service under this Agreement with or without Cause (as defined below) or Frustration of Purpose (as defined below) and the Consultant may terminate his service hereunder with or without Good Reason (as defined below), in each case on 30 days’ prior written notice. Consultant’s services hereunder shall also terminate on his death or permanent disability.
 
a.
Upon termination of Consultant’s service with the Company for any reason, the Company shall have no further obligation to Consultant under this Agreement other than for amounts earned through the date of termination. No severance pay or other benefits of any kind will be provided.
 
b.
The following shall constitute “Cause”: (i) any willful act of personal dishonesty, fraud or misrepresentation taken by the Consultant in connection with his responsibilities as a Consultant which was intended to result in substantial gain or personal enrichment of the Consultant at the expense of the Company and was materially and demonstrably injurious to the Company; (ii)  the Consultant’s conviction of a felony on account of any act which was materially and demonstrably injurious to the Company; or (iii) the Consultant’s willful and continued failure to substantially perform his principal duties and obligations (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied in a reasonable period of time after receipt of written notice from the Company. For the purposes of this Section, no act or failure to act shall be considered “ willful” unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The following shall constitute “Frustration of Purpose”: any change in University Policies which materially adversely affects Consultant’s ability to perform the services contemplated hereunder or to assign his rights in Inventions to the Company as provided for herein.
 
c.
The following shall constitute “Good Reason” for termination: material breach by the Company of any provision of this Agreement which breach continues for more than ten (10) business days following written notice from Consultant to the Company setting forth in reasonable detail the nature of such breach.
 
d.
The Agreement may be renewed for 30 day periods upon mutual agreement by the parties hereto.
 
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8.
No Conflict . Consultant represents that to the best of his knowledge and belief (a) his execution and delivery of, and performance of his expected duties under, this Agreement do not conflict with any other agreement to which he is a party or by which he is bound, including, without limitation, any agreement to keep in confidence proprietary information acquired by Consultant in confidence or trust prior to his retention as a consultant by the Company, and (b) he has not brought and will not bring with him to the Company or use in performance of his responsibilities at the Company any equipment, supplies, facility or trade secret information of any current or former employer which are not generally available to the public, unless he has obtained written authorization for their use.
 
9. 
Representations and Indemnity .
 
a.
Consultant hereby represents and warrants to the Company that there exist no actual, pending, threatened, or available claims (by the University, the United States Department of Veterans Affairs, or any other entity or individual with whom Consultant has been employed or for whom Consultant has performed services) of ownership or rights to any intellectual property owned or licensed by the Company.
 
b.
Consultant hereby indemnifies, defends and holds harmless the Company, its  affiliates and their respective officers, directors, employees and agents (each an “Indemnitee”) from and against any and all losses, damages, liabilities or expenses (including reasonable attorneys fees and other costs of defense) in connection with any and all actions, suits, claims or demands that may be brought or instituted against any Indemnitee by any third party based on, arising out of, or resulting from, any (a) breach by Consultant of his representations, warranties or covenants under this Agreement, (b) negligent act or omission, fraud, or the willful misconduct of Consultant in performing his obligations under this Agreement, or (c) the assertion of ownership or rights to any intellectual property owned licensed by the Company by the University, the United States Department of Veterans Affairs, or any other entity or individual with whom Consultant has been employed or for whom Consultant has performed services.
 
10.
Independent Contractor . In rendering services to the Company, Consultant shall act as an independent contractor and not as an employee or agent of the Company.
 
11.
Amendment . The provisions of this Agreement may be amended by the written agreement of the Company and Consultant.
 
12.
Choice of Law . This Agreement shall be governed and construed in accordance with the internal laws of the State of New Jersey.
 
13.
Successors , etc . This Agreement shall be binding upon and shall inure to the benefit of the Company’s successors, transferees and assigns. The Company requires the personal services of Consultant hereunder, and Consultant may not assign this Agreement.
 
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14.
Execution of Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one instrument.
 
15.
Severability . In the event that any provision of this Agreement would, under applicable law, be invalid or unenforceable, such provision shall, to the extent permitted under applicable law, be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent possible under applicable law. The provisions of this Agreement are severable, and in the event that any provision hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect any other provision hereof.
 
16.
Notices . Any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person or five business days after deposit in the United States mail, postage prepaid, registered or certified, and addressed to Consultant at his address set forth above or, in the case of the Company, at its address set forth above, attention of President, or to such other address as either party may specify by notice to the other.
 
17.
Survivability . Upon expiration or termination of this Agreement, neither the Company nor Consultant will have any further obligations under this Agreement, except the obligations under sections 5 and 6 will survive.
 
18.
Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto, and supersedes any and all prior or contemporaneous communications, agreements and understandings, written or oral, with respect to the terms and conditions of Consultant’s service to the Company, including without limitation the Existing Agreement.
 
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and delivered by its duly authorized officer and Consultant has executed and delivered this Agreement.
 
  CORMEDIX INC.
     
 
By:
/s/ Bruce Cooper  
    Name: Bruce Cooper, M.D.
   
Title:   President & CEO
 
  CONSULTANT  
       
 
 
 
  Sudhir V. Shah, M.D.  
 
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and delivered by its duly authorized officer and Consultant has executed and delivered this Agreement.
 
  CORMEDIX INC.  
       
 
By:
      
    Name: Bruce Cooper, M.D.  
   
Title:   President & CEO
 
 
  CONSULTANT  
       
  
/s/ Sudhir V. Shah
 
  Sudhir V. Shah, M.D.  
 
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SCHEDULE A
 
Compensation
 
Beginning on the Effective Date and continuing until the Qualified Financing Date, $7,000 per month, payable monthly in advance on the first of each month.
 
Beginning on the Qualified Financing Date, $12,000 per month, payable monthly in advance on the first of each month.
 
“Qualified Financing Date” shall mean the earliest date after the Effective Date on which the Company has consummated a sale of its equity securities (excluding convertible debt instruments) or assets in a transaction or series of related transactions with gross proceeds of at least $10,000,000 to the Company.
 
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CONSULTING AGREEMENT
 
THIS CONSULTING AGREEMENT (this “Agreement” ), dated as of 30 January 2008 (the “Effective Date” ), is by and between Frank Prosl (“Consultant” ), and CorMedix Inc., with principal executive offices at 86 Summit Ave., Suite 301, Summit, NJ 07901 (the “Company” ).
 
WITNESSETH :
 
WHEREAS, Company is a development stage biomedical and pharmaceutical company;
 
WHEREAS, Consultant provides expertise in regulatory and development matters related to the pharmaceutical, biotechnology and life science sectors;
 
WHEREAS, Company desires that it be able to call upon the knowledge and experience of Consultant for consultation services and advice; and
 
WHEREAS, Consultant is willing to render such services to Company on the terms and conditions hereinafter set forth in this Agreement.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:
 
Section 1. Services.   Consultant agrees to provide general consulting services to Company focused on certain assets as set forth on Exhibit A hereto (the Assets ). Consultant’s services to the Company shall include those set forth on Exhibit A hereto, and shall include assisting with other projects at the Company’s direction that are reasonably related to such services (the “Services” ). Consultant hereby agrees that the Services shall be provided at such times and at such places as the Company shall reasonably request, and in accordance with the highest prevailing industry standards and practices for the performance of similar services.
 
Section 2.    Term of Agreement.   The retention of the Consultant by the Company as provided in Section 1 above shall be for a period of two (2) years from the date hereof, unless sooner terminated in accordance herewith (the “Term” ); provided, however, that the Term shall be extended automatically for an additional one-year period upon mutual written agreement of both Consultant and Company. Notwithstanding anything to the contrary contained herein, the Agreement may be terminated by Consultant or the Company upon thirty (30) days prior written notice to the other party. Immediately upon receipt of such notice from the Company, Consultant shall institute such termination procedures as may be specified in the notice and shall use his/her best efforts to minimize the cost to Company resulting from such termination. Sections 5, 6, 7, 8, 9 and 10 shall survive the expiration or termination of this Agreement.
 
Section 3. Compensation.   As full compensation for the performance by Consultant of the Services hereunder, the Company shall:
 

 
(a)       Pay Consultant $12,500 per month. Consultant shall provide the Company with written invoices on a monthly basis for services rendered for such month, a description of the activities undertaken by Consultant and/or Consultant Personnel, a list of all meetings attended during the month and the itemization of all expenses incurred that are reimbursable pursuant to Section 4 hereof. The Company agrees that payment shall be made to Consultant within thirty (30) business days of its receipt of each undisputed monthly invoice, beginning on the two-month anniversary of the Effective Date.
 
(b)       As soon as practicable after the Effective Date, the Company shall issue to Consultant a warrant to purchase 20,000 shares of the Company’s Series A Common Stock, par value $0.001 (the “Common Stock” ), and shall further issue Consultant a warrant to purchase 10,000 shares of Common Stock as soon as practicable following the satisfactory achievement (in the good faith judgment of the Company’s Board of Directors) of each of the following milestones: (i) completion of all responses from the U.S. Patent and Trademark Office regarding patents related to the Services; and (ii) organizing the warehoused material relating to the antimicrobial files of ND Partners, LLC and other items for shipment to Company in its entirety (all such warrants collectively, the “Warrants” ). The exercise price of the Warrants shall be determined in the good faith judgment of the Company’s Board of Directors in accordance with applicable laws, and shall be equal to the fair market value of the Company’s Common Stock at the time of the delivery of the warrant to Consultant. The Warrants shall have a term of five (5) years commencing on the date of their respective issuances.
 
(d)       Consultant and Company acknowledge and agree that the compensation set forth herein represents the fair market value of the services provided to Company by Consultant, negotiated in an arms-length transaction, and has not been determined in a manner which takes into account the volume or value of any current or future referrals or business otherwise generated between the Company and the Consultant. Nothing contained in this Agreement constitutes or shall be construed in any manner as an obligation or inducement for Consultant to recommend the prescribing, purchase, use, or preferential formulary status or dispensing of any of the Company’s products or services or those of any organizations affiliated with the Company.
 
Section 4. Expenses . The Company shall reimburse Consultant for all reasonable and necessary expenses incurred by Consultant in connection with the Services provided hereunder; provided , however , that such expenses are pre-approved in writing (including, without limitation, by e-mail) by the Company.
 
Section 5. Confidential Information and Inventions .
 
(a)           Consultant recognizes and acknowledges that in the course of his/her duties Consultant is likely to receive confidential or proprietary information owned by the Company, its affiliates or third parties with whom the Company or any such affiliates has an obligation of confidentiality. Accordingly, during and after the Term, Consultant shall use his/her best efforts to protect the confidentiality of the Confidential and Proprietary Information and agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his/her duties under this Agreement, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its affiliates. “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company. Consultant expressly acknowledges the trade secret status of the Confidential and Proprietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. Consultant agrees: (i) not to use any such Confidential and Proprietary Information for himself/herself or others; and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company’s offices at any time during the Term, except as required in the execution of Consultant’s duties to the Company. Consultant agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof in his/her possession to the Company upon request and in any event immediately upon termination or expiration of the Term. Consultant shall inform the Company of the existence and basic content of any meetings, calls, or discussions related to the Assets or the Services with third parties, including without limitation governmental agencies and competitors.
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(b)           Except with prior written authorization by the Company, Consultant agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, scientific, technical or business information of any other party to whom the Company or any of its affiliates owes an obligation of confidence, at any time during or after the Term.
 
(c)           Consultant agrees that all inventions, discoveries, improvements and patentable or copyrightable works related to an Asset (“Developments” ) initiated, conceived or made by him/her, either alone or in conjunction with others, in connection with or as a result of performance of Services by Consultant during the Term shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith. Consultant hereby assigns to the Company all right, title and interest he/she may have or acquire in all such Developments. Consultant further agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights or other rights on such Developments in any and all countries, and to that end Consultant will execute all documents necessary:
 
(i)     During the Term, to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and
 
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(ii)    During the Term, to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection.
 
(d)           Consultant agrees that he/she will promptly disclose to the Company, or any persons designated by the Company, all improvements and Developments made or conceived or reduced to practice or learned by him/her, either alone or jointly with others, during the Term.
 
(e)           Consultant agrees that the Company shall be entitled to enjoin any breach of the confidentiality and other obligations hereunder without having to post a bond in addition to all other remedies it may have under applicable law. Consultant will notify the Company in writing immediately upon the occurrence of any unauthorized release of any Confidential and Proprietary Information or other breach of any of the obligations under this Section 5 of which it is or becomes aware.
 
(f)            If during the Term the Consultant has initiated, conceived, or made a Development that is an invention, discovery, improvement or patentable or copyrightable work related to an Asset (a “Developed Asset” ) and the Company intends to Abandon (as defined herein) such Developed Asset, it shall deliver written notice to the Consultant (by e-mail with confirmed receipt, certified mail or via an internationally recognized overnight courier) (any notice compliant with the foregoing provisions hereinafter referred to as “Notice” ) of such intent within thirty (30) days of the Company’s definitive determination of such intent. If the Company Abandons a Developed Asset, then the rights associated with such Abandoned Developed Asset shall revert to Consultant. For purposes of this Agreement, to “Abandon” a Developed Asset shall require at least one of the following by the Company: (i) failure to make any royalty payment required for such Developed Asset; (ii) failure to make any filing or payment required to keep such Developed Asset current within the extended period allowed; or (iii) failure to file and pursue patent applications, divisionals, and/or continuations-in-part for such Developed Asset to the extent patent protection is available (including all possible extensions of time). Notwithstanding the foregoing, prior to a Developed Asset being deemed Abandoned hereunder, Consultant shall first deliver Notice to the Company of a potential Abandonment hereunder and the Company shall have sixty (60) days from the date of such notice to cure such Abandonment, or if such Abandonment cannot reasonably be cured within such time period, then within such time period as is required to cure such Abandonment, provided that the Company commences such cure within such sixty (60) day period and pursues with reasonable diligence such cure thereafter until so cured.
 
(g)           If the Company commits a material breach of this Agreement, which breach remains uncured after sixty (60) days’ prior Notice to the Company by Consultant of such breach, then the rights associated with any Developed Asset shall revert to Consultant.
 
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(h)           If this Agreement is terminated by the Company during the Term, other than for Cause (as defined herein), then the rights associated with any Developed Asset shall revert to Consultant. If, during the Term, the Exclusive License and Consulting Agreement, dated January 18, 2008, between the Company and Hans-Dietrich Polaschegg (the “Polaschegg Agreement” ) , is terminated by the Company, other than for Cause on the part of Polaschegg, prior to the scheduled expiration thereof, then the rights associated with any Developed Asset shall revert to Consultant. For purposes of this Section 5(h), any of the following actions shall constitute Cause : (i) any willful failure, disregard or refusal by Consultant to perform his duties hereunder; (ii) any willful, intentional or grossly negligent act by Consultant having the effect of injuring, in a material way (whether financial or otherwise and as determined in good-faith by the Company), the business or reputation of the Company or any of its affiliates, including but not limited to, any officer, director, executive or shareholder of the Company or any of its affiliates; (iii) any willful misconduct by Consultant in respect of the duties or obligations of Consultant under this Agreement, including, without limitation, insubordination with respect to directions received by Consultant from an officer of the Company; (iv) any misappropriation or embezzlement of the property of the Company or its affiliates (whether or not a misdemeanor or felony); (v) any breach by Consultant of any of the provisions of Sections 5, 6, 7, or 8 of this Agreement; or (vi) breach by Consultant of any provision of this Agreement other than those contained in Sections 5, 6, 7, or 8 that is not cured by Consultant within thirty (30) days after Notice thereof is given to Consultant by the Company.
 
(i)            For the avoidance of doubt, (i) a Developed Asset hereunder shall be included in all calculations related to the Minimum Royalty Payments (as such term is defined in the Polaschegg Agreement) under Section 4 of Polaschegg Agreement, and (ii) no rights associated with a Developed Asset hereunder shall be deemed Blocking Rights (as such term is defined in the Polaschegg Agreement) under Section 3(b) of the Polaschegg Agreement, and accordingly the existence of a Developed Asset hereunder shall not cause a reduction of Royalty Payments (as such term is defined in the Polaschegg Agreement) under the Polaschegg Agreement.
 
(j)            If Consultant initiates, conceives, or makes (alone or with others) any invention, discovery, improvement or patentable or copyrightable work during the Term that is not related to an Asset or the Services (a “New Idea” ) and the Company is interested in obtaining a license to such New Idea, Consultant and the Company shall work together in good faith towards the successful negotiation of such a license. In addition, during the Term, the Company shall have a right of first refusal (the “Right of First Refusal” ) with respect to licensing or acquiring any New Idea. In connection therewith, if Consultant receives a bona fide offer from any third party to acquire or license any New Idea from Consultant, then Consultant shall promptly (and in no event later than twenty (20) days thereafter) deliver written notice and the complete description of the third party offer (and the actual offer, if the third party presented such offer in writing) to the Company. The Company shall have the right but not the obligation, to license such New Idea from Consultant on such terms and conditions set forth in the offer received by Consultant from the third party. If the Company elects to exercise the Right of First Refusal, it shall deliver written notice to Consultant within ninety (90) days of receipt of the written notice from Consultant with respect to the New Idea and the third party offer. If the Company does not exercise the Right of First Refusal within such ninety (90) day period, Consultant shall be free to license or sell the New Idea to such third party on the same terms set forth in the written offer within thirty (30) days after the expiration of such ninety (90) day period.
 
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Section 6. Insider Trading . Consultant recognizes that in the course of his/her duties hereunder, Consultant may receive from the Company or others information that may be considered material, nonpublic information” concerning a public company that is subject to the reporting requirements of the Securities and Exchange Act of 1934, as amended. Consultant agrees NOT to: (a) purchase or sell, directly or indirectly, any securities of any company while in possession of relevant material, nonpublic information relating to such company received from the Company or others in connection herewith; (b) provide Company with information with respect to any public company that may be considered material, nonpublic information; or (c) communicate any material, nonpublic information to any other person in which it is reasonably foreseeable that such person is likely to (i) purchase or sell securities of any company with respect to which such information relates, or (ii) otherwise directly or indirectly benefit from such information. Without limiting any of the confidentiality and insider trading obligations included in this Agreement, Consultant shall not discuss any information concerning Company obtained by Consultant in the course of performing the Services with any financial, securities or industry analyst or with the media without the written agreement of Company.
 
Section 7. Representations, Warranties and Covenants of Consultant.   The Consultant hereby represents, warrants and covenants to the Company as follows:
 
(a)           Neither the execution or delivery of this Agreement nor the performance by Consultant of his/her duties and other obligations hereunder violate or will violate any statute, law, determination or award, or conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which Consultant is a party or by which he/she is bound.
 
(b)           Consultant has the full right, power and legal capacity to enter and deliver this Agreement, as applicable, and to perform his/her duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of Consultant enforceable against him/her in accordance with its terms. No approvals or consents of any persons or entities are required for Consultant to execute and deliver this Agreement, as applicable, or perform his/her duties and other obligations hereunder.
 
(c)           Consultant represents that his/her performance of all the terms of this Agreement will not breach any agreement to keep in confidence any confidential information or trade secrets acquired by Consultant from any third party, and Consultant agrees not to use any confidential information or trade secrets of any third party in connection with the provision of the Services in violation of the agreements under which he/she had access to or knowledge of such confidential information or trade secrets.
 
(d)           Consultant will not use any confidential information or trade secrets of any third party in his employment by Company in violation of the terms of the agreements under which he had access to or knowledge of such confidential information or trade secrets.
 
(e)           During the Term of this Agreement and for a period of one-year thereafter, if Consultant uses, recommends, or comments upon the attributes of any Company product or service in connection with the treatment of a patient, a scientific or educational presentation or publication, a media interview, or any other third-party communication or interaction, Consultant shall disclose that Consultant is or has been a paid consultant of Company and the fact of any other of Consultant’s financial relationships with Company.
 
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(f)        During the Term of this Agreement, Consultant shall not engage in providing services to any other entity or person that is competing directly or indirectly with the business of the Company.
 
Section 8. Non-Circumvention . With respect to any of the technologies or parties introduced to the Consultant by the Company, Consultant agrees not to contact any parties (including any of their officers, directors, employees, agents, affiliates and/or consultants) with whom the Company has shared information without the presence of an officer of the Company or without the prior written consent of an officer of the Company and further agrees not to take any action which would adversely affect or otherwise hinder the Company’s ability to ultimately execute any agreements with such parties. In addition, Consultant agrees not to circumvent, avoid, bypass or obviate the Company directly or indirectly regarding the Confidential and Proprietary Information disclosed in connection with the Services and any possible business arrangement envisioned thereby.
 
Section 9. Consultant not an Employee.   Company and Consultant hereby acknowledge and agree that Consultant shall perform the services hereunder as an independent contractor and not as an employee or agent of Company or any Company affiliate. Consultant will be solely responsible for all taxes, withholding and other similar statutory obligations. Consultant shall not represent that he/she is an employee of Company or any Company affiliate under any circumstance. In addition, nothing in this Agreement shall be construed as establishing any joint venture, partnership or other business relationship between the parties hereto or representing any commitment by either party to enter into any other agreement by implication or otherwise except as specifically stated herein. Consultant shall not have any authority, express or implied, to bind Company or any Company affiliate to any agreement, contract, or other commitment. Consultant further understands and agrees that this Agreement is entered into by Company on a non-exclusive basis and that Company and its affiliates remain free to deal with others and retain other consultants, employees, brokers, finders and other agents in the same or similar capacity as Consultant has been retained at any time at their own option.
 
Section 10. Miscellaneous.
 
(a)           This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to its principles of conflicts of laws.
 
(b)           Any dispute arising out of, or relating to, this Agreement or the breach thereof (other than Section 5 hereof), or regarding the interpretation thereof, shall be finally settled by arbitration conducted in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect before a single arbitrator appointed in accordance with such rules. Judgment upon any award rendered therein may be entered and enforcement obtained thereon in any court having jurisdiction. The arbitrator shall have authority to grant any form of appropriate relief, whether legal or equitable in nature, including specific performance. For the purpose of any judicial proceeding to enforce such award or incidental to such arbitration or to compel arbitration and for purposes of Section 5 hereof, the parties hereby submit to the exclusive jurisdiction of the competent courts located in the Commonwealth of Massachusetts, and agree that service of process in such arbitration or court proceedings shall be satisfactorily made upon it if sent by registered mail addressed to it at the address referred to in paragraph (g) below. The costs of such arbitration shall be borne proportionate to the finding of fault as determined by the arbitrator. Judgment on the arbitration award may be entered by any court of competent jurisdiction.
 
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(c)           This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and permitted assigns.
 
(d)           This Agreement, and Consultant’s rights and obligations hereunder, may not be assigned, delegated or otherwise subcontracted by Consultant. The Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets.
 
(e)           This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.
 
(f)           The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.
 
(g)           All notices, demands or other communications desired or required to be given by any party to any other party hereto shall be in writing and shall be deemed effectively given upon (i) personal delivery to the party to be notified, (ii) upon confirmation of receipt of telecopy or other electronic facsimile transmission, (iii) one business day after deposit with a reputable overnight courier, prepaid for priority overnight delivery, or (iv) five days after deposit with the United States Post Office, postage prepaid, in each case to such party at the address set forth above, or to such other addresses and to the attention of such other individuals as any party shall have designated to the other parties by notice given in the foregoing manner.
 
(h)           This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.
 
(i)            As used in this Agreement, “affiliate” of a specified person or entity shall mean and include any person or entity controlling, controlled by or under common control with the specified Person.
 
(j)            The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
 
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(k)           This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument.
 
(1)           As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural, shall be deemed to include the others whenever and wherever the context so requires. Additionally, unless the context requires otherwise, “or” is not exclusive.
 
[ Remainder of Page Intentionally Left Blank — Signature Page Follows ]
 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above by proper person thereunto duly authorized.
 
  CORMEDIX INC.  
       
       
  By: /s/ Bruce Cooper  
  Name: Bruce Cooper, MD  
  Titile: President & CEO  
       
       
  CONSULTANT  
       
       
  By: /s/ Frank Prosl  
  Name: Frank Prosl  
 
 
Acknowledged and agreed solely with respect to Sections 5(f), 5(h), and 5(i) hereof:
 
 
/s/ Hans-Dietrich Polaschegg   
Hans-Dietrich Polaschegg   
 
 
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Exhibit A
 
Assets
 
European Patent Specification EP1442753 titled “Composition for the prevention of indwelling device related infection” – date of filing Feb 3, together with all divisionals, continuations-in-part and all other associated U.S. and foreign applications filed or to be filed in connection therewith.
 
International Publication Number WO 2005/115357 – filed April 28, 2004, titled “Taurolidine Formulations and Delivery: Therapeutic Treatments and Antimicrobial Protection against Bacterial Biofilm Formation”, together with patent applications, divisionals, continuations-in-part, and all other associated U.S. and foreign applications filed or to be filed.
 
Services
 
Patents
 
Assist legal team in preparation of all written responses required for the patents in process. Prior to submitting any written responses for patents in process, review proposed response with appropriate CorMedix staff in advance of response date to allow for adequate input and revisions that may be required.
o
Manage deadlines and filing requirements for patent portfolio and prepare chart defining patent status on a quarterly basis.
Meet all deadlines for filing, maintenance and prosecution of patent portfolio
Assess patent protection and competitive situation to maximize patent protection
Prepare invention disclosures and assist in patent preparation
 
CMX003 (Antimicrobial/Anticoagulant locking solution) development
 
Under the direction of the Project Leader for CMX003, work with the project team as appropriate on any and all pre clinical work that may be required for bringing CMX003 to market in the US. Completing in a timely fashion, assignments given.
Assist in the life cycle process for CMX003 i.e. other applications such as TPN, ICU, Chemotherapy, etc
o
Assist, as appropriate, in clarifying historic events that may assist in any aspect from the previous Neutrolin project at Biolink to bring a satisfactory Antimicrobial/Anticoagulant locking solution to market under CorMedix
 
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CMX004 (Thixotropic Gel) development
 
Liaison with Dr. Hans Polaschegg on all work being undertaken by Dr. Polaschegg or requiring Dr. Polaschegg’s input and guidance.
Participate as part of the CMX004 project team (Dr. Polaschegg and appropriate CorMedix staff) to produce a Development Plan.
Assist in the life cycle process for CMX004 i.e. other applications such as TPN, ICU, Chemotherapy, etc
Plan program and execute tasks to develop engineering product definition and validation of product and provide manufacturing assistance to build product for the initial clinical trials
 
Data Management
 
Organize all historic data/files received from ND Partners for future use by Cormedix staff.
 
This position will be under the direct supervision of Project Leader for CMX003/CMX004.
 
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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the inclusion in this registration statement on Form S-1 (File No. _____ ) of our report, which includes an explanatory paragraph relating to CorMedix Inc.’s ability to continue as a going concern, dated November 24, 2009, on our audits of the financial statements of CorMedix Inc. as of December 31, 2008 and 2007 and for the years then ended and for the period from July 28, 2006 to December 31, 2008.  We also consent to the reference to our Firm under the caption “Experts.”

/s/ J.H. Cohn LLP

Roseland, New Jersey
November 24, 2009