Exhibit 10.1

 

 

 

 

SECURITIES PURCHASE AGREEMENT

 

 

This Securities Purchase Agreement (this “Agreement”) is dated as of March 26,
2018, by and between Giga-tronics Incorporated, a corporation organized in the
State of California (the “Company”), and the respective purchasers identified on
the signature page hereto (including its successors and assigns, the
“Purchaser”).

 

RECITALS

 

A      Each Purchaser wishes to purchase, and the Company wishes to sell, at the
Purchase Price and upon the terms and conditions stated in this Agreement, the
number of shares of 6.0% Series E Senior Convertible Voting Perpetual Preferred
Stock set forth opposite or below each Purchaser’s name on such Purchaser’s
counterpart signature page of this Agreement (which shall be collectively
referred to herein as the “Preferred Shares”).

 

B.      The Company has filed or before Closing will file a Certificate of
Determination of 6% Series E Senior Convertible Voting Perpetual Preferred Stock
in substantially the form attached hereto as Exhibit A (the “Certificate of
Determination”) with the Secretary of State of the State of California,
designating the authorized number and the rights, preferences, privileges, and
restrictions of a new series of preferred stock of the Company, designated as
“6.0% Series E Senior Convertible Voting Perpetual Preferred Stock” (the
“Preferred Stock”). Each share of Preferred Stock is initially convertible into
100 shares of Common Stock.

 

C.     The Company is offering and selling the securities contemplated by this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 of Regulation D
(“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “Commission”) under the Securities Act.

 

D.      Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering an Investor Rights Agreement,
substantially in the form attached hereto as Exhibit B (the “Investor Rights
Agreement”), pursuant to which, among other things, the Company will agree to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Investor Rights Agreement) under the Securities Act and the
rules and regulations promulgated thereunder and applicable state securities
laws and to provide certain additional rights.

 

E.      Each Purchaser who purchased Units consisting of shares of the Company’s
common stock and warrants to acquire shares of common stock under a Securities
Purchase Agreement dated on or about January 29, 2016, shall be entitled to
repricing of some or all of such Purchaser’s 2016 Warrants as described in
Section 4.4 below.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser hereby
agree as follows:

 

 

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Article 1:
DEFINITIONS

 

1.1     Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:

 

“2016 Warrant” means a Warrant to Purchase Common Stock issued by the Company to
Purchaser under a Securities Purchase Agreement dated on or about January 29,
2016 (the “2016 SPA”), which represents the right to acquire shares of the
Common Stock at the price of $1.15 per share.

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 405 under the Securities Act; provided, however, that
notwithstanding the foregoing, as used herein, the Purchaser shall not be deemed
an Affiliate of the Company or any Subsidiary, and none of the Company and its
Subsidiaries shall be deemed an Affiliate of the Purchaser.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Articles of Incorporation” means the Articles of Incorporation of the Company
and all amendments and certificates of determination thereto, including the
Certificate of Determination, as the same may be amended from time to time.

 

“Audit Committee” has the meaning set forth in Section 3.1(v).

 

“Board” has the meaning set forth in Section 3.1(v).

 

“Business Day” means any day other than Saturday, Sunday or any other day on
which commercial banks in the State of California or City of New York are
authorized or required by law to remain closed.

 

“California Courts” means the courts of the State of California and the United
States District Courts located in the State of California.

 

“Certificate of Determination” has the meaning set forth in the Recitals.

 

“Closing” means the closing of the purchase and sale of the Preferred Shares and
the Warrants pursuant to this Agreement.

 

“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all of the
conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or
such other date as the parties may agree.

 

“Code” means the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder.

 

“Commission” has the meaning set forth in the Recitals.

 

“Common Stock” means the Company’s common stock, no par value, and also includes
any securities into which the Common Stock may hereafter be reclassified or
changed.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Deliverables” has the meaning set forth in Section 2.2(a).

 

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“Company’s Knowledge” means, with respect to any statement made to the knowledge
of the Company, that the statement is based upon the actual knowledge of the
executive officers of the Company (or any person serving in such capacity,
including in an “Acting” or “Interim” capacity) having responsibility for the
matter or matters that are the subject of the statement after reasonable
investigation.

 

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Conversion Price” means a dollar amount equal to “Conversion Price” as
determined in accordance with the Certificate of Determination.

 

“Conversion Shares” means the shares of Common Stock into which the Preferred
Shares are convertible from time to time.

 

“EGE” means Emerging Growth Equities, Ltd., which shall act as the Company’s
placement agent for purposes of the transactions contemplated by this Agreement

 

“Environmental Laws” has the meaning set forth in Section 3.1(k).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder.

 

“ERISA Affiliate”, as applied to the Company, means any Person under common
control with the Company, who, together with the Company, is treated as a single
employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

“ERISA Entity” has the meaning set forth in Section 3.2(j).

 

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

 

“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.

 

“In-Kind Dividend Shares” means shares of Common Stock issuable as in-kind
dividends on shares of Preferred Stock.

 

“Intellectual Property Rights” has the meaning set forth in Section 3.1(s).

 

“Investor Rights Agreement” has the meaning set forth in the Recitals.

 

“Internal Controls” has the meaning set forth in Section 3.1(v).

 

“Lien” means any lien, charge, claim, encumbrance, security interest, right of
first refusal, preemptive right or other restrictions of any kind.

 

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“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of this Agreement, the Warrants or the
Investor Rights Agreement, (ii) a material and adverse effect on the results of
operations, assets, properties, business, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries, taken as a whole, or (iii) any
adverse impairment to the Company’s ability to perform in any material respect
on a timely basis its obligations under this Agreement, the Warrants or the
Investor Rights Agreement; provided, that in determining whether a Material
Adverse Effect has occurred, there shall be excluded any effect to the extent
resulting from the following: (A) changes, after the date hereof, in GAAP, (B)
changes, after the date hereof, in applicable laws, rules and regulations or
interpretations thereof by any court, administrative agency or other
governmental authority, whether federal, state, local or foreign, or any
applicable industry self-regulatory organization, (C) actions or omissions of
the Company expressly required by the terms of this Agreement or taken with the
prior written consent of an affected Purchaser, (D) changes, after the date
hereof, in general economic, monetary or financial conditions, (E) changes in
the market price or trading volumes of the Common Stock (but not the underlying
causes of such changes), (F) changes in global or national political conditions,
including the outbreak or escalation of war or acts of terrorism and (G) the
public disclosure of this Agreement or the transactions contemplated hereby;
except, with respect to clauses (A), (B), (D) and (F), to the extent that the
effects of such changes have a disproportionate effect on the Company and the
Subsidiaries, taken as a whole, relative to other similarly situated companies
generally.

 

“Material Contract” means any contract, agreement, plan or instrument of the
Company or any Subsidiary that is required to be filed as an exhibit to the SEC
Reports pursuant to Item 601 of Regulation S-K.

 

“Multiemployer Plan” means a “multiemployer plan” as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate is making, or is
accruing an obligation to make, contributions or has made, or been obligated to
make, contributions within the preceding six (6) years.

 

“Outside Date” means March 30, 2018.

 

“Pension Plan” means any employee pension benefit plan within the meaning of
Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the
provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA and which (i) is maintained for employees of the Company or any of its
ERISA Affiliates or (ii) has at any time during the last six (6) years been
maintained for the employees of the Company or any current or former ERISA
Affiliate.

 

“Permits” has the meaning set forth in Section 3.1(t).

 

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

 

“Preferred Shares” has the meaning set forth in the Recitals.

 

“Preferred Stock” has the meaning set forth in the Recitals.

 

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading, which, as of the date of this
Agreement and the Closing Date, shall be the OTCQB.

 

“Purchase Price” means $25.00 per Preferred Share.

 

“Purchaser” has the meaning set forth in the Preamble.

 

“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

 

“Registration Statement” means a registration statement meeting the requirements
set forth in the Investor Rights Agreement and covering the resale by the
Purchaser of the Registrable Securities (as defined in the Investor Rights
Agreement).

 

“Regulation D” has the meaning set forth in the Recitals.

 

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“Required Approvals” has the meaning set forth in Section 3.1(d).

 

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

 

“SEC Reports” has the meaning set forth in Section 3.1(g).

 

“Securities” means the Preferred Shares, the In-Kind Dividend Shares and the
Conversion Shares.

 

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

 

“Shareholder Rights Plan” means that Rights Agreement dated as of January 23,
2013 by and between the Company and American Stock Transfer & Trust Company, as
amended from time to time.

 

“Subscription Amount” means, with respect to each Purchaser, the number of
Preferred Shares subscribed by such Purchaser multiplied by the per share
Purchase Price.

 

“Subsidiary” means any entity in which the Company, directly or indirectly, owns
sufficient capital stock or holds a sufficient equity or similar interest such
that it is consolidated with the Company in the financial statements of the
Company.

 

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market (other than the OTCQB), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTCQB), a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTCQB, or (iii) if the Common Stock is not quoted on any Trading Market, a
day on which the Common Stock is quoted in the over-the-counter market as
reported in the “pink sheets” by Pink Sheets LLC (or any similar organization or
agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i),
(ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the NASDAQ Global Select Market, the NASDAQ
Global Market, the NASDAQ Capital Market, or the OTCQB on which the Common Stock
is listed or quoted for trading on the date in question.

 

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Investor Rights Agreement, and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means American Stock Transfer & Trust Co., or any successor
transfer agent for the Company.

 

“Warrants” has the meaning set forth in the Recitals.

 

“Warrant Shares” has the meaning set forth in the Recitals

 

Article 2:
PURCHASE AND SALE

 

2.1     Closing.

 

(a)     Purchase of Preferred Shares. Subject to the terms and conditions set
forth in this Agreement, at the Closing, in exchange for the Subscription
Amount, the Company shall issue and sell to each Purchaser, and each Purchaser
shall purchase from the Company, the number of Preferred Shares set forth
opposite such Purchaser’s signature on the signature page of this Agreement.

 

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(b)     Closing. The parties shall use their commercially reasonable best
efforts to satisfy all conditions to Closing and to complete the Closing as soon
as practicable. The Closing of the purchase and sale of the Preferred Shares
shall take place at the San Francisco office of Sheppard Mullin Richter &
Hampton LLP, on the Closing Date or at such other locations or remotely by
facsimile transmission or other electronic means as the parties may mutually
agree.

 

(c)     Form of Payment. Unless otherwise agreed to by the Company and
Purchaser, on the Closing Date, (1) the Company shall cause the Transfer Agent
to issue the Preferred Shares (or to deliver to each Purchaser one or more stock
certificates, evidencing such shares in accordance with Section 2.2(a)(ii)
hereof), and (2) Purchaser shall wire the Subscription Amount, in United States
dollars and in immediately available funds, in accordance with the Company’s
written wire transfer instructions.

 

2.2     Closing Deliveries.

 

(a)     On or prior to the Closing, the Company shall issue, deliver or cause to
be delivered to Purchaser the following (the “Company Deliverables”):

 

(i)     as the Company and Purchaser agree, the Company shall cause the Transfer
Agent to issue, in book-entry form the Preferred Shares (or, if the Company and
any Purchaser shall have agreed, as indicated on such Purchaser’s signature page
hereto, that such Purchaser will receive stock certificates for its Preferred
Shares, then the Company shall instead instruct the Transfer Agent to issue such
specified stock certificates registered in the name of such Purchaser);

 

(ii)     the Investor Rights Agreement, duly executed by the Company (which
shall be delivered at the Closing);

 

(iii)    a certificate of the Secretary of the Company, in the form attached
hereto as Exhibit C, dated as of the Closing Date, (a) certifying the
resolutions adopted by the Board of Directors of the Company or a duly
authorized committee thereof approving the transactions contemplated by this
Agreement and the other Transaction Documents, including the issuance of the
Preferred Shares and the Warrants, and the reservation of the In-Kind Dividend
Shares and Conversion Shares, (b) certifying the current versions of the
Articles of Incorporation and Bylaws, as amended and restated, of the Company
and (c) certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company;

 

(iv)     a certificate of the Chief Executive Officer or Acting Chief Financial
Officer of the Company, in the form attached hereto as Exhibit D, dated as of
the Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1(a) and (b); and

 

(v)     a true, correct and complete copy of the Certificate of Determination,
as filed with and certified by the Secretary of State of the State of California
(if available).

 

(b)     each Purchaser shall deliver or cause to be delivered to the Company the
following (the “Purchaser Deliverables”) on or prior to the Closing Date:

 

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(i)      the Investor Rights Agreement, duly executed by such Purchaser; and

 

(ii)     the Subscription Amount, in United States dollars and in immediately
available funds, by wire transfer in accordance with the Company’s written
instructions.

 

Article 3:
REPRESENTATIONS AND WARRANTIES

 

3.1     Representations and Warranties of the Company. The Company hereby
represents and warrants as of the date hereof and the Closing Date (except for
the representations and warranties that speak as of a specific date, which shall
be made as of such date), to Purchaser that:

 

(a)     Organization and Qualification. The Company and each Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own or lease and use
its properties and assets and to carry on its business as disclosed in the SEC
Reports and as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its articles or certificate of
incorporation, bylaws or other organizational documents. The Company and each of
its Subsidiaries is duly qualified to conduct business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

(b)    Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The Company’s execution and delivery of
each of the Transaction Documents and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, and no further corporate action is
required by the Company, its Board of Directors or its shareholders in
connection therewith. Each of the Transaction Documents has been (or upon
delivery will have been) duly executed by the Company and is, or when delivered
in accordance with the terms hereof, will constitute the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

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(c)     No Conflicts. The execution, delivery and performance by the Company of
the Transaction Documents and the consummation by the Company of the
transactions contemplated hereby or thereby do not and will not (i)  violate any
provisions of the Company’s or any Subsidiary’s articles or certificate of
incorporation or bylaws, (ii) constitute a default (or an event that with notice
or lapse of time or both would result in a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any Material Contract, including the Shareholder Rights Plan, or (iii) subject
to the Required Approvals, result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or any Subsidiary is subject, or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except in the case of clauses (ii) and (iii) such as would not have or
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

(d)    Filings, Consents and Approvals. Neither the Company nor any of its
Subsidiaries is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificate of
Determination with the Secretary of State of the State of California, (ii) the
filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Investor Rights Agreement, (iii) filings required
by applicable state securities laws, (iv) the filing of a Notice of Exempt
Offering of Securities on Form D with the Commission under Regulation D of the
Securities Act, (v) the filing of any required notices with FINRA or the
Principal Securities Market (collectively, the “Required Approvals”).

 

(e)     Issuance of the Securities. The issuance of the Securities has been duly
authorized, and the Securities, when issued and paid for in accordance with the
terms of the Transaction Documents, will be duly and validly issued, fully paid
and non-assessable and free and clear of all Liens, other than restrictions on
transfer provided for in the Transaction Documents or imposed by applicable
securities laws. The issuance of the Securities is not subject to any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. Assuming the accuracy of the representations
and warranties of the Purchaser in this Agreement, the Securities will be issued
in compliance with all applicable federal and state securities laws.

 

(f)     Capitalization. The number of shares and type of all authorized, issued
and outstanding capital stock, options and other securities of the Company
(whether or not presently convertible into or exercisable or exchangeable for
shares of capital stock of the Company) has been set forth in the SEC Reports
and has changed since the date of such SEC Reports only due to (i) the filing of
the Certificate of Determination, and (ii) stock grants or other equity awards
under the plans described in the SEC Reports or exercises of stock options and
warrants described in the SEC Reports which do not, individually or in the
aggregate, have a material effect on the issued and outstanding capital stock,
options and other securities. All of the outstanding shares of capital stock of
the Company are duly authorized, validly issued, fully paid and non-assessable,
have been issued in compliance in all material respects with all applicable
federal and state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase any capital stock of the Company. There are no authorized or
outstanding shares of capital stock, options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company or any of the Subsidiaries other than those accurately
described in the SEC Reports. The description of the Company’s stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, as described in the SEC Reports accurately and fairly
present the information required to be shown with respect to such plans,
arrangements, options and rights.

 

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(g)     SEC Reports. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, since January 1, 2015
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”), on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension (except for the Company’s failure to file its proxy statement or to
amend its Form 10-K within 120 days after the end of its 2017 fiscal year to
include information required by Part III of Form 10-K). As of their respective
filing dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder (excepted as described
above), and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(h)    Financial Statements. The financial statements of the Company and its
Subsidiaries included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared from the books and records of the
Company in accordance with GAAP applied on a consistent basis during the periods
involved, except as may be otherwise specified in such financial statements or
the notes thereto and except as may be permitted by the Commission on Form 10-Q,
and fairly present in all material respects the financial condition of the
Company and its consolidated Subsidiaries taken as a whole as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments, which would not be material, either individually or in the
aggregate.

 

(i)     Tax Matters. The Company and each of its Subsidiaries has (i) filed all
foreign, U.S. federal, state and local tax returns, information returns and
similar reports that are required to be filed, and all such tax returns are
true, correct and complete in all material respects, and (ii) paid all taxes
required to be paid by it and any other material assessment, fine or penalty
levied against it other than taxes (x) currently payable without penalty or
interest, or (y) being contested in good faith by appropriate proceedings.

 

(j)     Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in subsequently
filed SEC Reports, (i) there have been no events, occurrences or developments
that have had or would reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect, (ii)  the Company has not altered its
method of accounting or the manner in which it keeps its accounting books and
records, and (iii) the Company has not declared or made any dividend or
distribution of cash or other property to its shareholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock except in connection with net or cashless exercise of stock options.

 

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(k)    Environmental Matters. Except as disclosed in the SEC Reports, to the
Company’s Knowledge, neither the Company nor any of its Subsidiaries (i) is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), (ii) is liable for any
off-site disposal or contamination pursuant to any Environmental Laws, or
(iii) is subject to any claim relating to any Environmental Laws; in each case,
which violation, contamination, liability or claim has had or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.

 

(l)     Litigation. There is no action pending, or to the Company’s Knowledge
threatened, which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the issuance of the
Securities, or (ii) if determined adversely to the Company and its Subsidiaries,
individually or in the aggregate, has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

 

(m)    Employment Matters. No material labor dispute exists or, to the Company’s
Knowledge, is threatened with respect to any of the employees of the Company
which has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

(n)     Insurance. The Company and each of the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes to be prudent and customary in the
businesses and locations in which the Company and the Subsidiaries are engaged.

 

(o)     Certain Fees. Except for EGE, no Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or Purchaser for any broker commissions, placement
agent fees, financial advisory fees, structuring fees or other similar
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company.

 

(p)   Private Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2 of this Agreement, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchaser under the Transaction Documents.

 

(q)     Subsidiaries. The Company owns or controls, directly or indirectly, only
the Subsidiaries identified in the SEC Reports; all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued and is fully paid and nonassessable; and the capital stock of
each Subsidiary is owned by the Company, directly or indirectly, through one or
more wholly-owned Subsidiaries, free and clear of any Liens.

 

(r)     Title to Property. Except as disclosed in the SEC Reports, the Company
and the Subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, and hold any leased real or
personal property under valid and enforceable leases, in each case which are
material to the business of the Company and the Subsidiaries taken as a whole
and free from any Liens that would reasonably be expected to result in a
Material Adverse Effect.

 

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(s)     Intellectual Property. The Company and the Subsidiaries own, or possess
the right to use all trademarks, trade names, patent rights, copyrights, domain
names, licenses, approvals, trade secrets, inventions, technology, know-how and
other intellectual property and similar rights, including registrations and
applications for registration thereof (collectively, “Intellectual Property
Rights”) necessary for the conduct of their respective businesses, except for
such as would not have a Material Adverse Effect, and the Company is not aware
of any claim to the contrary or any challenge by any other Person to the rights
of the Company and the Subsidiaries with respect to the foregoing. Except as
described in the SEC Reports, (i) to the Company’s Knowledge, the Company’s
business as now conducted and as proposed to be conducted does not and will not
infringe or conflict with any Intellectual Property Rights or franchise right of
any Person and (ii) no claim has been made against the Company alleging the
infringement by the Company or any of its licensees or other third parties of
any Intellectual Property Rights or franchise right of any Person, except for
such as would not have a Material Adverse Effect. Each employee of and
consultant to the Company and its Subsidiaries has entered into a
confidentiality and invention assignment agreement in favor of the Company or
its applicable Subsidiary as a condition of the employment or retention of
services of such employee or consultant, except where failure to enter into such
an agreement would not have a Material Adverse Effect. Except for matters
relating to third parties expressly identified and named in the SEC Reports: (A)
to the Company’s Knowledge, there are no rights of third parties to any
Intellectual Property Rights owned by or licensed to the Company or any of the
Subsidiaries that conflict with the rights of the Company or the Subsidiaries
related to such Intellectual Property Rights, except for any such rights that
would not have or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; (B) to the Company’s Knowledge, there is
no infringement by third parties of any Intellectual Property Rights owned by or
licensed to the Company or the Subsidiaries that would not have or reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(C) other than in connection with assertions or inquiries made by patent office
examiners in the ordinary course of the prosecution of the patent applications
of the Company or the Subsidiaries, there is no pending or, to the Company’s
Knowledge, threatened action, suit, proceeding or other claim by others
challenging the rights of the Company or any of the Subsidiaries in or to, or
alleging the violation of any of the terms of, or challenging the validity,
enforceability or scope of, any Intellectual Property Rights owned by or
licensed to the Company or the Subsidiaries, except for any such claims that
would not have or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect and, to the Company’s Knowledge, there are
no facts that would form a reasonable basis for any such claim; (D) there is no
pending or, to the Company’s Knowledge, threatened action, suit, proceeding or
other claim by others that the Company or any of the Subsidiaries, or any of
their respective licensees, infringes or otherwise violates, or would infringe
or otherwise violate upon commercialization of its products and product
candidates, any patent, trademark, copyright, trade secret or other proprietary
rights of others, and to the Company’s Knowledge, there are no facts that would
form a reasonable basis for any such claim by others that the Company or any of
the Subsidiaries, or any of their respective licensees, infringes or otherwise
violates, or would infringe or otherwise violate upon commercialization of its
products and product candidates, any Intellectual Property Rights of others,
except, in each case in this clause (D), for any such claims that would not have
or reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; (E) to the Company’s Knowledge, there is no patent or patent
application that contains claims that conflict with any Intellectual Property
Rights necessary for the conduct of the businesses of the Company or any of the
Subsidiaries as currently or contemplated to be conducted, except for such as
would not have or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and (F) to the Company’s Knowledge, none
of the Intellectual Property Rights used by the Company or the Subsidiaries in
their businesses has been obtained or is being used by the Company or the
Subsidiaries in violation of any contractual obligation binding on the Company,
any of the Subsidiaries in violation of the rights of any Persons, except for
such as would not have or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

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(t)     Possession of Licenses and Permits. The Company and the Subsidiaries
possess, and are in compliance with the terms of, all adequate certificates,
authorizations, franchises, licenses and permits (“Permits”) necessary or
material to the conduct of the business now conducted or proposed to be
conducted by them, except where failure to possess or to be in compliance,
individually or in the aggregate, would not have or reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and have not
received any notice of proceedings relating to the revocation or modification of
any Permit that, if determined adversely to the Company or any of the
Subsidiaries, would not have or reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.

 

(u)     Contributions. Neither the Company nor any of the Subsidiaries nor, to
the Company’s Knowledge, any employee or agent of the Company or any Subsidiary,
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended or (iv) made any other unlawful payment.

 

(v)     Internal Controls. The Company maintains a system of internal controls,
including, but not limited to, disclosure controls and procedures, internal
controls over accounting matters and financial reporting and legal and
regulatory compliance controls (collectively, “Internal Controls”) that are
sufficient to provide reasonable assurances 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 and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Internal Controls are overseen by
the audit committee (the “Audit Committee”) of the Company’s board of directors
(the “Board”) in accordance with the Exchange Act rules. Since January 1, 2015,
the Company has not publicly disclosed or reported to the Audit Committee or the
Board, and does not reasonably expect to publicly disclose or report to the
Audit Committee or the Board, a significant deficiency, material weakness,
change in Internal Controls or fraud involving management or other employees who
have a significant role in Internal Controls, any violation of, or failure to
comply with, the Securities Laws, or any matter that, if determined adversely,
would have or reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.

 

(w)     Investment Company Act. The Company is not and, after giving effect to
the offering and sale of the Preferred Shares and the Warrants and the
application of the proceeds thereof, will not be an “investment company” as
defined in the Investment Company Act of 1940, as amended.

 

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3.2     Representations and Warranties of the Purchaser. Each Purchaser hereby
represents and warrants, for such Purchaser only and not for any other
Purchaser, as of the date hereof and as of the Closing Date to the Company as
follows:

 

(a)     Organization; Authority. Purchaser, if an entity, is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or other power and authority to enter
into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution, delivery and performance by Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all
necessary limited liability company action on the part of Purchaser. Each of
this Agreement and the Investor Rights Agreement has been duly executed by
Purchaser, and when delivered by Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of Purchaser,
enforceable against it in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

(b)     No Conflicts. The execution, delivery and performance by Purchaser of
this Agreement and the Investor Rights Agreement and the consummation by
Purchaser of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of Purchaser,
(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 material
agreement, indenture or instrument to which Purchaser 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 Purchaser,
except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations that would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of
Purchaser to perform its obligations hereunder.

 

(c)     Investment Intent. Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to, or for distributing or reselling
such Securities, or any part thereof in violation of the Securities Act or any
applicable state securities laws; provided, that, by making the representations
herein, other than as set forth herein, Purchaser does not agree to hold any of
the Securities for any minimum period of time and reserves the right at all
times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act or an
exemption from such registration and in compliance with applicable federal and
state securities laws. Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Purchaser does not presently have any
agreement, plan or understanding, directly or indirectly, with any Person to
distribute or effect any distribution of any of the Securities (or any
securities that are derivatives thereof) to or through any Person.

 

(d)     Purchaser Status. At the time Purchaser was offered the Securities it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act.

 

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(e)     General Solicitation. Purchaser: (i) became aware of the offering of the
Securities, and the Securities were offered to Purchaser, solely by direct
contact between Purchaser and the Company or EGE as the Company’s placement
agent, and not by any other means, including any form of “general solicitation”
or “general advertising” (as such terms are used in Regulation D promulgated
under the Securities Act and interpreted by the Commission); (ii) has entered
into no agreements with shareholders of the Company or other subscribers for the
purpose of controlling the Company or any of its subsidiaries (except the
Investor Rights Agreement and prior similar investor rights agreement); and
(iii) has entered into no agreements with shareholders of the Company or other
subscribers regarding voting or transferring Purchaser’s interest in the Company
(except the Investor Rights Agreement and the prior similar investor rights
agreements dated July 8, 2013, February 25, 2013 and October 31, 2011).

 

(f)     Experience of Purchaser. Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

 

(g)     Access to Information. Purchaser acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in the Securities and any such questions have been answered to
Purchaser’s reasonable satisfaction; (ii) access to information about the
Company and the Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment and any such additional information has
been provided to Purchaser’s reasonable satisfaction; and (iv) the opportunity
to ask questions of management and any such questions have been answered to
Purchaser’s reasonable satisfaction. Purchaser has sought such accounting, legal
and tax advice as it has considered necessary to make an informed decision with
respect to its acquisition of the Securities. Purchaser acknowledges that it has
read, or has had the opportunity to read, the Company’s periodic reports on file
with the Commission, including its reports on Form 10-K, Form 10-Q and Form 8-K,
and acknowledges that the Risk Factors disclosed by the Company include
uncertainty as to its ability to continue as a going concern. Purchaser
acknowledges that the Company’s financial statements have not been adjusted to
reflect changes that would be required if the Company were unable to continue as
a going concern.

 

(h)     Brokers and Finders. Except for EGE, no Person will have, as a result of
the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company or any Purchaser for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Purchaser.

 

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(i)     Independent Investment Decision. Purchaser has independently evaluated
the merits of its decision to purchase Preferred Shares, the In-Kind Dividend
Shares and the Conversion Shares pursuant to the Transaction Documents, and
Purchaser confirms that it has not relied on the advice of any other Purchaser’s
business and/or legal counsel in making such decision. Purchaser understands
that nothing in this Agreement or any other materials presented by or on behalf
of the Company to the Purchaser in connection with the purchase of the
Securities constitutes legal, regulatory, tax or investment advice. Purchaser
has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Securities.

 

(j)     ERISA. (i) Purchaser is not, and is not acting on behalf of, an ERISA
Entity. For the purpose of this paragraph, the term “ERISA Entity” will mean (A)
an “employee benefit plan” within the meaning of Section 3(3) of ERISA subject
to Title I of ERISA, (B) a “plan” within the meaning of Section 4975(e)(1) of
the Code and (C) any person whose assets are deemed to be “plan assets” within
the meaning of ERISA Section 3(42) and 29 C.F.R. § 2510.3-101 or otherwise under
ERISA

 

(k)     Reliance on Exemptions. Purchaser understands that the Securities being
offered and sold to it in reliance on specific exemptions from the registration
requirements of U.S. federal and state securities laws and that the Company is
relying in part upon the truth and accuracy of, and Purchaser’s compliance with,
the representations, warranties, agreements, acknowledgements and understandings
of Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of Purchaser to acquire the Securities.

 

(l)     No Governmental Review. Purchaser understands that no U.S. federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Preferred Shares or the fairness
or suitability of the investment in the Preferred Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Preferred
Shares.

 

(m)     Residency. Purchaser’s office in which its investment decision with
respect to the Preferred Shares and the Warrants was made is located at the
address immediately below Purchaser’s name on its signature page hereto.

 

(n)     2016 Warrant. Each Purchaser has good and marketable title to the 2016
Warrant (if any) recorded in such Purchaser’s name on the books and records of
the Company, free from any Liens.

 

The Company and the Purchaser acknowledge and agree that no party to this
Agreement has made or makes any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
this Article 3 and the Transaction Documents.

 

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Article 4:
OTHER AGREEMENTS OF THE PARTIES

 

4.1     Transfer Restrictions.

 

(a)     Compliance with Laws. Notwithstanding any other provision of this
Article 4, Purchaser covenants that the Securities may be disposed of only
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state, federal or foreign
securities laws. In connection with any transfer of the Securities other than
(i) pursuant to an effective registration statement, (ii) to the Company, (iii)
to an Affiliate of Purchaser, or (iv) pursuant to Rule 144 (provided, that the
transferor provides the Company with reasonable assurances (in the form of
seller and broker representation letters) that such securities may be sold
pursuant to such rule), the Company may require the transferor thereof to
provide to the Company and the Transfer Agent, at the transferor’s expense, an
opinion of counsel selected by the transferor and reasonably acceptable to the
Company and the Transfer Agent, the form and substance of which opinion shall be
reasonably satisfactory to the Company and the Transfer Agent, to the effect
that such transfer does not require registration of such transferred securities
under the Securities Act. As a condition of transfer (other than pursuant to
clauses (i), (ii), (iii) or (iv) of the preceding sentence), any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have
the rights of “Purchaser” under this Agreement and the Investor Rights Agreement
with respect to such transferred securities.

 

(b)     Legends. Certificates evidencing the Securities shall bear any legend as
required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form (and, with respect to securities held in
book-entry form, the Transfer Agent will record such a legend on the share
register), until such time as they are not required under Section 4.1(c) or
applicable law:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), 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 OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT (PROVIDED
THAT THE TRANSFEROR PROVIDES THE COMPANY WITH REASONABLE ASSURANCES (IN THE FORM
OF SELLER AND BROKER REPRESENTATION LETTERS) THAT THE SECURITIES MAY BE SOLD
PURSUANT TO SUCH RULE). NO REPRESENTATION IS MADE BY THE ISSUER AS TO THE
AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR
RESALES OF THESE SECURITIES.

 

Certificates evidencing the Securities shall also bear the following legend as
long as the Investor Rights Agreement is in effect:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN
INVESTOR RIGHTS AGREEMENT. THE INVESTOR RIGHTS AGREEMENT LIMITS THE VOTING
RIGHTS OF THE HOLDER OF THESE SECURITIES IN CONNECTION WITH THE APPROVAL OF
CERTAIN CORPORATE REORGANIZATIONS. ANY TRANSFEREE OF THESE SECURITIES TAKES
SUBJECT TO THE TERMS OF SUCH AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

 

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(c)     Certificates evidencing the Securities shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) following any
sale of such securities pursuant to Rule 144, (ii) if such securities are
eligible for sale under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such securities and without volume or manner-of-sale restrictions or (iii) if
such legend is otherwise not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the SEC). The Company makes no representation that the Preferred
Shares will be eligible for sale under Rule 144 at any time.

 

4.2     Furnishing of Information. In order to enable the Purchaser to sell the
Securities under Rule 144 of the Securities Act, the Company shall use its best
efforts to maintain the registration of the Common Stock under Section 12(b) or
12(g) of the Exchange Act and to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act.

 

4.3     Form D and Blue Sky. The Company agrees to file a Form D with respect to
the Preferred Shares as required under Regulation D within three (3) business
days following the Closing Date. The Company, on or before the Closing Date,
shall take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Preferred Shares for sale to
the Purchaser 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). The Company shall make all filings and
reports relating to the offer and sale of the Preferred Shares required under
applicable securities or “blue sky” laws of the states of the United States
within three (3) business days following the Closing Date.

 

4.4     Repricing of Warrants. Effective upon the Closing Date, the Company
shall cause the exercise price under certain of the 2016 Warrants previously
issued under the 2016 SPA to be adjusted down to a new exercise price equal to
the Conversion Price from the current exercise price of $1.15. In order to
reduce 100% of their existing 2016 Warrants to the Conversion Price, a Purchaser
is required to purchase the lower of $200,000 or 50% of their original invested
amount under the 2016 SPA. If the Purchaser invests less than $200,000 or 50% of
the amount invested under the 2016 SPA, the percentage of 2016 Warrants whose
conversion price is adjusted would be reduced ratably based on the lower
invested amount. For clarity, a Purchaser who invested $1,000,000 under the 2016
SPA would be required to invest at least $200,000 under this Agreement in order
to have 100% of such Purchaser’s existing 2016 Warrants exercise price being
reduced to the new Conversion Price. If the same Purchaser invested $150,000
under this Agreement, 75% of his or her 2016 Warrants would be reduced to the
new Conversion Price and the remaining Warrants would be unaffected. After
Closing the Company shall provide each Purchaser with confirmation of the
resulting adjustments and shall issue replacement warrants, or an amendment to
the existing warrants, to reflect such adjustments.

 

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Article 5:
CONDITIONS PRECEDENT TO CLOSING

 

5.1     Conditions Precedent to the Obligations of the Purchaser to Purchase
Preferred Shares. The obligation of Purchaser to acquire Preferred Shares and
the Warrants at the Closing is subject to the fulfillment to Purchaser’s
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Purchaser:

 

(a)     Representations and Warranties. The representations and warranties of
the Company contained herein shall be true and correct in all material respects
(except for those representations and warranties that are qualified by
materiality, which shall be true and correct in all respects) as of the date
hereof and as of the Closing Date, as though made on and as of such date, except
for such representations and warranties that speak as of a specific date.

 

(b)     Performance. The Company shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by it at
or prior to the Closing.

 

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

 

(d)      Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).

 

(e)      No Suspensions of Trading in Common Stock; Listing. The Common Stock
shall not have been suspended, as of the Closing Date, from trading on the OTCQB
nor shall suspension by OTCQB have been threatened, as of the Closing Date.

 

(f)      Material Adverse Effect. No Material Adverse Effect shall have occurred
since the date of this Agreement.

 

(g)     Amendment to Shareholder Rights Plan. The Company shall have amended the
Shareholder Rights Plan to include each Purchaser who would otherwise become a
“20% Shareholder” under the Shareholder Rights Plan as a result of purchasing
Securities under this Agreement as an “Exempt Person” as such term is defined in
the Shareholder Rights Plan, or the Board shall otherwise have adopted a
resolution to the same effect.

 

5.2     Conditions Precedent to the Obligations of the Company to Sell Preferred
Shares. The Company’s obligation to sell and issue the Preferred Shares at the
Closing is subject to the fulfillment, on or prior to the Closing Date, of the
following conditions, any of which may be waived by the Company:

 

(a)     Representations and Warranties. The representations and warranties made
by Purchaser in Section 3.2 hereof shall be true and correct in all material
respects (except for those representations and warranties that are qualified by
materiality, which shall be true and correct in all respects) as of the date
hereof and as of the Closing Date as though made on and as of such date, except
for representations and warranties that speak as of a specific date.

 

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(b)     Performance. Purchaser shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by
Purchaser at or prior to the Closing Date.

 

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

 

(d)     Purchaser Deliverables. Purchaser shall have delivered the Purchaser
Deliverables in accordance with Section 2.2(b).

 

(e)     Minimum for Closing. Purchasers for the purchase of Preferred Shares
with an aggregate gross purchase price of at least $1,000,000 (including the
Purchaser under this Agreement) shall be prepared to complete their purchases
concurrently with closing under this Agreement.

 

Article 6:
MISCELLANEOUS

 

6.1     Fees and Expenses. The parties hereto shall be responsible for the
payment of all expenses incurred by them in connection with the preparation and
negotiation of the Transaction Documents and the consummation of the
transactions contemplated hereby. The Company shall pay all Transfer Agent fees,
stamp taxes and other taxes and duties levied in connection with the sale and
issuance of the Preferred Shares to the Purchaser.

 

6.2     Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters.

 

6.3     Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:00 p.m., Pacific time, on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 5:00
p.m., Pacific time, on any Trading Day, (c) the Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service with
next day delivery specified, or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications shall be as follows:

 

 

If to the Company:

Giga-tronics Incorporated
5990 Gleason Drive

Dublin CA 94568

Attn: John Regazzi

Email: jregazzi@gigatronics.com 

 

 

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With a copy to:

Sheppard Mullin Richter & Hampton LLP

Four Embarcadero Center, 17th Floor

San Francisco, California 94111

Attention: Thomas G. Reddy

Telephone: (415) 774-2929

Email: treddy@sheppardmullin.com

 

 

 

If to Purchaser

To the address set forth under Purchaser’s name on the signature page hereof

 

 

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

 

6.4     Amendments; Waivers; No Additional Consideration. No amendment or waiver
of any provision of this Agreement will be effective with respect to any party
unless made in writing and signed by an officer or a duly authorized
representative of such party.

 

6.5     Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. This Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement or any of the Transaction Documents.

 

6.6    Successors and Assigns. The provisions of this Agreement shall inure to
the benefit of and be binding upon the parties and their successors and
permitted assigns. Any Purchaser may assign its rights hereunder in whole or in
part to any Person to whom Purchaser assigns or transfers any Preferred Shares
in compliance with the Transaction Documents and applicable law; provided, that
such transferee shall agree in writing to be bound, with respect to the
transferred Preferred Shares, by the terms and conditions of this Agreement that
apply to the “Purchaser”.

 

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

 

6.8     Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and to be performed entirely within such State. Each party agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees
or agents) may be commenced on a non-exclusive basis in the California Courts.

 

6.9    Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that the parties need not sign
the same counterpart. In the event that any signature is delivered by facsimile
transmission, or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile signature page were an original thereof.

 

20

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6.10     Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

6.11     Termination. This Agreement may be terminated and the sale and purchase
of the Preferred Shares abandoned at any time prior to the Closing by either the
Company or any Purchaser (with respect to itself only) upon written notice to
the other, if the Closing has not been consummated on or prior to 5:00 p.m.,
Pacific time, on the Outside Date; provided, however, that the right to
terminate this Agreement under this Section 6.11 shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time. Nothing in this Section 6.11 shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

21

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

Giga-tronics Incorporated

 

 

 

 

 

 

 

 

 

 

By:

/s/ John Regazzi

 

 

 

Name:  John Regazzi

 

 

 

Title: Chief Executive Officer

 

 

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[COUNTERPART SIGNATURE PAGE OF PURCHASER FOLLOWS]

 

 

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[Purchaser’s counterpart signature page to Securities Purchase Agreement

 

 

PURCHASER:

 

Entity:

Individual:

___________________________

 

 

By: ________________________

Name: ______________________

Title: _______________________

 

 

 

____________________________

Name: ______________________

   

Number of Preferred Shares subscribed:

_______________

Aggregate purchase price:

_______________

   

 

Select one:     

[__] Book entry shares

or

[__] Certificated shares

 

If no selection is made shares will be issued in book-entry form.

   

 

Address for notices:

Delivery Instructions (if different from address for notices):

__________________________

__________________________

__________________________

__________________________

__________________________

Telephone: _________________

__________________________

__________________________

__________________________

__________________________

__________________________

 

 

[Signature Page to Securities Purchase Agreement]

 

 

--------------------------------------------------------------------------------

 

 

EXHIBITS

 

A:

Certificate of Determination

B:

Form of Investor Rights Agreement

C:

Form of Secretary’s Certificate

D:

Form of Officer’s Certificate