Exhibit 10.1

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of October 10,
2012, among Marlborough Software Development Holdings Inc., a Delaware
corporation (collectively with its predecessors, the “Company”), and the
investors listed on the Schedule of Investors attached hereto as Annex A and
identified on the signature pages hereto (each, an “Investor” and collectively,
the “Investors”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined below) and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Investor,
and each Investor, severally and not jointly, desires to purchase from the
Company certain securities of the Company, as more fully described in this
Agreement.

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 Investors agree
as follows:

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:

“Action” means any action, claim, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

“Additional Shares” means additional shares of Series A Preferred Stock that
shall be issued and sold to Investors at the Second Closing pursuant to this
Agreement.

“Additional Units” means additional Units that shall be issued and sold to
Investors at the Second Closing pursuant to this Agreement.

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.

“Business Day” means any day except Saturday, Sunday and any day which is a
federal legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other governmental action to close.

“Close of Business” shall mean 5:00 p.m. (New York City time).

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.01 per share,
and any securities into which such common stock may hereafter be reclassified.

“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which entitle the holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common
Stock.

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“Company Counsel” means Seyfarth Shaw LLP.

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

“Delivery Date” means three (3) Trading Days after the date on which the
Investor shall have requested removal of the restricted legends from
certificates representing Shares and shall have delivered to the Company’s
transfer agent those items required by Section 4.1(c) hereunder.

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

“EBITDA” means, for any fiscal period, the consolidated net income (loss) of the
Company and any of its subsidiaries for such period plus, to the extent
reflected in such consolidated net income: (A) interest expense, (B) income tax
expense, (C) depreciation expense; (D) any expense related to the Warrants
issued to the Investors pursuant to this Agreement; and (E) amortization or
writedown of intangibles, all derived from the consolidated financial statements
of the Company and its subsidiaries at and as of the last day of such fiscal
period prepared in accordance with U.S. generally accepted accounting principles
consistently followed throughout the periods indicated, subject, in the case of
unaudited statements, to year-end audit adjustments. For purpose of this
definition, any research and development costs and expenses incurred by the
Company and any of its subsidiaries shall be deemed expenses (and not
investments).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exempt Securities” means (i) the issuance of additional Units at a price no
less than the Per Unit Purchase Price and with an aggregate purchase price not
to exceed $3,000,000, provided that such issuance occurs on or before
December 31, 2012, (ii) Units issued pursuant to the Second Closing,
(iii) securities issued or issuable pursuant to stock splits, stock dividends,
or similar transactions; (iv) shares of Common Stock issued upon exercise of
Outstanding Compensatory Awards; (v) up to 1,500,000 shares of Common Stock
(other than Outstanding Compensatory Awards) that may be issued to employees,
consultants, officers or directors of the Company pursuant to stock option plans
or restricted stock plans or agreements approved by the Compensation Committee
and the Board of Directors of the Company any time prior to June 30, 2014,
provided that the issuance price of any such Common Stock shall not be less than
$0.75; and (vi) shares of Common Stock issued or issuable (A) to financial
institutions or lessors in connection with commercial credit arrangements,
equipment financings, commercial property lease transactions or similar
transactions; (B) in connection with acquisition transactions; or (C) securities
in strategic partnership transactions representing in the aggregate up to 20% of
the issued and outstanding share capital of the Company at the time of their
issuance.

“First Closing” means the closing of the purchase and sale of the Initial Units
pursuant to Article 2.

“First Closing Date” means the Business Day on which all of the conditions set
forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the
parties may agree.

“GAAP” means U.S. generally accepted accounting principles.

“Initial Shares” means the shares of Series A Preferred Stock issued or issuable
at the First Closing to the Investors pursuant to this Agreement.

“Initial Units” means the Units at the First Closing to the Investors pursuant
to this Agreement.

“Investment Amount” means, with respect to each Investor, the Investment Amount
indicated on such Investor’s signature page to this Agreement.

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

 

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“Lien” means any lien, charge, encumbrance, security interest, right of first
refusal or other restrictions of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.

“Material Adverse Effect” means any result, occurrence, fact, change, event or
effect (whether or not constituting a breach of a representation, warranty or
covenant set forth in this Agreement) that, individually or in the aggregate
with any such other results, occurrences, facts, changes, events or effects,
(i) would have or could reasonably be expected to have a material adverse effect
on the historical or near-term or long-term projected business, operations,
assets, liabilities, condition (financial or otherwise) or results of operations
of the Company and the Subsidiaries, taken as a whole, (ii) would or could
reasonably be expected to prevent or materially impair or delay the ability of
the Company to consummate the transactions contemplated by this Agreement or
perform its duties under this Agreement or any of the other Transaction
Documents, or (iii) would or could reasonably be expected to be materially
adverse to the ability of the Company or any Subsidiary to operate its business
immediately after the First Closing substantially in the manner as such business
was operated immediately prior to the First Closing.

“Money Laundering Laws” has the meaning set forth in Section 3.1(s).

“OFAC” has the meaning set forth in Section 3.1(r).

“Outside Date” means October 31, 2012.

“Outstanding Compensatory Awards” means options to purchase 1,648,267 shares of
the Company’s Common Stock issued to employees, consultants, officers or
directors of the Company pursuant to stock option plans or restricted stock
plans or agreements approved by the Compensation Committee and the Board of
Directors of the Company prior to September 1, 2012 and that are outstanding as
of the date this Agreement.

“Per Unit Purchase Price” equals $3.35.

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

“Reference Value” means $0.67 per share.

“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(h).

“Second Closing” means the closing of the purchase and sale of the Additional
Units pursuant to Article 6.

“Second Closing Date” has the meaning set forth in Section 6.1(a).

“Securities Act” means the Securities Act of 1933, as amended.

“Series A Preferred Stock” means the 6.5% Series A Redeemable Preferred Stock of
the Company, par value $0.01 per share having the powers, designations,
preferences and rights in accordance with the Certificate of Designation in the
form of Exhibit A attached hereto (“Certificate of Designation”).

“Shares” means the aggregate of the Initial Shares and Additional Shares that
are issued or issuable to the Investors pursuant to this Agreement.

 

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“Short Sales” include, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Exchange Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts, calls,
swaps and similar arrangements (including on a total return basis), and sales
and other transactions through non-US broker dealers or foreign regulated
brokers.

“Subsidiary” of a specified Person is an Affiliate controlled by such Person
directly, or indirectly through one or more intermediaries.

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, 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 by the 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 NYSE AMEX Equities, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing) on which the Common Stock is listed or quoted for trading on the date
in question.

“Transaction Documents” means this Agreement and any other documents or
agreements executed pursuant to this Agreement.

“Units” means the aggregate of the Initial Units and the Additional Units that
are issued or issuable to the Investors pursuant to this Agreement, each unit
consisting of (a) one share of Series A Preferred Stock, and (b) a Warrant to
purchase five shares of Common Stock. The Shares and Warrants are immediately
separable and will be issued separately.

“Warrant” or “Warrants” means the ten year warrants to purchase Common Stock,
each Warrant to be exercisable for five shares of Common Stock at an exercise
price per share equal to the Reference Value, substantially in the form of
Exhibit B attached hereto.

“Warrant Shares” means shares of Common Stock issuable upon exercise of the
Warrants.

ARTICLE 2.

PURCHASE AND SALE OF INITIAL UNITS

2.1. First Closing. Subject to the terms and conditions set forth in this
Agreement (including Section 9.6 below), at the First Closing the Company shall
issue and sell to each Investor, and each Investor shall, severally and not
jointly, purchase from the Company, the Initial Units representing such
Investor’s Investment Amount, each Unit to be issued and sold for the Per Unit
Purchase Price. The First Closing shall take place at the offices of Company
Counsel on the First Closing Date or at such other location or time as the
parties may agree.

2.2. First Closing Deliveries.

(a) At the First Closing, the Company shall deliver or cause to be delivered to
each Investor (i) a certificate evidencing a number of Initial Shares equal to
such Investor’s Investment Amount divided by the Per Unit Purchase Price,
registered in the name of such Investor, (ii) Warrants to purchase a number of
Warrant Shares equal to such Investor’s Investment Amount divided by the
Reference Value, registered in the name of such Investor, with an exercise price
per share of Common Stock equal to the Reference Value, (iii) a copy, certified
by an officer of the Company, of duly adopted resolutions of the Board of
Directors of the Company, substantially in the form of Exhibit 2.2(a)(iii)
attached hereto; and (iv) an opinion of counsel to the Company, substantially in
the form of Exhibit 2.2(a)(iv) attached hereto, dated as of the date of the
First Closing, as to the organization, good standing and authority of the
Company, the enforceability of the Transaction Documents and the transferability
of the Warrant Shares (the “Company Deliverables”).

 

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(b) By the First Closing, each Investor shall deliver or cause to be delivered
its counterpart signature page to this Agreement duly signed by such Investor
(collectively, the “Investor Deliverables”).

(c) At the First Closing, each Investor shall cause to be delivered its
Investment Amount, in United States dollars and in immediately available funds,
by wire transfer to an account designated in writing by the Company for such
purpose.

2.3. Subsequent Closings. The Company may conduct one or more subsequent
closings after the First Closing, but in any event on or before March 31, 2013,
on the same terms (and price) as the First Closing provided that the Company may
not sell Units with an aggregate purchase price exceeding $3,000,000 at such
subsequent closings.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES

3.1. Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to each Investor:

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than
as specified in the SEC Reports. The Company owns, directly or indirectly, all
of the capital stock of each Subsidiary free and clear of any and all Liens, and
all the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights. There are no outstanding conversion or other rights, options,
warrants or agreements granted or issued by or binding upon any Subsidiary for
the purchase or acquisition of any shares of capital stock of any Subsidiary or
any other securities convertible into, exchangeable for or evidencing the rights
to subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Person or
any convertible securities, rights, warrants or options of the type described in
the preceding sentence. Neither the Company nor any Subsidiary is party to, nor
has any knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of any Subsidiary.

(b) Organization and Qualification. The Company and each Subsidiary are 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 and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. The Company and each Subsidiary are
duly qualified to conduct its respective businesses and are 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, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

(c) Authorization; Enforcement. 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
thereunder, and to issue and sell the Units, Shares, Warrants and the Warrant
Shares. The execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, any Subsidiary, the Board of
Directors of the Company, or the Company’s stockholders in connection
therewith. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, 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.

 

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(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 thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or
(ii) conflict with, or constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) 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 a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any United States 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 with the Commission of one or
more Registration Statements in accordance with this Agreement, (ii) filings
required by state securities laws, (iii) the filing of a Notice of Sale of
Securities on Form D with the Commission under Regulation D of the Securities
Act, and (iv) those that have been made or obtained prior to the date of this
Agreement.

(f) Issuance of the Shares. The issuance, sale and delivery of the Units, Shares
and Warrants and the issuance of the Warrant Shares have been duly authorized by
all requisite action on part of the Company, and no action or authorization of
the stockholders of the Company is required with respect to thereto. The Units,
Shares, Warrants and the issuance of the Warrant Shares, when issued and paid
for in accordance with the Transaction Documents, each will be duly and validly
issued, fully paid and nonassessable shares with no personal liability attaching
to the ownership thereof, free and clear of all Liens. The issuance, sale and
delivery of the Units, Shares, Warrant and Warrant Shares will not be subject to
any preemptive right of any stockholder of the Company or to any right of first
refusal in favor of any Person, in either case, which shall not have been waived
by the holder thereof. The Company has authorized and reserved from its duly
authorized capital stock the shares of Series A Preferred Stock issuable
pursuant to this Agreement in order to issue the Shares and has reserved from
its duly authorized capital stock the Warrant Shares issuable upon exercise of
the Warrants in order to issue the Warrants. Upon filing of a registration
statement with the SEC as to the Warrant Shares and the effectiveness of such
registration statement (including, without limitation, pursuant to Section 7.1),
until such time as the registration statement has been suspended, withdrawn or
terminated, the Warrant Shares (i) with respect to those Warrant Shares held by
Altshuler, shall not be considered “restricted” or “control” securities within
the meaning of Rule 144 under the Securities Act, (ii) may be sold to any person
or entity without any restrictions or limitations which would otherwise be
imposed under U.S. securities laws by virtue of the Warrant Shares having been
issued in a transaction exempt from registration under applicable U.S.
securities laws; and (iii) may be sold in accordance with the plan of
distribution included in such registration statement without regard to the
volume, manner of sale or holding period requirements of Rule 144.

(g) Capital Stock. (i) The Company has an authorized capitalization consisting
of (i) 30,500,000 shares of Common Stock, of which 10,751,609 shares are issued
and outstanding and 0 shares are held in the Company’s treasury, (ii) 10,000,000
shares of preferred stock, of which 0 shares are issued and outstanding and 0
shares are held in the Company’s treasury, including 1,940,299 shares of
preferred stock which have been designated as Series A Preferred Stock, of which
0 shares are issued and outstanding and 0 shares are held in the Company’s
treasury. All such outstanding shares of capital stock are duly authorized, have
been validly issued, and are fully paid and nonassessable and are not subject
to, nor were they issued in violation of, any preemptive rights. Sufficient
shares of Common Stock are reserved for issuance of the Warrant Shares. The
Capitalization of the Company as of the date of this Agreement and after giving
effect to the issuance and sale of the Units in the Initial Closing and the
Second Closing contemplated by this Agreement, in each case assuming no other
issuances or sales of securities by the Company in accordance with this
Agreement, is as set forth on Schedule 3.1(g) attached hereto.

 

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Except as described above, no shares of capital stock of the Company are
authorized, issued, outstanding or reserved for issuance. Except as described in
the SEC Filings, there are no outstanding or authorized options, warrants,
rights, subscriptions, agreements, obligations, convertible or exchangeable
securities, or other commitments contingent or otherwise, relating to the
capital stock of, or other equity or voting interest in, the Company, pursuant
to which the Company or any of its Subsidiaries is or may become obligated to
issue, deliver or sell or cause to be issued, delivered or sold, shares of
Common Stock, any other shares of the capital stock of, or other equity or
voting interest in, the Company or any securities convertible into, exchangeable
for, or evidencing the right to subscribe for or acquire, any shares of the
capital stock of, or other equity or voting interest in, the Company. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the capital stock of, or other
equity or voting interest in, the Company. To the Company’s knowledge, there are
no irrevocable proxies or voting agreements with respect to any equity or voting
interest in, the Company.

(ii) There are no restrictions of any kind which prevent or restrict the payment
of dividends or other distributions by the Company other than those imposed by
the Certificate of Incorporation or by laws of general applicability of the
Company’s jurisdiction of organization.

(h) SEC Reports; Financial Statements. The Company has furnished or filed all
current and periodic reports required to be furnished or filed by it under the
Securities Act and the Exchange Act, including pursuant to Sections 13(a) or
15(d) thereof (the foregoing materials filed during such period being
collectively referred to herein as the “SEC Reports” and, together with the
Schedules to this Agreement (if any), the “Disclosure Materials”) on a timely
basis or has timely filed a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension. As of their
respective 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, 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. The financial statements of the Company included
in the SEC Reports (the “Financial Statements”) 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 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 fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries 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 year-end audit adjustments.

(k) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Units or (ii) except as specifically disclosed in the SEC Reports as of the date
of this Agreement, could, if there were an unfavorable decision, individually or
in the aggregate, have or reasonably be expected to result in a material effect
on the Company and its business and operations. Neither the Company nor any
Subsidiary, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty, except as specifically disclosed in the SEC Reports as of the
date of this Agreement. There has not been, and to the knowledge of the Company,
there is not pending any investigation by the Commission involving the Company
or any current or former director or officer of the Company (in his or her
capacity as such). The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

(l) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health

 

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and safety, product quality and safety and employment and labor matters. The
Company is in compliance with all effective requirements of the Sarbanes-Oxley
Act of 2002, as amended, and the rules and regulations thereunder, that are
applicable to it, except where such noncompliance could not have or reasonably
be expected to result in a Material Adverse Effect.

(m) Intellectual Properties.

(i) For purposes of this Agreement, (1) “Intellectual Property” shall mean any
of the following: (A) patents and patent applications; (B) registered and
unregistered trademarks and service marks, pending trademark and service mark
registration applications, and intent-to-use registrations or similar
reservations of marks, logos, trade names, brand names, trade dress, business
names and corporate names, including all goodwill associated therewith;
(C) registered copyrights and applications for registration thereof;
(iv) internet domain names, applications and reservations therefor, uniform
resource locators (“URLs”) and the corresponding Internet sites; (D) trade
secrets and proprietary information not otherwise listed in (1) through
(4) above; and (E) any other intellectual property rights; and (2) “Company
Intellectual Property” shall mean any Intellectual Property or rights thereto,
owned by the Company or any of its Subsidiaries or used or held for use in
connection with the business of the Company or any of its Subsidiaries.

(ii) Schedule 3.1(m) of the Agreement set forth a true and complete list of
each: (A) patent, trademark, copyright, domain name registration which has been
issued to the Company with respect to any of the Company Intellectual Property
and (B) pending patent, trademark or copyright application or application for
registration which the Company has made with respect to any of the Company
Intellectual Property.

(iii) The Company Intellectual Property includes all Intellectual Property
rights necessary or material to the Company or any of its Subsidiaries to
conduct their respective business(es) as and where conducted on the First
Closing or the Second Closing, as the case may be, and as contemplated to be
conducted in the near term and neither the Company nor any of its Subsidiaries
uses any Intellectual Property which is not owned by the Company or a Subsidiary
or licensed to the Company under a duly executed agreement. To the Company’s
knowledge, neither the Company’s business operations nor any of its
Subsidiaries’ business operations (including, without limitation, the
manufacturing, marketing, licensing, sale or distribution of products and the
general conduct and operation of the business of the Company and its
Subsidiaries) violates, infringes, misappropriates or misuses any Intellectual
Property rights.

(iv) Each item of Company Intellectual Property registered, filed, issued or
applied for, with the applicable official governmental registrars and/or issuers
has been duly and validly registered in, filed in or issued by, the official
governmental registrars and/or issuers (or officially recognized issuers) of
patents, trademarks, copyrights or Internet domain names, in the various
jurisdictions, each such registration, filing and/or issuance (A) has not been
abandoned, canceled or otherwise compromised, (B) has been maintained effective
by all requisite filings, renewals and payments, and (C) remains in full force
and effect.

(v) To the extent any Company Intellectual Property is or has been used under
license in the business of the Company or any of its Subsidiaries, no notice of
a material default of such license has been sent or received by the Company
and/or any of its Subsidiaries which default remains uncured, and the execution,
delivery or performance of the Company’s obligations hereunder and under the
other instruments and agreements to be executed and delivered as contemplated
hereby will not result in such a default. Each such license agreement is a
legal, valid and binding obligation of the Company or any of its Subsidiaries
and the relevant other parties thereto, enforceable in accordance with the terms
thereof and the transactions contemplated by this Agreement will not breach the
terms thereof.

(vi) The Company or one of its Subsidiaries owns or is licensed to use the
Company Intellectual Property free and clear of any Liens, except with respect
to any Company Intellectual Property licensed to the Company from a third party
in the ordinary course of the Company’s business which may contain customary
restrictions (other than any lien, charge, encumbrance, or other security
interest) as to which the Company must comply with the applicable license
obligations.

 

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(vii) Neither the Company nor any of its Subsidiaries has received any notice of
any claim, or a threat of any claim, from any third party, and no third party
claims are pending, (A) challenging the right of the Company or any of its
Subsidiaries to use any Intellectual Property or alleging any violation,
infringement, misuse or misappropriation by the Company or any of its
Subsidiaries of Intellectual Property or indicating that the failure to take a
license would result in any such claim, or (B) challenging the ownership rights
of the Company or any of its Subsidiaries in any Company Intellectual Property
or asserting any opposition, interference, invalidity, termination, abandonment,
unenforceability, or other infirmity of any Company Intellectual Property.

(viii) Neither the Company nor any of its Subsidiaries has made any claim of a
violation, infringement, misuse or misappropriation by any third party
(including any employee or former employee of the Company or any of its
Subsidiaries) of its rights to, or in connection with, any Company Intellectual
Property, which claim is pending. Neither the Company nor any of its
Subsidiaries has entered into any agreement to indemnify any other Person
against any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders or license agreements
arising in the ordinary course of business and indemnification obligations to
Bitstream, Inc with respect to technology transferred to the Company from
Bitstream, Inc. pursuant to agreements which have been publically disclosed and
filed with the SEC.

(ix) The Company and its Subsidiaries have secured valid written assignments
from all consultants, contractors and employees who contributed to the creation
or development of Company Intellectual Property of the rights to such
contributions that either the Company or one of its Subsidiaries do not already
own by operation of law.

(n) Certain Fees. The Investors shall have no obligation with respect to any
fees or with respect to any claims (other than such fees or commissions owed by
an Investor pursuant to written agreements executed by such Investor which fees
or commissions shall be the sole responsibility of such Investor) made by or on
behalf of any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person for brokerage or finder’s fees or
commissions that may be due in connection with the transactions contemplated by
this Agreement.

(o) Investment Company. The Company is not, and is not an Affiliate of, and
immediately following the First Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

(p) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.

(q) Foreign Corrupt Practices Act. Neither the Company nor any Subsidiary, nor
to the knowledge of the Company, any agent or other person acting on behalf of
any of the Company or any Subsidiary, has, directly or indirectly, (i) used any
funds, or will use any proceeds from the sale of the Shares, for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company or any Subsidiary (or made
by any Person acting on their behalf of which the Company is aware) which is in
violation of law, or (iv) has violated the Foreign Corrupt Practices Act of
1977, as amended, and the rules and regulations thereunder.

(r) OFAC. Neither the Company nor any Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee, Affiliate or Person acting on
behalf of the Company or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not directly or indirectly
use the proceeds of the sale of the Shares, or

 

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lend, contribute or otherwise make available such proceeds to any Subsidiary,
joint venture partner or other Person or entity, towards any sales or operations
in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or
for the purpose of financing the activities of any Person currently subject to
any U.S. sanctions administered by OFAC.

(s) Money Laundering Laws. The operations of each of the Company and any
Subsidiary are and have been conducted at all times in compliance with the money
laundering statutes of applicable jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any applicable governmental agency (collectively,
the “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 and/or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the best knowledge of the Company, threatened.

(t) Taxes. The Company has timely filed all tax returns required to be filed by
it. The Company has not made any elections under applicable laws or regulations
(other than elections that related solely to methods of accounting, depreciation
or amortization) that would have a material adverse effect on the business,
condition, operations or assets of the Company. Proper and accurate amounts have
been withheld by the Company from its employees for all periods in compliance
with the tax, social security and any employment withholding provisions of
applicable law. The Company is currently not liable for any income tax, capital
gains tax, value added tax, or other tax, except for taxes paid in the ordinary
course of business, such as V.A.T, social security and withholding of income
taxes, in respect of which payments the Company is not under any default.

(u) Related Party Transactions. Other than as disclosed in the SEC Filings, no
officer or director of the Company, any Affiliate of an officer or director of
the Company, or, to the Company’s knowledge, no shareholder of the Company
holding at least 5% of the issued and outstanding shares of capital stock of the
Company, either directly or indirectly has an interest in any related party
transaction with the Company subject to disclosure pursuant to Item 404 of
Regulation S-K. To the Company’s knowledge, no officer, director or shareholder
of the Company holding at least 5% of the issued and outstanding shares, (i) is
involved in any business arrangement or relationship with the Company which is
material to the Company or its business, (ii) has a beneficial interest in any
contract or agreement to which the Company is a party or currently proposes to
be a party, (iii) to the knowledge of the Company, has any interest in or owns
any property or right, including Intellectual Property, material to the Company
in the conduct of its business as presently conducted and as currently proposed
by the Company to be conducted, or (iv) has lent or advanced any money to (of
which any amount is outstanding), or borrowed any money from, or guaranteed any
outstanding indebtedness or other outstanding obligations of the Company.

(v) Disclosure. Neither the SEC Filings, this Agreement, nor any schedule or
exhibit hereto, when read together, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading (excluding any statements or omissions to state a material
fact made by parties other than the Company in such other documents). To the
Company’s best knowledge, there is no material fact or event with respect to the
business, financial condition, affairs, operations, or assets of the Company,
which constitutes, or which is reasonably expected to result in, a Material
Adverse Effect.

3.2. Representations and Warranties of the Investors. Each Investor hereby, for
itself and for no other Investor, represents and warrants to the Company as
follows:

(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Investor. Each of the Transaction Documents has been duly executed by such
Investor, and when delivered by such Investor in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as such
enforceability may be

 

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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.

(b) Investment Intent. Such Investor is acquiring the Units as principal for its
own account (except in the case of Altshuler Shaham Provident Funds and Pension
Ltd (“Altshuler”), which is acquiring the Units in trust for the benefit of the
provident funds and/or pensions managed by it), and not with a view to or for
distributing or reselling such Shares or any part thereof, without prejudice,
however, to such Investor’s right at all times to sell or otherwise dispose of
all or any part of such Shares in compliance with applicable federal and state
securities laws. Such Investor is acquiring the Shares hereunder in the ordinary
course of its business. Such Investor does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Shares.

(c) Investor Status. At the time such Investor was offered the Units, it was,
and at the date hereof it is, an “accredited investor” as defined in Rule 501(a)
under the Securities Act, it being expressly acknowledged by the Company that
Altshuler qualifies as an accredited investor by virtue of its status as the
management company of the provident funds and pensions managed by it which is a
corporation, partnership or limited liability company not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of $5,000,000. Such Investor is not a registered broker-dealer under
Section 15 of the Exchange Act.

(d) General Solicitation. Such Investor is not purchasing the Units as a result
of any advertisement, article, notice or other communication regarding the Units
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

(e) Access to Information. Such Investor acknowledges that it had access to
review the Disclosure Materials and 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 Units and the merits and risks of investing in the Units;
(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; and
(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. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents.

(f) Certain Trading Activities. Other than consummating the transactions
contemplated hereunder, such Investor, has not, directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such
Investor, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Investor first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof; provided, however, that with respect to Altshuler, it is
expressly acknowledged and agreed by the parties that Altshuler is providing
this representation and warranty solely for itself and in its own name and not
with respect to the provident funds and pensions managed by, with respect to
such funds and pensions no representation or warranty is made. Notwithstanding
the foregoing, in the case of an Investor that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Investor’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Investor’s assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement. Such
Investor, as the management company of the provident funds and pensions managed
by it (not to include Affiliates over which Investor does not exercise
investment discretion), covenants that neither it nor any Person acting on its
behalf or pursuant to any understanding with it will engage in any transactions
in the securities of the Company (including Short Sales) prior to the time that
the transactions contemplated by this Agreement are publicly disclosed.

 

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(g) Independent Investment Decision. Except as may be disclosed in any filings
with the Commission by the Investors under Section 13 and/or Section 16 of the
Exchange Act, no Investor has agreed to act with any other Investor for the
purpose of acquiring, holding, voting or disposing of the Shares or Warrants for
purposes of Section 13(d) under the Exchange Act, and each Investor is acting
independently with respect to its investment in the Units. Such Investor has
independently evaluated the merits of its decision to purchase Units pursuant to
the Transaction Documents, and such Investor confirms that it has not relied on
the advice of any other Investor’s business and/or legal counsel in making such
decision. Such Investor has not relied on the business or legal advice of the
Company or any of its agents, counsel or Affiliates in making its investment
decision hereunder.

(h) Affiliates Involvement in Offering. Investor acknowledges that it is aware
of the following: One or more of the Company’s officers or directors may invest
in the Units and it is anticipated that one director, Amos Kaminski, will
purchase a substantial portion of the Units issued and sold pursuant to this
Agreement. The participation of officers and directors of the Company in this
offering should not be taken as an indication of their views regarding the
prospects of the Company nor should the Investor infer from their participation
that they possess non-public information suggesting favorable prospects for the
Company. Given that the Company is attempting to close the offering in an
expeditious manner, the Company has not engaged an investment banker and the Per
Unit Purchase Price has been determined based on negotiation with a limited
number of investors that includes Mr. Kaminski. The Company’s stock is thinly
traded and accordingly the trading price of the Company’s stock may not
accurately reflect the current value of the Company. As of the date of this
Agreement, Mr. Kaminski owned approximately 3.6% of the outstanding voting
capital stock of the Company. At the conclusion of the First Closing,
Mr. Kaminski will own approximately 18.6% of the outstanding voting capital
stock of the Company on a fully diluted basis, which percentage may increase in
the event of subsequent closings or the Second Closing.

ARTICLE 4.

OTHER AGREEMENTS OF THE PARTIES

4.1. Restrictions on Transfer

(a) Compliance with Law. Shares and Warrants may only be disposed of in
compliance with state and federal securities laws. In connection with any
transfer of the Shares or Warrants other than pursuant to an effective
registration statement, to the Company, to an Affiliate of an Investor or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Shares or Warrants under the
Securities Act.

(b) Legends. The Warrants and certificates evidencing the Shares or any Warrant
Shares will contain the following legend, until such time as they are not
required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Shares or
Warrants or Warrant Shares, such Investor may transfer pledged or secured Shares
or Warrants to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval or consent of the Company and no legal opinion of
legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in connection
with a

 

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subsequent transfer following default by the Investor transferee of the
pledge. No notice shall be required of such pledge. Except as otherwise provided
in Section 4.1(c), any Shares or Warrants or Warrant Shares subject to a pledge
or security interest as contemplated by this Section 4.1(b) shall continue to
bear the legend set forth in this Section 4.1(b) and be subject to the
restrictions on transfer set forth in Section 4.1(a).

(c) Legend Removal. Certificates evidencing Shares or Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)):
(i) following a sale or transfer of such Shares or Warrant Shares pursuant to
Rule 144 (assuming the transferee is not an Affiliate of the Company),
(ii) while such Shares or Warrant Shares are eligible for sale without volume
limitations pursuant to Rule 144; or (iii) while a registration statement
covering the resale of such Shares or Warrant Shares is effective under the
Securities Act.

4.2. Restrictions on Issuance of Debt. So long as any Shares are outstanding,
the Company shall not (i) authorize or issue, or obligate itself to issue, any
debt exceeding, individually or in the aggregate, the principal amount of
$50,000 or (ii) effect a public offering or private placement of the debt
securities of the Company (or pledge any of the Company’s intellectual
property), in each instance other than commercial bank debt (or with respect to
a commercial bank debt), unless prior to such debt issuance (or pledge) the
Company has acquired the outstanding Shares held by the Investors at a price per
Share equal to the Liquidation Preference of such Share plus any accrued and
unpaid dividends on such Share through and including their redemption hereunder
(the “Redemption Price”). For the avoidance of doubt, the provisions of this
Section 4.2 shall terminate upon the redemption of all of the Shares.

4.3. Restrictions on Issuance of Other Securities. Other than Exempt Securities,
the Company shall not issue any: (i) equity security ranking senior to, or on
parity with, the Series A Preferred Stock as to liquidation, sale or merger
preferences, redemption, dividend rights, with any special voting rights or any
other rights, preferences or privileges, (ii) debt exceeding the principal
amount of $50,000, other than commercial bank debt or (iii) debt securities of
the Company, other than commercial bank debt (collectively, the securities
described in clauses (i), (ii) and (iii), the “New Securities”), unless prior to
such issuance the Company has redeemed all, and not less than all, of the
outstanding Shares held by the Investors at a price per Share equal to the
Redemption Price. For the avoidance of doubt, the provisions of this Section 4.3
shall terminate upon the redemption of all of the Shares.

4.4 Use of Proceeds. The Company shall utilize the proceeds of the Investment
Amount for general corporate purposes and working capital of the Company, and
shall not distribute any portion of the Investment Amount to the Company’s
shareholders as a dividend or repayment of any outstanding shareholder loans of
the Company.

ARTICLE 5.

CONDITIONS PRECEDENT TO FIRST CLOSING

5.1. Conditions Precedent to the Obligations of the Investors to Purchase
Initial Units. The obligation of each Investor to acquire Initial Units at the
First Closing is subject to the satisfaction or waiver by such Investor, at or
before the First Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the First Closing Date as though made on and as
of such 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 First Closing;

(c) No Injunction or Action. 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; and no Action shall have been instituted or threatened
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by the Transaction Documents, or seeking
damages in connection with such transactions’

 

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

(e) Termination. This Agreement shall not have been terminated as to such
Investor in accordance with Section 9.5;

(f) Secretary’s Certificate. The Company shall have delivered to such Investor a
Secretary’s Certificate, dated as of the First Closing Date, as to (i) the
matters described in section 2.2(a) above, (ii) the Company’s Certificate of
Incorporation and Bylaws, each as in effect at the First Closing, (iii) the
authority and incumbency of the officers of the Company executing the
Transaction Documents and any other documents required to be executed or
delivered in connection therewith, and (iv) the matters set forth in Sections
5.1(a), (b), (h) and (gi);

(h) Material Adverse Effect. Since the date hereof there shall have been no
Material Adverse Effect with respect to the Company, and no events, facts or
circumstances shall have occurred which could reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect with respect to
the Company; and

(i) Amos Kaminski Investment. Solely with respect to the obligation of Altshuler
to acquire (in trust for the benefit of the provident funds and/or pensions
managed by it) Initial Units at the First Closing, Amos Kaminski has invested
his Investment Amount and purchased his portion of the Units.

5.2. Conditions Precedent to the Obligations of the Company to Sell Initial
Units. The obligation of the Company to sell Initial Units at the First Closing
is subject to the satisfaction or waiver by the Company, at or before the First
Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the First Closing Date as though made on and as
of such date;

(b) Performance. Each Investor 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 such
Investor at or prior to the First 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; and

(d) Termination. This Agreement shall not have been terminated in accordance
with Section 9.5.

ARTICLE 6.

SECOND CLOSING

6.1. Additional Units.

(a) Second Closing Milestone. No later than 14 days after the date on which the
Company has filed with the SEC its quarterly report on Form 10-Q for the fiscal
period ending June 30, 2013 (the financial statements incorporated therein, the
“Q2 2013 Financial Statements”), the Company shall deliver to each Investor a
written certificate executed by the Chief Financial Officer of the Company as to
the total revenues of the Company for the six months ended June 30, 2013 and the
Company’s EBITDA for the six months ended June 30, 2013 as derived from the Q2
2013 Financial Statements (the “Company Certificate”). In the event that, based
on the Q2 2013 Financial Statements and the Company Certificate, as and for the
six month period ending June 30, 2013 (i) the Company has total revenues equal
to or exceeding $7,000,000.00; and (ii) the Company has EBITDA equal to or
exceeding $750,000.00 (the “Milestone”), then, subject to the satisfaction or
waiver of the closing

 

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conditions set forth in Sections 6.3 and 6.4 below (and the other terms and
conditioned herein, including Section 9.6 below), the Second Closing shall occur
on the date which the later of (x) the Business Day on which all the conditions
set forth in Sections 6.3 and 6.4 hereof are satisfied (or waived) and (y) 30
days after the delivery of the Company Certificate to the Investors (the “Second
Closing Date”). In the event that the Milestone is not achieved for the six
month period ending June 30, 2013 as disclosed in the Q2 2013 Financial
Statements, the Second Closing shall not occur and the Investors shall not be
obligated to acquire any additional Units, Shares or Warrants of the Company.

(c) Second Closing Units. At the Second Closing, each Investor shall invest its
respective Investment Amount (except that Mr. Kaminski shall only invest 50% of
his Investment Amount) and the Company shall issue to each Investor that number
of Additional Units equal to such Investor’s Investment Amount divided by the
Per Unit Purchase Price, subject to adjustment to reflect any stock splits,
subdivision, combination, reorganizations, recapitalizations, substitutions (or
any similar transaction) that may have occurred with respect to the outstanding
shares of capital stock of the Company between the First Closing and the Second
Closing (the Per Unit Purchase Price as so adjusted, the “Second Closing
Price”).

6.2 Second Closing Deliveries.

(a) At the Second Closing, the Company shall deliver or cause to be delivered to
each of the Investors (i) a certificate evidencing a number of Additional Shares
equal to such Investor’s Investment Amount divided by the Second Closing Price,
registered in the name of such Investor, (ii) Warrants to purchase a number of
Warrant Shares equal to such Investor’s Investment Amount divided by the
Reference Value, subject to adjustment to reflect any stock splits, subdivision,
combination, reorganizations, recapitalizations, substitutions (or any similar
transaction) that may have occurred with respect to the outstanding shares of
capital stock of the Company between the First Closing and the Second Closing
(the Reference Value as so adjusted, the “Adjusted Reference Value”), registered
in the name of such Investor, with an exercise price per share of Common Stock
equal to the Adjusted Reference Value, (iii) a copy, certified by an officer of
the Company, of duly adopted resolutions of the Board of Directors of the
Company, substantially in the form of Exhibit 2.2(a)(iii) attached hereto; and
(iv) an opinion of counsel to the Company, substantially in the form of Exhibit
2.2(a)(iv) attached hereto, dated as of the date of the Second Closing, as to
the organization, good standing and authority of the Company, the enforceability
of the Transaction Documents the transferability of the Warrant Shares (the
“Company Deliverables for Second Closing”).

(b) At the Second Closing, each Investor shall cause to be delivered its
Investment Amount for the Second Closing, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose.

6.3. Conditions Precedent to the Obligations of the Investors to Purchase
Additional Units. The obligation of each Investor to acquire Additional Units at
the Second Closing is subject to the satisfaction or waiver by such Investor, at
or before the Second Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Second Closing Date with the same effect as
though made at and as of such date (except those representations and warranties
that address matters only as of a specified date, which shall be true and
correct in all respects as of that specified 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 Second Closing;

(c) No Injunction or Action. 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; and no Action shall have been instituted or threatened
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by the Transaction Documents, or seeking
damages in connection with such transactions.

 

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(d) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 6.2(a);

(e) Termination. This Agreement shall not have been terminated as to such
Investor in accordance with Section 9.5;

(f) Secretary’s Certificate. The Company shall have delivered to such Investor a
Secretary’s Certificate, dated as of the Second Closing Date, as to (i) the
matters described in section 6.2(a) above, (ii) the Company’s Certificate of
Incorporation and Bylaws, each as in effect at the Second Closing, (iii) the
authority and incumbency of the officers of the Company executing any documents
required to be executed or delivered in connection with the Second Closing, and
(iv) the matters set forth in Sections 6.3(a), (b), (h) and (i).

(h) Material Adverse Effect. Since the First Closing there shall have been no
Material Adverse Effect with respect to the Company, and no events, facts or
circumstances shall have occurred which could reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect with respect to
the Company.

(i) Amos Kaminski Investment. Solely with respect to the obligation of Altshuler
to acquire (in trust for the benefit of the provident funds and/or pensions
managed by it) the Additional Units at the Second Closing, Amos Kaminski has
invested his Investment Amount and purchased his portion of the Additional
Units.

6.4. Conditions Precedent to the Obligations of the Company to Sell Additional
Units. The obligation of the Company to sell Additional Units at the Second
Closing is subject to the satisfaction or waiver by the Company, at or before
the Second Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the Second Closing Date with the same effect as
though made at and as of such date (except those representations and warranties
that address matters only as of a specified date, which shall be true and
correct in all respects as of that specified date);

(b) Performance. Each Investor 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 such
Investor at or prior to the Second 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; and

(d) Termination. This Agreement shall not have been terminated in accordance
with Section 9.5.

ARTICLE 7.

REGISTRATION RIGHTS

7.1 Demand Registration Rights

(a) Demand Rights. Subject to the terms set forth herein, at any time after the
date hereof until the date on which all of the Warrant Shares are eligible to be
resold pursuant to Rule 144 without restriction, each of (x) Investors holding
at least twenty percent (20%) of the then outstanding Shares and (y) Altshuler
for as long as it owns Warrant Shares, may request that the Company file a
resale shelf registration statement under the Securities Act on Form S-1 or any
similar long-form registration (each, a “Long-Form Registration”) covering the
public resale of the Warrant Shares or, if available, on Form S-3 or any similar
short-form registration (each, a “Short-Form

 

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Registration”), on the terms and conditions set forth in this Section 7.1(a) and
in Section 7.1(b). All registrations requested pursuant to this Section 7.1(a)
are referred to herein as “Demand Registrations,” and the Investors requesting a
Demand Registration pursuant to the terms hereof are referred to herein as the
“Initiating Holders.” Within ten (10) days after receipt of any such request,
the Company shall give written notice of such requested registration to all
other Investors holding Warrants or Warrant Shares and, subject to
Section 7.1(c) below, shall include in such registration all, and not less than
all, of the Warrant Shares issued or issuable upon exercise of the Warrants.

(b) Mandatory Registration. Notwithstanding any other provision to the contrary
(including Section 7.1(a) above), and regardless of whether a Demand
Registration has been requested by an Investor, (1) the Company shall be
obligated to file a Demand Registration for all Warrant Shares (which may be
exercised under the Warrant as of such date) no later than March 31, 2013; and
(2) in the event that the Second Closing occurs, the Company shall be obligated
to file a Demand Registration for all additional Warrant Shares (which may be
exercised under the Warrant as of such date) no later than December 31, 2013.

(c) Timing; Expenses. The Company shall pay all Registration Expenses (as
hereinafter defined) in connection with any Demand Registrations. The Company
shall file a registration statement in connection with any Demand Registration
with the U.S. Securities and Exchange Commission (the “SEC”) on the later to
occur of (i) forty-five (45) days following its receipt of the Initiating
Holder’s valid notice requesting such Demand Registration, and (ii) March 31,
2013; The Company agrees to use all commercially reasonable efforts to (i) cause
such registration statement to be declared effective by the SEC as soon as
possible after its filing with the SEC; and (ii) keep such registration
statement continuously effective with the SEC for the lesser of (A) until all of
the Warrant Shares are eligible for resale under Rule 144 without restriction,
or (B) until all Warrant Shares covered by such registration statement have been
sold.

(d) Delay. Other than pursuant to Section 7.1(b) above, the Company may postpone
for up to ninety (90) days the filing or the effectiveness of a registration
statement for a Demand Registration to the extent the board of directors of the
Company in good faith determines that such postponement is necessary in order to
avoid premature disclosure of a material financing, acquisition,
recapitalization, reorganization or other material transaction, the disclosure
of which would have a materially detrimental effect on the Company. The Company
may delay a Demand Registration hereunder only once in any twelve (12) month
period.

(d) Selection of Investment Bank(s). The Company shall have the right to select
the investment banker(s) and manager(s) to administer any Demand Registration,
subject to the approval of the holders of a majority of the Warrant Shares,
which approval shall not be unreasonably withheld or delayed.

(e) Other Registration Rights. The Company may grant rights to other persons to
participate in Piggyback Registrations (defined below) so long as such rights
are subordinate to the rights of the holders of Warrant Shares with respect to
such Piggyback Registrations as provided in this Section 7.1. The Company shall
not, without the prior written consent of the holders of at least 25% of Warrant
Shares grant rights to other persons to make Demand Registrations.

7.2. Piggyback Registrations.

(a) Piggyback Rights. Whenever the Company proposes to register any of its
securities under the Securities Act, for its own account or for the account of
any holder of its securities other than Warrant Shares, (other than pursuant to
a Demand Registration or a registration on Form S-4 or S-8 or any successor or
similar forms) and the registration form to be used may be used for the
registration of Warrant Shares (a “Piggyback Registration”), the Company shall
give prompt written notice to all Investors holding Warrants or Warrant Shares
of its intention to effect such a registration and shall include in such
registration all Warrant Shares held by or issuable to such Investors with
respect to which the Company has received written requests for inclusion therein
within fifteen (15) days after receipt of the Company’s notice.

(b) Timing; Expenses. The Company shall pay all Registration Expenses in all
Piggyback Registrations (whether such Registration Expenses are incurred by the
Company or the holders of Warrant Shares). The Company agrees to use all
commercially reasonable efforts to (i) cause such registration statement to be

 

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declared effective by the SEC as soon as possible after its filing with the SEC;
and (ii) keep such registration statement continuously effective with the SEC
for the lesser of (A) until all of the Warrant Shares are eligible for resale
under Rule 144 without restriction, or (B) until all Warrant Shares covered by
such registration statement have been sold.

(c) Allocation and Cutbacks -Primary Offering. If a Piggyback Registration is an
underwritten registration of securities for the account of the Company, and the
managing underwriters advise the Company in writing that, in their opinion, the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company shall include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the Warrant
Shares held by the Investors, pro rata among the respective holders thereof on
the basis of the amount of Warrant Shares owned by or issuable to each such
holder, and (iii) third, any other securities eligible to be included in such
registration, pro rata among the holders of such securities on the basis of the
number of shares owned by each such holder.

(d) Allocation and Cutbacks- Secondary Offering. If a Piggyback Registration is
an underwritten registration of securities for the account of holders of the
Company’s securities, and the managing underwriters advise the Company in
writing that, in their opinion, the number of securities requested to be
included in such registration exceeds the number which can be sold in an orderly
manner in such offering within the price range of the offering, the Company
shall include in such registration (i) first, the securities the holders of the
Company’s securities requesting the registration propose to sell, (ii) second,
the Warrant Shares, pro rata among the respective holders thereof on the basis
of the amount of Warrant Shares owned by or issuable to each such holder, and
(iii) third, any other securities eligible to be included in such registration,
pro rata among the holders of such securities on the basis of the number of
shares owned by each such holder.

(e) Selection of Investment Banker(s). If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering shall be made by the Company.

7.3. Additional Registration Procedures.

(a) Company Obligations. In connection with any Demand Registration or Piggyback
Registration, the Company shall use all reasonable commercially reasonable
efforts to effect the sale of such Warrant Shares in accordance with the
intended method of disposition thereof. The registration statement filed in
connection therewith shall (i) be available for the sale of the Warrant Shares
in accordance with the intended method or methods of distribution by the selling
holders thereof and (ii) comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be included therein or if permitted by the rules and
forms of the SEC, incorporate such financial statements therein by reference.
Before filing a registration statement or prospectus or any amendments or
supplements thereto relating to a Demand Registration or Piggyback Registration,
the Company shall furnish to the counsel of each Investor copies of all such
documents proposed to be filed, which documents shall be subject to the review
and comment of such counsel. Additionally, the Company shall, as expeditiously
as possible:

(i) notify each holder of Warrants or Warrant Shares of the effectiveness of
each registration statement filed hereunder;

(ii) prepare and file with the SEC such amendments to any registration statement
as may be necessary to keep any such registration statement effective for the
period specified in 7.1(b) or 7.2(b);

(iii) cause the prospectus to such registration statement to be amended or
supplemented as required and to be filed as required by Rule 424 or any similar
rule that may be adopted under the Securities Act;

(iv) respond as promptly as practicable to any comments received from the SEC
with respect to any Long-Form or Short-Form Registration statement or any
amendment thereto; and

 

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(v) comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during the
applicable period in accordance with the intended method or methods of
distribution by the selling holders thereof.

(b) Delay. Other than with respect to registration pursuant to Section 7.1(b)
above, the Company may delay taking any of the actions described in clauses
(i) through (v) of Section 7.3(a) (i) to the extent that the board of directors
of the Company in good faith determines that such delay is necessary in order to
avoid premature disclosure of a material financing, acquisition,
recapitalization, reorganization or other material transaction, the disclosure
of which would have a materially detrimental effect on the Company; provided,
however, that the Company may not exercise such right of delay for more than
sixty days, less the number of days if any such registration statement may have
been postponed pursuant to Section 7.1(d) above, with respect to any Demand
Registration and it delivers written notice to each such holder of Warrants and
Warrant Shares to such effect or (ii) unless and until the Company has received
a written notice (a “Registration Notice”) from such holder that such holder
intends to make offers or sales under the registration statement as specified in
such Registration Notice; provided, however, that the Company shall have ten
(10) business days to prepare and file any such amendment or supplement after
receipt of the Registration Notice or such longer period as is reasonably
necessary if such preparation and filing are not commercially practicable within
ten (10) business days. Once a holder has delivered a Registration Notice to the
Company, such holder shall promptly provide to the Company such information as
the Company reasonably requests in order to identify such holder and the method
of distribution in a post-effective amendment to such registration statement or
a supplement to its prospectus. Such holder also shall notify the Company in
writing upon completion of such offer or sale or at such time as such holder no
longer intends to make offers or sales under such registration statement.

(c) Copies of Filings. The Company shall furnish to each seller of Warrant
Shares under a registration statement such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus or
supplement), such documents incorporated by reference in such registration
statement, and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Warrant Shares owned by or issuable
to such seller;

(d) Notices. The Company shall immediately notify each seller of such Warrant
Shares (i) when any amendment or supplement to the prospectus relating to a
registration statement covering the Warrant Shares has been filed with the SEC,
(ii) of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of the registration statement or any part
thereof or the initiation of any proceedings for that purpose, (iii) if the
Company receives any notification with respect to the suspension of the
qualification of the Warrant Shares for offer or sale in any jurisdiction or the
initiation of any proceeding for such purpose, and (iv) of the happening of any
event during the period the registration statement is effective as a result of
which (A) such registration statement contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or (B) such
prospectus as then amended or supplemented contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such Warrant
Shares, such registration statement or prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;

ARTICLE 8.

INDEMNIFICATION

8.1. Indemnification.

The Company agrees to indemnify, defend and hold each of the Investors, each of
its officers, directors, members, shareholders, partners, agents (including its
legal counsel and independent accountants) and each person controlling such
Investor within the meaning of Section 15 of the Securities Act and each person
controlling such Investor within the meaning of Section 15 of the Securities Act
(each an “Indemnified Party”), harmless against

 

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any and all damages, costs, liabilities, expenses (including reasonable legal
fees and expenses) or losses suffered by such Indemnified Party, as a result of,
or in connection with, (i) any breach or misrepresentation contained in any
Transaction Document; or (ii) the failure by the Company to fulfill any
obligation, agreement or covenant under any Transaction Documents, or (iii) with
respect to any registration been effected pursuant to Section 7 above, any
untrue statement (or alleged untrue statement) of a material fact contained in
any registration statement, prospectus, offering circular or other document, or
any amendment or supplement thereto, incident to any such registration, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, or any violation by
the Company of the Securities Act, the Exchange Act, state securities laws or
any rule or regulation promulgated under such laws applicable to the Company in
connection with any such registration; or (iv) with a claim that the Company
Intellectual Property violates, infringes, misappropriates or misuses any
Intellectual Property rights of any Person; or (v) any cost or expense,
including reasonable legal fees, incurred in connection with enforcing the
rights of the Indemnified Party hereunder, including the rights afforded under
this Section 8.

If the indemnification provided for in this Section 8(iii) or 8(v) is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Company, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by Indemnified Party as a result
of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
the Indemnified Party on the other hand, in connection with the statements or
omissions that resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations.

ARTICLE 9.

MISCELLANEOUS

9.1. Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents; provided, however, that
the Company shall, upon and subject to the First Closing, pay the reasonable
fees and expenses of Altshuler for legal and other fees and expenses incurred in
connection with the transaction contemplated hereby. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Shares.

9.2. 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,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.

9.3. 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 6:30 p.m. (New York City 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 6:30
p.m. (New York City time) on any Trading Day, (c) the fifth (5th) Trading Day
following the date of mailing, if sent by internationally recognized overnight
courier service, 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:    Marlborough Software Development Holdings Inc.    500
Nickerson Road    Marlborough, MA 01752-4695    Facsimile: (617) 249-0107

 

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With a copy to:    Seyfarth Shaw LLP    2 Seaport Lane, Ste. 300    Boston, MA
02210    Facsimile: (617) 946-4801    Attn.: Gregory L. White, Esq.
If to an Investor:    To the address set forth under such Investor’s name on the
signature pages hereof; or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

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

9.4. Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and both Investors. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of this Agreement unless the same consideration is also offered to all Investors
who then hold Shares.

9.5. Termination. This Agreement may be terminated prior to the First Closing:

(a) by written agreement of the Investors and the Company; and

(b) by the Company or an Investor (as to itself but no other Investor) upon
written notice to the other, if the First Closing shall not have taken place by
6:30 p.m. Eastern time on the Outside Date; provided, that the right to
terminate this Agreement under this Section 9.5(b) 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 First Closing to occur on or
before such time.

In the event of a termination pursuant to this Section, the Company shall
promptly notify all Investors. Upon a termination in accordance with this
Section 9.5, the Company and the Investor(s) shall not have any further
obligation or liability (including as arising from such termination) to the
other (except with respect to breaches of this Agreement) and no Investor will
have any liability to any other Investor under the Transaction Documents as a
result therefrom.

9.6 Limitation on Ownership.

(a) Notwithstanding the foregoing terms and conditions of this Agreement, in the
event any issuance or sale of Initial Units or Additional Units to an Investor
would result in such Investor (i) acquiring 20% or more of the issued and
outstanding equity interests or voting interests in the Company, (ii) having
board observer or director or designation rights; (iii) having a right to
receive 20% or more of the profits of the Company; (iv) having a right to
receive 20% or more of the residual assets of the Company upon its liquidation;
or (v) be an Affiliate of the Company such that it exercises control over the
Company within the meaning of the Securities Act, and such Investor is subject
to a contractual, legal or regulatory prohibition against such level of
ownership, then such Investor shall not be obligated to purchase, and the
Company may not compel the issuance or sale to such Investor, of such number of
Units as would represent the excess of 20% of the issued and outstanding equity
interests or voting interests in the Company.

(b) Notwithstanding the foregoing terms and conditions of this Agreement, if as
a result of any recapitalization, repurchase, restructuring, issuance of New
Securities or any other event (other than solely as a result of the purchase of
additional equity or voting interests in the Company by Altshuler not pursuant
to the

 

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Transaction Documents), Altshuler, after giving effect to such transaction,
would (i) own 20% or more of the issued and outstanding equity interests or
voting interests of the Company, (ii) have board observer or director or
designation rights, (iii) have a right to receive 20% or more of the profits of
the Company; (iv) have a right to receive 20% or more of the residual assets of
the Company upon its liquidation; or (v) be an Affiliate of the Company such
that it exercises control over the Company within the meaning of the Securities
Act, then the Company shall be obligated to offer to repurchase from the
Investor and cancel, and the Investor may, but is not required to sell to the
Company for cancellation, such number of Units as would represent the excess of
20% of the issued and outstanding equity interests or voting interests or such
other means of control in the Company at a price per Unit equal to the
Redemption Price. It is understood and agreed that for all purposes under this
Agreement, such repurchase shall be treated as a rescission of the initial
issuance of such repurchased and cancelled Units.

9.7. 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. 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.

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. In addition, each and every reference to share prices and
shares of Common Stock or Series A Preferred Stock, as applicable, in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock or Series A Preferred Stock, as applicable, that occur after
the date of this Agreement.

9.8. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Shares, provided such transferee agrees in writing to
be bound, with respect to the transferred Shares, by the provisions hereof that
apply to the “Investors.”

9.9. 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.

9.10. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Actions concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other Transaction
Documents shall be commenced exclusively in the state or federal courts located
in the State of New York. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Action by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for 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 hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal Action arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence an Action to enforce any
provisions of a Transaction Document, then the prevailing party in such Action
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Action.

9.11. Survival. The representations, warranties, agreements and covenants
contained herein shall survive the First Closing and the Second Closing and the
delivery of the Shares.

9.12. 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 both parties need not
sign the

 

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same counterpart. In the event that any signature is delivered by facsimile
transmission, 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.

9.13. 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.

9.14. Independent Nature of Investors’ Obligations and Rights. The obligations
of each Investor under any Transaction Document are several and not joint with
the obligations of any other Investor, and no Investor shall be responsible in
any way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Shares pursuant
to the Transaction Documents has been made by such Investor independently of any
other Investor. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no Investor will be acting as agent of such
Investor in connection with monitoring its investment in the Shares or enforcing
its rights under the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor.

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SIGNATURE PAGES FOLLOW]

 

23

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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.

 

MARLBOROUGH SOFTWARE DEVELOPMENT HOLDINGS INC. By:  

/s/ P. Romik

  Name:   Pinhas Romik   Title:  

President and Chief Executive Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR INVESTORS FOLLOW]

Company Signature Page to Securities Purchase Agreement

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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.

 

ALTSHULER SHAHAM PROVIDENT FUNDS AND PENSION LTD, FOR THE BENEFIT OF THE
PROVIDENT FUNDS AND/OR PENSIONS MANAGED BY IT By:  

/s/ Gilad AltshuLer

  Name: Gilad AltshuLer   Title: General Investment Manager By:  

/s/ Yair Lowenstein

  Name: Yair Lowenstein   Title: Chief Executive Officer

 

 

Investment Amount: $ 1,000,000

 

Tax ID No.:

 

 

 

ADDRESS FOR NOTICE [intentionally omitted] c/o:  

 

Street:  

 

City/State/Zip:  

 

Attention:  

 

Tel:  

 

Fax:  

 

DELIVERY INSTRUCTIONS

(if different from above)

c/o:  

 

Street:  

 

City/State/Zip:  

 

Attention:  

 

Tel:  

 

Investor Signature Page to Securities Purchase Agreement

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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.

 

INVESTOR

/s/ Amos Kaminski

  Name: Amos Kaminski

 

 

Investment Amount: $ 1,000,000

 

Tax ID No.:

 

 

 

ADDRESS FOR NOTICE [intentionally omitted] c/o:  

 

Street:  

 

City/State/Zip:  

 

Attention:  

 

Tel:  

 :

Fax:  

 

DELIVERY INSTRUCTIONS

(if different from above)

c/o:  

 

Street:  

 

City/State/Zip:  

 

Attention:  

 

Tel:  

 

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Annex A

SCHEDULE OF INVESTORS

 

(1)   (2)

Investor

 

Address and

Facsimile Number

Amos Kaminski   [intentionally omitted] Altshuler Shaham Provident Funds and
Pension Ltd, in trust for the benefit of the provident funds and/or pensions
managed by it   [intentionally omitted]

 

A-1

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EXHIBIT A

CERTIFICATE OF DESIGNATION

[Filed as Exhibit 3.1 to the Current Report on Form 8-K of which this Agreement
is a part]

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EXHIBIT B

FORM OF WARRANT

[Filed as Exhibit 10.2 to the Current Report on Form 8-K of which this Agreement
is a part]

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Exhibit 2.2(a)(iii)

CERTIFIED BOARD RESOLUTIONS

Resolutions

RESOLVED, that the Board hereby designates 1,940,299 shares of the Company’s
authorized and unissued preferred stock as “6.5% Series A Redeemable Preferred
Stock” (the “Series A Preferred Stock”) and fixes the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of the shares
of such Series A Preferred Stock as set forth set forth in the Certificate of
Designation in the form attached hereto as Exhibit A; and it is further

RESOLVED, that the executive officers of the Company be, and each of them hereby
is, authorized, empowered and directed to execute and file the Certificate of
Designation with the Secretary of State of the State of Delaware and to take any
and all other action as they, in their discretion, may deem necessary, proper or
advisable in order to carry out the intent and to accomplish the purposes of the
foregoing resolutions; and it is further

RESOLVED, that the Company be, and hereby is, authorized to undertake an
offering (the “Offering”) for the issuance of up to 1,940,299 units (each, a
“Unit” and, collectively, the “Units”) at a purchase price of $3.35 per Unit,
each Unit consisting of (a) one (1) share of Series A Preferred Stock and (b) a
ten year warrant (the “Warrant”) to purchase five (5) shares (the “Warrant
Shares”) of the Company’s common stock, par value $0.01 per share (the “Common
Stock”), at an initial purchase price of $0.67 per share, substantially in the
form attached hereto as Exhibit B. Initially, up to 1,044,776 Units may be
offered and sold pursuant to the Offering on the terms and conditions set forth
in that certain Securities Purchase Agreement, substantially in the form
attached hereto as Exhibit C (the “Purchase Agreement”); and it is further

RESOLVED, that the Purchase Agreement be, and hereby is, in all respects
authorized, approved, ratified and confirmed, and the Company be, and hereby is,
authorized to enter into and perform its obligations under the Purchase
Agreement the Board having determined that it is necessary, desirable and
appropriate for the Company to enter into the Purchase Agreement; and it is
further

RESOLVED, that the form of Warrant be, and hereby is, in all respects
authorized, approved, ratified and confirmed, and the Company be, and hereby is,
authorized to enter into and perform its obligations under each Warrant to be
issued to investors in the Offering pursuant to the Purchase Agreement; and it
is further

RESOLVED, that the executive officers of the Company be, and each of them hereby
is, authorized and directed to cause instruments evidencing ownership of the
Series A Preferred Stock and the Warrants to be issued and sold in the Offering
to be issued and delivered to the initial investors in the Offering in
accordance with the Purchase Agreement; and it is further

RESOLVED, that the Company hereby reserves for future issuance up to 9,701,495
shares of Common Stock for issuance as Warrant Shares upon exercise of the
Warrants to be offered and sold with the Units in the Offering; and it is
further

RESOLVED, that the executive officers of the Company be, and each of them hereby
is, authorized and directed for and on behalf of the Company and in its name, to
prepare or cause to be prepared, execute and file or cause to be filed with the
Securities and Exchange Commission (the “Commission”) on or before March 31,
2013, a resale shelf registration statement on any form of registration
statement that the Company is then eligible to use for the registration of
securities under the Securities Act of 1933, as amended (the “Registration
Statement”), to register the resale by investors in the Offering of the Warrant
Shares issuable to such investors upon exercise of the Warrants, and to file
with the Commission, or elsewhere, any such other and additional documents
amending, supplementing or otherwise relating to the Registration Statement, and
any required exhibits to the Registration Statement which such executive officer
deems necessary or appropriate in connection with the Offering; and it is
further

RESOLVED, that the executive officers of the Company be, and each of them hereby
is, authorized and directed to execute and deliver such other documents and to
take such other actions as such executive officers deems necessary or
appropriate in furtherance of the filing of the Registration Statement, and the
consummation of the transactions contemplated therewith; and it is further

RESOLVED, that the executive officers be, and each of them hereby is,
authorized, empowered and directed, acting in the name of and on behalf of the
Company, to negotiate, make, execute, perform, acknowledge, verify, issue and
delivery all such other agreements, instruments, consents, acknowledgments,
waivers, filings and other documents, and to take all other actions, as may, in
each case, in the opinion of such executive officer executing such documents or
taking such actions, be necessary, appropriate or advisable, in order to be
effectuate the full intent and purpose of all of the foregoing resolutions, such
opinion to be conclusively evidenced by the execution of such documents or the
taking of such action by any such executive officer; and it is further

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RESOLVED, that the Board of Directors hereby adopts and incorporates herein by
reference, the full text of any resolution or resolutions in statutory or
regulatory form that may be required by an state or other jurisdictional
authority in connection with any such registration or qualification, and the
executive officers be, and each of them hereby is, authorized and empowered to
certify to any such state authority that any such form of resolution required by
such authority has been adopted; and it is further

RESOLVED, that the proper officers of the Corporation be, and they hereby are,
authorized and directed, in the name and on behalf of the Corporation, to
execute and deliver such other writings and to take such action as may be
necessary or which such officer or officers may deem appropriate to carry out
the intent of the foregoing resolutions, the execution and delivery or
performance thereof by such officer or officers of the Corporation to be
conclusive evidence of the approval by the Corporation of the terms and
conditions or the appropriateness thereof.