Exhibit 10.1
 

SECURITIES PURCHASE AGREEMENT
 
This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March __,
2019, is entered into by and among Bridgeline Digital, Inc., a Delaware
corporation, with headquarters located at 100 Summit Drive, Burlington,
Massachusetts 01803 (the “Company”), and the investors listed on the Schedule of
Buyers attached hereto (individually, a “Buyer “and collectively, the “Buyers”).
RECITALS
A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule
506(b) of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.
 
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, (i) that aggregate number of shares of
the Company’s Series C Convertible Preferred Stock, par value $0.001 per share
(the “Preferred Stock”), having the rights, preferences and privileges as set
forth on Exhibit A attached hereto (the “COD”), set forth opposite such Buyer’s
name in column (3) on the Schedule of Buyers (which aggregate amount for all
Buyers together shall be [____________] shares of Preferred Stock and shall
collectively be referred to herein as the “Preferred Shares”), which Preferred
Shares shall be convertible into that number of shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”) in accordance with its
terms and conditions (as converted, collectively, the “Conversion Shares”); (ii)
warrants, in substantially the form attached hereto as Exhibit B (the “Series A
Warrants”), representing the right to acquire initially that number of shares of
Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule
of Buyers (as exercised, collectively, the “Series A Warrant Shares”), (iii)
warrants, in substantially the form attached hereto as Exhibit C (the "Series B
Warrants") representing the right to acquire initially that number of shares of
Common Stock set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers (as exercised, collectively, the “Series B Warrant Shares”), and (iv)
warrants, in substantially the form attached hereto as Exhibit D (the "Series C
Warrants" and collectively with the Series A Warrants and the Series B Warrants,
the "Warrants") representing the right to acquire initially that number of
shares of Common Stock set forth opposite such Buyer’s name in column (6) on the
Schedule of Buyers (as exercised, collectively, the “Series C Warrant Shares”
and collectively with the Series A Warrant Shares and the Series B Warrant
Shares, the “Warrant Shares”).
 
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
substantially the form attached hereto as Exhibit E (the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
 
D. The Preferred Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities.”
  
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
 
1.           PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
(a) Purchase of Preferred Shares and Warrants. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Closing Date (as defined below), the number
of Preferred Shares as is set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers, along with (x) Series A Warrants to acquire up to that
number of Series A Warrant Shares as is set forth opposite such Buyer’s name in
column (4) on the Schedule of Buyers, (y) Series B Warrants to acquire up to
that number of Series B Warrant Shares as is set forth opposite such Buyer’s
name in column (5) on the Schedule of Buyers, and (z) Series C Warrants to
acquire up to that number of Series C Warrant Shares as is set forth opposite
such Buyer’s name in column (6) on the Schedule of Buyers (the “Closing”).
 
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(b) Closing. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York City time, on the date hereof (or such other date and time
as is mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below, at the offices of Gracin & Marlow, LLP, The Chrysler Building,
405 Lexington Avenue, 26th Floor, New York, New York 10174. The Closing may also
be undertaken remotely by electronic transfer of Closing documentation.
 
(c) Purchase Price. The purchase price for the Preferred Shares and the related
Warrants to be purchased by each Buyer at the Closing shall be the amount set
forth opposite such Buyer’s name in column (7) of the Schedule of Buyers (the
“Purchase Price”), which shall be equal to the amount of $1,000 per Preferred
Share and related Warrants.
 
(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
respective Purchase Price (less, in the case of Empery Asset Master, Ltd. (the
“Lead Investor”), any amounts withheld pursuant to Section 4(g)) to the Company
for the Preferred Shares and the Warrants to be issued and sold to such Buyer at
the Closing by wire transfer of immediately available funds in accordance with
the Company’s written wire instructions, after deducting certain fees and
expenses due to the Buyers and the Placement Agent; and (ii) the Company shall
deliver to each Buyer (w) one or more stock certificates, evidencing the number
of Preferred Shares such Buyer is purchasing as is set forth opposite such
Buyer’s name in column (3) of the Schedule of Buyers, (x) a Series A Warrant
pursuant to which such Buyer shall have the right to acquire such number of
Series A Warrant Shares as is set forth opposite such Buyer’s name in column (4)
of the Schedule of Buyers, (y) a Series B Warrant pursuant to which such Buyer
shall have the right to acquire such number of Series B Warrant Shares as is set
forth opposite such Buyer’s name in column (5) of the Schedule of Buyers, and
(z) a Series C Warrant pursuant to which such Buyer shall have the right to
acquire such number of Series C Warrant Shares as is set forth opposite such
Buyer’s name in column (6) of the Schedule of Buyers, in each case duly executed
on behalf of the Company and registered in the name of such Buyer or its
designee.
 
2.           BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer, severally and
not jointly, represents and warrants with respect to only itself to the Company
that:
 
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Preferred
Shares and the Warrants and (ii) upon exercise of the Warrants (other than
pursuant to a Cashless Exercise (as defined in the Warrants)) will acquire the
Warrant Shares issuable upon exercise of the Warrants, for its own account and
not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act. Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities. As used herein, “Person “means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and any governmental entity or any
department or agency thereof.
 
(b) Accredited Investor Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D.
 
(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the
Securities.
 
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(d) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities that have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
 
(e) No Governmental Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
 
(f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other Person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
 
(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Preferred Shares and the Warrants and, until such time as the
resale of the Preferred Shares and the Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Warrant Shares, except as set forth below, shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
 
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]
HAVE BEEN] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL SELECTED BY THE HOLDER, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.]
 
 
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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company (“DTC”), if (i) such Securities are
registered for resale under the 1933 Act, (ii) in connection with a sale,
assignment or other transfer, such holder provides the Company with an opinion
of counsel, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act, or (iii) the Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A. The Company
shall be responsible for the fees of its transfer agent and all DTC fees
associated with such issuance. If the Company shall fail for any reason or for
no reason to issue to the holder of the Securities within two (2) Trading Days
(as defined in the Warrants) after the occurrence of any of (i) through (iii)
above (the initial date of such occurrence, the “Legend Removal Date”), a
certificate without such legend to such holder or to issue such Securities to
such holder by electronic delivery at the applicable balance account at DTC, and
if on or after such Trading Day the holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
the holder of such Securities that the holder anticipated receiving without
legend from the Company (a “Buy-In”), then the Company shall, within two (2)
Trading Days after the holder’s request and in the holder’s discretion, either
(i) pay cash to the holder in an amount equal to the holder’s total purchase
price (including brokerage commissions, if any) for the Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such unlegended Securities shall terminate, or (ii) promptly honor its
obligation to deliver to the holder such unlegended Securities as provided above
and pay cash to the holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) any trading price of the Common Stock selected by the Holder in
writing as in effect at any time during the period beginning on the applicable
Legend Removal Date and the date the Company makes the applicable cash payment.
In addition to such Buyer’s other available remedies, the Company shall pay to a
Buyer, in cash, (i) as partial liquidated damages and not as a penalty, for each
$1,000 of Preferred Shares or Warrant Shares (based on the VWAP of the Common
Stock on the date such Preferred Shares or Warrant Shares are submitted to the
transfer agent) delivered for removal of the restrictive legend and subject to
Section 2(g), $10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day after
the Legend Removal Date until such certificate is delivered without a legend.
The Company shall be responsible for the fees of its transfer agent and all DTC
fees associated with such issuance. As used in this Section 2(g), “VWAP” means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB
or OTCQX is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted for trading on
OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink
Sheets” published by OTC Markets Group, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of
the Securities then outstanding and reasonably acceptable to the Company, the
fees and expenses of which shall be paid by the Company. As used in this Section
2(g), “Trading Market” means any of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any successors to any of
the foregoing).
 
(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement
have been duly and validly authorized, executed and delivered on behalf of such
Buyer and shall constitute the legal, valid and binding obligations of such
Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
 
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(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such
Buyer of the transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Buyer or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
 
(j) Stockholder Approval. Buyer agrees and acknowledges that the Preferred
Shares may not be converted into Conversion Shares, and the Warrants cannot be
exercised for Warrant Shares unless and until such time as (i) stockholders have
approved an amendment to the Company’s Certificate of Incorporation to increase
the number of shares of authorized Common Stock (or effect a reverse split of
the Common Stock) to permit the issuance of Conversion Shares and Warrant Shares
upon conversion of the Preferred Shares and exercise of the Warrants,
respectively (the “Authorized Share Approval”), and (ii) the Company (A) obtains
the approval of its stockholders, as may be required by the applicable rules of
the Nasdaq Stock Market LLC (or any successor entity), for the issuances of
Common Stock as contemplated by the Transaction Documents, including, without
limitation, the issuance of all of the Conversion Shares and Warrant Shares in
accordance with Rule 5635(d) (the “Stockholder Approval”), or (B) obtains a
waiver from the Nasdaq Stock Market LLC (or any successor entity) of all
applicable listing rules requiring such Stockholder Approval. Buyer further
agrees and acknowledges that Buyer shall bear the economic risk of loss
associated with holding the Preferred Shares and Warrants pending the
satisfaction of the conditions set forth in this Section 2(j).
 
3.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Buyers that, as of the date hereof and as
of the Closing Date:
 
(a) Organization and Qualification. Each of the Company and each of its
“Subsidiaries “(which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns any of the capital stock or holds an
equity or similar interest) are entities duly organized and validly existing and
in good standing under the laws of the jurisdiction in which they are formed,
and have the requisite power and authorization to own their properties and to
carry on their business as now being conducted and as presently proposed to be
conducted. Each of the Company and each of its Subsidiaries is duly qualified as
a foreign entity to do business and is in good standing in every jurisdiction in
which its ownership of property 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 be in good standing would not reasonably be expected to have a
Material Adverse Effect. As used in this Agreement, “Material Adverse Effect
“means any material adverse effect on the business, properties, assets,
liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, individually or
taken as a whole, or on the transactions contemplated hereby or on the other
Transaction Documents or by the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform any of its obligations under any of the Transaction Documents (as
defined below). The Company has no Subsidiaries except as set forth in Schedule
3(a). The outstanding shares of capital stock of each of the Subsidiaries have
been duly authorized and validly issued, are fully paid and non-assessable and
are owned by the Company or another Subsidiary free and clear of all liens,
encumbrances and equities and claims; and no options, warrants or other rights
to purchase, agreements or other obligations to issue or other rights to convert
any obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
 
(b) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the COD, the Warrants, the Registration Rights Agreement, the
Lock-Up Agreements (as defined in Section 7(x)), the Irrevocable Transfer Agent
Instructions (as defined in Section 5(b)), and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”) and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Transaction Documents by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Preferred
Shares and the Warrants and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion of the Preferred Shares pursuant to
the terms of the COD and the Warrant Shares issuable upon exercise of the
Warrants have been duly authorized by the Company’s Board of Directors and
(other than the filing with the SEC of one or more Registration Statements (as
defined in the Registration Rights Agreement) in accordance with the
requirements of the Registration Rights Agreement, a Form D with the SEC and any
other filings as may be required by any state securities agencies) no further
filing, consent or authorization is required by the Company, its Board of
Directors or its stockholders. This Agreement and the other Transaction
Documents have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and
remedies.
 
 
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(c) Issuance of Securities. The issuance of the Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with the terms of
the Transaction Documents, the Preferred Shares and the Warrants shall be
validly issued and free from all preemptive or similar rights (except for those
which have been validly waived prior to the date hereof), taxes, liens and
charges and other encumbrances with respect to the issue thereof and the
Preferred Shares shall be fully paid and nonassessable with the holders being
entitled to all rights accorded to a holder of Preferred Stock. As of the
Closing Date, a number of shares of Common Stock shall have been duly authorized
and reserved for issuance which equals at least the sum of (i) the maximum
number of shares of Common Stock issuable upon conversion of the Preferred
Shares, (ii) the maximum number of shares of Common Stock issuable upon exercise
of the Series A Warrants, (iii) the maximum number of shares of Common Stock
issuable upon exercise of the Series B Warrants and (iv) the maximum number of
shares of Common Stock issuable upon exercise of the Series C Warrants, in each
case, without giving effect to any limitation on exercise set forth therein and,
with respect to the Series A Warrants and Series B Warrants, assuming that the
Maximum Eligibility Number (as defined in the Series C Warrant) is determined
based on a Reset Price (as defined in the Series C Warrants) equal to $0.08 (as
adjusted for stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other similar events
occurring after the date hereof). Upon conversion of the Preferred Shares in
accordance with the COD, the Conversion Shares when issued will be validly
issued, fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens, charges and other encumbrances with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. Upon exercise of the Warrants in accordance with the Warrants, the
Warrant Shares when issued will be validly issued, fully paid and nonassessable
and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. Assuming the accuracy of
each of the representations and warranties set forth in Section 2 of this
Agreement, the offer and issuance by the Company of the Securities is exempt
from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Preferred Shares and the Warrants and reservation for issuance and issuance
of the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation (as defined below) or Bylaws (as defined below) or other
organizational documents of the Company or any of its Subsidiaries, any capital
stock of the Company or any of its Subsidiaries or the articles of association
or bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the NASDAQ Capital Market (the
“Principal Market”) and including all applicable foreign, federal, state laws,
rules and regulations) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected.
 
(e) Consents. The Company is not required to obtain any consent from,
authorization or order of, or make any filing or registration with (other than
the filing with the SEC of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, a Form D with the
SEC, a Notification of Additional Listing of Securities with Nasdaq and any
other filings as may be required by any state securities agencies), any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case, in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date (or in the case of filings detailed above, will be made timely after the
Closing Date), and the Company is unaware of any facts or circumstances which
might prevent the Company from obtaining or effecting any of the registration,
application or filings contemplated by the Transaction Documents. Except as set
forth on Schedule 3.1(e), the Company is not in violation of the listing
requirements of the Principal Market and has no knowledge of any facts or
circumstances which would reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future. The issuance by the Company of the
Securities shall not have the effect of delisting or suspending the Common Stock
from the Principal Market.
 
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(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an “affiliate” of
the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to the
knowledge of the Company, a “beneficial owner” of more than 10% of the Common
Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the “1934 Act”)). The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities. The Company
further represents to each Buyer that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
 
(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor
any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
Persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby, including, without limitation,
placement agent fees payable to ThinkEquity, a Division of Fordham Financial
Management Inc. and Taglich Brothers Inc.(the “Placement Agents”) in connection
with the sale of the Securities. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has engaged the Placement
Agents in connection with the sale of the Securities. Other than the Placement
Agents, neither the Company nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the offer or sale of the
Securities.
 
(h) No Integrated Offering. None of the Company, its Subsidiaries or any of
their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the 1933 Act, whether through
integration with prior offerings or otherwise, or cause this offering of the
Securities to require approval of stockholders of the Company for purposes of
the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated for quotation. None of the Company, its Subsidiaries, their
affiliates nor any Person acting on their behalf will take any action or steps
that would require registration of the issuance of any of the Securities under
the 1933 Act or cause the offering of any of the Securities to be integrated
with other offerings for purposes of any such applicable stockholder approval
provisions.
 
(i) Application of Takeover Protections; Rights Agreement. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, interested stockholder, business
combination, poison pill (including, without limitation, any distribution under
a rights agreement) or other similar anti-takeover provision under the Articles
of Incorporation, Bylaws or other organizational documents or the laws of the
jurisdiction of its formation which is or could become applicable to any Buyer
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company’s issuance of the Securities and any Buyer’s
ownership of the Securities. The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company or any of its
Subsidiaries.
 
 
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(j) SEC Documents; Financial Statements. Except as disclosed in Schedule 3(j) ,
during the two (2) years prior to the date hereof, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934 Act
(all of the foregoing filed prior to the date hereof or prior to the Closing
Date, and all exhibits included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). The Company has delivered to
the Buyers or their respective representatives true, correct and complete copies
of the SEC Documents not available on the EDGAR system. As of their respective
filing dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act applicable to the Company and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. As of their respective filing dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”), consistently applied during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments which will not be material, either individually or in
the aggregate). No other information provided by or on behalf of the Company to
any of the Buyers which is not included in the SEC Documents (including, without
limitation, information referred to in Section 2(d) of this Agreement or in the
disclosure schedules to this Agreement) contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
 
(k) Absence of Certain Changes. Except as disclosed in Schedule 3(k)(i), since
September 30, 2018, there has been no material adverse change and no material
adverse development in the business, assets, liabilities, properties,
operations, condition (financial or otherwise), results of operations or
prospects of the Company or any of its Subsidiaries. Except as disclosed in
Schedule 3(k)(ii), since September 30, 2018, neither the Company nor any of its
Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any law or
statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing, will not be Insolvent (as defined below). For purposes of this
Section 3(k), “Insolvent” means, with respect to any Person, (i) the present
fair saleable value of such Person’s assets is less than the amount required to
pay such Person’s total Indebtedness (as defined in Section 3(r)), (ii) such
Person is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) such
Person intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.
 
(l) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as
set forth on Schedule 3(l), no event, liability, development or circumstance has
occurred or exists, or is contemplated to occur with respect to the Company, its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
 
-8-

 
 
(m) Conduct of Business; Regulatory Permits. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, any certificate of designations, preferences or rights of any
other outstanding series of preferred stock of the Company or any of its
Subsidiaries or Bylaws or their organizational charter, certificate of formation
or certificate of incorporation or bylaws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except in all cases for
possible violations which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company and each
of its Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate foreign, federal or state regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit. Without limiting
the generality of the foregoing, the Company is not in violation of any of the
rules, regulations or requirements of the Principal Market and has no knowledge
of any facts or circumstances that would reasonably lead to delisting or
suspension of the Common Stock by the Principal Market in the foreseeable
future. During the two (2) years prior to the date hereof, (i) the Common Stock
have been listed or designated for quotation on the Principal Market, (ii)
trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Common Stock from the Principal Market.
 
(n) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other Person acting on behalf of
the Company or any of its Subsidiaries has, in the course of its actions for, or
on behalf of, the Company or any of its Subsidiaries (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
 
(o) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof.
 
(p) Transactions With Affiliates. Except as set forth in Schedule 3(p), none of
the officers, directors or employees of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers or
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company or any of its
Subsidiaries, any corporation, partnership, trust or other Person in which any
such officer, director, or employee has a substantial interest or is an
employee, officer, director, trustee or partner.
 
-9-

 
 
(q) Equity Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 50,000,000 shares of Common Stock, of which as of
the date hereof, 16,241,259 are issued and outstanding, 662,902 shares are
reserved for issuance pursuant to the Company’s stock option and purchase plans
and 11,443,073 shares are reserved for issuance pursuant to securities (other
than the aforementioned options and Warrants) exercisable or exchangeable for,
or convertible into, Common Stock; and (ii) 1,000,000 shares of preferred stock,
par value $0.001 per share, of which 264,000 shares are designated as Series A
convertible preferred stock, of which 262,310 are currently issued and
outstanding, 5,000 shares are designated as Series B convertible preferred
stock, none which are currently issued and outstanding, and 11,000 shares are
designated as Series C convertible preferred stock, none of which are currently
issued and outstanding. No Common Stock are held in treasury. All of such
outstanding shares are duly authorized and have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. 1,059,173 shares of the
Company’s issued and outstanding Common Stock on the date hereof are as of the
date hereof owned by Persons who are “affiliates” (as defined in Rule 405 of the
1933 Act) of the Company or any of its Subsidiaries. (i) Except as disclosed in
Schedule 3(q)(i), hereto, none of the Company’s or any Subsidiary’s capital
stock is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company or any Subsidiary; (ii)
except as disclosed in Schedule 3(q)(ii), there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries; (iii) except as disclosed in Schedule 3(q)(iii), there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) except as disclosed in Schedule
3(q)(iv), there are no financing statements securing obligations in any amounts
filed in connection with the Company or any of its Subsidiaries; (v), except as
disclosed in Schedule 3(q)(v), there are no agreements or arrangements (other
than pursuant to the Registration Rights Agreement) under which the Company or
any of its Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act; (vi) except as disclosed in Schedule 3(q)(vi),
there are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vii) except as disclosed in Schedule
3(q)(vii) , there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Securities;
(viii) except as disclosed in Schedule 3(q)(viii), neither the Company nor any
Subsidiary has any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) neither the Company nor
any of its Subsidiaries have any liabilities or obligations required to be
disclosed in the SEC Documents which are not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company’s or its
Subsidiaries’ respective businesses and which, individually or in the aggregate,
do not or could not have a Material Adverse Effect. True, correct and complete
copies of the Company’s certificate of incorporation, as amended and as in
effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”),
and the terms of all securities convertible into, or exercisable or exchangeable
for, Common Stock and the material rights of the holders thereof in respect
thereto have heretofore been filed as part of the SEC Documents.
 
 
-10-

 
 
(r) Indebtedness and Other Contracts. Neither the Company nor any of its
Subsidiaries, (i) except as disclosed in Schedule 3(r)(i), has any outstanding
Indebtedness (as defined below), (ii) except as disclosed in Schedule 3(r)(ii),
is a party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or
instrument would reasonably be expected to result in a Material Adverse Effect,
(iii) except as disclosed in Schedule 3(r)(iii), is in violation of any term of,
or in default under, any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) except
as disclosed in Schedule 3(r)(iv), is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect. Schedule 3(r) provides a detailed description of the material
terms of such outstanding Indebtedness. For purposes of this Agreement: (x)
“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without limitation,
“capital leases” in accordance with GAAP, consistently applied during the
periods involved) (other than trade payables entered into in the ordinary course
of business consistent with past practice), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F) all monetary
obligations under any leasing or similar arrangement which, in connection with
GAAP, consistently applied for the periods covered thereby, is classified as a
capital lease, (G) all indebtedness referred to in clauses (A) through (F) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, claim, lien, tax, right
of first refusal, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; and (y) “Contingent
Obligation “means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness,
capital lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto.
 
(s) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any
of the Company’s or its Subsidiaries’ officers or directors, whether of a civil
or criminal nature or otherwise, in their capacities as such, except as set
forth in Schedule 3(s). The matters set forth in Schedule 3(s) would not
reasonably be expected to have a Material Adverse Effect.
 
(t) Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will be unable to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
 
-11-

 
 
(u) Employee Relations. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
The Company believes that its and its Subsidiaries’ relations with their
respective employees are good. No executive officer (as defined in Rule 501(f)
promulgated under the 1933 Act) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, 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.
 
(v) Title. The Company and its Subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held under
lease by the Company or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company or any of its Subsidiaries.
 
(w) Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, original works of authorship, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted and
as presently proposed to be conducted. Each of patents owned by the Company or
any of its Subsidiaries is listed on Schedule 3(w)(i). Except as set forth in
Schedule 3(w)(ii), none of the Company’s or its Subsidiaries’ Intellectual
Property Rights have expired, terminated or been abandoned, or are expected to
expire, terminate or be abandoned, within three years from the date of this
Agreement. The Company has no knowledge of any infringement by the Company or
any of its Subsidiaries of Intellectual Property Rights of others. There is no
claim, action or proceeding being made or brought, or to the knowledge of the
Company or any of its Subsidiaries, being threatened, against the Company or any
of its Subsidiaries regarding their Intellectual Property Rights. The Company is
not aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and each
of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property Rights.
 
(x) Environmental Laws. The Company and its Subsidiaries (A) are in compliance
with all Environmental Laws (as defined below), (B) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (C) are in compliance with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (A), (B) and (C), the failure to so comply could be reasonably
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.
 
 
-12-

 
 
(y) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
 
(z) Tax Status. The Company and each of its Subsidiaries (i) has timely made or
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
timely 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 and its
Subsidiaries know of no basis for any such claim.
 
(aa) Internal Accounting and Disclosure Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP, consistently applied during the periods involved and
applicable law, and to maintain asset and liability accountability, (iii) access
to assets or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that are
effective in ensuring that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. Except as set forth in Schedule 3(aa), during the twelve months
prior to the date hereof neither the Company nor any of its Subsidiaries has
received any notice or correspondence from any accountant relating to any
material weakness in any part of the system of internal accounting controls of
the Company or any of its Subsidiaries.
 
(bb) Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect.
 
(cc) Investment Company Status. Neither the Company nor any of its Subsidiaries
is, and upon consummation of the sale of the Securities, and for so long as any
Buyer holds any Securities, will not be, an “investment company,” an affiliate
of an “investment company,” a company controlled by an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.
 
(dd) Acknowledgement Regarding Buyers’ Trading Activity. The Company
acknowledges and agrees that (i) none of the Buyers has been asked to agree, nor
has any Buyer agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) any Buyer,
and counter-parties in “derivative” transactions to which any such Buyer is a
party, directly or indirectly, presently may have a “short” position in the
Common Stock and (iii) each Buyer shall not be deemed to have any affiliation
with or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that one or more
Buyers may engage in hedging and/or trading activities at various times during
the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares are being determined and
(b) such hedging and/or trading activities, if any, can reduce the value of the
existing stockholders’ equity interest in the Company both at and after the time
the hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement, the Warrants or any of the documents
executed in connection herewith.
 
-13-

 
 
(ee) Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result, or that could reasonably be expected to cause or result,
in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) other than the
Placement Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than the
Placement Agent, paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
 
(ff) U.S. Real Property Holding Corporation. Neither the Company nor any of its
Subsidiaries is, or has ever been, and so long as any of the Securities are held
by any of the Buyers, shall become, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company and each Subsidiary shall so certify upon any Buyer’s
request.
 
(gg) Eligibility for Registration. The Company is eligible to register the
Conversion Shares and the Warrant Shares for resale by the Buyers using Form S-1
promulgated under the 1933 Act.
 
(hh) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the issuance, sale and transfer of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.
 
(ii) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
or affiliates is subject to the Bank Holding Company Act of 1956, as amended
(the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or affiliates owns or controls, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
 
(jj) Shell Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i)(1) of the 1933 Act.
 
(kk) Compliance with Anti-Money Laundering Laws. The operations of the Company
and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements and all other
applicable U.S. and non-U.S. anti-money laundering laws, rules and regulations,
including, but not limited to, those of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the United States Bank Secrecy Act, as
amended by the USA PATRIOT Act of 2001, and the United States Money Laundering
Control Act of 1986 (18 U.S.C. §§1956 and 1957), as amended, as well as the
implementing rules and regulations promulgated thereunder, and the applicable
money laundering statutes of all applicable jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency or
self-regulatory body (collectively, the “Anti-Money Laundering Laws”), and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to
the knowledge of the Company, threatened.
 
 
-14-

 
 
(ll) No Conflicts with Sanctions Laws. Neither the Company nor any of its
Subsidiaries, nor any director, officer, employee, agent, affiliate or other
person associated with or acting on behalf of the Company or any of its
Subsidiaries or affiliates is, or is directly or indirectly owned or controlled
by, a Person that is currently the subject or the target of any sanctions
administered or enforced by the U.S. government (including, without limitation,
the Office of Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”) or the U.S. Departments of State or Commerce and including, without
limitation, the designation as a “Specially Designated National” or on the
“Sectoral Sanctions Identifications List”, collectively “Blocked Persons”), the
United Nations Security Council (“UNSC”), the European Union, Her Majesty’s
Treasury (“HMT”) or any other relevant sanctions authority (collectively,
“Sanctions Laws”); neither the Company, any of its Subsidiaries, nor any
director, officer, employee, agent, affiliate or other person associated with or
acting on behalf of the Company or any of its Subsidiaries or affiliates, is
located, organized or resident in a country or territory that is the subject or
target of a comprehensive embargo or Sanctions Laws prohibiting trade with the
country or territory, including, without limitation, Crimea, Cuba, Iran, North
Korea, Sudan and Syria (each, a “Sanctioned Country”); the Company maintains in
effect and enforces policies and procedures designed to ensure compliance by the
Company and its Subsidiaries with applicable Sanctions Laws; neither the
Company, any of its Subsidiaries, nor any director, officer, employee, agent,
affiliate or other person associated with or acting on behalf of the Company or
any of its Subsidiaries or affiliates, acting in any capacity in connection with
the operations of the Company, conducts any business with or for the benefit of
any Blocked Person or engages in making or receiving any contribution of funds,
goods or services to, from or for the benefit of any Blocked Person, or deals
in, or otherwise engages in any transaction relating to, any property or
interests in property blocked or subject to blocking pursuant to any applicable
Sanctions Laws; no action of the Company or any of its Subsidiaries in
connection with (i) the execution, delivery and performance of this Agreement
and the other Transaction Documents, (ii) the issuance and sale of the
Securities, or (iii) the direct or indirect use of proceeds from the Securities
or the consummation of any other transaction contemplated hereby or by the other
Transaction Documents or the fulfillment of the terms hereof or thereof, will
result in the proceeds of the transactions contemplated hereby and by the other
Transaction Documents being used, or loaned, contributed or otherwise made
available, directly or indirectly, to any Subsidiary, joint venture partner or
other person or entity, for the purpose of (i) unlawfully funding or
facilitating any activities of or business with any person that, at the time of
such funding or facilitation, is the subject or target of Sanctions Laws, (ii)
unlawfully funding or facilitating any activities of or business in any
Sanctioned Country or (iii) in any other manner that will result in a violation
by any Person (including any Person participating in the transaction, whether as
underwriter, advisor, investor or otherwise) of Sanctions Laws. For the past
five (5) years, the Company and its Subsidiaries have not knowingly engaged in
and are not now knowingly engaged in any dealings or transactions with any
person that at the time of the dealing or transaction is or was the subject or
the target of Sanctions Laws or with any Sanctioned Country.
 
(mm) Anti-Bribery. Neither the Company nor any of the Subsidiaries has made any
contribution or other payment to any official of, or candidate for, any federal,
state or foreign office in violation of any law which violation is required to
be disclosed in the Prospectus. Neither the Company, nor any of its Subsidiaries
or affiliates, nor any director, officer, agent, employee or other person
associated with or acting on behalf of the Company, or any of its Subsidiaries
or affiliates, has (i) used any funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity, (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, to any employee or agent of a private entity
with which the Company does or seeks to do business (a “Private Sector
Counterparty”) or to foreign or domestic political parties or campaigns, (iii)
violated or is in violation of any provision of any applicable law or regulation
implementing the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions or any applicable provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the
U.K. Bribery Act 2010, or any other similar law of any other jurisdiction in
which the Company operates its business, including, in each case, the rules and
regulations thereunder (the “Anti-Bribery Laws”), (iv) taken, is currently
taking or will take any action in furtherance of an offer, payment, gift or
anything else of value, directly or indirectly, to any person while knowing that
all or some portion of the money or value will be offered, given or promised to
anyone to improperly influence official action, to obtain or retain business or
otherwise to secure any improper advantage or (v) otherwise made any offer,
bribe, rebate, payoff, influence payment, unlawful kickback or other unlawful
payment; the Company and each of its respective Subsidiaries has instituted and
has maintained, and will continue to maintain, policies and procedures
reasonably designed to promote and achieve compliance with the laws referred to
in (iii) above and with this representation and warranty; none of the Company,
nor any of its Subsidiaries or affiliates will directly or indirectly use the
proceeds of the convertible securities or lend, contribute or otherwise make
available such proceeds to any subsidiary, affiliate, joint venture partner or
other person or entity for the purpose of financing or facilitating any activity
that would violate the laws and regulations referred to in (iii) above; there
are, and have been, no allegations, investigations or inquiries with regard to a
potential violation of any Anti-Bribery Laws by the Company, its Subsidiaries or
affiliates, or any of their respective current or former directors, officers,
employees, stockholders, representatives or agents, or other persons acting or
purporting to act on their behalf.
 
-15-

 
 
(nn) No Additional Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
 
(oo) Disclosure. Except for discussions specifically regarding the offer and
sale of the Securities, the Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute material, non-public information concerning the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
All of the written information furnished after the date hereof by or on behalf
of the Company or any of its Subsidiaries to you pursuant to or in connection
with this Agreement and the other Transaction Documents, taken as a whole, will
be true and correct in all material respects as of the date on which such
information is so provided and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable
law, rule or regulation, requires public disclosure at or before the date hereof
or announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.
 
 (pp) Stock Option Plans. Each stock option granted by the Company was granted
(i) in accordance with the terms of the applicable Company stock option plan and
(ii) with an exercise price at least equal to the fair market value of the
Common Stock on the date such stock option would be considered granted under
GAAP, consistently applied during the periods involved and applicable law. No
stock option granted under the Company’s stock option plan has been backdated.
The Company has not knowingly granted, and there is no and has been no Company
policy or practice to knowingly grant, stock options prior to, or otherwise
knowingly coordinate the grant of stock options with, the release or other
public announcement of material information regarding the Company or its
Subsidiaries or their financial results or prospects.
 
(qq) No Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company and the Company is current with respect to
any fees owed to its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the Transaction
Documents.
 
(rr) No Disqualification Events. With respect to Securities to be offered and
sold hereunder in reliance on Rule 506(b) under the 1933 Act (“Regulation D
Securities”), none of the Company, any of its predecessors, any affiliated
issuer, any director, executive officer, other officer of the Company
participating in the offering hereunder, any beneficial owner of 20% or more of
the Company’s outstanding voting equity securities, calculated on the basis of
voting power, nor any promoter (as that term is defined in Rule 405 under the
1933 Act) connected with the Company in any capacity at the time of sale (each,
an “Issuer Covered Person “and, together, “Issuer Covered Persons”) is subject
to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 Act (a ”Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has
exercised reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished
to the Buyers a copy of any disclosures provided thereunder.
 
-16-

 
 
(ss) Other Covered Persons. The Company is not aware of any Person (other than
the Placement Agent) that has been or will be paid (directly or indirectly)
remuneration for solicitation of Buyers or potential purchasers in connection
with the sale of any Regulation D Securities.
 
(tt) Dilutive Effect. The Company understands and acknowledges that the number
of Warrant Shares issuable pursuant to terms of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Warrant Shares pursuant to the terms of the Warrants in accordance with
this Agreement and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
 
(uu) Related Party Loans. All loans payable by the Company and/or its
Subsidiaries to any of its directors, officers and/or any of their Affiliates
(the “Related Party Loans”), including, without limitation, all loans set forth
on under the caption “Related Party Notes Payable” on Schedule 3(r)(i) , have
been amended such that no payments under any of such Related Party Loans will be
due prior to December 31, 2019.
 
4.           COVENANTS.
 
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each
of the covenants and the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
 
(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following the Closing Date.
 
(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all of the Preferred Shares and
Warrant Shares and none of the Preferred Shares or Warrants are outstanding (the
“Reporting Period”), the Company shall timely file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would no longer require or
otherwise permit such termination, and the Company shall take all actions
necessary to maintain its eligibility to register the Conversion Shares and
Warrant Shares for resale by the Investors on Form S-3, or any other form for
which the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the resale by the Buyers of
all Registrable Securities.
 
(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for its acquisition of the assets of Stantive Technologies Group Inc.
pursuant to the terms of the proposed Asset Purchase Agreement the Company
submitted to the Ontario Superior Court of Justice in Bankruptcy and Solvency,
to pay $2.7 million of Indebtedness, and for working capital purposes.
 
(e) Financial Information. The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, any Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K (or
any analogous reports under the 1934 Act) and any registration statements (other
than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same
day as the release thereof, facsimile or e-mailed copies of all press releases
issued by the Company or any of its Subsidiaries and (iii) copies of any notices
and other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders. As used herein, “Business Day “means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
 
 
-17-

 
 
(f) Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock are then listed (subject to official notice of issuance)
and shall maintain such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the authorization for quotation of the Common Stock on the Principal
Market or any other Eligible Market (as defined in the COD and Warrants).
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
 
(g) Fees. The Company shall reimburse the Lead Investor (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to any Buyer or its
counsel prior to the date of this Agreement) for all costs and expenses incurred
in connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amount
may be withheld by such Buyer from its Purchase Price at the Closing to the
extent not previously reimbursed by the Company. Notwithstanding the foregoing,
in no event will the fees of counsel of the Lead Investor reimbursed by the
Company pursuant to this Section 4(g) (in addition to any other expense amounts
paid to any Buyer or its counsel prior to the date of this Agreement) exceed
$15,000 without the prior approval from the Company. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including,
without limitation, any fees or commissions payable to the Placement Agent,
including any reasonable legal fees and expenses of the Placement Agent. The
Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, reasonable attorney’s fees and
out-of-pocket expenses) arising in connection with any claim relating to any
such payment. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the sale
of the Securities to the Buyers.
 
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.
 
 
-18-

 
 
(i) Disclosure of Transactions and Other Material Information. On or before 9:00
AM on March ___, 20191, the Company shall (A) issue a press release (the “Press
Release”) reasonably acceptable to the Buyers disclosing all material terms of
the transactions contemplated hereby and (B) file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules and exhibits to this Agreement), the COD, the form of the Warrants,
the form of Exchange Agreement, the form of Lock-Up Agreement and the form of
the Registration Rights Agreement as exhibits to such filing (including all
attachments), the “8-K Filing”). From and after the filing of the 8-K Filing, no
Buyer shall be in possession of any material, non-public information received
from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees, affiliates or agents, that is not disclosed in the 8-K
Filing. In addition, effective upon the filing of the 8-K Filing, the Company
acknowledges and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company, any of its
Subsidiaries or any of their respective officers, directors, affiliates,
employees or agents, on the one hand, and any of the Buyers or any of their
affiliates, on the other hand, shall terminate. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers,
directors, employees, affiliates and agents, not to, provide any Buyer with any
material, non-public information regarding the Company or any of its
Subsidiaries from and after the date hereof without the express prior written
consent of such Buyer. If a Buyer has, or believes it has, received any such
material, non-public information regarding the Company or any of its
Subsidiaries from the Company, any of its Subsidiaries or any of their
respective officers, directors, employees, affiliates or agents, it may provide
the Company with written notice thereof. The Company shall, within two (2)
Trading Days of receipt of such notice, make public disclosure of such material,
non-public information. In the event of a breach of the foregoing covenant by
the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees, affiliates and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, affiliates or agents. No Buyer shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, affiliates or agents for any such
disclosure. To the extent that the Company delivers any material, non-public
information to a Buyer without such Buyer’s consent, the Company hereby
covenants and agrees that such Buyer shall not have any duty of confidentiality
to the Company, any of its Subsidiaries or any of their respective officers,
directors, employees, affiliates or agents with respect to, or a duty to the
Company, any of its Subsidiaries or any of their respective officers, directors,
employees, affiliates or agents not to trade on the basis of, such material,
non-public information. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Except for the Registration Statement
required to be filed pursuant to the Registration Rights Agreement, without the
prior written consent of any applicable Buyer, neither the Company nor any of
its Subsidiaries or affiliates shall disclose the name of such Buyer in any
filing, announcement, release or otherwise.
 
(j) Corporate Existence. So long as any Buyer beneficially owns any Securities,
the Company shall maintain its corporate existence and shall not be party to any
Fundamental Transaction (as defined in the Warrants) unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Warrants.
1 Insert date of signing of SPA if signed pre-market or the next Trading Day if
signed during or after the close of trading on a Trading Day.
 
-19-

 
 
(k) Reservation of Shares. So long as any Buyer owns any Preferred Shares or
Warrants, the Company shall take all action necessary to at all times after the
date hereof have authorized, and reserved for the purpose of issuance, no less
than the number of shares of Common Stock issuable upon conversion of the
Preferred Shares (without taking into account any limitations on the conversion
of the Preferred Shares set forth in the COD) and upon exercise of the Warrants
then outstanding (without taking into account any limitations on the exercise of
the Warrants set forth in the Warrants) (herein, the “Required Reserve Amount”).
If at any time the number of shares of Common Stock authorized and reserved for
issuance is not sufficient to meet the Required Reserved Amount, the Company
will promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company’s
obligations under Section 3(c), in the case of an insufficient number of
authorized shares, obtain stockholder approval of an increase in such authorized
number of shares (or effecting a reverse stock split of the Common Stock), and
voting the management shares of the Company in favor of an increase in the
authorized shares (or effecting a reverse stock split of the Common Stock) of
the Company to ensure that the number of authorized shares is sufficient to meet
the Required Reserved Amount.
 
As soon as practicable following the Closing Date, the Company shall hold a
special meeting of stockholders for the purpose of obtaining Authorized Share
Approval and Stockholder Approval (the “Special Meeting”). The Special Meeting
shall be held no later than May 1, 2019. The Company shall use its reasonable
best efforts to obtain Authorized Share Approval and Stockholder Approval of
such items and shall cause the Board of Directors of the Company to recommend to
the stockholder that they approve such items. If, despite the Company’s
reasonable best efforts the Authorized Share Approval and Stockholder Approval
is not obtained on or prior to the May 1, 2019, the Company shall cause an
additional stockholder meeting to be held every three months thereafter until
such Authorized Share Approval and Stockholder Approval is obtained.
 
(l) Conduct of Business. The business of the Company and its Subsidiaries shall
not be conducted in violation of any law, ordinance or regulation of any
governmental entity, including, without limitation, FCPA and other applicable
Anti-Bribery Laws, OFAC regulations and other applicable Sanctions Laws, and
Anti-Money Laundering Laws.
 
(i) Neither the Company, nor any of its Subsidiaries or affiliates, directors,
officers, employees, representatives or agents shall:
 
(a) conduct any business or engage in any transaction or dealing with or for the
benefit of any Blocked Person, including the making or receiving of any
contribution of funds, goods or services to, from or for the benefit of any
Blocked Person;
 
(b) deal in, or otherwise engage in any transaction relating to, any property or
interests in property blocked or subject to blocking pursuant to the applicable
Sanctions Laws;
 
(c) use any of the proceeds of the transactions contemplated by this Agreement
to finance, promote or otherwise support in any manner any illegal activity,
including, without limitation, any Anti-Money Laundering Laws, Sanctions Laws,
or Anti-Bribery Laws; or
 
(d) violate, attempt to violate, or engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding,
any of the Anti-Money Laundering Laws, Sanctions Laws, or Anti-Bribery Laws.
 
(ii) The Company shall maintain in effect and enforce policies and procedures
designed to ensure compliance by the Company and its Subsidiaries and their
directors, officers, employees, agents representatives and affiliates with the
Sanctions Laws and Anti-Bribery Laws.
 
-20-

 
 
(iii) The Company will promptly notify the Buyers in writing if any of the
Company, or any of its Subsidiaries or affiliates, directors, officers,
employees, representatives or agents, shall become a Blocked Person, or become
directly or indirectly owned or controlled by a Blocked Person.
 
(iv) The Company shall provide such information and documentation as the Buyers
or any of their affiliates may require to satisfy compliance with the Anti-Money
Laundering Laws, Sanctions Laws, or Anti-Bribery Laws.
 
(v) The covenants set forth above shall be ongoing. The Company shall promptly
notify the Buyers in writing should it become aware (a) of any changes to these
covenants, or (b) if it cannot comply with the covenants set forth herein. The
Company shall also promptly notify the Buyers in writing should they become
aware of an investigation, litigation or regulatory action relating to an
alleged or potential violation of the Anti-Money Laundering Laws, Sanctions
Laws, and Anti-Bribery Laws.
 
(m) Additional Issuances of Securities.
 
(i) For purposes of this Section 4(m), the following definitions shall apply.
 
(1) “Convertible Securities “means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.
 
(2) “Options “means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
 
(3) “Common Stock Equivalents “means, collectively, Options and Convertible
Securities.
 
(ii) From the date hereof until the Trigger Date, the Company shall not,
directly or indirectly, file any registration statement with the SEC, or file
any amendment or supplement thereto or cause any registration statement or
amendment thereto to be declared effective by the SEC, or grant any registration
rights to any Person that can be exercised prior to such time as set forth
above, other than pursuant to the Registration Rights Agreement. From the date
hereof until the date that is ninety (90) calendar days after the Trigger Date,
the Company shall not, (1) directly or indirectly, offer, sell, grant any option
to purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its Subsidiaries’
debt, equity or equity equivalent securities, including without limitation any
debt, preferred stock or other instrument or security that is, at any time
during its life and under any circumstances, convertible into or exchangeable or
exercisable for Common Stock or Common Stock Equivalents, including, without
limitation, any rights, warrants or options to subscribe for or purchase Common
Stock or directly or indirectly convertible into or exchangeable or exercisable
for Common Stock at a price which varies or may vary with the market price of
the Common Stock, including by way of one or more reset(s) to any fixed price
(any such offer, sale, grant, disposition or announcement being referred to as a
“Subsequent Placement”), (2) enter into, or effect a transaction under, any
agreement, including, but not limited to, an equity line of credit or
“at-the-market” offering, whereby the Company may issue securities at a future
determined price or (3) be party to any solicitations, negotiations or
discussions with regard to the foregoing. As used herein, “Trigger Date “means
the latest of (I) the date of Stockholder Approval, (II) the date of Authorized
Share Approval and (III) the earlier of (x) such time as one or more
Registration Statement(s) covering the resale of all Registrable Securities has
been effective and available for the re-sale of all such Registrable Securities
and (y) such time as all of the Registrable Securities may be sold without
restriction or limitation pursuant to Rule 144 and without the requirement to be
in compliance with Rule 144(c)(1). At any time prior to the date that is ninety
(90) calendar days after the Trigger Date, the Company and each Subsidiary shall
be prohibited from effecting or entering into an agreement to effect any
Subsequent Placement involving a Variable Rate Transaction. “Variable Rate
Transaction “means a transaction in which the Company or any Subsidiary (i)
issues or sells any Convertible Securities either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the Ordinary Shares at any time after the
initial issuance of such Convertible Securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such Convertible Securities or upon the occurrence
of specified or contingent events directly or indirectly related to the business
of the Company or the market for the Ordinary Shares, other than pursuant to a
customary “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit or an
“at-the-market” offering) whereby the Company or any Subsidiary may sell
securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Buyer shall be entitled to obtain
injunctive relief against the Company and its Subsidiaries to preclude any such
issuance, which remedy shall be in addition to any right to collect damages.
 
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(iii) From 90 days following the Trigger Date until the two year anniversary of
the Closing Date (the “Participation Period”), the Company will not, directly or
indirectly, effect any Subsequent Placement unless the Company shall have first
complied with this Section 4(m)(iii).
 
(1) The Company shall deliver to each Buyer an irrevocable written notice (the
“Offer Notice”) of any proposed or intended issuance or sale or exchange (the
“Offer”) of the securities being offered (the “Offered Securities”) in a
Subsequent Placement, which Offer Notice shall (A) identify and describe the
Offered Securities, (B) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (C) identify the Persons (if known)
to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (D) offer to issue and sell to or exchange with such Buyers at
least 35% of the Offered Securities, allocated among such Buyers (I) based on
such Buyer’s pro rata portion of the aggregate number of Preferred Shares
purchased hereunder (the “Basic Amount”), and (II) with respect to each Buyer
that elects to purchase its Basic Amount, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Buyers as such Buyer shall
indicate it will purchase or acquire should the other Buyers subscribe for less
than their Basic Amounts (the “Undersubscription Amount”).
 
(2) To accept an Offer, in whole or in part, such Buyer must deliver a written
notice to the Company prior to the end of the third (3rd) Business Day after
such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the
portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided , however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent its deems reasonably
necessary. Notwithstanding anything to the contrary contained herein, if the
Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to the Buyers a
new Offer Notice and the Offer Period shall expire on the third (3 rd) Business
Day after such Buyer’s receipt of such new Offer Notice.
 
(3) The Company shall have five (5) Business Days from the expiration of the
Offer Period above (A) to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Buyers (the “Refused Securities”) pursuant to a definitive agreement (the
“Subsequent Placement Agreement”) but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (B) to publicly announce
(I) the execution of such Subsequent Placement Agreement, and (II) either (x)
the consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, in each
case, which shall be filed with the SEC on a Current Report on Form 8-K with
such Subsequent Placement Agreement and any documents contemplated therein filed
as exhibits thereto.
 
(4) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4(m)(iii)(3) above), then each Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(m)(iii)(2) above multiplied by a fraction, (A) the numerator of
which shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(m)(iii)(3) above prior to such
reduction) and (B) the denominator of which shall be the original amount of the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(m)(iii)(1) above.
 
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(5) Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the Buyers shall acquire from the Company, and the
Company shall issue to the Buyers, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section
4(m)(iii)(3) above if the Buyers have so elected, upon the terms and conditions
specified in the Offer. The purchase by the Buyers of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective
counsel.
 
(6) Any Offered Securities not acquired by the Buyers or other persons in
accordance with Section 4(m)(iii)(3) above may not be issued, sold or exchanged
until they are again offered to the Buyers under the procedures specified in
this Agreement.
(7) The Company and the Buyers agree that if any Buyer elects to participate in
the Offer, (A) neither the Subsequent Placement Agreement with respect to such
Offer nor any other transaction documents related thereto (collectively, the
“Subsequent Placement Documents”) shall include any term or provisions whereby
any Buyer shall be required to agree to any restrictions in trading as to any
securities of the Company owned by such Buyer prior to such Subsequent
Placement, and (B) any registration rights set forth in such Subsequent
Placement Documents shall be similar in all material respects to the
registration rights contained in the Registration Rights Agreement.
 
(8) Notwithstanding anything to the contrary in this Section 4(m) and unless
otherwise agreed to by the Buyers, the Company shall either confirm in writing
to the Buyers that the transaction with respect to the Subsequent Placement has
been abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case in such a manner such that the Buyers will not be in
possession of material non-public information, by the tenth (10 th) Business Day
following delivery of the Offer Notice. If by the tenth (10th) Business Day
following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by the Buyers,
such transaction shall be deemed to have been abandoned and the Buyers shall not
be deemed to be in possession of any material, non-public information with
respect to the Company. Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide each Buyer
with another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(m)(iii). The Company shall not be
permitted to deliver more than one such Offer Notice to the Buyers in any 60 day
period.
 
(iv) The restrictions contained in subsection (iii) of this Section 4(m) shall
not apply in connection with (x) the issuance of any Excluded Securities (as
defined in the COD and the Warrants).
 
(v) Notwithstanding anything to the contrary in Section 4(m)(iii), if, during
the Participation Period, the Company becomes eligible to register its
securities on a Registration Statement on Form S-3 with the SEC, the Company
will not, directly or indirectly, effect any Subsequent Placement by means of a
sale (i.e. “shelf take-down”) of securities registered on such Form S-3 (a
“Subsequent Overnight Placement”) unless the Company shall have first complied
with this Section 4(m)(v).
 
(1) Between the time period of 4:00 pm (New York City time) and 6:00 pm (New
York City time) on the Trading Day immediately prior to the Trading Day of the
expected announcement of the Subsequent Overnight Placement (or, if the Trading
Day of the expected announcement of the Subsequent Overnight Placement is the
first Trading Day following a holiday or a weekend (including a holiday
weekend), between the time period of 4:00 p.m. (New York City time) on the
Trading Day immediately prior to such holiday or weekend and 2:00 p.m. (New York
City time) on the day immediately prior to the Trading Day of the expected
announcement of the Subsequent Overnight Placement), the Company shall deliver
to each Buyer a written notice of the Company’s intention to effect a Subsequent
Overnight Placement (a “Subsequent Overnight Placement Notice”), which notice
shall describe in reasonable detail the proposed terms of such Subsequent
Overnight Placement, the amount of proceeds intended to be raised thereunder and
the Person or Persons through or with whom such Subsequent Overnight Placement
is proposed to be effected and shall include a term sheet and transaction
documents relating thereto as an attachment.
 
 
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(2) Any Buyer desiring to participate in such Subsequent Overnight Placement
must provide written notice to the Company by 6:30 am (New York City time) on
the Trading Day following the date on which the Subsequent Overnight Placement
Notice is delivered to such Buyer (the “Overnight Notice Termination Time”) that
such Buyer is willing to participate in the Subsequent Overnight Placement, the
amount of such Buyer’s participation (subject to the amounts provided for in
Section 4(m)(iii)(1), and representing and warranting that such Buyer has such
funds ready, willing, and available for investment on the terms set forth in the
Subsequent Overnight Placement Notice. If the Company receives no such notice
from a Buyer as of such Overnight Notice Termination Time, such Buyer shall be
deemed to have notified the Company that it does not elect to participate in
such Subsequent Overnight Placement.
 
(3) If, by the Overnight Notice Termination Time, notifications by the Buyer of
their willingness to participate in the Subsequent Overnight Placement (or to
cause their designees to participate) is, in the aggregate, less than the total
amount of the Subsequent Overnight Placement, then the Company may effect the
remaining portion of such Subsequent Overnight Placement on the terms and with
the Persons set forth in the Subsequent Overnight Placement Notice.
 
(4) The Company must provide the Buyers with a second Subsequent Overnight
Placement Notice, and the Buyers will again have the right of participation set
forth above in this Section 4(m)(v), if the definitive agreement related to the
initial Subsequent Overnight Placement Notice is not entered into for any reason
on the terms set forth in such Subsequent Overnight Placement Notice within two
(2) Trading Days after the date of delivery of the initial Subsequent Overnight
Placement Notice.
 
(5) The Company and each Buyer agree that, if any Buyer elects to participate in
the Subsequent Overnight Placement, the transaction documents related to the
Subsequent Overnight Placement shall not include any term or provision whereby
such Buyer shall be required to agree to any restrictions on trading as to any
of the Securities purchased hereunder or be required to consent to any amendment
to or termination of, or grant any waiver, release or the like under or in
connection with, this Agreement, without the prior written consent of such
Buyer. In addition, the Company and each Buyer agree that, in connection with a
Subsequent Overnight Placement, the transaction documents related to the
Subsequent Overnight Placement shall include a requirement for the Company to
issue a widely disseminated press release by 9:30 a.m. (New York City time) on
the Trading Day of execution of the transaction documents in such Subsequent
Overnight Placement (or, if the date of execution is not a Trading Day, on the
immediately following Trading Day) that discloses the material terms of the
transactions contemplated by the transaction documents in such Subsequent
Overnight Placement.
 
(6) Notwithstanding anything to the contrary in this 4(m)(v) and unless
otherwise agreed to by such Buyer, the Company shall either confirm in writing
to such Buyer that the transaction with respect to the Subsequent Overnight
Placement has been abandoned or shall publicly disclose its intention to issue
the securities in the Subsequent Overnight Placement, in either case, in such a
manner such that such Buyer will not be in possession of any material,
non-public information, by 9:30 a.m. (New York City time) on the second (2nd)
Trading Day following date of delivery of the Subsequent Overnight Placement
Notice. If by 9:30 a.m. (New York City time) on such second (2 nd) Trading Day,
no public disclosure regarding a transaction with respect to the Subsequent
Overnight Placement has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be deemed to be in
possession of any material, non-public information with respect to the Company
or any of its Subsidiaries.
 
(n) Public Information. At any time during the period commencing from the six
(6) month anniversary of the Closing Date and ending at such time that all of
the Securities, if a registration statement is not available for the resale of
all of the Securities, may be sold without restriction or limitation pursuant to
Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), if
the Company shall (i) fail for any reason to satisfy the requirements of Rule
144(c)(1), including, without limitation, the failure to satisfy the current
public information requirements under Rule 144(c) or (ii) if the Company has
ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in
the future, and the Company shall fail to satisfy any condition set forth in
Rule 144(i)(2) (each, a “Public Information Failure”) then, as partial relief
for the damages to any holder of Securities by reason of any such delay in or
reduction of its ability to sell the Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each such holder an amount in cash equal to one percent (1.0%) of
the aggregate Purchase Price of such holder’s Securities on the day of a Public
Information Failure and on every thirtieth day (pro-rated for periods totaling
less than thirty days) thereafter until the earlier of (i) the date such Public
Information Failure is cured and (ii) such time that such Public Information
Failure no longer prevents a holder of Securities from selling such Securities
pursuant to Rule 144 without any restrictions or limitations. The payments to
which a holder shall be entitled pursuant to this Section 4(p) are referred to
herein as “Public Information Failure Payments.”
 
 
-24-

 
 
Notwithstanding anything to the contrary contained herein, the aggregate amount
of all Public Information Failure Payments shall not exceed 8% of the aggregate
Purchase Price of such holder’s Securities. Public Information Failure Payments
shall be paid on the earlier of (I) the last day of the calendar month during
which such Public Information Failure Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Public Information
Failure Payments is cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month (prorated for partial
months) until paid in full.
(o) Lock-Up. The Company shall not amend, modify, waive or terminate any
provision of any of the Lock-Up Agreements except to extend the term of the
lock-up period and shall enforce the provisions of each Lock-Up Agreement in
accordance with its terms. If any officer or director that is a party to a
Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company
shall promptly use its best efforts to seek specific performance of the terms of
such Lock-Up Agreement.
 
(p) Voting Agreements. Until the Stockholder Approval and the Authorized Share
Approval have each been obtained, the Company shall not amend, modify, waive or
terminate any provision of any of the Voting Agreements and shall enforce the
provisions of each Voting Agreement in accordance with its terms. If any party
to a Voting Agreement breaches any provision of a Voting Agreement, the Company
shall promptly use its best efforts to seek specific performance of the terms of
such Voting Agreement.
 
(q) Notice of Disqualification Events. The Company will notify the Buyers in
writing, prior to the Closing Date of (i) any Disqualification Event relating to
any Issuer Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer Covered Person.
 
(r) FAST Compliance. While any Warrants are outstanding, the Company shall
maintain a transfer agent that participates in the DTC Fast Automated Securities
Transfer Program.
 
(s) Closing Documents. On or prior to fourteen (14) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Buyer and Gracin &Marlow, LLP a complete closing set of the executed Transaction
Documents, Securities and any other documents required to be delivered to any
party pursuant to Section 7 hereof or otherwise.
 
(t) Related Party Loans. While any Securities remain outstanding, without the
prior written consent of the Required Holders, the Company hereby covenants and
agrees that it will not, and will cause its Subsidiaries not to, (i) change the
date on which any payments are due under any of the Related Party Loans to a
date prior to December 31, 2019, (ii) make any payments under any of the Related
Party Loans prior to December 31, 2019.
 
(u) 2018 Public Warrants. The Company shall (i) enter into an exchange agreement
(each, an "Exchange Agreement" and collectively, the "Exchange Agreements") with
each Buyer that acquired warrants that were registered pursuant to the Company’s
registration statement (the “2018 Registration Statement”) on Form S-1 (File No.
333-227430) declared effective by the Securities and Exchange Commission on
October 16, 2018 (the “2018 Warrants”), pursuant to which the Company shall, at
the Buyer’s option, exchange each 2018 Warrant for a new warrant (the, "Exchange
Warrants") with identical terms to such 2018 Warrant other than the exercise
price which shall be equal to the exercise price of the Series A Warrants
(subject to further adjustment as set forth in the Series A Warrants), and (ii)
file a prospectus supplement to the 2018 Registration Statement within five (5)
Business Days of the Closing Date and take all other steps necessary, at the
Company’s expense and Buyer’s option, to maintain the registration of the shares
of Common Stock underlying the Exchange Warrants.
 
 
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5.           REGISTER; TRANSFER AGENT INSTRUCTIONS.
 
(a) Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Securities), a register for the Warrants in which the Company shall
record the name and address of the Person in whose name the Warrants have been
issued (including the name and address of each transferee) and the number of
Warrant Shares issuable upon exercise of the Warrants held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.
 
(b) Transfer Agent Instructions. Subject to the terms and conditions of the COD
and the Warrants, the Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, in the form of Exhibit I
attached hereto (the “Irrevocable Transfer Agent Instructions”) to issue
certificates or credit shares to the applicable balance accounts at DTC,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares issuable upon conversion of the Preferred Shares and the
Warrant Shares issuable upon exercise of the Warrants in such amounts as
specified from time to time by each Buyer to the Company upon exercise of the
Warrants. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(f) hereof, will be given by the Company
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves the Conversion Shares or
the Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to a Buyer. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b), that
a Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
 
6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the Company
hereunder to issue and sell the Preferred Shares and the related Warrants to
each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company.
 
(ii) Such Buyer shall have delivered to the Company the Purchase Price (less, in
the case of the Lead Investor, the amounts withheld pursuant to Section 4(g)),
for the Preferred Shares and the related Warrants being purchased by such Buyer
at the Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
 
(iii) The representations and warranties of such Buyer shall be true and correct
as of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date
which shall be true and correct as of such specified date), and such Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
 
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7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Preferred Shares and the related Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for each Buyer’s
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
 
(i) The Company shall have duly executed and delivered to such Buyer (A) each of
the Transaction Documents, (B) the Preferred Shares (allocated in such amounts
as such Buyer shall request), being purchased by such Buyer at the Closing
pursuant to this Agreement and (C) the related Warrants (allocated in such
amounts as such Buyer shall request) being purchased by such Buyer at the
Closing pursuant to this Agreement.
 
(ii) Such Buyer and the Placement Agent shall have received the opinion of
Disclosure Law Group, the Company’s outside counsel, dated as of the Closing
Date, in substantially the form of Exhibit F attached hereto.
 

(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, which instructions shall have been delivered to and
acknowledged in writing by the Company’s transfer agent.
 
(iv) The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in such
entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within ten (10) calendar
days of the Closing Date.
 
(v) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State (or
comparable office) of the Company’s jurisdiction of formation within ten (10)
calendar days of the Closing Date.
 
(vi) The Company shall have delivered to such Buyer a certificate, executed by
the Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s Board of
Directors, (ii) the Certificate of Incorporation, and (iii) the Bylaws, each as
in effect at the Closing, in the form attached hereto as Exhibit H.
 
(vii) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date which shall be true and correct as of such specified date) and the Company
shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit G.
 
(viii) The Company shall have delivered to such Buyer a letter from the
Company’s transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five (5) calendar days of the Closing Date.
 
(ix) The Company shall have delivered to each Buyer a lock-up agreement in the
form attached hereto as Exhibit J executed and delivered by each of the Persons
listed on Schedule 7(ix) (collectively, the “Lock-Up Agreements”).
 
(x) The Company shall have delivered to each Buyer a voting agreement in the
form attached hereto as Exhibit K executed and delivered by each of the Persons
listed on Schedule 7(x) (collectively, the "Voting Agreements").
 
-27-

 
 
(x) The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the Principal Market from trading on the Principal Market.
 
(xi) The Company shall have filed the COD with the Secretary of State of
Delaware and shall have delivered to each Buyer evidence of the filing, and
acceptance of the COD;
 
(xii) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Securities.
 
(xiii) The Company shall have entered into the Placement Agency Agreement with
the Placement Agent.
 
(ix) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.
 
8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before five (5) Business Days from the date hereof due
to the Company’s or such Buyer’s failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party’s failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date by delivering a written notice to that effect to each
other party to this Agreement and without liability of any party to any other
party; provided , however , that if this Agreement is terminated pursuant to
this Section 8, the Company shall remain obligated to reimburse the Lead
Investor or its designee(s), as applicable, for the expenses described in
Section 4(g) above.
 
9. MISCELLANEOUS.
 
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. If any Buyer shall
commence a suit, action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the Company under
Section 9(k) below, such Buyer shall be reimbursed by the Company for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such suit, action or proceeding.
 
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile or.pdf signature shall
be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
or.pdf signature.
 
(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
 
-28-

 
 
(d) Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
(e) Entire Agreement; Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
holders of at least a majority of the aggregate amount of Securities issued and
issuable hereunder and under the Warrants (without regard to any restriction or
limitation on the exercise of the Warrants contained therein) and shall include
the Lead Investor so long as the Lead Investor or any of its Affiliates holds
any Securities, Hudson Bay Capital Management LP so long as Hudson Bay Capital
Management LP or any of its Affiliates holds any Securities, and Sabby
Management, LLC so long as Sabby Management, LLC or any of its Affiliates holds
any Securities (the “Required Holders”), and any amendment to this Agreement
made in conformity with the provisions of this Section 9(e) shall be binding on
all Buyers and holders of Securities and the Company. No provisions hereto may
be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent
that it applies to less than all of the Buyers or holders of the applicable
Securities then outstanding. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration (other than the
reimbursement of legal fees) also is offered to all of the parties to the
Transaction Documents, holders of Preferred Shares or holders of the Warrants,
as the case may be. The Company has not, directly or indirectly, made any
agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Company or
otherwise.
 
(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement or any of the other
Transaction Documents must be in writing and will be deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon delivery, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party) or by electronic
mail; (iii) upon delivery, when sent by electronic mail (provided that the
sending party does not receive an automated rejection notice); or (iv) one (1)
Business Day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same. The addresses, facsimile
numbers and e-mail addresses for such communications shall be:
 
 
-29-

 
 
If to the Company:
Bridgeline Digital, Inc.
100 Summit Drive, Suite 916
Burlington, MA 01803
Telephone: (781) 376-5555
Attention: Roger Kahn, President and Chief Executive Officer
E-mail: akahn@bridgline.com
 
With a copy (for informational purposes only) to:
 
Disclosure Law Group, a Professional Corporation
600 West Broadway, Suite 700
San Diego, CA 92101
Telephone: (619) 272-7050
Facsimile: (619) 330-2101
Attention: Daniel W. Rumsey, Esq.
Email: drumsey@disclosurelawgroup.com
 
If to the Transfer Agent:
 
American Stock Transfer Company
6201 15th Avenue
Brooklyn, NY 11219
Telephone: (800) 937-5449
Facsimile:
Attention:
Email:
 
If to a Buyer, to its address, facsimile number and e-mail address set forth on
the Schedule of Buyers, with copies to such Buyer’s representatives as set forth
on the Schedule of Buyers,
 
With a copy (for informational purposes only) to:
 
Gracin & Marlow, LLP
The Chrysler Building
405 Lexington Avenue, 26th Floor
New York, NY 10174
Attention: Leslie Marlow, Esq.
Telephone: (212) 907-6457
Facsimile: (212) 208-4657
 
or to such other address, facsimile number and/or e-mail address and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) calendar days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine or
e-mail containing the time, date, recipient facsimile number and an image of the
first page of such transmission or (C) provided by an overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from an overnight courier service in accordance with clause (i), (ii) or
(iii) above, respectively.
 
(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares or the Warrants. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Required Holders, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Warrants). A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.
 
-30-

 
 
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except that each Indemnitee shall have the right to enforce the
obligations of the Company with respect to Section 9(k).
 
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, and the agreements and covenants set forth in Sections 4, 5
and 9 shall survive the Closing. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
 
(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
(k) Indemnification. In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities that is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Section 9(k) shall be the same as those
set forth in Section 6 of the Registration Rights Agreement.
 
(l) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
 
(m) Remedies. Each Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.
 
 
-31-

 
 
(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
 
(o) Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
 
(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not so
constitute, a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert
or as a group, and the Company shall not assert any such claim with respect to
such obligations or the transactions contemplated by the Transaction Documents
and the Company acknowledges that the Buyers are not acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges and each Buyer confirms that it
has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.
 
(q) Equal Treatment. No consideration (including any modification of any
Transaction Document) shall be offered or paid to any Buyer to amend or consent
to a waiver or modification of any provision of any of the Transaction Documents
unless the same consideration (other than the reimbursement of legal fees) also
is offered to all of the parties to the Transaction Documents, holders of
Preferred Shares or holders of the Warrants, as the case may be. The Company has
not, directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, no
Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company or otherwise. For clarification purposes, this
provision constitutes a separate right granted to each Buyer by the Company and
negotiated separately by each Buyer, and is intended for the Company to treat
the Buyers as a class and shall not in any way be construed as the Buyers acting
in concert or as a group with respect to the purchase, disposition or voting of
Securities or otherwise.
 
 
[Signature Page Follows]
 
 
-32-

 
 
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
 
 
COMPANY:
 
 
 
 
BRIDGELINE DIGITAL, INC.
 
 
 
 
 
 
By:
 
 
 
Name: Roger Kahn
 
 
Title: Chief Executive Officer

 
 

 
 
[Signature Page to Securities Purchase Agreement]
 
 
 
-33-

 
 

 
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
 
 
 
Name of Purchaser: __________________________________________________________

 
Signature of Authorized Signatory of Purchaser:
__________________________________________________________
 
Joint Signature of Authorized Signatory of Purchaser, if applicable:
__________________________________________________________
 
Name(s) of Authorized Signatory:
__________________________________________________________
 
Title of Authorized Signatory:
__________________________________________________________

 
Email Address of Authorized Signatory:
__________________________________________________________
 
Address for Notice to Purchaser:
__________________________________________________________
 
Social Security/EIN Number(s):
__________________________________________________________
 
Election for book-entry Preferred Shares:  _____[check for book-entry shares]
 
Election for physical delivery of a Preferred Stock certificate:   _____[check
for physical stock certificate]
 
Address for Delivery of Warrants (and Preferred Stock certificate, if
applicable), to Purchaser (if not same as address for notice):
 
______________________________________________________________________________ 

 
In accordance with Section 1(f) of the Warrants, the applicable Beneficial
Ownership Limitation of the Purchaser shall be: ____4.99% ____ 9.99% [check one]
 

In accordance with Section 4(d) of the Certificate of Designation, the
applicable Beneficial Ownership Limitation of the Purchaser relating to
conversions of the Series C Convertible Preferred Stock shall be:
 
____4.99% ____ 9.99% [check one]
 
Affiliate of the Issuer: __________[Check if an affiliate of the Company]
 
Subscription Amount: $ ______________________

 
 
 
 
 
[Signature Page to Securities Purchase Agreement]
 
-34-

 
 
SCHEDULE OF BUYERS
 
(1)
 
(2)
 
 
(3)
 
 
(4)
 
(5)
 
(6)
 
(7)
 
(8)
 
Buyer
 
Address, Facsimile Number and E-mail
 
 
Number of Preferred Shares
 
 
 
Number of Series A Warrant Shares
 
 
 
Number of Series B Warrants Shares

 
 
Number of Series C Warrant Shares

 
 
Purchase Price

 
Legal Representative’s Address, Facsimile Number andE-mail
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
-35-

 
EXHIBITS
 
Exhibit A
Certificate of Designations for Series C Preferred Stock
Exhibit B
Form of Series A Warrant
Exhibit C
Form of Series B Warrant
Exhibit D
Form of Series C Warrant
Exhibit E
Form of Registration Rights Agreement
Exhibit F
Company Opinion
Exhibit G
Form of Officer’s Certificate
Exhibit H
Form of Secretary’s Certificate
Exhibit I
Irrevocable Transfer Agent Instructions
Exhibit J
Exhibit K
Form of Lock-Up Agreement
Form of Voting Agreement

 
SCHEDULES
 
Schedule 3(a)
Subsidiaries
Schedule 3(j)
SEC Documents
Schedule 3(k)
Absence of Certain Changes
Schedule 3(p)
Transactions with Affiliates
Schedule 3(q)
Equity Capitalization
Schedule 3(r)
Indebtedness and Other Contracts
Schedule 3(s)
Absence of Litigation
Schedule 3(w)
Intellectual Property Rights
Schedule 3(aa)
Internal Accounting and Disclosure Controls

   
 
-36-