Exhibit 10.1

PURCHASE AGREEMENT

PURCHASE AGREEMENT (the “Agreement”), dated as of April 30, 2015, by and between
ONCOGENEX PHARMACEUTICALS, INC., a Delaware corporation, (the “Company”), and
LINCOLN PARK CAPITAL FUND, LLC, an Illinois limited liability company (the
“Investor”).

WHEREAS:

Subject to the terms and conditions set forth in this Agreement, the Company
wishes to sell to the Investor, and the Investor wishes to buy from the Company,
(i) Two Million Dollars ($2,000,000) of the Company’s Series A-1 Units (the
“Series A-1 Units”), with each Series A Unit consisting of (a) one share of
common stock, par value $0.001, of the Company (the “Common Stock”) and (b) one
warrant to purchase one-quarter (1/4) of a share of Common Stock in the form
attached hereto as Exhibit A (collectively, the “Warrant”), on the Commencement
Date (as defined herein), and (ii) up to Sixteen Million Dollars ($16,000,000)
of Common Stock from time to time, in the Company’s sole and absolute
discretion, after the Commencement Date. The shares of Common Stock to be
purchased under this Agreement (including, without limitation, the Initial
Purchase Shares (as defined herein)) are referred to herein as the “Purchase
Shares.”

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 Investor hereby
agree as follows:

 

  1. CERTAIN DEFINITIONS.

For purposes of this Agreement, the following terms shall have the following
meanings:

(a) “Accelerated Purchase Share Amount” means, with respect to any Accelerated
Purchase made pursuant to Section 2(b) hereof, the number of Purchase Shares
directed by the Company to be purchased by the Investor on an Accelerated
Purchase Notice, which number of Purchase Shares shall not exceed the lesser of
(i) 750,000 shares of Common Stock (subject to adjustment for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction that occurs on or after the date of this
Agreement) and (ii) the Accelerated Purchase Share Percentage multiplied by the
trading volume of the Common Stock on the Principal Market during normal trading
hours on the Accelerated Purchase Date.

(b) “Accelerated Purchase Date” means, with respect to any Accelerated Purchase
made pursuant to Section 2(b) hereof, the Business Day immediately following the
applicable Purchase Date with respect to the corresponding Regular Purchase
referred to in Section 2(b) hereof.

(c) “Accelerated Purchase Notice” means, with respect to any Accelerated
Purchase made pursuant to Section 2(b) hereof, an irrevocable written notice
from the Company to the Investor directing the Investor to buy a specified
Accelerated Purchase Share Amount on the applicable Accelerated Purchase Date
pursuant to Section 2(b) hereof at the applicable Accelerated Purchase Price.

(d) “Accelerated Purchase Share Percentage” means, with respect to any
Accelerated Purchase made pursuant to Section 2(b) hereof, 0.30.

(e) “Accelerated Purchase Price” means, with respect to any particular
Accelerated Purchase made pursuant to Section 2(b) hereof, the lower of
(i) ninety-seven percent (97%) of the VWAP during

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(A) the entire trading day on the Accelerated Purchase Date, if the volume of
shares of Common Stock traded on the Principal Market on the Accelerated
Purchase Date has not exceeded the Accelerated Purchase Share Volume Maximum, or
(B) the portion of the trading day of the Accelerated Purchase Date (calculated
starting at the beginning of normal trading hours) until such time at which the
volume of shares of Common Stock traded on the Principal Market has exceeded the
Accelerated Purchase Share Volume Maximum or (ii) the Closing Sale Price on the
Accelerated Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction).

(f) “Accelerated Purchase Share Volume Maximum” means the number of shares of
Common Stock traded on the Principal Market during normal trading hours on the
Accelerated Purchase Date equal to (i) the amount of shares of Common Stock
properly directed by the Company to be purchased on the Accelerated Purchase
Notice, divided by (ii) the Accelerated Purchase Share Percentage (to be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split, reverse stock split or other similar transaction).

(g) “Available Amount” means initially Eighteen Million Dollars ($18,000,000) in
the aggregate, which amount shall be reduced by the Purchase Amount each time
the Investor purchases Series A-1 Units or shares of Common Stock pursuant to
Section 2 hereof, including, without limitation, the Initial Purchase pursuant
to Section 2(a) hereof.

(h) “Average Price” means a price per Purchase Share (rounded to the nearest
tenth of a cent) equal to the quotient obtained by dividing (i) the aggregate
gross purchase price paid by the Investor for all Purchase Shares purchased
pursuant to this Agreement, by (ii) the aggregate number of Purchase Shares
issued pursuant to this Agreement.

(i) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state
law for the relief of debtors.

(j) “Base Price” means a price per Purchase Share equal to the sum of (i) the
Signing Market Price, (ii) $0.03125 and (iii) $0.0603 (subject to adjustment for
any reorganization, recapitalization, non-cash dividend, stock split, reverse
stock split or other similar transaction that occurs on or after the date of
this Agreement).

(k) “Base Prospectus” means the Company’s final base prospectus, dated
November 30, 2012, a preliminary form of which is included in the Registration
Statement, including the documents incorporated by reference therein.

(l) “Business Day” means any day on which the Principal Market is open for
trading, including any day on which the Principal Market is open for trading for
a period of time less than the customary time.

(m) “Closing Sale Price” means, for any security as of any date, the last
closing sale price for such security on the Principal Market as reported by the
Principal Market.

(n) “Confidential Information” means any information disclosed by either party
to the other party, either directly or indirectly, in writing, orally or by
inspection of tangible objects (including, without limitation, documents,
prototypes, samples, plant and equipment), which is designated as
“Confidential,” “Proprietary” or some similar designation. Information
communicated orally shall be

 

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considered Confidential Information if such information is confirmed in writing
as being Confidential Information within ten (10) Business Days after the
initial disclosure. Confidential Information may also include information
disclosed to a disclosing party by third parties. Confidential Information shall
not, however, include any information which (i) was publicly known and made
generally available in the public domain prior to the time of disclosure by the
disclosing party; (ii) becomes publicly known and made generally available after
disclosure by the disclosing party to the receiving party through no action or
inaction of the receiving party; (iii) is already in the possession of the
receiving party at the time of disclosure by the disclosing party as shown by
the receiving party’s files and records immediately prior to the time of
disclosure; (iv) is obtained by the receiving party from a third party without a
breach of such third party’s obligations of confidentiality; (v) is
independently developed by the receiving party without use of or reference to
the disclosing party’s Confidential Information, as shown by documents and other
competent evidence in the receiving party’s possession; or (vi) is required by
law to be disclosed by the receiving party, provided that the receiving party
gives the disclosing party prompt written notice of such requirement prior to
such disclosure and assistance in obtaining an order protecting the information
from public disclosure.

(o) “Custodian” means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.

(p) “DTC” means The Depository Trust Company, or any successor performing
substantially the same function for the Company.

(q) “DWAC Shares” means shares of Common Stock that are (i) issued in electronic
form, (ii) freely tradable and transferable and without restriction on resale
and (iii) timely credited by the Company to the Investor’s or its designee’s
specified Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast
Automated Securities Transfer (FAST) Program or any similar program hereafter
adopted by DTC performing substantially the same function.

(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

(s) “Initial Prospectus Supplement” means the prospectus supplement to the Base
Prospectus complying with Rule 424(b) under the Securities Act that is filed
with the SEC and delivered by the Company to the Investor upon the execution and
delivery of this Agreement in accordance with Section 5(a), including the
documents incorporated by reference therein.

(t) “Initial Purchase Shares” means the aggregate number of shares of Common
Stock contained in all of the Series A-1 Units to be purchased by the Investor
in the Initial Purchase.

(u) “Material Adverse Effect” means any material adverse effect on (i) the
enforceability of any Transaction Document, (ii) the results of operations,
assets, business or financial condition of the Company and its Subsidiaries,
taken as a whole, other than any material adverse effect that resulted primarily
from (A) any change in the United States or foreign economies or securities or
financial markets in general that does not have a disproportionate effect on the
Company and its Subsidiaries, taken as a whole, (B) any change that generally
affects the industry in which the Company and its Subsidiaries operate that does
not have a disproportionate effect on the Company and its Subsidiaries, taken as
a whole, (C) any change arising in connection with earthquakes, hostilities,
acts of war, sabotage or terrorism or military actions, or declaration of a
national emergency or other calamity or crisis or any escalation or material
worsening of any such hostilities, acts of war, sabotage or terrorism or
military actions or similar event existing as of the date hereof, (D) any action
taken by the Investor, its affiliates or

 

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its or their successors and assigns with respect to the transactions
contemplated by this Agreement, (E) the effect of any change in applicable laws
or accounting rules that does not have a disproportionate effect on the Company
and its Subsidiaries, taken as a whole, or (F) any change resulting from
compliance with terms of this Agreement or the consummation of the transactions
contemplated by this Agreement, or (iii) the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document to be performed as of the date of determination.

(v) “Maturity Date” means the first day of the month immediately following the
twenty-four (24) month anniversary of the Commencement Date.

(w) “Person” means an individual or entity including but not limited to any
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.

(x) “Principal Market” means The NASDAQ Capital Market; provided however, that
in the event the Company’s Common Stock is ever listed or traded on The NASDAQ
Global Market, The NASDAQ Global Select Market, the New York Stock Exchange, the
NYSE MKT, the NYSE Arca or the OTC Bulletin Board (it being understood that as
used herein “OTC Bulletin Board” shall also mean any successor or comparable
market quotation system or exchange to the OTC Bulletin Board such as the OTCQB
operated by the OTC Markets Group, Inc.), then the “Principal Market” shall mean
such other market or exchange on which the Company’s Common Stock is then listed
or traded or any successor thereto.

(y) “Prospectus” means the Base Prospectus, as supplemented by any Prospectus
Supplement (including the Initial Prospectus Supplement), including the
documents incorporated by reference therein.

(z) “Prospectus Supplement” means any prospectus supplement to the Base
Prospectus (including the Initial Prospectus Supplement) filed with the SEC
pursuant to Rule 424(b) under the Securities Act in connection with the
transactions contemplated by this Agreement, including the documents
incorporated by reference therein.

(aa) “Purchase Amount” means, with respect to the Initial Purchase, any Regular
Purchase or any Accelerated Purchase made hereunder, the portion of the
Available Amount to be purchased by the Investor pursuant to Section 2 hereof.

(bb) “Purchase Date” means, with respect to any Regular Purchase made pursuant
to Section 2(a) hereof, the Business Day on which the Investor receives by 5:00
p.m., Eastern time, of such Business Day a valid Regular Purchase Notice that
the Investor is to buy Purchase Shares pursuant to Section 2(a) hereof.

(cc) “Purchase Price” means, with respect to any Regular Purchase made pursuant
to Section 2(a) hereof, the lower of: (i) the lowest Sale Price of the Common
Stock on the applicable Purchase Date and (ii) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during the ten
(10) consecutive Business Days ending on the Business Day immediately preceding
such Purchase Date (in each case, to be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction).

(dd) “Registration Statement” means the effective registration statement on Form
S-3 (Commission File No. 333-184829) filed by the Company with the SEC pursuant
to the Securities Act for the registration of shares of its Common Stock,
including the Purchase Shares, the Commitment Shares

 

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and the Warrant Shares, warrants, including the Warrants, and certain other
securities, as such Registration Statement has been or may be amended and
supplemented from time to time, including all documents filed as part thereof or
incorporated by reference therein, and including all information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430B of the
Securities Act, including any comparable successor registration statement filed
by the Company with the SEC pursuant to the Securities Act for the registration
of shares of its Common Stock, including the Purchase Shares, the Commitment
Shares and the Warrant Shares, and warrants, including the Warrants.

(ee) “Regular Purchase Notice” means, with respect to any Regular Purchase
pursuant to Section 2(a) hereof, an irrevocable written notice from the Company
to the Investor directing the Investor to buy such applicable amount of Purchase
Shares at the applicable Purchase Price as specified by the Company therein on
the Purchase Date.

(ff) “Sale Price” means any sale price for the shares of Common Stock on the
Principal Market as reported by the Principal Market.

(gg) “SEC” means the U.S. Securities and Exchange Commission.

(hh) “Securities” means, collectively, the Purchase Shares, the Commitment
Shares, the Warrant and the Warrant Shares.

(ii) “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

(jj) “Signing Market Price” means $2.10, representing the consolidated closing
bid price of the Common Stock on The NASDAQ Capital Market on the Business Day
immediately preceding the date of this Agreement.

(kk) “Staff Interpretations” means the interpretations of the SEC’s staff set
forth in response to question 116.21 of the Compliance and Disclosure
Interpretations of Securities Act Forms of the Division of Corporate Finance
dated May 16, 2013.

(ll) “Subsidiary” means any Person the Company wholly-owns or controls, or in
which the Company, directly or indirectly, owns a majority of the voting stock
or similar voting interest, in each case that would be disclosable pursuant to
Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.

(mm) “Transaction Documents” means, collectively, this Agreement, the Warrant
and the schedules and exhibits hereto, and each of the other agreements,
documents, certificates and instruments entered into or furnished by the parties
hereto in connection with the transactions contemplated hereby and thereby.

(nn) “Transfer Agent” means Computershare Trust Company, N.A., or such other
Person who is then serving as the transfer agent for the Company in respect of
the Common Stock.

(oo) “Warrant Shares” means the shares of Common Stock issuable upon exercise of
the Warrant (without regard to any limitations on the exercise of the Warrant
set forth therein).

 

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(pp) “VWAP” means in respect of an applicable Accelerated Purchase Date, the
volume weighted average price of the Common Stock on the Principal Market, as
reported on the Principal Market.

 

  2. PURCHASE OF SERIES A-1 UNITS AND PURCHASE SHARES.

Subject to the terms and conditions set forth in this Agreement, the Company has
the right, but not the obligation, to sell to the Investor and the Investor has
the obligation to purchase from the Company, Series A-1 Units and Purchase
Shares as follows:

(a) Commencement. Upon the satisfaction of the conditions set forth in Sections
7 and 8 hereof (the “Commencement” and the date of satisfaction of such
conditions the “Commencement Date”), the Investor shall purchase 956,938 Series
A-1 Units (such purchase, the “Initial Purchase”), for an aggregate purchase
price of Two Million Dollars ($2,000,000) (the “Initial Purchase Price”).
Beginning one (1) Business Day following the Commencement Date, the Company
shall have the right, but not the obligation, in its sole and absolute
discretion, to direct the Investor, by its delivery to the Investor of a Regular
Purchase Notice from time to time, to purchase up to One Hundred Twenty-Five
Thousand (125,000) Purchase Shares (each such purchase a “Regular Purchase”), at
the Purchase Price on the Purchase Date; provided, however, that (i) the Regular
Purchase may be increased to up to One Hundred Seventy-Five Thousand
(175,000) Purchase Shares, provided that the Closing Sale Price of the Common
Stock is not below $3.00 on the Purchase Date, and (ii) the Regular Purchase may
be increased to up to Two Hundred Twenty-Five Thousand (225,000) Purchase
Shares, provided that the Closing Sale Price of the Common Stock is not below
$5.00 on the Purchase Date (all of which share amounts shall be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction that occurs on or after
the date of this Agreement); and provided, further, that the Investor’s
committed obligation under any single Regular Purchase shall not exceed One
Million Dollars ($1,000,000), unless the parties mutually agree to increase the
dollar amount of any Regular Purchase on any Purchase Date at the applicable
Purchase Price. If the Company delivers any Regular Purchase Notice for a
Purchase Amount in excess of the limitations contained in the immediately
preceding sentence, such Regular Purchase Notice shall be void ab initio to the
extent of the amount by which the number of Purchase Shares set forth in such
Regular Purchase Notice exceeds the number of Purchase Shares which the Company
is permitted to include in such Purchase Notice in accordance herewith, and the
Investor shall have no obligation to purchase such excess Purchase Shares in
respect of such Regular Purchase Notice; provided that the Investor shall remain
obligated to purchase the number of Purchase Shares which the Company is
permitted to include in such Regular Purchase Notice. The Company may deliver a
new Regular Purchase Notice to the Investor on the Business Day immediately
following the date on which the most recent Regular Purchase was completed.

(b) Accelerated Purchases. Subject to the terms and conditions of this
Agreement, in addition to purchases of Purchase Shares as described in
Section 2(a) above, the Company shall also have the right, but not the
obligation, in its sole and absolute discretion, to direct the Investor by the
Company’s delivery to the Investor of an Accelerated Purchase Notice from time
to time, and the Investor thereupon shall have the obligation, to buy Purchase
Shares at the Accelerated Purchase Price on the Accelerated Purchase Date in an
amount equal to the Accelerated Purchase Share Amount (each such purchase, an
“Accelerated Purchase”). The Company may deliver an Accelerated Purchase Notice
to the Investor only on a Purchase Date on which the Closing Sale Price is not
below $1.50 (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction). If the Company delivers any Accelerated Purchase Notice
for an Accelerated Purchase Share Amount in excess of the limitations contained
in the definition of Accelerated Purchase Share Amount, such Accelerated
Purchase Notice shall be void ab initio to the extent of the amount by

 

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which the number of Purchase Shares set forth in such Accelerated Purchase
Notice exceeds the Accelerated Purchase Share Amount which the Company is
permitted to include in such Accelerated Purchase Notice in accordance herewith
(which shall be confirmed in an Accelerated Purchase Confirmation (defined
below)), and the Investor shall have no obligation to purchase such excess
Purchase Shares in respect of such Accelerated Purchase Notice; provided that
the Investor shall remain obligated to purchase the Accelerated Purchase Share
Amount which the Company is permitted to include in such Accelerated Purchase
Notice. Within one (1) Business Day after completion of each Accelerated
Purchase Date, the Accelerated Purchase Share Amount and the applicable
Accelerated Purchase Price shall be set forth on a confirmation of the
Accelerated Purchase to be provided to the Company by the Investor (an
“Accelerated Purchase Confirmation”).

(c) Payment for Purchase Shares and Warrant. The Investor shall pay to the
Company the Initial Purchase Price via wire transfer of immediately available
funds on the same Business Day that the Investor receives the Initial Purchase
Shares as DWAC Shares and a true and correct copy of the Warrant, duly executed
on behalf of the Company and registered in the name of the Investor or its
designee, if such Initial Purchase Shares and Warrant are so received by the
Investor before 1:00 p.m., Eastern time, or, if such Initial Purchase Shares and
Warrant are so received by the Investor after 1:00 p.m., Eastern time, the next
Business Day. An original copy of the Warrant shall be sent to the Investor via
nationally recognized overnight delivery service, in each case properly
addressed to the Investor at its address set forth in Section 12(f). For each
Regular Purchase, the Investor shall pay to the Company an amount equal to the
Purchase Amount with respect to such Regular Purchase as full payment for such
Purchase Shares via wire transfer of immediately available funds on the same
Business Day that the Investor receives such Purchase Shares, if such Purchase
Shares are received by the Investor before 1:00 p.m., Eastern time, or, if such
Purchase Shares are received by the Investor after 1:00 p.m., Eastern time, the
next Business Day. For each Accelerated Purchase, the Investor shall pay to the
Company an amount equal to the Purchase Amount with respect to such Accelerated
Purchase as full payment for such Purchase Shares via wire transfer of
immediately available funds on the third Business Day following the date that
the Investor receives such Purchase Shares. If the Company or the Transfer Agent
shall fail for any reason or for no reason to electronically transfer any
Purchase Shares as DWAC Shares in respect of a Regular Purchase or Accelerated
Purchase (as applicable) within three (3) Business Days following the receipt by
the Company of the Purchase Price or Accelerated Purchase Price, respectively,
therefor in compliance with this Section 2(c), and if on or after such Business
Day the Investor purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Investor of such
Purchase Shares that the Investor anticipated receiving from the Company in
respect of such Regular Purchase or Accelerated Purchase (as applicable), then
the Company shall, within three (3) Business Days after the Investor’s request,
either (i) pay cash to the Investor in an amount equal to the Investor’s total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Cover Price”), at which point the Company’s
obligation to deliver such Purchase Shares as DWAC Shares shall terminate, or
(ii) promptly honor its obligation to deliver to the Investor such Purchase
Shares as DWAC Shares and pay cash to the Investor in an amount equal to the
excess (if any) of the Cover Price over the total Purchase Price for such
Regular Purchase plus the total Accelerated Purchase Price for such Accelerated
Purchase (as applicable). The Company shall not issue any fraction of a share of
Common Stock upon any Regular Purchase or Accelerated Purchase. If the issuance
would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up or down to the
nearest whole share. All payments made under this Agreement shall be made in
lawful money of the United States of America or wire transfer of immediately
available funds to such account as the Company may from time to time designate
by written notice in accordance with the provisions of this Agreement. Whenever
any amount expressed to be due by the terms of this Agreement is due on any day
that is not a Business Day, the same shall instead be due on the next succeeding
day that is a Business Day.

 

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(d) Compliance with Registration Statement Eligibility Requirements and Rules of
Principal Market.

(i) Maximum Share Cap. Subject to Section 2(d)(ii) below, the Company shall not
issue or sell any shares of Common Stock pursuant to this Agreement, and the
Investor shall not purchase or acquire any shares of Common Stock pursuant to
this Agreement, to the extent that after giving effect thereto, the aggregate
number of shares of Common Stock that would be issued pursuant to this Agreement
would exceed the maximum number of shares of Common Stock that the Company may
issue pursuant to this Agreement and the transactions contemplated hereby and
thereby (taking into account all shares of Common Stock issued or issuable
pursuant to any transaction or series of transactions that may be aggregated
with the transactions contemplated by this Agreement under applicable rules of
The NASDAQ Stock Market) without (A) breaching the Company’s obligations under
the applicable rules of The NASDAQ Stock Market or (B) obtaining stockholder
approval under the applicable rules of The NASDAQ Stock Market (the “Exchange
Cap”), unless and until the Company elects to solicit stockholder approval of
the issuance of Common Stock pursuant to this Agreement and the stockholders of
the Company have in fact approved such issuance in accordance with the
applicable rules and regulations of The NASDAQ Stock Market and the Certificate
of Incorporation and Bylaws of the Company, or (C) if for so long as the Company
is subject to the limitations set forth in General Instruction I.B.6 of Form S-3
and the Staff Interpretations, the maximum number of shares of Common Stock that
the Company may issue pursuant to this Agreement and the transactions
contemplated hereby without exceeding the limitations set forth in General
Instruction I.B.6 of Form S-3 and the Staff Interpretations (the “Registration
Statement Eligibility Cap”). For all purposes of this Agreement, the term
“Maximum Share Cap” shall mean the lesser of (i) the Exchange Cap, to the extent
applicable to the transactions contemplated by this Agreement, and (ii) the
Registration Statement Eligibility Cap, to the extent applicable to the
transactions contemplated by this Agreement. For the avoidance of doubt, the
Company may, but shall be under no obligation to, request its stockholders to
approve the issuance of Common Stock pursuant to this Agreement; provided, that
if stockholder approval is not obtained in accordance with this Section 2(d)(i),
the Exchange Cap shall be applicable for all purposes of this Agreement and the
transactions contemplated hereby and thereby at all times during the term of
this Agreement (except as set forth in Section 2(d)(ii) below).

(ii) At-Market Transaction. Notwithstanding Section 2(d)(i) above, the Exchange
Cap shall not be applicable for any purposes of this Agreement and the
transactions contemplated hereby and thereby, solely to the extent that (and
only for so long as) the Average Price shall equal or exceed the Base Price (it
being hereby acknowledged and agreed that the Exchange Cap shall be applicable
for all purposes of this Agreement and the transactions contemplated hereby and
thereby at all other times during the term of this Agreement, unless the
stockholder approval referred to in Section 2(d)(i) is obtained).

(iii) General. The Company shall not issue any shares of Common Stock pursuant
to this Agreement if such issuance would reasonably be expected to result in
(A) a violation of the Securities Act or non-compliance with the General
Instructions of Form S-3 (including General Instruction I.B.6. thereof) or the
Staff Interpretations or (B) a breach of the rules and regulations of The NASDAQ
Stock Market. The provisions of this Section 2(d) shall be implemented in a
manner otherwise than in strict conformity with the terms hereof only if
necessary to ensure compliance with the Securities Act, the General Instructions
of Form S-3 (including General Instruction I.B.6. thereof), the Staff
Interpretations and the rules and regulations of The NASDAQ Stock Market.

 

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(e) Beneficial Ownership Limitation. Notwithstanding anything to the contrary
contained in this Agreement or the Warrant, the Company shall not issue or sell,
and the Investor shall not purchase or acquire, any shares of Common Stock under
this Agreement or the Warrant which, when aggregated with all other shares of
Common Stock then beneficially owned by the Investor and its affiliates (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder) would result in the beneficial ownership by the Investor
and its affiliates of more than 9.99% of the then issued and outstanding shares
of Common Stock (the “Beneficial Ownership Limitation”). Upon the written or
oral request of the Investor, the Company shall promptly (but not later than one
(1) Business Day) confirm orally or in writing to the Investor the number of
shares of Common Stock then outstanding. The Investor and the Company shall each
cooperate in good faith in the determinations required hereby and the
application hereof. The Investor’s written certification to the Company of the
applicability of the Beneficial Ownership Limitation, and the resulting effect
thereof hereunder at any time, shall be conclusive with respect to the
applicability thereof and such result absent manifest error.

 

  3. INVESTOR’S REPRESENTATIONS AND WARRANTIES.

The Investor represents and warrants to the Company that as of the date hereof
and as of the Commencement Date:

(a) Accredited Investor Status. The Investor is an “accredited investor” as that
term is defined in Rule 501(a)(3) of Regulation D promulgated under the
Securities Act.

(b) Information. The Investor understands that its investment in the Securities
involves a high degree of risk. The Investor (i) is able to bear the economic
risk of an investment in the Securities including a total loss thereof, (ii) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its representatives shall modify, amend or affect
the Investor’s right to rely on the Company’s representations and warranties
contained in Section 4 below. The Investor has sought such accounting, legal and
tax advice from its own independent advisors as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities and is not relying on any accounting, legal, tax or other advice from
the Company or its officers, employees, representatives or advisors.

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

(d) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Investor and is a valid and binding
agreement of the Investor enforceable against the Investor in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

(e) Residency. The Investor is a resident of the State of Illinois.

 

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(f) Confidentiality. Other than to other Persons party to this Agreement,
Investor has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).

(g) No Short Selling. The Investor represents and warrants to the Company that
at no time prior to the date of this Agreement has any of the Investor, its
agents, representatives or affiliates engaged in or effected, nor has the
Investor caused any Person to engage in or effect, in any manner whatsoever,
directly or indirectly, any (i) “short sale” (as such term is defined in Rule
200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.

 

  4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Investor that as of the date hereof
and as of the Commencement Date:

(a) Organization and Qualification. The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite corporate 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 or default of
any of the provisions of its respective certificate or articles of formation or
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or reasonably be expected to result
in a Material Adverse Effect, and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification, except where the revocation,
limitation or curtailment would not reasonably be expected to result in a
Material Adverse Effect. The Company has no Subsidiaries except as set forth on
Schedule 4(a).

(b) Authorization; Enforcement; Validity. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Warrant and each of the other Transaction Documents,
including without limitation, the reservation for issuance and the issuance of
the Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation, the issuance of the Commitment Shares (as defined
below in Section 5(e)), the Initial Purchase Shares and the Warrant and the
reservation for issuance and the issuance of the other Purchase Shares and the
Warrant Shares issuable under this Agreement and the Warrant, as applicable,
have been duly authorized by the Company’s Board of Directors (or a duly
authorized committee thereof) and no further consent or authorization is
required by the Company, its Board of Directors (or a duly authorized committee
thereof) or its stockholders, (iii) each of this Agreement and the Warrant has
been, and each other Transaction Document shall be on the Commencement Date,
duly executed and delivered by the Company and (iv) each of this Agreement and
the Warrant constitutes, and each other Transaction Document upon its execution
on behalf of the Company, shall constitute, the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies. The

 

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Board of Directors of the Company (or a duly authorized committee thereof) has
approved the resolutions (the “Signing Resolutions”) substantially in the form
as set forth as Exhibit D attached hereto to authorize this Agreement, the
Warrant, the other Transaction Documents and the transactions contemplated
hereby and thereby. The Signing Resolutions are valid, in full force and effect
and have not been materially modified or supplemented in any respect. The
Company has delivered to the Investor a true and correct copy of a unanimous
written consent adopting the Signing Resolutions executed by all of the members
of the Board of Directors of the Company (or a duly authorized committee
thereof). Except as set forth in this Agreement, no other approvals or consents
of the Company’s Board of Directors and/or stockholders is necessary under
applicable laws and the Company’s Certificate of Incorporation and/or Bylaws to
authorize the execution and delivery of this Agreement, the Warrant, the other
Transaction Documents or any of the transactions contemplated hereby or thereby,
including, but not limited to, the issuance of the Commitment Shares, the
Purchase Shares, the Warrant and the Warrant Shares.

(c) Capitalization. As of the date hereof, the authorized capital stock of the
Company is set forth on Schedule 4(c). Except as disclosed in Schedule 4(c), or
in the SEC Documents, (i) no shares of the Company’s capital stock are subject
to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the Securities Act, (v) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement or the Warrant and (vii) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. The Company has made available to
the Investor true and correct copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s Bylaws, as amended and as in effect on the
date hereof (the “Bylaws”), and summaries of the terms of all securities
convertible into or exercisable for Common Stock, if any, and copies of any
documents containing the material rights of the holders thereof in respect
thereto.

(d) Issuance of Securities. Upon issuance and payment thereof in accordance with
the terms and conditions of this Agreement, (i) the Purchase Shares shall be
duly authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens, charges, restrictions, rights of first refusal and preemptive
rights with respect to the issue thereof, and will be issued in compliance with
all federal and state securities laws, with the holders being entitled to all
rights accorded to a holder of shares of Common Stock and (ii) the Warrant shall
be duly authorized, validly issued and free from all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights with respect to the
issue thereof, and will be issued in compliance with all federal and state
securities laws. The Commitment Shares (as defined below in Section 5(e)) have
been duly authorized and, upon issuance in accordance with the terms of this
Agreement, shall be validly issued, fully paid and nonassessable and free from
all taxes, liens, charges, restrictions, rights of first refusal and preemptive
rights with respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock. As of the Commencement, the

 

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Company shall have reserved from its duly authorized shares of capital stock not
less than (i) 10,000,000 shares of Common Stock for issuance upon purchase under
this Agreement as Purchase Shares and (ii) the maximum number of Warrant Shares
issuable upon exercise of the Warrant (without taking into account any
limitations on the exercise of the Warrant set forth therein). Upon issuance and
payment thereof in accordance with the terms and conditions of the Warrant, the
Warrant Shares shall be validly issued, fully paid and nonassessable and free
from all taxes, liens, charges, restrictions, rights of first refusal and
preemptive rights with respect to the issue thereof, and will be issued in
compliance with all federal and state securities laws, with the holders being
entitled to all rights accorded to a holder of shares of Common Stock. The
Company understands and acknowledges that the number of Warrant Shares will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue the Warrant Shares upon exercise of the Warrant in
accordance with this Agreement and the Warrant is absolute and unconditional,
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company. The Securities are being issued
pursuant to the Registration Statement and the issuance of the Securities has
been registered by the Company pursuant to the Securities Act. Upon receipt of
the Securities, the Investor will have good and marketable title to such
Securities and such Securities will be immediately freely tradable, except that
the Warrants sold under this Agreement are not listed, and will not be listed,
for trading on any national securities exchange.

(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Purchase Shares, the Commitment Shares, the
Warrant and the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the Bylaws
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market applicable to
the Company or any of its Subsidiaries) or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, except in the case of
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations under clause (ii), which would not reasonably be expected to result
in a Material Adverse Effect. Neither the Company nor its Subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation,
any Certificate of Designation, Preferences and Rights of any outstanding series
of preferred stock of the Company or Bylaws or their organizational charter or
Bylaws, respectively. Neither the Company nor any of its Subsidiaries is in
violation of any term of or is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which would not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted, in knowing violation of any law, ordinance, and
regulation of any governmental entity, except for possible violations, the
sanctions for which either individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act or
applicable state securities laws and the rules and regulations of the Principal
Market, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents in accordance with the terms hereof or thereof. Except as
set forth elsewhere in this agreement, all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence shall be obtained or effected on or

 

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prior to the Commencement Date. Since one year prior to the date hereof, the
Company has not received nor delivered any notices or correspondence from or to
the Principal Market other than routine correspondence. To the knowledge of the
Company, the Principal Market has not commenced any delisting proceedings
against the Company.

(f) SEC Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Documents”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates and to the
Company’s knowledge, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act, as applicable. None
of the SEC Documents, 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 the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company 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 normal, immaterial, year-end audit adjustments. The Company has
received no notices or correspondence from the SEC for the one year preceding
the date hereof. To the Company’s knowledge, the SEC has not commenced any
enforcement proceedings against the Company or any of its subsidiaries.

(g) Absence of Certain Changes. Except as disclosed in the SEC Documents, since
December 31, 2014, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings. The Company is financially solvent and is
generally able to pay its debts as they become due.

(h) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the
Company’s Subsidiaries’ officers or directors in their capacities as such, which
would reasonably be expected to result in a Material Adverse Effect.

(i) Acknowledgment Regarding Investor’s Status. The Company acknowledges and
agrees that the Investor is acting solely in the capacity of arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and

 

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thereby and any advice given by the Investor or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investor’s purchase
of the Securities. The Company further represents to the Investor that the
Company’s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives and
advisors.

(j) No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company in a manner that would require
stockholder approval pursuant to the rules of the Principal Market on which any
of the securities of the Company are listed or designated. The issuance and sale
of the Securities hereunder does not contravene the rules and regulations of the
Principal Market.

(k) Intellectual Property Rights. To the Company’s knowledge, it and its
Subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted described in the SEC Documents and which
the failure to so have would not reasonably be expected to have a Material
Adverse Effect. None of the Company’s material trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights have expired or terminated, or, by
the terms and conditions thereof, could expire or terminate within two years
from the date of this Agreement. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of any
material trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark registrations,
trade secret or other similar rights of others, or of any such development of
similar or identical trade secrets or technical information by others and there
is no claim, action or proceeding being made or brought against, or to the
Company’s knowledge, threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade secret
or other infringement, which would reasonably be expected to have a Material
Adverse Effect.

(l) Environmental Laws. The Company and its Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

(m) Title. The Company and the Subsidiaries have good and marketable title in
fee simple to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all liens,
encumbrances and defects (“Liens”) and, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under leases by the Company and the Subsidiaries
are held by them under valid, subsisting and

 

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enforceable leases with which the Company and the Subsidiaries are in compliance
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.

(n) Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.

(o) Regulatory Permits. The Company and its Subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
written notice of proceedings relating to the revocation or modification of any
such certificate, authorization or permit.

(p) Tax Status. The Company and each of its Subsidiaries has made or filed (or
requested valid extensions of) all federal and state income and all other
material tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. To the knowledge
of the Company, there are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.

(q) Transactions With Affiliates. Except as set forth in the SEC Documents, none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors) that is required to be disclosed and is not
disclosed, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $120,000
other than for (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

(r) Application of Takeover Protections. The Company and its board of directors
have taken or will take prior to the Commencement Date all necessary action, if
any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or would reasonably be
expected to become applicable to the Investor as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and the Investor’s ownership of the Securities.

 

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(s) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents that will be timely
publicly disclosed by the Company, the Company confirms that neither it nor, to
the knowledge of the Company, any other Person acting on its behalf has provided
the Investor or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information which is not
otherwise disclosed in the Registration Statement or any Prospectus Supplements
thereto. The Company understands and confirms that the Investor will rely on the
foregoing representation in effecting purchases and sales of securities of the
Company. All of the disclosure made available by or on behalf of the Company to
the Investor regarding the Company, its business and the transactions
contemplated hereby, including the disclosure schedules to this Agreement, is
true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading. The Company acknowledges and agrees that the Investor
neither makes nor has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3 hereof.

(t) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other Person acting on behalf of the Company, has
(i) directly or indirectly, used any funds 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 made by any Person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

(u) Registration Statement. The Company has prepared and filed with the SEC in
accordance with the provisions of the Securities Act the Registration Statement.
The Registration Statement was declared effective by order of the SEC on
November 30, 2012. The Registration Statement is effective pursuant to the
Securities Act and available for the issuance of the Securities thereunder, and
the Company has not received any written notice that the SEC has issued or
intends to issue a stop order or other similar order with respect to the
Registration Statement or the Prospectus or that the SEC otherwise has
(i) suspended or withdrawn the effectiveness of the Registration Statement or
(ii) issued any order preventing or suspending the use of the Prospectus or any
Prospectus Supplement, in either case, either temporarily or permanently or
intends or has threatened in writing to do so. The “Plan of Distribution”
section of the Prospectus permits the issuance of the Securities under the terms
of this Agreement and the Warrant, as applicable. At the time the Registration
Statement and any amendments thereto became effective, at the date of this
Agreement and at each deemed effective date thereof pursuant to Rule 430B(f)(2)
of the Securities Act, the Registration Statement and any amendments thereto
complied and will comply in all material respects with the requirements of the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Base
Prospectus and any Prospectus Supplement thereto, at the time such Base
Prospectus or such Prospectus Supplement thereto was issued and on the
Commencement Date, complied and will comply in all material respects with the
requirements of the Securities Act and did not and will not contain an untrue
statement of a

 

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material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that this representation and warranty does not apply to
statements in or omissions from any Prospectus Supplement made in reliance upon
and in conformity with information relating to the Investor furnished to the
Company in writing by or on behalf of the Investor expressly for use therein.
The Company meets all of the requirements for the use of a registration
statement on Form S-3 pursuant to the Securities Act for the offering and sale
of the Securities contemplated by this Agreement and the Warrant, as applicable,
in reliance on General Instruction I.B.6. of Form S-3 and the Staff
Interpretations, and the SEC has not notified the Company of any objection to
the use of the form of the Registration Statement pursuant to Rule 401(g)(1) of
the Securities Act. The Company hereby confirms that, for so long as the Company
is subject to General Instruction I.B.6 of Form S-3 and the Staff
Interpretations, the Company shall not issue any shares of Common Stock pursuant
to this Agreement if such issuance would reasonably be expected to result in
noncompliance with General Instruction I.B.6 of Form S-3 and the Staff
Interpretations. The Registration Statement, as of its effective date, meets the
requirements set forth in Rule 415(a)(1)(x) pursuant to the Securities Act. At
the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act) relating to any of the
Securities, the Company was not and is not an Ineligible Issuer (as defined in
Rule 405 of the Securities Act). The Company has not distributed any offering
material in connection with the offering and sale of any of the Securities, and,
until the Investor does not hold any of the Securities, shall not distribute any
offering material in connection with the offering and sale of any of the
Securities, to or by the Investor, in each case, other than the Registration
Statement or any amendment thereto, the Prospectus or any Prospectus Supplement
required pursuant to applicable law or the Transaction Documents. The Company
has not made, and agrees that unless it obtains the prior written consent of the
Investor it will not make, an offer relating to the Securities that would
constitute a “free writing prospectus” as defined in Rule 405 under the
Securities Act. The Company shall comply with the requirements of Rules 164 and
433 under the Securities Act applicable to any such free writing prospectus
consented to by the Investor, including in respect of timely filing with the
SEC, legending and record keeping.

(v) DTC Eligibility. The Company, through the Transfer Agent, currently
participates in the DTC Fast Automated Securities Transfer (FAST) Program and
the Common Stock can be transferred electronically to third parties via the DTC
Fast Automated Securities Transfer (FAST) Program.

(w) Sarbanes-Oxley. The Company is in material compliance with all provisions of
the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it as of the
date hereof.

(x) Certain Fees. Except as disclosed on Schedule 4(x), no brokerage or finder’s
fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by the
Transaction Documents. Except as disclosed on Schedule 4(x), the Investor shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
Section 4(x) that may be due in connection with the transactions contemplated by
the Transaction Documents.

(y) Investment Company. The Company is not, and immediately after receipt of
payment for the Securities will not be, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.

(z) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which

 

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to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock pursuant to the Exchange Act nor has the Company received
any written notification that the SEC is currently contemplating terminating
such registration. The Company has not, in the twelve (12) months preceding the
date hereof, received any written notice from the Principal Market to the effect
that the Company is not in compliance with the listing or maintenance
requirements of the Principal Market. The Company is in compliance with all such
listing and maintenance requirements.

(aa) Accountants. The Company’s accountants are set forth in the SEC Documents
and, to the knowledge of the Company, such accountants are an independent
registered public accounting firm as required by the Securities Act.

(bb) No Market Manipulation. The Company has not, and to its knowledge no Person
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company.

(cc) Shell Company Status. The Company is not currently, and has never been, an
issuer identified in Rule 144(i)(1) under the Securities Act.

(dd) Canadian Securities Laws. The Company is not the subject of a cease trade
order, or management cease trade order, issued by the British Columbia
Securities Commission (the “BCSC”), and the Company is, to the best of its
knowledge, not aware of any such order being contemplated or threatened by the
BCSC. The Company is a reporting issuer under the securities laws of the
Province of British Columbia (the “BC Securities Laws”), is not in default of
any requirement of the BC Securities Laws, and the Company is not included on
the Defaulting Issuers List maintained by the BCSC. All disclosure and filings
on the public record and fees required to be made and paid by the Company
pursuant to the BC Securities Laws have been made and paid, and the Company has
not filed any confidential material change reports.

 

  5. COVENANTS.

(a) Filing of Current Report and Initial Prospectus Supplement. The Company
agrees that it shall, within the time required under the Exchange Act, file with
the SEC a report on Form 8-K relating to the transactions contemplated by, and
describing the material terms and conditions of, the Transaction Documents (the
“Current Report”). The Company further agrees that it shall, within the time
required under Rule 424(b) under the Securities Act, file with the SEC the
Initial Prospectus Supplement pursuant to Rule 424(b) under the Securities Act
specifically relating to the transactions contemplated by, and describing the
material terms and conditions of, the Transaction Documents, containing
information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430B under the Securities Act, and disclosing all
information relating to the transactions contemplated hereby required to be
disclosed in the Registration Statement and the Prospectus as of the date of the
Initial Prospectus Supplement, including, without limitation, information
required to be disclosed in the section captioned “Plan of Distribution” in the
Prospectus. The Investor acknowledges that it will be identified in the Initial
Prospectus Supplement as an underwriter within the meaning of Section 2(a)(11)
of the Securities Act. The Company shall permit the Investor to review and
comment upon the Current Report and the Initial Prospectus Supplement at least
two (2) Business Days prior to their filing with the SEC, the Company shall give
due consideration to all such comments, and the Company shall not file the
Current Report or the Initial Prospectus Supplement with the SEC in a form to
which the Investor reasonably

 

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objects. The Investor shall use its reasonable best efforts to comment upon the
Current Report and the Initial Prospectus Supplement within one (1) Business Day
from the date the Investor receives the final pre-filing draft version thereof
from the Company. The Investor shall furnish to the Company such information
regarding itself, the Securities held by it and the intended method of
distribution thereof, including any arrangement between the Investor and any
other Person relating to the sale or distribution of the Securities, as shall be
reasonably requested by the Company in connection with the preparation and
filing of the Current Report and the Initial Prospectus Supplement, and shall
otherwise cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Current Report and the Initial
Prospectus Supplement with the SEC. From and after the filing of the Current
Report and the Initial Prospectus Supplement, the Company shall have publicly
disclosed, in the manner contemplated by Regulation FD, all material, non-public
information (if any) regarding the Company or any of its Subsidiaries delivered
to the Investor by the Company or any of its Subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents.

(b) Blue Sky. The Company shall use its reasonable best efforts to take all such
actions, if any, as is reasonably necessary in order to obtain an exemption for
or to register or qualify (i) the issuance of the Securities to the Investor
under this Agreement and (ii) any subsequent resale of all Securities by the
Investor, in each case, under applicable securities or “Blue Sky” laws of the
states of the United States in such states as is reasonably requested by the
Investor from time to time, and shall provide evidence of any such action so
taken to the Investor.

(c) Listing/DTC. The Company shall promptly secure the listing of all of the
Purchase Shares, Commitment Shares and Warrant Shares to be issued to the
Investor under this Agreement and the Warrant, as applicable, on the Principal
Market (subject to official notice of issuance) and upon each other national
securities exchange or automated quotation system, if any, upon which the Common
Stock is then listed, and shall use commercially reasonable efforts to maintain,
so long as any shares of Common Stock shall be so listed, such listing of all
such Purchase Shares, Commitment Shares and Warrant Shares from time to time
issuable hereunder. The Company shall use commercially reasonable efforts to
maintain the listing of the Common Stock on the Principal Market and shall
comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules and regulations of the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action that would
reasonably be expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in no event later
than the following Business Day, provide to the Investor copies of any notices
it receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on the Principal Market; provided, however, that the
Company shall not be required to provide the Investor copies of any such notice
that the Company reasonably believes constitutes material non-public information
and the Company would not be required to publicly disclose such notice in any
report or statement filed with the SEC under the Exchange Act (including on Form
8-K) or the Securities Act. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 5(c). The Company
shall take all action necessary to ensure that its Common Stock can be
transferred electronically as DWAC Shares.

(d) Prohibition of Short Sales and Hedging Transactions. The Investor agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11, the Investor and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into, engage in or effect, or cause any Person to enter into, engage in or
effect, directly or indirectly through any third party, any (i) “short sale” (as
such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the
Common Stock or (ii) hedging transaction, which establishes a net short position
with respect to the Common Stock.

 

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(e) Issuance of Commitment Shares. In consideration for the Investor’s execution
and delivery of this Agreement, the Company shall cause the Transfer Agent to
issue, on the date of this Agreement, 126,582 shares of Common Stock (the
“Commitment Shares”) directly to the Investor electronically as DWAC Shares and
shall deliver to the Transfer Agent the Irrevocable Transfer Agent Instructions
with respect to the issuance of the Commitment Shares. For the avoidance of
doubt, all of the Commitment Shares shall be fully earned as of the date of this
Agreement, whether or not the Commencement shall occur or any Purchase Shares
are purchased by the Investor under this Agreement and irrespective of any
termination of this Agreement.

(f) Due Diligence; Non-Public Information. The Investor shall have the right,
from time to time as the Investor may reasonably deem appropriate and upon
reasonable advance notice to the Company, to perform reasonable due diligence on
the Company during normal business hours. The Company and its officers and
employees shall provide information and reasonably cooperate with the Investor
in connection with any reasonable request by the Investor related to the
Investor’s due diligence of the Company. Each party hereto agrees not to
disclose any Confidential Information of the other party to any third party and
shall not use the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions contemplated hereby.
Each party hereto acknowledges that the Confidential Information shall remain
the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party. The Company confirms that neither it nor any other
Person acting on its behalf shall provide the Investor or its agents or counsel
with any information that constitutes or might constitute material, non-public
information, unless a simultaneous public announcement thereof is made by the
Company in the manner contemplated by Regulation FD. In the event of a breach of
the foregoing covenant by the Company or any Person acting on its behalf (as
determined in the reasonable good faith judgment of the Investor), in addition
to any other remedy provided herein or in the other Transaction Documents, the
Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, non-public
information without the prior approval by the Company; provided the Investor
shall have first provided notice to the Company that it believes it has received
information that constitutes material, non-public information, the Company shall
have at least 24 hours to publicly disclose such material, non-public
information prior to any such disclosure by the Investor, and the Company shall
have failed to publicly disclose such material, non-public information within
such time period. The Investor shall not have any liability to the Company, any
of its Subsidiaries, or any of their respective directors, officers, employees,
stockholders or agents, for any such disclosure. The Company understands and
confirms that the Investor shall be relying on the foregoing covenants in
effecting transactions in securities of the Company.

(g) Purchase Records. The Investor and the Company shall each maintain records
showing the remaining Available Amount at any given time and the dates and
Purchase Amounts for each Regular Purchase and Accelerated Purchase or shall use
such other method, reasonably satisfactory to the Investor and the Company.

(h) Taxes. The Company shall pay any and all transfer, stamp or similar taxes
that may be payable with respect to the issuance and delivery of any shares of
Common Stock to the Investor made under this Agreement.

(i) Effective Registration Statement; Current Prospectus; Securities Law
Compliance. The Company shall use its reasonable best efforts to keep the
Registration Statement effective pursuant to Rule 415 promulgated under the
Securities Act, and to keep the Registration Statement and the Prospectus
current and available for issuances and sales of all of the Securities, subject
to the Maximum Share Cap,

 

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by the Company to the Investor, and for the resale of all the Securities by the
Investor, at all times until the date on which the Investor shall have sold all
the Securities (including, without limitation, all of the Warrant Shares) and no
Available Amount remains under this Agreement (the “Registration Period”).
Without limiting the generality of the foregoing, during the Registration
Period, the Company shall (a) take all action necessary to cause the Common
Stock to continue to be registered as a class of securities under Sections 12(b)
or 12(g) of the Exchange Act, shall comply with its reporting and filing
obligations under the Exchange Act, and shall not take any action or file any
document (whether or not permitted by the Exchange Act) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act, and (b) prepare and file with the SEC, at
the Company’s expense, such amendments (including, without limitation,
post-effective amendments) to the Registration Statement and such Prospectus
Supplements pursuant to Rule 424(b) under the Securities Act, in each case, as
may be necessary to keep the Registration Statement effective pursuant to Rule
415 promulgated under the Securities Act, and to keep the Registration Statement
and the Prospectus current and available for issuances and sales of all of the
Securities by the Company to the Investor, and for the resale of all of the
Securities by the Investor, at all times during the Registration Period (it
being hereby acknowledged and agreed that the Company shall prepare and file
with the SEC, at the Company’s expense, immediately prior to the third
anniversary of the initial effective date of the Registration Statement (the
“Renewal Date”), a new Registration Statement relating to the Securities, in a
form satisfactory to the Investor and its counsel, and the Company shall use its
reasonable best efforts to cause such Registration Statement to be declared
effective within 180 days after the Renewal Date). The Investor shall furnish to
the Company such information regarding itself, its affiliates, the Securities
held by it and its affiliates and the intended method of distribution thereof as
shall be reasonably requested by the Company in connection with the preparation
and filing of any such amendment to the Registration Statement (or new
Registration Statement) or any such Prospectus Supplement, and shall otherwise
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any such amendment to the Registration
Statement (or new Registration Statement) or any such Prospectus Supplement. The
Company shall comply with all applicable federal, state and foreign securities
laws in connection with the offer, issuance and sale by the Company of the
Securities contemplated by the Transaction Documents. Without limiting the
generality of the foregoing, neither the Company nor any of its officers,
directors or affiliates will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or which would reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.

(j) Stop Orders. The Company shall advise the Investor promptly (but in no event
later than 24 hours) and shall confirm such advice in writing: (i) of the
Company’s receipt of notice of any request by the SEC for amendment of or a
supplement to the Registration Statement, the Prospectus, any Prospectus
Supplement or for any additional information in connection therewith; (ii) of
the Company’s receipt of notice of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or prohibiting or
suspending the use of the Prospectus or any Prospectus Supplement, or of the
Company’s receipt of any notification of the suspension of qualification of the
Securities for offering or sale in any jurisdiction or the initiation or
contemplated initiation of any proceeding for such purpose; and (iii) of the
Company becoming aware of the happening of any event, which makes any statement
of a material fact made in the Registration Statement, the Prospectus or any
Prospectus Supplement untrue or which requires the making of any additions to or
changes to the statements then made in the Registration Statement, the
Prospectus or any Prospectus Supplement in order to state a material fact
required by the Securities Act to be stated therein or necessary in order to
make the statements then made therein (in the case of the Prospectus or any
Prospectus Supplement, in light of the circumstances under which they were made)
not misleading, or of the necessity to amend the Registration Statement or
supplement the Prospectus or any Prospectus Supplement to comply with the
Securities Act or any other law. The Company shall not be required to disclose
to the Investor the

 

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substance or specific reasons of any of the events set forth in clauses
(i) through (iii) of the immediately preceding sentence, but rather, shall only
be required to disclose that the event has occurred. The Company shall not
deliver to the Investor any Regular Purchase Notice or Accelerated Purchase
Notice, and the Investor shall not be obligated to purchase any shares of Common
Stock under this Agreement, during the continuation or pendency of any of the
foregoing events. If at any time the SEC shall issue any stop order suspending
the effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, the Company shall use its
reasonable best efforts to obtain the withdrawal of such order at the earliest
possible time. The Company shall furnish to the Investor, without charge, a copy
of any correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to the Registration Statement or the Prospectus, as the
case may be.

(k) Amendments to Registration Statement; Prospectus Supplements. Except as
provided in this Agreement and other than periodic and current reports required
to be filed pursuant to the Exchange Act, the Company shall not file with the
SEC any amendment to the Registration Statement or any supplement to the Base
Prospectus that refers to the Investor, the Transaction Documents or the
transactions contemplated thereby (including, without limitation, any Prospectus
Supplement filed in connection with the transactions contemplated by the
Transaction Documents), in each case with respect to which (a) the Investor
shall not previously have been advised and afforded the opportunity to review
and comment thereon at least two (2) Business Days prior to filing with the SEC,
as the case may be, (b) the Company shall not have given due consideration to
any comments thereon received from the Investor or its counsel, or (c) the
Investor shall reasonably object, unless the Company reasonably has determined
that it is necessary to amend the Registration Statement or make any supplement
to the Prospectus to comply with the Securities Act or any other applicable law
or regulation, in which case the Company shall promptly (but in no event later
than 24 hours) so inform the Investor, the Investor shall be provided with a
reasonable opportunity to review and comment upon any disclosure referring to
the Investor, the Transaction Documents or the transactions contemplated
thereby, as applicable, and the Company shall expeditiously furnish to the
Investor a copy thereof. In addition, for so long as, in the reasonable opinion
of counsel for the Investor, the Prospectus is required to be delivered in
connection with any acquisition or sale of Securities by the Investor, the
Company shall not file any Prospectus Supplement with respect to the Securities
without furnishing to the Investor as many copies of such Prospectus Supplement,
together with the Prospectus, as the Investor may reasonably request.

(l) Prospectus Delivery. The Company consents to the use of the Prospectus (and
of each Prospectus Supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or “blue sky” laws of the jurisdictions
in which the Securities may be sold by the Investor, in connection with the
offering and sale of the Securities and for such period of time thereafter as
the Prospectus is required by the Securities Act to be delivered in connection
with sales of the Securities. The Company will make available to the Investor
upon request, and thereafter from time to time will furnish to the Investor, as
many copies of the Prospectus (and each Prospectus Supplement thereto) as the
Investor may reasonably request for the purposes contemplated by the Securities
Act within the time during which the Prospectus is required by the Securities
Act to be delivered in connection with sales of the Securities. If during such
period of time any event shall occur that in the reasonable judgment of the
Company and its counsel, or in the reasonable judgment of the Investor and its
counsel, is required to be set forth in the Registration Statement, the
Prospectus or any Prospectus Supplement or should be set forth therein in order
to make the statements made therein (in the case of the Prospectus or any
Prospectus Supplement, in light of the circumstances under which they were made)
not misleading, or if in the reasonable judgment of the Company and its counsel,
or in the reasonable judgment of the Investor and its counsel, it is otherwise
necessary to amend the Registration Statement or supplement the Prospectus or
any Prospectus Supplement to comply with the Securities Act or any other
applicable law or regulation,

 

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the Company shall forthwith prepare and, subject to Section 5(k) above, file
with the SEC an appropriate amendment to the Registration Statement or an
appropriate Prospectus Supplement and in each case shall expeditiously furnish
to the Investor, at the Company’s expense, such amendment to the Registration
Statement or such Prospectus Supplement, as applicable, as may be necessary to
reflect any such change or to effect such compliance. The Company shall have no
obligation to separately advise the Investor of, or deliver copies to the
Investor of, the SEC Documents, all of which the Investor shall be deemed to
have notice of.

(m) Integration. From and after the date of this Agreement, the Company will
not, and will use its reasonable best efforts to ensure that no Person acting on
its behalf will, directly or indirectly, make any offers or sales of any
security or solicit any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with other
offerings by the Company in a manner that would require stockholder approval
pursuant to the rules of the Principal Market on which any of the securities of
the Company are listed or designated, unless stockholder approval is obtained
before the closing of such subsequent transaction in accordance with the rules
of such Principal Market.

(n) Use of Proceeds. The Company will use the net proceeds from the offering as
described in the Prospectus.

(o) Other Transactions. The Company shall not enter into, announce or recommend
to its stockholders any agreement, plan, arrangement or transaction in or of
which the terms thereof would restrict, materially delay, conflict with or
impair the ability or right of the Company to perform its obligations under the
Transaction Documents, including, without limitation, the obligation of the
Company to deliver the Securities to the Investor in accordance with the terms
of the Transaction Documents, as applicable.

(p) Required Filings Relating to Purchases. To the extent required under the
Securities Act or under interpretations by the SEC thereof, as promptly as
practicable after the close of each of the Company’s fiscal quarters (or on such
other dates as required under the Securities Act or under interpretations by the
SEC thereof), the Company shall prepare a Prospectus Supplement, which will set
forth the number of Purchase Shares sold to the Investor during such quarterly
period (or other relevant period), the purchase price for such Purchase Shares
and the net proceeds received by the Company from such sales, and shall file
such Prospectus Supplement with the SEC pursuant to Rule 424(b) under the
Securities Act (and within the time periods required by Rule 424(b) and Rule
430B under the Securities Act). If any such quarterly Prospectus Supplement is
not required to be filed under the Securities Act or under interpretations by
the SEC thereof, the Company shall disclose the information referenced in the
immediately preceding sentence in its annual report on Form 10-K or its
quarterly report on Form 10-Q (as applicable) in respect of the quarterly period
that ended immediately before the filing of such report in which sales of
Purchase Shares were made to the Investor under this Agreement, and file such
report with the SEC within the applicable time period required by the Exchange
Act. The Company shall not file any Prospectus Supplement pursuant to this
Section 5(p), and shall not file any report containing disclosure relating to
such sales of Purchase Shares, unless a copy of such Prospectus Supplement or
disclosure has been submitted to the Investor a reasonable period of time before
the filing and the Investor has not reasonably objected thereto (it being
acknowledged and agreed that the Company shall not submit any portion of any
Form 10-K or Form 10-Q other than the specific disclosure relating to any sales
of Purchase Shares). The Company shall also furnish copies of all such
Prospectus Supplements to each exchange or market in the United States on which
sales of the Purchase Shares may be made as may be required by the rules or
regulations of such exchange or market, if applicable.

 

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(q) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than
the maximum number of shares of Common Stock issuable upon exercise of the
Warrant in full (without regard to any limitations on the exercise of the
Warrant set forth therein) (the “Required Reserved Amount”). If at any time the
number of shares of Common Stock authorized and reserved for issuance is not
sufficient to meet the Required Reserved Amount, the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of
shares of Common Stock to meet the Required Reserved Amount.

(r) Exercise Procedures. The form of Notice of Exercise included in the Warrant
sets forth the totality of the procedures required of the Investor in order to
exercise the Warrant. No legal opinion, other information or instructions shall
be required of the Investor to exercise the Warrant. The Company shall honor
exercises of the Warrant and shall deliver the Warrant Shares in accordance with
the terms, conditions and time periods set forth in the Warrant.

 

  6. TRANSFER AGENT INSTRUCTIONS.

On the date of this Agreement, the Company shall issue to the Transfer Agent
(and any subsequent transfer agent) irrevocable instructions, in the form
heretofore furnished to the Company, to issue the Purchase Shares, the
Commitment Shares and the Warrant Shares in accordance with the terms of this
Agreement and the Warrant, as applicable (the “Irrevocable Transfer Agent
Instructions”). All Purchase Shares, Commitment Shares and Warrant Shares to be
issued to or for the benefit of the Investor pursuant to this Agreement and the
Warrant, as applicable, shall be issued as DWAC Shares. The Company represents
and warrants to the Investor that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 6 will be given by the
Company to the Transfer Agent with respect to the Purchase Shares, Commitment
Shares and Warrant Shares, and the Securities shall otherwise be freely
transferable on the books and records of the Company. Certificates and any other
instruments evidencing the Securities shall not bear any restrictive or other
legend. If the Investor effects a sale, assignment or transfer of the
Securities, the Company shall permit the transfer and shall promptly instruct
the Transfer Agent (and any subsequent transfer agent) to issue DWAC Shares in
such name and in such denominations as specified by the Investor to effect such
sale, transfer or assignment. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Investor.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 6 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Section 6, that the Investor shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required. The Company
shall cause its counsel to issue the legal opinion referred to in the
Irrevocable Transfer Agent Instructions to the Transfer Agent (and any
subsequent transfer agent) to the extent required or requested by the Transfer
Agent (or any subsequent transfer agent). Any fees (with respect to the Transfer
Agent, counsel to the Company or otherwise) associated with the issuance of such
opinion shall be borne by the Company.

 

  7. CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON
STOCK AND WARRANT.

The right of the Company hereunder to commence sales of the Purchase Shares and
the Warrant on the Commencement Date is subject to the satisfaction or, where
legally permissible, the waiver of each of the following conditions:

 

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(a) The Investor shall have executed each of the Transaction Documents and
delivered the same to the Company;

(b) No stop order with respect to the Registration Statement shall be pending or
threatened by the SEC; and

(c) The representations and warranties of the Investor shall be true and correct
in all material respects as of the date hereof and as of the Commencement Date
as though made at that time.

 

  8. CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK
AND WARRANT.

The obligation of the Investor to buy Purchase Shares and the Warrant under this
Agreement is subject to the satisfaction or, where legally permissible, the
waiver of each of the following conditions on or prior to the Commencement Date
and, once such conditions have been initially satisfied, there shall not be any
ongoing obligation to satisfy such conditions after the Commencement has
occurred:

(a) The Company shall have executed each of the Transaction Documents and
delivered the same to the Investor;

(b) The Common Stock shall be listed on the Principal Market and all Purchase
Shares, Commitment Shares and Warrant Shares to be issued by the Company to the
Investor pursuant to this Agreement and the Warrant, as applicable, shall have
been approved for listing on the Principal Market in accordance with the
applicable rules and regulations of the Principal Market, subject only to
official notice of issuance;

(c) The Investor shall have received the opinion of the Company’s U.S. legal
counsel dated as of the Commencement Date, substantially in the form agreed to
prior to the date of this Agreement by the Company’s legal counsel and the
Investor’s legal counsel;

(d) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties is already qualified as to materiality in Section 4 above, in
which case, such representations and warranties shall be true and correct as so
qualified) as of the date when made and as of the Commencement Date as though
made at that time (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such date) and the Company
shall have performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Commencement Date. The Investor
shall have received a certificate, executed by the CEO, President or CFO of the
Company, dated as of the Commencement Date, to the foregoing effect in the form
attached hereto as Exhibit B;

(e) The Board of Directors of the Company (or a duly authorized committee
thereof) shall have adopted resolutions in the form attached hereto as Exhibit D
which shall be in full force and effect without any amendment or supplement
thereto as of the Commencement Date;

(f) As of the Commencement Date, the Company shall have reserved out of its
authorized and unissued Common Stock, (i) not less than the maximum number of
Warrant Shares issuable upon exercise of the Warrant (without taking into
account any limitations on the exercise of the Warrant set forth therein) and
(ii) 10,000,000 shares of Common Stock solely for the purpose of effecting
purchases of Purchase Shares hereunder;

 

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(g) The Irrevocable Transfer Agent Instructions shall have been delivered to and
acknowledged in writing by the Company and the Company’s Transfer Agent (or any
successor transfer agent), and the Commitment Shares required to be issued on
the date of this Agreement in accordance with Section 5(e) hereof shall have
been issued directly to the Investor electronically as DWAC Shares;

(h) The Company shall have delivered to the Investor a certificate evidencing
the incorporation and good standing of the Company in the State of Delaware
issued by the Secretary of State of the State of Delaware as of a date within
ten (10) Business Days of the Commencement Date;

(i) The Company shall have delivered to the Investor a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
of Delaware within ten (10) Business Days of the Commencement Date;

(j) The Company shall have delivered to the Investor a secretary’s certificate
executed by the Secretary of the Company, dated as of the Commencement Date, in
the form attached hereto as Exhibit C;

(k) The Registration Statement shall continue to be effective and no stop order
with respect to the Registration Statement shall be pending or threatened by the
SEC. The Company shall have a maximum dollar amount certain of Common Stock and
warrants registered under the Registration Statement which is sufficient to
issue to the Investor not less than the sum of (i) the full Available Amount
worth of Purchase Shares, (ii) all of the Commitment Shares, (iii) the Warrant
and (iv) the maximum number of Warrant Shares issuable upon exercise of the
Warrant (without taking into account any limitations on the exercise of the
Warrant set forth therein). The Current Report and the Initial Prospectus
Supplement each shall have been filed with the SEC, as required pursuant to
Section 5(a), and copies of the Prospectus shall have been delivered to the
Investor in accordance with Section 5(m) hereof. The Prospectus shall be current
and available for issuances and sales of all of the Securities by the Company to
the Investor, and for the resale of all of the Securities by the Investor. Any
other Prospectus Supplements required to have been filed by the Company with the
SEC under the Securities Act at or prior to the Commencement Date shall have
been filed with the SEC within the applicable time periods prescribed for such
filings under the Securities Act. All reports, schedules, registrations, forms,
statements, information and other documents required to have been filed by the
Company with the SEC at or prior to the Commencement Date pursuant to the
reporting requirements of the Exchange Act shall have been filed with the SEC
within the applicable time periods prescribed for such filings under the
Exchange Act;

(l) No Event of Default (as defined below) has occurred, or any event which,
after notice and/or lapse of time, would become an Event of Default has
occurred;

(m) All federal, state and local governmental laws, rules and regulations
applicable to the transactions contemplated by the Transaction Documents and
necessary for the execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby in
accordance with the terms thereof shall have been complied with, and all
consents, authorizations and orders of, and all filings and registrations with,
all federal, state and local courts or governmental agencies and all federal,
state and local regulatory or self-regulatory agencies necessary for the
execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby in accordance with the
terms thereof shall have been obtained or made, including, without limitation,
in each case those required under the Securities Act, the Exchange Act,
applicable state securities or “Blue Sky” laws or applicable rules and
regulations of the Principal Market, or otherwise required by the SEC, the
Principal Market or any state securities regulators;

 

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(n) No statute, regulation, order, decree, writ, ruling or injunction shall have
been enacted, entered, promulgated, threatened or endorsed by any federal,
state, local or foreign court or governmental authority of competent
jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by the Transaction
Documents; and

(o) No action, suit or proceeding before any federal, state, local or foreign
arbitrator or any court or governmental authority of competent jurisdiction
shall have been commenced or threatened, and no inquiry or investigation by any
federal, state, local or foreign governmental authority of competent
jurisdiction shall have been commenced or threatened, against the Company, or
any of the officers, directors or affiliates of the Company, seeking to
restrain, prevent or change the transactions contemplated by the Transaction
Documents, or seeking material damages in connection with such transactions.

 

  9. INDEMNIFICATION.

In consideration of the Investor’s execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Investor and all of its
affiliates, stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing Person’s agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to: (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (d) any violation of the Securities
Act, the Exchange Act, state securities or “Blue Sky” laws, or the rules and
regulations of the Principal Market in connection with the transactions
contemplated by the Transaction Documents by the Company or any of its
Subsidiaries, affiliates, officers, directors or employees, (e) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or any amendment
thereto or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (f) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Prospectus, or any omission or alleged
omission to state therein, or in any document incorporated by reference therein,
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (I) the indemnity contained in clause
(c) of this Section 9 shall not apply to any Indemnified Liabilities which
directly and primarily result from the fraud, gross negligence or willful
misconduct of an Indemnitee, (II) the indemnity contained in clauses (d),
(e) and (f) of this Section 9 shall not apply to any Indemnified Liabilities to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged

 

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omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Investor expressly for use in
any Prospectus Supplement (it being hereby acknowledged and agreed that the
written information set forth on Exhibit E attached hereto is the only written
information furnished to the Company by or on behalf of the Investor expressly
for use in the Initial Prospectus Supplement), if the Prospectus was timely made
available by the Company to the Investor pursuant to Section 5(l), (III) the
indemnity contained in clauses (d), (e) and (f) of this Section 9 shall not
inure to the benefit of the Investor to the extent such Indemnified Liabilities
are based on a failure of the Investor to deliver or to cause to be delivered
the Prospectus made available by the Company, if such Prospectus was timely made
available by the Company pursuant to Section 5(l), and if delivery of the
Prospectus would have cured the defect giving rise to such Indemnified
Liabilities, and (IV) the indemnity in this Section 9 shall not apply to amounts
paid in settlement of any claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld, conditioned or delayed. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Payment under this
indemnification shall be made within thirty (30) days from the date Investor
makes written request for it. A certificate containing reasonable detail as to
the amount of such indemnification submitted to the Company by Investor shall be
conclusive evidence, absent manifest error, of the amount due from the Company
to Investor. If any action shall be brought against any Indemnitee in respect of
which indemnity may be sought pursuant to this Agreement, such Indemnitee shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Indemnitee. Any Indemnitee shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnitee, except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel
or (iii) in such action there is, in the reasonable written opinion of such
separate counsel furnished to the Company, a material conflict on any material
issue between the position of the Company and the position of such Indemnitee,
in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel.

 

  10. EVENTS OF DEFAULT.

An “Event of Default” shall be deemed to have occurred at any time as any of the
following events occurs:

(a) the effectiveness of the Registration Statement registering the Securities
lapses for any reason (including, without limitation, the issuance of a stop
order or similar order) or the Registration Statement or the Prospectus is
unavailable for the sale by the Company to the Investor (or the resale by the
Investor) of any or all of the Securities to be issued to the Investor under the
Transaction Documents (including, without limitation, as a result of any failure
of the Company to satisfy all of the requirements for the use of a registration
statement on Form S-3 pursuant to the Securities Act for the offering and sale
of the Securities contemplated by this Agreement), and such lapse or
unavailability continues for a period of ten (10) consecutive Business Days or
for more than an aggregate of thirty (30) Business Days in any 365-day period;

(b) the suspension of the Common Stock from trading or the failure of the Common
Stock to be listed on the Principal Market for a period of one (1) Business Day,
provided that the Company may not direct the Investor to purchase any shares of
Common Stock during any such suspension;

 

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(c) the delisting of the Common Stock from The NASDAQ Capital Market, provided,
however, that the Common Stock is not immediately thereafter trading on the New
York Stock Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market,
the NYSE MKT, the NYSE Arca, the OTC Bulletin Board or OTC Markets (or
nationally recognized successor to any of the foregoing);

(d) the failure for any reason by the Transfer Agent to issue (i) Purchase
Shares to the Investor within three (3) Business Days after the applicable
Purchase Date or Accelerated Purchase Date (as applicable) which the Investor is
entitled to receive such Purchase Shares or (ii) Warrant Shares to the Investor
within three (3) Business Days after the applicable date on which the Investor
is entitled to receive such Warrant Shares upon exercise of the Warrant;

(e) the Company breaches any representation, warranty, covenant or other term or
condition under any Transaction Document if such breach would reasonably be
expected to have a Material Adverse Effect and except, in the case of a breach
of a covenant which is reasonably curable, only if such breach continues for a
period of at least five (5) Business Days after the Company receives notice of
such breach;

(f) if any Person commences a proceeding against the Company pursuant to or
within the meaning of any Bankruptcy Law;

(g) if the Company, pursuant to or within the meaning of any Bankruptcy Law,
(i) commences a voluntary case, (ii) consents to the entry of an order for
relief against it in an involuntary case, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, or (iv) makes a
general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due;

(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against the Company in an involuntary
case, (ii) appoints a Custodian of the Company or for all or substantially all
of its property, or (iii) orders the liquidation of the Company or any
Subsidiary;

(i) if at any time the Company is not eligible to transfer its Common Stock
electronically as DWAC Shares; or

(j) if at any time after the Commencement Date, the Maximum Share Cap is reached
(to the extent the Maximum Share Cap is applicable pursuant to Section 2(d)
hereof).

In addition to any other rights and remedies under applicable law and this
Agreement or the Warrant, so long as an Event of Default has occurred and is
continuing, or if any event which, after notice and/or lapse of time, would
become an Event of Default, has occurred and is continuing, the Company shall
not deliver to the Investor any Regular Purchase Notice or Accelerated Purchase
Notice, and the Investor shall not purchase any shares of Common Stock under
this Agreement.

 

  11. TERMINATION

This Agreement may be terminated only as follows:

(a) If pursuant to or within the meaning of any Bankruptcy Law, the Company
commences a voluntary case or any Person commences a proceeding against the
Company, a Custodian is appointed for the Company or for all or substantially
all of its property, or the Company makes a general assignment for

 

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the benefit of its creditors (any of which would be an Event of Default as
described in Sections 10(f), 10(g) and 10(h) hereof), this Agreement shall
automatically terminate without any liability or payment to the Company (except
as set forth below) without further action or notice by any Person.

(b) In the event that the Commencement shall not have occurred on or before May
15, 2015, due to the failure to satisfy the conditions set forth in Sections 7
and 8 above with respect to the Commencement, either the Company or the Investor
shall have the option to terminate this Agreement at the close of business on
such date or thereafter without liability of any party to any other party
(except as set forth below); provided, however, that the right to terminate this
Agreement under this Section 11(b) shall not be available to any party if such
party is then in breach of any covenant or agreement contained in this Agreement
or any representation or warranty of such party contained in this Agreement
fails to be true and correct such that the conditions set forth in Section 7(c)
or Section 8(d), as applicable, could not then be satisfied.

(c) At any time after the Commencement Date, the Company shall have the option
to terminate this Agreement for any reason or for no reason by delivering notice
(a “Company Termination Notice”) to the Investor electing to terminate this
Agreement without any liability whatsoever of any party to any other party under
this Agreement (except as set forth below). The Company Termination Notice shall
not be effective until one (1) Business Day after it has been received by the
Investor.

(d) This Agreement shall automatically terminate on the date that the Company
sells and the Investor purchases the full Available Amount as provided herein,
without any action or notice on the part of any party and without any liability
whatsoever of any party to any other party under this Agreement (except as set
forth below).

(e) If for any reason or for no reason the full Available Amount has not been
purchased in accordance with Section 2 of this Agreement by the Maturity Date,
this Agreement shall automatically terminate on the Maturity Date, without any
action or notice on the part of any party and without any liability whatsoever
of any party to any other party under this Agreement (except as set forth
below).

Except as set forth in Sections 11(a) (in respect of an Event of Default under
Sections 10(f), 10(g) and 10(h)), 11(d) and 11(e), any termination of this
Agreement pursuant to this Section 11 shall be effected by written notice from
the Company to the Investor, or the Investor to the Company, as the case may be,
setting forth the basis for the termination hereof. The representations and
warranties and covenants of the Company and the Investor contained in Sections
3, 4, 5, and 6 hereof, the indemnification provisions set forth in Section 9
hereof and the agreements and covenants set forth in Sections 10, 11 and 12,
shall survive the Commencement and any termination of this Agreement. No
termination of this Agreement shall (i) affect the Company’s or the Investor’s
rights or obligations under this Agreement with respect to pending Regular
Purchases and Accelerated Purchases and the Company and the Investor shall
complete their respective obligations with respect to any pending Regular
Purchases and Accelerated Purchases under this Agreement or (ii) be deemed to
release the Company or the Investor from any liability for intentional
misrepresentation or willful breach of any of the Transaction Documents,
including, without limitation, the Warrant.

 

  12. MISCELLANEOUS.

(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of
Delaware shall govern all issues concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction
Documents shall be governed by the internal laws of the State of New York,
without

 

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giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in the State of New York, County of New York, for the
adjudication of any dispute hereunder or under the other Transaction Documents
or in connection herewith or therewith, or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature or signature
delivered by e-mail in a “.pdf” format data file shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original signature.

(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

(e) Entire Agreement; Amendment. This Agreement supersedes all other prior oral
or written agreements between the Investor, the Company, their affiliates and
Persons acting on their behalf with respect to the subject matter hereof, and
this Agreement, the other Transaction Documents and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. The Company
acknowledges and agrees that is has not relied on, in any manner whatsoever, any
representations or statements, written or oral, other than as expressly set
forth in the Transaction Documents. No provision of this Agreement may be
amended other than by a written instrument signed by both parties hereto.

(f) Notices. Any notices, consents or other communications required or permitted
to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered: (i) upon receipt when delivered personally;
(ii) upon receipt when sent by facsimile or email (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in

 

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each case properly addressed to the party to receive the same. The addresses for
such communications shall be:

If to the Company:

 

OncoGenex Pharmaceuticals, Inc. 19820 North Creek Parkway, Suite 201 Bothell,
Washington 98011 Telephone: 425-686-1500 Facsimile: 425-686-1600 Email:
jbencich@oncogenex.com Attention: John Bencich

With a copy (which shall not constitute notice or service of process) to:

 

Fenwick & West LLP 1191 2nd Avenue, 10th Floor Seattle, Washington 98101
Telephone: 206-389-4510 Facsimile: 206-389-4511 Email: acsmith@fenwick.com
Attention: Alan Smith, Esq.

If to the Investor:

 

Lincoln Park Capital Fund, LLC 440 North Wells, Suite 410 Chicago, IL 60654
Telephone: 312-822-9300 Facsimile: 312-822-9301 Email:
jscheinfeld@lpcfunds.com/jcope@lpcfunds.com Attention: Josh Scheinfeld/Jonathan
Cope

With a copy (which shall not constitute notice or service of process) to:

 

Greenberg Traurig, LLP The MetLife Building 200 Park Avenue New York, NY 10166
Telephone: (212) 801-9200 Facsimile: (212) 801-6400 Email: marsicoa@gtlaw.com
Attention: Anthony J. Marsico, Esq.

If to the Transfer Agent:

 

Computershare Trust Company, N.A.

8742 Lucent Boulevard, Suite 225

Highlands Ranch, Colorado 80129

Telephone: (303) 262-0711 Facsimile: (303) 262-0609 Attention: Patrick Hayes

or at such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to

 

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the effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent or other communication, (B) mechanically
or electronically generated by the sender’s facsimile machine or email account
containing the time, date, and recipient facsimile number or email address, as
applicable, and an image of the first page of such transmission or (C) provided
by a nationally recognized overnight delivery service, shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor, including by merger or
consolidation, which shall not be unreasonably withheld. The Investor may not
assign its rights or obligations under this Agreement.

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

(i) Publicity. The Company shall afford the Investor and its counsel with the
opportunity to review and comment upon, shall consult with the Investor and its
counsel on the form and substance of, and shall give due consideration to all
such comments from the Investor or its counsel on, any press release, SEC filing
or any other public disclosure by or on behalf of the Company relating to the
Investor, its purchases hereunder or any aspect of the Transaction Documents or
the transactions contemplated thereby, not less than 24 hours prior to the
issuance, filing or public disclosure thereof. The Investor must be provided
with a final version of any such press release, SEC filing or other public
disclosure at least 24 hours prior to any release, filing or use by the Company
thereof. The Company agrees and acknowledges that its failure to fully comply
with this Section 12(i) constitutes a Material Adverse Effect; provided,
however, that any failure of the Company to provide the Investor with
(i) disclosure contained in any annual report on Form 10-K or quarterly report
on Form 10-Q regarding only the number of Purchase Shares sold to the Investor
during the relevant quarterly period, the purchase price for such Purchase
Shares and the net proceeds received by the Company from such sales, or (ii) any
disclosure contained in any periodic report filed with the SEC under the
Exchange Act the substance of which has previously been reviewed and consented
to by the Investor, in each case in accordance with this Section 12(i) shall not
constitute a Material Adverse Effect.

(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

(k) No Financial Advisor, Placement Agent, Broker or Finder. The Company
represents and warrants to the Investor that, except as disclosed in Schedule
4(x), it has not engaged any financial advisor, placement agent, broker or
finder in connection with the transactions contemplated hereby. The Investor
represents and warrants to the Company that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. Each party shall be responsible for the payment of any fees
or commissions, if any, of any financial advisor, placement agent, broker or
finder engaged by such party relating to or arising out of the transactions
contemplated hereby. Each party shall pay, and hold the other party harmless
against, any liability, loss or expense (including, without limitation,
attorneys’ fees and out of pocket expenses) arising in connection with any such
claim.

 

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(l) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

(m) Remedies, Other Obligations, Breaches and Injunctive Relief. The parties’
remedies provided in this Agreement, including, without limitation, the
Investor’s remedies provided in Section 9, shall be cumulative and in addition
to all other remedies available to the parties under this Agreement, at law or
in equity (including a decree of specific performance and/or other injunctive
relief), no remedy of any party contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit any party’s right to pursue actual damages for any failure by the
other party to comply with the terms of this Agreement. The parties acknowledge
that a breach by any party of its obligations hereunder will cause irreparable
harm to the non-breaching party and that the remedy at law for any such breach
may be inadequate. The parties therefore agree that, in the event of any such
breach or threatened breach, the non-breaching party shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

(n) Enforcement Costs. If: (i) this Agreement is placed by the Investor in the
hands of an attorney for enforcement or is enforced by the Investor through any
legal proceeding, or (ii) an attorney is retained to represent the Investor in
any bankruptcy, reorganization, receivership or other proceedings affecting
creditors’ rights and involving a claim under this Agreement, then the Company
shall pay to the Investor, as incurred by the Investor, all reasonable
documented costs and expenses including reasonable documented attorneys’ fees
incurred in connection therewith, in addition to all other amounts due
hereunder. If this Agreement is placed by the Company in the hands of an
attorney for enforcement or is enforced by the Company through any legal
proceeding, then the Investor shall pay to the Company, as incurred by the
Company, all reasonable documented costs and expenses including reasonable
documented attorneys’ fees incurred in connection therewith, in addition to all
other amounts due hereunder.

(o) Waivers. No provision of this Agreement may be waived other than in a
written instrument signed by the party against whom enforcement of such waiver
is sought. No failure or delay in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

*    *    *    *    *

 

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IN WITNESS WHEREOF, the Investor and the Company have caused this Agreement to
be duly executed as of the date first written above.

 

THE COMPANY: ONCOGENEX PHARMACEUTICALS, INC. By:

/s/ Scott Cormack

Name: Scott Cormack Title: President and Chief Executive Officer INVESTOR:
LINCOLN PARK CAPITAL FUND, LLC BY: LINCOLN PARK CAPITAL, LLC BY: ALEX NOAH
INVESTORS, INC.

By:

/s/ Jonathan Cope

Name: Jonathan Cope

Title: President

 

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SCHEDULES

 

Schedule 4(a) Subsidiaries Schedule 4(c) Capitalization Schedule 4(x) Agent Fees

EXHIBITS

 

Exhibit A Form of Warrant Exhibit B Form of Officer’s Certificate Exhibit C Form
of Secretary’s Certificate Exhibit D Form of Resolutions of the Board of
Directors of the Company (or a duly authorized committee thereof) Exhibit E
Information About Investor Furnished to the Company

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DISCLOSURE SCHEDULES

Schedule 4(a) – Subsidiaries

OncoGenex Technologies, Inc.

Schedule 4(c) - Capitalization

Authorized Capital Stock

The Company has a total of 50,000,000 authorized shares of the Company’s common
stock, par value of $6.001 per share.

Schedule 4(x) – Agent Fees

The Company engaged Academy Securities, Inc., a registered broker-dealer and
FINRA member (“Academy”) as a placement agent. Academy will receive $10,000 as
compensation in connection with its services in connection with the transaction
contemplated by the Agreement. The Company also agreed to reimburse Academy for
reasonable out of pocket expenses incurred in connection with its services up to
an aggregate of $5,000.

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EXHIBIT A

FORM OF WARRANT

[Provided Separately]

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EXHIBIT B

FORM OF OFFICER’S CERTIFICATE

This Officer’s Certificate (“Certificate”) is being delivered pursuant to
Section 8(d) of that certain Purchase Agreement dated as of April 30, 2015,
(“Purchase Agreement”), by and between ONCOGENEX PHARMACEUTICALS, INC., a
Delaware corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”). Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Purchase Agreement.

The undersigned, [                    ], [                    ] of the Company,
hereby certifies, on behalf of the Company and not in his individual capacity,
as follows:

1. I am the [                    ] of the Company and make the statements
contained in this Certificate;

2. The representations and warranties of the Company are true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 4 of the Purchase
Agreement, in which case, such representations and warranties are true and
correct as so qualified) as of the date when made and as of the Commencement
Date as though made at that time (except for representations and warranties that
speak as of a specific date);

3. The Company has performed, satisfied and complied in all material respects
with covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Commencement Date.

4. The Company has not taken any steps, and does not currently expect to take
any steps, to seek protection pursuant to any Bankruptcy Law nor does the
Company or any of its Subsidiaries currently have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy or
insolvency proceedings. The Company is currently financially solvent and is
generally able to pay its debts as they become due.

IN WITNESS WHEREOF, I have hereunder signed my name on this      day of
                .

 

 

Name: Title:

The undersigned as [                    ] of OncoGenex Pharmaceuticals, Inc., a
Delaware corporation, hereby certifies that [                    ] is the duly
elected, appointed, qualified and acting [                    ] of OncoGenex
Pharmaceuticals, Inc., and that the signature appearing above is his genuine
signature.

 

 

Name: Title:

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EXHIBIT C

FORM OF SECRETARY’S CERTIFICATE

This Secretary’s Certificate (“Certificate”) is being delivered pursuant to
Section 8(j) of that certain Purchase Agreement dated as of April 30, 2015,
(“Purchase Agreement”), by and between ONCOGENEX PHARMACEUTICALS, INC., a
Delaware corporation (the “Company”) and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”), pursuant to which the Company may sell to the Investor (i) Two
Million Dollars ($2,000,000) of the Company’s Series A-1 Units (the “Series A-1
Units”), with each Series A Unit consisting of (a) one share of common stock,
par value $0.001, of the Company (the “Common Stock”) and (b) one warrant to
purchase one-quarter (1/4) of a share of Common Stock (collectively, the
“Warrant”) and (ii) up to Sixteen Million Dollars ($16,000,000) of Common Stock
from time to time. Terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement.

The undersigned, [                    ], [                    ] of the Company,
hereby certifies, on behalf of the Company and not in his individual capacity,
as follows:

1. I am the [                    ] of the Company and make the statements
contained in this Secretary’s Certificate.

2. Attached hereto as Exhibit A and Exhibit B are true, correct and complete
copies of the Company’s Bylaws (“Bylaws”) and Certificate of Incorporation
(“Charter”), in each case, as amended through the date hereof, and no action has
been taken by the Company, its directors, officers or stockholders, in
contemplation of the filing of any further amendment relating to or affecting
the Bylaws or Charter.

3. Attached hereto as Exhibit C are true, correct and complete copies of the
resolutions duly adopted by the Board of Directors of the Company (or a duly
authorized committee thereof) on [                    ], at which a quorum was
present and acting throughout. Such resolutions have not been materially
amended, modified or rescinded and remain in full force and effect and such
resolutions are the only resolutions adopted by the Company’s Board of
Directors, or any committee thereof, or the stockholders of the Company relating
to or affecting (i) the entering into and performance of the Purchase Agreement
and the Warrant, or the issuance, offering and sale of the Series A-1 Units,
Purchase Shares, the Commitment Shares, the Warrant and the Warrant Shares and
(ii) and the performance of the Company of its obligation under the Transaction
Documents as contemplated therein.

4. As of the date hereof, the authorized, issued and reserved capital stock of
the Company is as set forth on Exhibit D hereto.

IN WITNESS WHEREOF, I have hereunder signed my name on this     day of
                .

 

 

Secretary

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The undersigned as [                    ] of OncoGenex Pharmaceuticals, Inc., a
Delaware corporation, hereby certifies that [                    ] is the duly
elected, appointed, qualified and acting [                    ] of OncoGenex
Pharmaceuticals, Inc., and that the signature appearing above is his genuine
signature.

 

 

Name: Title:

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EXHIBIT D

FORM OF COMPANY RESOLUTIONS

FOR SIGNING PURCHASE AGREEMENT

UNANIMOUS WRITTEN CONSENT OF

ONCOGENEX PHARMACEUTICALS, INC.

In accordance with the corporate laws of the state of Delaware, the undersigned,
being all of the directors of ONCOGENEX PHARMACEUTICALS, INC., a Delaware
corporation (the “Corporation”) do hereby consent to and adopt the following
resolutions as the action of the Board of Directors for and on behalf of the
Corporation and hereby direct that this Consent be filed with the minutes of the
proceedings of the Board of Directors:

WHEREAS, there has been presented to the Board of Directors of the Corporation a
draft of the Purchase Agreement (the “Purchase Agreement”) by and between the
Corporation and Lincoln Park Capital Fund, LLC (“Lincoln Park”), providing for
the purchase by Lincoln Park of (i) Two Million Dollars ($2,000,000) of the
Company’s Series A-1 Units (the “Series A-1 Units”), with each Series A Unit
consisting of (a) one share of common stock, par value $0.001, of the Company
(the “Common Stock”) and (b) one warrant to purchase one-quarter (1/4) of a
share of Common Stock (collectively, the “Warrant”) and (ii) up to Sixteen
Million Dollars ($16,000,000) of Common Stock from time to time; and

WHEREAS, after careful consideration of the Purchase Agreement, the documents
incident thereto and other factors deemed relevant by the Board of Directors,
the Board of Directors has determined that it is advisable and in the best
interests of the Corporation to engage in the transactions contemplated by the
Purchase Agreement, including, but not limited to, the issuance of 126,582
shares of Common Stock to Lincoln Park as a commitment fee (the “Commitment
Shares”), the sale of shares of Common Stock to Lincoln Park up to the available
amount under the Purchase Agreement (the “Purchase Shares”), and the sale of the
Warrant to Lincoln Park.

Transaction Documents

NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and                                          (the
“Authorized Officers”) are severally authorized to execute and deliver the
Purchase Agreement, and any other agreements or documents contemplated thereby,
with such amendments, changes, additions and deletions as the Authorized
Officers may deem to be appropriate and approve on behalf of, the Corporation,
such approval to be conclusively evidenced by the signature of an Authorized
Officer thereon; and

FURTHER RESOLVED, that the terms and provisions of the forms of Irrevocable
Transfer Agent Instructions (the “Instructions”) are hereby approved and the
Authorized Officers are authorized to execute and deliver the Instructions on
behalf of the Company in accordance with the Purchase Agreement, with such
amendments, changes, additions and deletions as the Authorized Officers may deem
appropriate and approve on behalf of, the Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

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Execution of Purchase Agreement

FURTHER RESOLVED, that the Corporation be and it hereby is authorized to execute
the Purchase Agreement providing for the purchase of (i) Two Million Dollars
($2,000,000) of the Company’s Series A-1 Units and (ii) up to Sixteen Million
Dollars ($16,000,000) of Common Stock from time to time; and

Issuance of Common Stock and Warrant

FURTHER RESOLVED, that the Corporation is hereby authorized to issue to Lincoln
Park Capital Fund, LLC, 126,582 shares of Common Stock as Commitment Shares and
that upon issuance of the Commitment Shares pursuant to the Purchase Agreement
the Commitment Shares shall be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof; and

FURTHER RESOLVED, that the Corporation is hereby authorized to issue shares of
Common Stock upon the purchase of Purchase Shares up to the Available Amount
under the Purchase Agreement in accordance with the terms of the Purchase
Agreement; and

FURTHER RESOLVED, that the Corporation is hereby authorized to issue the Warrant
under the Purchase Agreement in accordance with the terms of the Purchase
Agreement; and

FURTHER RESOLVED, that the Corporation is hereby authorized to issue shares of
Common Stock upon the exercise of the Warrant in accordance with the terms of
the Warrant (the “Warrant Shares”) and that, upon issuance of the Warrant Shares
pursuant to the Warrant, the Warrant Shares will be duly authorized, validly
issued, fully paid and nonassessable with no personal liability attaching to the
ownership thereof; and

FURTHER RESOLVED, that the Corporation shall initially reserve 239,234 shares of
Common Stock for issuance as Warrant Shares under the Warrant.

FURTHER RESOLVED, that the Corporation shall initially reserve 10,000,000 shares
of Common Stock for issuance as Purchase Shares under the Purchase Agreement.

Approval of Actions

FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation and to take all such steps as deemed necessary or appropriate,
with the advice and assistance of counsel, to cause the Corporation to
consummate the agreements referred to herein and to perform its obligations
under such agreements; and

FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.

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IN WITNESS WHEREOF, the Board of Directors has executed and delivered this
Consent effective as of             , 2015.

 

 

 

 

being [all of the directors] of ONCOGENEX PHARMACEUTICALS, INC.

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EXHIBIT E

Information About The Investor Furnished To The Company By The Investor

Expressly For Use In Connection With The Initial Prospectus Supplement

Information With Respect to Lincoln Park Capital

As of the date of the Purchase Agreement, Lincoln Park Capital Fund, LLC,
beneficially owned [                    ] shares of our common stock. Josh
Scheinfeld and Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC,
the manager of Lincoln Park Capital Fund, LLC, are deemed to be beneficial
owners of all of the shares of common stock owned by Lincoln Park Capital Fund,
LLC. Messrs. Cope and Scheinfeld have shared voting and investment power over
the shares being offered under the prospectus supplement filed with the SEC in
connection with the transactions contemplated under the Purchase Agreement.
Lincoln Park Capital, LLC is not a licensed broker dealer or an affiliate of a
licensed broker dealer.