Document:

Exhibit

 
Exhibit 10.1

August 22, 2017
Charles Giancarlo

Re: Employment Terms
Dear Charles:
Pure Storage, Inc. (the “Company”) is pleased to offer you employment with the Company on the following terms.
		
	I.
	Employment Position and Duties.

You will be employed in the executive position of Chief Executive Officer, and shall perform the duties of such position as are customary, as specified in the Bylaws of the Company, and as may be required by the Board of Directors (the “Board”), and you will have all of the responsibilities and authority commensurate with such position.  You will report to the Company’s Board and be based in the Company’s corporate headquarters located at 650 Castro Street in Mountain View, California.  Subject to Section VIII below, the Company may modify your job title and duties as it deems necessary and appropriate in light of the Company’s needs and interests from time to time.
		
	II.
	Appointment to Board.  

You will be appointed to serve as a member of the Board while employed as the Company’s CEO and during the period you are employed as the Company’s CEO, subject to the requirements of applicable law (including, without limitation, any rules or regulations of any exchange on which the common stock of the Company is listed, if applicable), the Board or the appropriate committee of the Board will nominate you for re-election to the Board at each annual meeting at which you are subject to re-election.  You acknowledge and agree that upon the end of your employment as CEO for any reason, you will immediately resign from the Board upon the Board’s request.
		
	III.
	Base Salary, Bonus and Benefits.

(a)    Salary.  You will receive for services to be rendered hereunder a base salary paid at the rate of $500,000 per year, less applicable payroll deductions and withholdings.  Your base salary will be paid on the Company’s ordinary payroll cycle.  
(b)    Annual Bonus.  You will be eligible to earn an annual performance bonus of up to 100 percent of your annual base salary (the “Annual Bonus”).  You will be eligible to receive an Annual Bonus for 2017 (prorated based on your date of hire). The Annual Bonus will be based upon the Board’s assessment of your performance and the Company’s attainment of goals with such goals as determined annually by the Compensation Committee of the Board after consultation with you.  Bonus payments, if any, will be subject to applicable payroll deductions and withholdings.  No amount of Annual Bonus is guaranteed, and you must be an employee on the Annual Bonus payment date in order to earn an Annual Bonus, except as set forth in Section VIII below.  The Annual Bonus, if earned, will be paid within [90] days following the completion of the applicable bonus year.  

        

Charles Giancarlo 
August 22, 2017
Page 2

Notwithstanding the foregoing, the Annual Bonus may be earned and paid on a quarterly basis as determined by the Compensation Committee to be consistent with the bonus program for other management team members of the Company.
(c)    Benefits.  As a regular, full-time employee, you will be eligible to participate in the Company’s standard vacation programs and employee benefits (pursuant to the terms and conditions of the vacation programs, benefit plans and applicable policies).  A list of the present plans and programs is attached hereto as Exhibit A. The Company retains the discretion to modify employee benefits from time to time in its discretion.
		
	IV.
	Equity.

(a)    Initial Grants.  Within fifteen (15) days after your employment start date (the “Grant Date”), the Company will provide you with the following equity awards:
1.    Stock Option. The Company will grant you an option to purchase 1,000,000 shares of the Company’s Class A common stock (the “Option”) under the terms of the Company’s 2015 Equity Incentive Plan (the “Plan”) and standard form of Option grant documents.  Subject to Section VIII below, the Option will vest over a four-year period based on your Continuous Service (as defined in the Plan), with twenty-five percent (25%) of the Option shares vesting on the one year anniversary of your employment start date, and the remaining Option shares vesting equally over the following thirty-six (36) months of Continuous Service. Fifty percent (50%) of the Option shares will have an exercise price equal to the greater of $17.00 or the closing price of the Company’s Class A common stock on the New York Stock Exchange on the Grant Date.  The remaining fifty percent (50%) of the Option shares will have an exercise price equal to the closing price of the Company’s Class A common stock on the New York Stock Exchange on the Grant Date.
2.    Restricted Stock Units.  
Initial Restricted Stock Unit Award.  The Company will grant you a restricted stock unit award under the terms of the Plan and standard form of restricted stock unit grant documents with an aggregate value of $15,000,000, with such value being calculated based on the closing price of the Company’s Class A common stock averaged over the 30 trading days immediately prior to the Grant Date, rounded up to the nearest whole share (the “RSU Award”).  The RSU Award will vest as follows: 
(i)    Time-Based Vesting.  Subject to Section VIII below, forty percent (40%) of the RSU Award ($6,000,000 in value) will vest and settle over a four-year period (the “Time-Based RSU Award”), with 25% of the Time-Based RSU Award shares vesting on September 20, 2018, and the remaining shares vesting and settling quarterly over the following three years on the 20th day of the second month of each fiscal quarter, so long as you are in Continuous Service with the Company.
(ii)    Performance-Based Vesting.  Subject to Section VIII below and the time-based vesting provision set forth in this paragraph (ii) below, an additional sixty percent (60%) of the RSU Award ($9,000,000 in value) (the “Initial Performance RSU Award”) will vest and 

        

Charles Giancarlo 
August 22, 2017
Page 3

settle on the occurrence of certain performance metrics during the Company’s 2019 fiscal year (February 1, 2018 – January 31, 2019), as determined by the Compensation Committee of the Board (the “Performance Metrics”) as set forth in this paragraph.  One third (33.33%), or $3,000,000 in value, of the Initial Performance RSU Award will be earned upon achievement of 80% of the Performance Metrics, and additional amounts will be earned on a proportional basis up to 120% achievement of the Performance Metrics.  For example, if 90% of the Performance Metrics are achieved, then $4,500,000 in value of the Initial Performance RSU Award will be earned, if 100% of the Performance Metrics are achieved, then $6,000,000 in value of the Initial Performance RSU Award will be earned, if 110% of the Performance Metrics are achieved, then $7,500,000 in value of the Initial Performance RSU Award will be earned and if 120% of the Performance Metrics are achieved, then $9,000,000 in value of the Initial Performance RSU Award will be earned. Once earned, subject to Section VIII below, the Initial Performance RSU Award will be subject to time-based vesting over a three year period with one-third vesting as of December 20, 2018 and the remainder vesting quarterly over the following eight quarters on the 20th day of the second month of each fiscal quarter thereafter, subject to your Continuous Service with the Company.  For the avoidance of doubt, any time-vested Performance RSU Award shares will be settled and issued to you after the Compensation Committee makes its determination regarding achievement of the Performance Metrics, which determination is expected to be made in March 2019.  
(b)    Equity Refresh Grants.  You will be eligible for equity refresh grants, as determined by the Compensation Committee, on an annual basis, starting with the first anniversary of your start date.
		
	V.
	Compliance with Confidential Information Agreement and Company Policies.

As a condition of employment, you must sign and comply with the Employee Confidential Information and Inventions Assignment Agreement attached hereto as Exhibit B, which prohibits unauthorized use or disclosure of the Company’s proprietary information, among other obligations.  You are also required to abide by the Company’s policies and procedures (including, without limitation, the Company’s Insider Trading Policy, attached hereto as Exhibit C), as modified from time to time within the Company’s discretion.  
In your work for the Company, you will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality.  The foregoing will not prohibit you from using information that is generally known and used by persons with training and experience comparable to your own, and which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.  You agree that you will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person which would be in violation of any confidentiality or other legal obligations you have to such prior employer or other person. You hereby represent that you have disclosed to the Company any contract you have signed that may restrict your activities on behalf of the Company.

        

Charles Giancarlo 
August 22, 2017
Page 4

		
	VI.
	Outside Activities.

Throughout your employment with the Company, you may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of your duties hereunder or present a conflict of interest with the Company.
During your employment by the Company, except on behalf of the Company, you will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by you to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that you may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange.  You are to withdraw your membership from the board of directors of any entity of which you currently serve, and you are not to serve on the board of directors for any other entity during your employment with the Company without advance written approval of the Board.  Notwithstanding the foregoing, you may remain a board member for Arista Networks and Accenture PLC throughout your employment with the Company.  
		
	VII.
	At-Will Employment Relationship.

You may terminate your employment with the Company at any time and for any reason whatsoever simply by notifying the Company.  Likewise, subject to Section VIII below, the Company may terminate your employment at any time, with or without cause or advance notice.  Your employment at-will status can only be modified in a written agreement signed by you and by an officer of the Company.
		
	VIII.
	Severance Benefits.

(a)    Termination for Cause; Resignation Without Good Reason; Death or Disability.  If, at any time, you resign your employment without Good Reason (as defined below), or the Company terminates your employment for Cause (as defined below), or if either party terminates your employment as a result of your death or Disability (as defined below), you will receive your base salary accrued through your last day of employment, as well as any unused vacation (if applicable) accrued through your last day of employment (the “Accrued Compensation”).  Under these circumstances, you will not be entitled to any other form of compensation from the Company, including any severance benefits, other than your rights to the vested portion of your equity awards and COBRA (as defined below) rights and any other rights to which you are entitled under the Company’s benefit programs.  In addition to the foregoing, upon your death or Disability during the first year of your employment, any equity awards that are subject to time-based vesting (and in the case of the Initial Performance RSU Award and other performance-based equity awards the performance metrics have been met) will have the time-based equity awards accelerated by twelve (12) months.  

        

Charles Giancarlo 
August 22, 2017
Page 5

(b)    Termination Without Cause or Resignation for Good Reason Not In Connection With a Change in Control.  If, at any time other than during the Change in Control Period (as defined below), the Company terminates your employment without Cause (other than as a result of your death or disability) or you resign for Good Reason (either such termination referred to as a “Qualifying Termination”), provided such termination or resignation constitutes a Separation from Service (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from Service”), or if not, at such time as you do have a Separation from Service, then subject to Section VIII(d) below and your continued compliance with the terms of this Agreement (including, without limitation, Section V), the Company will provide you with the following severance benefits:
1.    Accrued Compensation.  The Company will pay you or your beneficiary all Accrued Compensation.
2.    Cash Severance.  The Company will pay you or your beneficiary, as cash severance an amount equal to twelve (12) months of your base salary in effect as of your Separation from Service date (or, if higher, the base salary rate in effect prior to any reduction giving rise to Good Reason) (the “Cash Severance”). The Cash Severance will be paid, less standard payroll deductions and tax withholdings, in the form of continuation of your base salary payments, paid on the Company’s regular payroll dates, commencing on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date (with the first payment to include any accrued salary for the sixty (60)-day period plus the period from the sixtieth (60th) day until the regular payroll date, if applicable).
3.    COBRA Severance.  Provided that you timely elect continued health care coverage under COBRA for you and your eligible dependents, the Company will pay the COBRA premiums to continue coverage for you and your eligible dependents (the “COBRA Severance”), for a maximum of eighteen (18) months following your Separation from Service.  The Company’s obligation to pay the COBRA Severance on your behalf will cease if you obtain health care coverage from another source (e.g., a new employer or spouse’s benefit plan), unless otherwise prohibited by applicable law.  You must notify the Company within two (2) weeks if you obtain coverage from a new source.  This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which you would otherwise be entitled under applicable law.  Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would be required to pay to continue your group health coverage in effect on the date of your termination (which amount shall be based on the premium for the first month of COBRA coverage).
(c)    Termination Without Cause and Resignation for Good Reason In Connection With a Change in Control.  In the event of a Qualifying Termination that occurs during the period beginning three (3) months prior to a Change in Control and ending twelve (12) months following the closing of such Change in Control (such period, the “Change in Control Period”), provided 

        

Charles Giancarlo 
August 22, 2017
Page 6

such Qualifying Termination constitutes a Separation from Service or if not, at such time as you do have a Separation from Service, then subject to Section VII(d) and your continued compliance with the terms of this Agreement (including, without limitation, Section V) then the Company will provide you with the following as your sole severance benefits:
1.    Accrued Compensation.  The Company will pay you or your beneficiary all Accrued Compensation.
2.    Cash Severance.  The Company will pay you or your beneficiary, as cash severance, (i) an amount equal to twelve (12) months of your base salary in effect as of your Separation from Service date (or, if higher, the base salary rate in effect prior to any reduction giving rise to Good Reason); and (ii) your then target Annual Bonus  (collectively, the “Change in Control Cash Severance”).  The Change in Control Cash Severance will be paid, less standard payroll deductions and tax withholdings in a single lump sum to you on the 60th day following your Separation from Service. 
3.    COBRA Severance.  Provided that you timely elect continued health care coverage under COBRA for you and your eligible dependents, the Company will pay the COBRA premiums to continue coverage for you and your eligible dependents (the “Change in Control COBRA Severance”), for a maximum of eighteen (18) months following your Separation from Service.  The Company’s obligation to pay the Change in Control COBRA Severance on your behalf will cease if you obtain health care coverage from another source (e.g., a new employer or spouse’s benefit plan), unless otherwise prohibited by applicable law.  You must notify the Company within two (2) weeks if you obtain coverage from a new source.  This payment of Change in Control COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which you would otherwise be entitled under applicable law.  Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing Change in Control COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would be required to pay to continue your group health coverage in effect on the date of your termination (which amount shall be based on the premium for the first month of COBRA coverage).
4.    Equity Acceleration.  The Company shall accelerate the vesting of any equity awards then held by you such that one hundred percent (100%) of such awards shall be deemed immediately vested (and, as applicable, exercisable) as of your Separation from Service date or to the extent such equity awards are not assumed or substituted for in such Change in Control immediately prior to such Change in Control.
(d)    Conditions to Receipt of Severance Benefits.  Prior to and as a condition to your receipt of the severance benefits described in this Section VIII (other than the Accrued Compensation), you shall execute and deliver to the Company an effective release of claims in favor of and in a form acceptable to the Company with such release of claims excluding any claims for indemnification pursuant to any policy, bylaws or agreement with the Company, and any fiduciary insurance policy otherwise in effect (the “Release”) within the timeframe set forth therein and in any event prior to the 60th day following your Qualifying Termination, and allow the Release to 

        

Charles Giancarlo 
August 22, 2017
Page 7

become effective according to its terms (by not invoking any legal right to revoke it) within any applicable time period set forth therein.  You must also return to the Company all Company documents (and all copies thereof) and other Company property within your possession, custody or control, no later than five (5) days after your Separation from Service date.
		
	IX.
	Definition of Terms:

(a)    A “Change in Control” shall mean the occurrence of any one or more of the following events: (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold fifty percent (50%) or more of the voting power of the surviving entity (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; (ii) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; provided that the foregoing shall not include any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or indebtedness of the Company is cancelled or converted or a combination thereof; or (iii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.  A Change in Control must satisfy the definitions of “change in ownership of a corporation” and “change in ownership of a substantial portion of a corporation’s assets” provided in Treasury Regulation Sections 1.409A-3(i)(5)(v) and (vii).
(b)    “Cause” means the occurrence of any or more of the following events: (i) your conviction (including a guilty plea or plea of nolo contendere) of any felony or any other crime involving fraud, dishonesty or moral turpitude; (ii) your commission or attempted commission of or participation in a fraud or act of dishonesty or misrepresentation against the Company; (iii) your  material violation of any contract or agreement between you and the Company, including without limitation, material breach of your Confidential Information and Inventions Assignment Agreement, or of any Company policy, or of any statutory duty you owe to the Company; or (iv) your conduct that constitutes gross insubordination, incompetence or habitual neglect of duties, provided, however, that the action or conduct described in clause (iii) above and this clause (iv) will constitute “Cause” only if such action or conduct continues after the Board has provided you with written notice thereof and thirty (30) days opportunity to cure the same (provided that the Board is not obligated to provide such written notice and opportunity to cure if the action or conduct is not reasonably susceptible to cure).  The determination that a termination is for Cause shall be made by the Company in its sole discretion.
(c)    “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(d)    “Disability” shall have that meaning set forth in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”).
(e)    A resignation for “Good Reason” means the occurrence of any of the following events without your written consent; provided however, that any resignation by you due to any of 

        

Charles Giancarlo 
August 22, 2017
Page 8

the following events shall be deemed for Good Reason (except in the case of a resignation by reason of subsection (iv) below) only if (1) you give the Company written notice of the intent to terminate for Good Reason within thirty (30) days after the occurrence of any of the events and that you assert that grounds for a resignation for Good Reason exist as a result which is not corrected within thirty (30) days after the Company (or any successor thereto) receives such written notice from you; and (2) you resign within one hundred twenty (120) days of the first occurrence of the applicable event:  (i) a material diminution of your duties, position or responsibilities; (ii) a reduction by the Company in your base salary as in effect immediately prior to such reduction by more than ten percent (10%) (unless such reduction is made pursuant to an across the board reduction applicable to senior executives of the Company); (iii) the relocation of your assigned office location resulting in an increase in your one-way commuting distance from your residence by at least forty-five (45) miles; or (iv) you no longer continue as Chief Executive Officer of the parent company of the Company following a Change in Control event.
		
	X.
	Dispute Resolution.

To ensure the timely and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, your employment, or the termination of your employment, including but not limited to statutory claims, shall be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, conducted by JAMS, Inc. (“JAMS”) under the then applicable JAMS rules (which can be found at the following web address: http://www.jamsadr.com/rulesclauses, and which will be provided to you upon request).  By agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.   All claims, disputes, or causes of action under this section, whether by me or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity.  The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding.  This paragraph shall not apply to an action or claim brought in court pursuant to the California Private Attorneys General Act of 2004.  The Company acknowledges that you will have the right to be represented by legal counsel at any arbitration proceeding.  The arbitration will take place in the county (or comparable governmental unit) in which you were last employed by the Company, as determined by the arbitrator; provided, however, that if the arbitrator determines there will be an undue hardship to you to have the arbitration in such location, the arbitrator will choose an alternative appropriate location.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that you or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of you if the dispute were decided in a court of law.  Nothing in this 

        

Charles Giancarlo 
August 22, 2017
Page 9

Agreement is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.
		
	XI.
	Section 409A Compliance.

It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code provided under Treasury Regulations 1.409A‐1(b)(4), 1.409A‐1(b)(5) and 1.409A‐1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent not so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A.  For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A‐2(b)(2)(iii)), your right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if you are deemed by the Company at the time of your Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to you prior to the earliest of (i) the expiration of the six-month period measured from the date of your Separation from Service with the Company, (ii) the date of your death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such time period, all payments deferred pursuant to this Paragraph shall be paid in a lump sum to you or your beneficiary, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred.
		
	XII.
	Parachute Payments.  

If any payment or benefit (including payments and benefits pursuant to this Agreement) that you would receive in connection with a Change in Control from the Company or otherwise (“Transaction Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to you, which of the following two alternative forms of payment would result in your receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (1) payment in full of the entire amount of the Transaction Payment (a “Full Payment”), or (2) payment of only a part of the Transaction Payment so that you receive the largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”).  For purposes of 

        

Charles Giancarlo 
August 22, 2017
Page 10

determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).  If a Reduced Payment is made, (x) you will have no rights to any additional payments and/or benefits constituting the Transaction Payment, and (y) reduction in payments and/or benefits shall occur in the manner that results in the greatest economic benefit to you as determined in this paragraph.  If more than one method of reduction will result in the same economic benefit, the portions of the Transaction Payment shall be reduced pro rata. Unless you and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon you and the Company for all purposes.  For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  You and the Company will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section.  The Company will bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this paragraph as well as any costs incurred by you with the Accountants for tax planning under Sections 280G and 4999 of the Code.  Notwithstanding the foregoing, the Company will solely upon your request take reasonable actions to mitigate the effect (or avoid) any excessive Tax or Reduced Payment, including entering into any noncompetition agreement or any consulting relationship with you.
		
	XIII.
	Indemnification.

You and the Company will enter into the form of indemnification agreement provided to other similarly situated officers and directors of the Company.  In addition, you will be named as an insured on the director and officer liability insurance policy currently maintained by the Company, or as may be maintained by the Company from time to time.
		
	XIV.
	Miscellaneous.

This offer is contingent upon a background check clearance, reference check, and satisfactory proof of your right to work in the United States, which the parties agree must be completed prior to your first day of employment.  You agree to assist as needed and to complete any documentation at the Company’s request to meet these conditions.
The Company will pay your legal fees in connection with this Agreement not to exceed $25,000.
This letter, together with your Employee Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement of your employment agreement with the Company.  It supersedes any other agreements or promises made to you by anyone, whether oral or written. Changes in your employment terms, other than those changes expressly reserved to the Company’s or Board’s discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company.  This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company by merger or 

        

Charles Giancarlo 
August 22, 2017
Page 11

otherwise, and inure to the benefit of both you and the Company, their heirs, successors and assigns.  If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law.  This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to conflicts of law principles.  Any ambiguity in this Agreement shall not be construed against either party as the drafter.  Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.  This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic image copies of signatures shall be equivalent to original signatures.
Please sign and date this letter, and the enclosed Employee Confidential Information and Inventions Assignment Agreement and return them to me on or before August 22, 2017 if you wish to accept employment at the Company under the terms described above.  If you accept our offer, we would like you to start on August 22, 2017.
We look forward to your favorable reply and to a productive and enjoyable work relationship.
Sincerely,
/s/ Aneel Bhusri        8/22/2017     
Aneel Bhusri    Date
Compensation Committee Chairman    

Accepted:
/s/ Charles Giancarlo        8/22/2017     
Charles Giancarlo    Date
Attachments: 
Exhibit A – List of Benefits*
Exhibit B – Employee Confidential Information and Inventions Assignment Agreement*
Exhibit C – Insider Trading Policy*

*Attachments are the Company's standard documents, available upon request.Exhibit 10.1

 

SONOMA PHARMACEUTICALS, INC.

 

Common Stock

(par value $0.0001 per share)

 

At Market Issuance
Sales Agreement

 

December 8, 2017

 

B. Riley FBR, Inc.

299 Park Avenue, 7th Floor

New York, NY 10017

 

Ladies and Gentlemen:

 

Sonoma Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), confirms its agreement (this “Agreement”),
with B. Riley FBR, Inc. (the “Agent”), as follows:

 

1.                     Issuance
and Sale of Shares. The Company agrees that, from time to time during the term of this Agreement, on the terms and
subject to the conditions set forth herein, it may issue and sell through the Agent, shares (the
“Placement Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common
Stock”), the specific amount which shall be in the Company’s sole discretion, provided however, that
in no event shall the Company issue or sell through the Agent such number of Placement Shares that (a) exceeds the number of
shares of Common Stock registered on the effective Registration Statement (as defined below) pursuant to which the offering
is being made, (b) exceeds the number of authorized but unissued shares of Common Stock, or (c) would cause the Company to
exceed the limitations set forth in General Instruction I.B.6 of Form S-3. The lesser of (a), (b), and (c) shall be defined
as the “Maximum Amount”. Notwithstanding anything to the contrary contained herein, the parties hereto
agree that compliance with the limitations set forth in this Section 1 as to the number of Placement Shares issued and
sold under this Agreement shall be the sole responsibility of the Company and that the Agent shall have no obligation in
connection with such compliance. The issuance and sale of Placement Shares through the Agent will be effected pursuant to the
Registration Statement (as defined below), although nothing in this Agreement shall be construed as requiring the Company to
use the Registration Statement to issue any Placement Shares.

 

The Company has filed,
in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (the “Securities
Act”), with the Securities and Exchange Commission (the “Commission”), a registration statement on
Form S-3 (File No. 333-221477), including a base prospectus, relating to certain securities, including the Placement Shares to
be issued from time to time by the Company, and which incorporates by reference documents that the Company has filed or will file
in accordance with the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder
(the “Exchange Act”). The Company has prepared a prospectus supplement to the base prospectus included as part
of such registration statement specifically relating to the Placement Shares (the “Prospectus Supplement”).
The Company will make available via EDGAR (as defined below), or furnish to the Agent, for use by the Agent, copies of the base
prospectus included as part of such Registration Statement (as defined below), as supplemented by the Prospectus Supplement, relating
to the Placement Shares. Except where the context otherwise requires, such Registration Statement, and any post-effective amendment
thereto, including all documents filed as part thereof or incorporated by reference therein, and including any information contained
in a Prospectus (as defined below) subsequently filed with the Commission pursuant to Rule 424(b) under the Securities Act or deemed
to be a part of such registration statement pursuant to Rule 430B of the Securities Act, is herein called the “Registration
Statement.” The base prospectus, including all documents incorporated or deemed incorporated therein by reference to
the extent such information has not been superseded or modified in accordance with Rule 412 under the Securities Act (as qualified
by Rule 430B(g) of the Securities Act), included in the Registration Statement, as it may be supplemented by the Prospectus Supplement,
in the form in which such base prospectus and/or Prospectus Supplement have most recently been filed by the Company with the Commission
pursuant to Rule 424(b) under the Securities Act, is herein called the “Prospectus.” Any reference herein to
the Registration Statement, the Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents
incorporated or deemed incorporated by reference therein, and any reference herein to the terms “amend,” “amendment”
or “supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include
the filing after the execution hereof of any document with the Commission deemed to be incorporated by reference therein (the “Incorporated
Documents”).

 

 

 

    	 	1	 

     

    

 

For purposes
of this Agreement, all references to the Registration Statement, the Prospectus or to any amendment or supplement thereto shall
be deemed to include the most recent copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval
System, or if applicable, the Interactive Data Electronic Application system when used by the Commission (collectively, “EDGAR”).

 

2.                    
Placements. Each time that the Company wishes to issue and sell Placement Shares hereunder (each, a “Placement”),
it will notify the Agent by email notice (or other method mutually agreed to in writing by the Parties) of the proposed terms of
such Placement, which shall include at a minimum, the number or dollar value of Placement Shares proposed to be issued, the time
period during which sales are requested to be made, any limitation on the number of Placement Shares that may be sold in any one
Trading Day (as defined below) and any minimum price below which sales may not be made (a “Placement Notice”),
the form of which is attached hereto as Schedule 1. The Placement Notice shall originate from any of the individuals from
the Company set forth on Schedule 3 (with a copy to each of the other individuals from the Company listed on such schedule),
and shall be addressed to each of the individuals from the Agent set forth on Schedule 3, as such Schedule 3 may
be amended from time to time. Provided that the Company is otherwise in compliance with the terms of this Agreement, the Placement
Notice shall be effective immediately upon receipt by the Agent unless and until (i) the Agent declines to accept the terms contained
therein for any reason, in its sole discretion, (ii) the entire amount of the Placement Shares thereunder has been sold, (iii)
the Company suspends or terminates the Placement Notice or (iv) this Agreement has been terminated under the provisions of Section
13. The amount of any discount, commission or other compensation to be paid by the Company to the Agent in connection with
the sale of the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 2. It is expressly
acknowledged and agreed that neither the Company nor the Agent will have any obligation whatsoever with respect to a Placement
or any Placement Shares unless and until the Company delivers a Placement Notice to the Agent and the Agent does not decline such
Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and herein. In the event
of a conflict between the terms of Sections 2 or 3 of this Agreement and the terms of a Placement Notice, the terms
of the Placement Notice will control.

 

3.                    
Sale of Placement Shares by the Agent.

 

a.                 
Subject to the terms and conditions of this Agreement, for the period specified in a Placement Notice, the Agent
will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal
laws, rules and regulations and the rules of The NASDAQ Capital Market (the “Exchange”), to sell the Placement
Shares up to the amount specified in, and otherwise in accordance with the terms of, such Placement Notice. The Agent will provide
written confirmation to the Company no later than the opening of the Trading Day (as defined below) immediately following the Trading
Day on which it has made sales of Placement Shares hereunder setting forth the number of Placement Shares sold on such day, the
compensation payable by the Company to the Agent pursuant to Section 2 with respect to such sales, and the Net Proceeds
(as defined below) payable to the Company, with an itemization of the deductions made by the Agent (as set forth in Section
5(b)) from the gross proceeds that it receives from such sales. Subject to the terms of the Placement Notice, the Agent may
sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415
of the Securities Act. “Trading Day” means any day on which Common Stock is purchased and sold on the Exchange.

 

b.                 
During the term of this Agreement, neither the Agent nor any of its affiliates or subsidiaries shall engage, either
directly or indirectly, in (i) any short sale of any security of the Company, (ii) any sale of any security of the Company that
the Agent does not own or any sale which is consummated by the delivery of a security of the Company borrowed by, or for the account
of, the Agent, or (iii) any market making, bidding, purchasing, stabilization or other trading activity with regard to the Common
Stock, or attempting to induce another person to do any of the foregoing, if such activity would be prohibited under Regulation
M or other anti-manipulation rules under the Securities Act. Neither the Agent nor any of its affiliates or subsidiaries shall
engage in any proprietary trading or trading for the Agent’s (or its affiliates’ or subsidiaries’) own account.

 

4.                    
Suspension of Sales. The Company or the Agent may, upon notice to the other party in writing (including by email
correspondence to each of the individuals of the other party set forth on Schedule 3, if receipt of such correspondence
is actually acknowledged by any of the individuals to whom the notice is sent, other than via an auto-reply message) or by telephone
(confirmed immediately by verifiable facsimile transmission or email correspondence to each of the individuals of the other party
set forth on Schedule 3), suspend any sale of Placement Shares; provided, however, that such suspension shall not
affect or impair any party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such
notice. Each of the parties agrees that no such notice under this Section 4 shall be effective against any other party unless
it is made to each of the individuals of the other party named on Schedule 3 hereto, as such Schedule may be amended from
time to time, and receipt thereof is confirmed.

 

 

 

    	 	2	 

     

    

 

5.                    
Sale and Delivery to the Agent; Settlement.

 

a.                  
Sale of Placement Shares. On the basis of the representations and warranties herein contained and subject to the
terms and conditions herein set forth, upon the Agent’s acceptance of the terms of a Placement Notice, and unless the sale
of the Placement Shares described therein has been declined, suspended, or otherwise terminated in accordance with the terms of
this Agreement, the Agent, for the period specified in the Placement Notice, will use its commercially reasonable efforts consistent
with its normal trading and sales practices to sell such Placement Shares up to the amount specified in, and otherwise in accordance
with the terms of, such Placement Notice. The Company acknowledges and agrees that (i) there can be no assurance that the Agent
will be successful in selling Placement Shares, (ii) the Agent will incur no liability or obligation to the Company or any other
person or entity if it does not sell Placement Shares for any reason other than a failure by the Agent to use its commercially
reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell such Placement
Shares as required under this Agreement and (iii) the Agent shall be under no obligation to purchase Placement Shares on a principal
basis pursuant to this Agreement, except as otherwise agreed by the Agent and the Company.

 

b.                 
Settlement of Placement Shares. Unless otherwise specified in the applicable Placement Notice, settlement for sales
of Placement Shares will occur on the second (2nd) Trading Day (or such earlier day as is industry practice for regular-way
trading) following the date on which such sales are made (each, a “Settlement Date”). The amount of proceeds
to be delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the “Net Proceeds”)
will be equal to the aggregate sales price received by the Agent, after deduction for (i) the Agent’s commission, discount
or other compensation for such sales payable by the Company pursuant to Section 2 hereof, and (ii) any transaction fees
imposed by any governmental or self-regulatory organization in respect of such sales.

 

c.                  
Delivery of Placement Shares. On or before each Settlement Date, the Company will, or will cause its transfer agent
to, electronically transfer the Placement Shares being sold by crediting the Agent’s or its designee’s account (provided
the Agent shall have given the Company written notice of such designee at least one Trading Day prior to the Settlement Date) at
The Depository Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of delivery as may be
mutually agreed upon by the parties hereto which in all cases shall be freely tradable, transferable, registered shares in good
deliverable form. On each Settlement Date, the Agent will deliver the related Net Proceeds in same day funds to an account designated
by the Company on, or prior to, the Settlement Date. The Company agrees that if the Company, or its transfer agent (if applicable),
defaults in its obligation to deliver Placement Shares on a Settlement Date, then in addition to and in no way limiting the rights
and obligations set forth in Section 11(a) hereto, it will (i) hold the Agent harmless against any loss, claim, damage,
or reasonable, documented expense (including reasonable and documented legal fees and expenses), as incurred, arising out of or
in connection with such default by the Company or its transfer agent (if applicable) and (ii) pay to the Agent (without duplication)
any commission, discount, or other compensation to which it would otherwise have been entitled absent such default.

 

d.                 
 Limitations on Offering Size. Under no circumstances shall the Company cause or request the offer or sale of any
Placement Shares if, after giving effect to the sale of such Placement Shares, the aggregate number of Placement Shares sold pursuant
to this Agreement would exceed the lesser of (A) together with all sales of Placement Shares under this Agreement, the Maximum
Amount, (B) the amount available for offer and sale under the currently effective Registration Statement and (C) the amount authorized
from time to time to be issued and sold under this Agreement by the Company’s board of directors, a duly authorized committee
thereof or a duly authorized executive committee, and notified to the Agent in writing. Under no circumstances shall the Company
cause or request the offer or sale of any Placement Shares pursuant to this Agreement at a price lower than the minimum price authorized
from time to time by the Company’s board of directors, a duly authorized committee thereof or a duly authorized executive
committee, and notified to the Agent in writing. Further, under no circumstances shall the Company cause or permit the aggregate
offering amount of Placement Shares sold pursuant to this Agreement to exceed the Maximum Amount.

 

6.                    
Representations and Warranties of the Company. Except as disclosed in the Registration Statement or the Prospectus
(including the Incorporated Documents), the Company represents and warrants to, and agrees with the Agent that as of the date of
this Agreement and as of each Applicable Time (as defined in Section 25 below), unless such representation, warranty or agreement
specifies a different date or time:

 

 

 

    	 	3	 

     

    

 

a.                  
Registration Statement and Prospectus. The Company and, assuming no act or omission on the part of the Agent that
would make such statement untrue, the transactions contemplated by this Agreement meet the requirements for and comply with the
conditions for the use of Form S-3 under the Securities Act. The Registration Statement has been filed with the Commission and
has been declared effective under the Securities Act. The Prospectus Supplement will name the Agent as the Company’s agent
in the section entitled “Plan of Distribution.” The Company has not received, and has no notice of, any order of the
Commission preventing or suspending the use of the Registration Statement, or threatening or instituting proceedings for that purpose.
The Registration Statement and the offer and sale of Placement Shares as contemplated hereby meet the requirements of Rule 415
under the Securities Act and comply in all material respects with said Rule. Any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration
Statement have been so described or filed. Copies of the Registration Statement, the Prospectus, and any such amendments or supplements
and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement
have been delivered, or are available through EDGAR, to the Agent and its counsel. The Company has not distributed and, prior to
the later to occur of each Settlement Date and completion of the distribution of the Placement Shares, will not distribute any
offering material in connection with the offering or sale of the Placement Shares other than the Registration Statement and the
Prospectus and any Issuer Free Writing Prospectus (as defined below) to which the Agent has consented, such consent shall not be
unreasonably withheld, conditioned or delayed. The Common Stock is currently quoted on the Exchange. Except as previously disclosed
in the Company’s filings with the Commission the Company has not, in the 12 months preceding the date hereof, received notice
from the Exchange to the effect that the Company is not in compliance with the listing or maintenance requirements of the Exchange.
The Company has no reason to believe that it will not in the foreseeable future continue to be in compliance with all such listing
and maintenance requirements.

 

b.                 
No Misstatement or Omission. The Registration Statement, when it became effective, and the Prospectus, and any amendment
or supplement thereto, on the date of such Prospectus or amendment or supplement, conformed and will conform in all material respects
with the requirements of the Securities Act. At each Settlement Date, the Registration Statement and the Prospectus, as of such
date, will conform in all material respects with the requirements of the Securities Act. The Registration Statement, when it became
or becomes effective, did not, and will not, contain an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendment and supplement
thereto, on the date thereof and at each Applicable Time (defined in Section 25 below), did not or will not include an untrue statement
of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The documents incorporated by reference in the Prospectus or any Prospectus Supplement did
not, and any further documents filed and incorporated by reference therein will not, when filed with the Commission, contain an
untrue statement of a material fact or omit to state a material fact required to be stated in such document or necessary to make
the statements in such document, in light of the circumstances under which they were made, not misleading. The foregoing shall
not apply to, and the Company neither makes nor shall make any representation or warranty in respect of, statements in, or omissions
from, any such document made in reliance upon, and in conformity with, information furnished to the Company by the Agent specifically
for use in the preparation thereof.

 

c.                  
Conformity with Securities Act and Exchange Act. The Registration Statement, the Prospectus, any Issuer Free Writing
Prospectus or any amendment or supplement thereto, and the Incorporated Documents, when such documents were or are filed with the
Commission under the Securities Act or the Exchange Act or became or become effective under the Securities Act, as the case may
be, conformed or will conform in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable.

 

d.                 
Financial Information. The consolidated financial statements of the Company included or incorporated by reference
in the Registration Statement and the Prospectus, together with the related notes and schedules, present fairly, in all material
respects, the consolidated financial position of the Company and the Subsidiaries (as defined below) as of the dates indicated
and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company for the periods
specified and have been prepared in compliance in all material respects with the requirements of the Securities Act and Exchange
Act, as applicable, and in conformity with generally accepted accounting principles in the United States (“GAAP”)
applied on a consistent basis (except for (i) such adjustments to accounting standards and practices as are noted therein, (ii)
in the case of unaudited interim financial statements, to the extent such financial statements may not include footnotes required
by GAAP or may be condensed or summary statements and (iii) such adjustments which will not be material, either individually or
in the aggregate) during the periods involved; the other financial and statistical data with respect to the Company and the Subsidiaries
contained or incorporated by reference in the Registration Statement and the Prospectus, are accurately and fairly presented and
prepared on a basis consistent with the financial statements and books and records of the Company; there are no financial statements
(historical or pro forma) that are required to be included or incorporated by reference in the Registration Statement, or the Prospectus
that are not included or incorporated by reference as required; the Company and the Subsidiaries do not have any material liabilities
or obligations, direct or contingent (including any off balance sheet obligations), not described in the Registration Statement,
and the Prospectus which are required to be described in the Registration Statement or Prospectus; and all disclosures contained
or incorporated by reference in the Registration Statement and the Prospectus, if any, regarding “non-GAAP financial measures”
(as such term is defined by the rules and regulations of the Commission) comply in all material respects with Regulation G of the
Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable.

 

 

 

    	 	4	 

     

    

 

e.                  
Conformity with EDGAR Filing. The Prospectus delivered upon request to the Agent for use in connection with the sale
of the Placement Shares pursuant to this Agreement will be identical to the versions of the Prospectus created to be transmitted
to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T.

 

f.                   
Organization. The Company and any subsidiary that is a significant subsidiary (as such term is defined in Rule 1-02
of Regulation S-X promulgated by the Commission) (each, a “Subsidiary”, collectively, the “Subsidiaries”),
are, and will be, duly organized, validly existing as a corporation and in good standing under the laws of their respective jurisdictions
of organization. The Company and the Subsidiaries are, and will be, duly licensed or qualified as a foreign corporation for transaction
of business and in good standing under the laws of each other jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such license or qualification, and have all corporate power and authority
necessary to own or hold their respective properties and to conduct their respective businesses as described in the Registration
Statement and the Prospectus, except where the failure to be so qualified or in good standing or have such power or authority would
not, individually or in the aggregate, have a material adverse effect or would reasonably be expected to have a material adverse
effect on the assets, business, operations, earnings, properties, condition (financial or otherwise), prospects, stockholders’
equity or results of operations of the Company and the Subsidiaries taken as a whole, or prevent the consummation of the transactions
contemplated hereby (a “Material Adverse Effect”).

 

g.                 
Subsidiaries. As of the date hereof, the Company’s only Subsidiaries are set forth on Schedule 6(g).
The Company owns directly or indirectly, all of the equity interests of the Subsidiaries free and clear of any lien, charge, security
interest, encumbrance, right of first refusal or other restriction, and all the equity interests of the Subsidiaries are validly
issued and are fully paid, nonassessable and free of preemptive and similar rights.

 

h.                 
No Violation or Default. Neither the Company nor any Subsidiary is (i) in violation of its charter or by-laws or
similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of the property or assets of the Company or any Subsidiary is subject;
or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except, in the case of each of clauses (ii) and (iii) above, for any such violation or default that would
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge,
no other party under any material contract or other agreement to which it or any Subsidiary is a party is in default in any respect
thereunder where such default would reasonably be expected to have a Material Adverse Effect.

 

i.                   
No Material Adverse Effect. Since the date of the most recent financial statements of the Company included or incorporated
by reference in the Registration Statement and Prospectus, there has not been (i) any Material Adverse Effect, or any development
involving a prospective Material Adverse Effect, in or affecting the business, properties, management, condition (financial or
otherwise), results of operations, or prospects of the Company and the Subsidiaries taken as a whole, (ii) any transaction which
is material to the Company and the Subsidiaries taken as a whole, (iii) any obligation or liability, direct or contingent (including
any off-balance sheet obligations), incurred by the Company or the Subsidiaries, which is material to the Company and the Subsidiaries
taken as a whole, (iv) any material change in the capital stock (other than (A) the grant of additional options under the Company’s
existing stock option plans, (B) changes in the number of outstanding shares of Common Stock of the Company due to the issuance
of shares upon the exercise or conversion of securities exercisable for, or convertible into, shares of Common Stock outstanding
on the date hereof and, in addition, shares issued to service providers as compensation pursuant to certain agreements with those
service providers, (C) as a result of the issuance of Placement Shares, (D) any repurchases of capital stock of the Company, (E)
as described in a proxy statement filed on Schedule 14A or a Registration Statement on Form S-4, (F) as disclosed on a Form 8-K,
or (G) otherwise publicly announced) or outstanding long-term indebtedness of the Company or the Subsidiaries or (v) any dividend
or distribution of any kind declared, paid or made on the capital stock of the Company or any Subsidiary, other than in each case
above in the ordinary course of business or as otherwise disclosed in the Registration Statement or Prospectus.

 

 

 

 

    	 	5	 

     

    

 

j.                   
Capitalization. The issued and outstanding shares of capital stock of the Company have been validly issued, are fully
paid and non-assessable and, other than as disclosed in the Registration Statement or the Prospectus, are not subject to any preemptive
rights, rights of first refusal or similar rights. The Company has an authorized, issued and outstanding capitalization as set
forth in the Registration Statement and the Prospectus as of the dates referred to therein (other than (i) the grant of additional
options, restricted stock or other equity awards under the Company’s existing stock option plans, (ii) changes in the number
of outstanding Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable
for, or convertible into, Common Stock outstanding on the date hereof and, in addition, shares issued to service providers as compensation
pursuant to certain agreements with those service providers, (iii) as a result of the issuance of Placement Shares, or (iv) any
repurchases of capital stock of the Company) and such authorized capital stock conforms to the description thereof set forth in
the Registration Statement and the Prospectus. The description of the Common Stock in the Registration Statement and the Prospectus
is complete and accurate in all material respects.

 

k.                 
S-3 Eligibility. (i) At the time of filing the Registration Statement and (ii) at the time of the most recent amendment
thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective
amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), the Company met
the then applicable requirements for use of Form S-3 under the Securities Act, including compliance with General Instruction I.B.6
of Form S-3. As of November 16, 2017, the aggregate market value of the outstanding voting and non-voting common equity (as
defined in Rule 405) of the Company held by persons other than affiliates of the Company (pursuant to Rule 144 of the Securities
Act, those that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common
control with, the Company)  (the “Non-Affiliate Shares”), was approximately $21.8 million (calculated by
multiplying (x) the price at which the common equity of the Company was last sold on the Exchange on November 16, 2017, by (y)
the number of Non-Affiliate Shares). The Company is not a shell company (as defined in Rule 405) and has not been a shell company
for at least 12 calendar months previously and if it has been a shell company at any time previously, has filed current Form 10
information (as defined in Instruction I.B.6 of Form S-3) with the Commission at least 12 calendar months previously reflecting
its status as an entity that is not a shell company.

 

l.                   
Authorization; Enforceability. The Company has full legal right, power and authority to enter into this Agreement
and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company
and is a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except
to the extent that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles and (ii) the indemnification and contribution provisions
of Section 11 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof.

 

m.               
Authorization of Placement Shares. The Placement Shares, when issued and delivered pursuant to the terms approved
by the board of directors of the Company or a duly authorized committee thereof, or a duly authorized executive committee, against
payment therefor as provided herein, will be duly and validly authorized and issued and fully paid and nonassessable, free and
clear of any pledge, lien, encumbrance, security interest or other claim (other than any pledge, lien, encumbrance, security interest
or other claim arising from an act or omission of the Agent or a purchaser), including any statutory or contractual preemptive
rights, resale rights, rights of first refusal or other similar rights, and will be registered pursuant to Section 12 of the Exchange
Act. The Placement Shares, when issued, will conform in all material respects to the description thereof set forth in or incorporated
into the Prospectus.

 

n.                 
No Consents Required. No consent, approval, authorization, order, registration or qualification of or with any court
or arbitrator or any governmental or regulatory authority is required for the execution, delivery and performance by the Company
of this Agreement, and the issuance and sale by the Company of the Placement Shares as contemplated hereby, except for such consents,
approvals, authorizations, orders and registrations or qualifications as may be required under applicable state securities laws
or by the by-laws and rules of the Financial Industry Regulatory Authority (“FINRA”) or the Exchange, including
but not limited to any notices that may be required by Exchange, in connection with the sale of the Placement Shares by the Agent.

 

 

 

 

    	 	6	 

     

    

 

o.                 
No Preferential Rights. (i) No person, as such term is defined in Rule 1-02 of Regulation S-X promulgated under the
Securities Act (each, a “Person”), has the right, contractual or otherwise, to cause the Company to issue or
sell to such Person any Common Stock or shares of any other capital stock or other securities of the Company (other than upon the
exercise of options or warrants to purchase Common Stock or upon the exercise of options that may be granted from time to time
under the Company’s stock option plans), (ii) no Person has any preemptive rights, rights of first refusal, or any other
rights (whether pursuant to a “poison pill” provision or otherwise) to purchase any Common Stock or shares of any other
capital stock or other securities of the Company from the Company which have not been duly waived with respect to the offering
contemplated hereby, (iii) no Person has the right to act as an underwriter or as a financial advisor to the Company in connection
with the offer and sale of the Common Stock, and (iv) no Person has the right, contractual or otherwise, to require the Company
to register under the Securities Act any Common Stock or shares of any other capital stock or other securities of the Company,
or to include any such shares or other securities in the Registration Statement or the offering contemplated thereby, whether as
a result of the filing or effectiveness of the Registration Statement or the sale of the Placement Shares as contemplated thereby
or otherwise.

 

p.                 
Independent Public Accountant. Marcum LLP (the “Accountant”), whose report on the consolidated
financial statements of the Company is filed with the Commission as part of the Company’s most recent Annual Report on Form
10-K filed with the Commission and incorporated into the Registration Statement, are and, during the periods covered by their report,
were independent public accountants within the meaning of the Securities Act and the Public Company Accounting Oversight Board
(United States). To the Company’s knowledge, with due inquiry, the Accountant is not in violation of the auditor independence
requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) with respect to the Company.

 

q.                 
Enforceability of Agreements. All agreements between the Company and third parties expressly referenced in the Prospectus,
other than such agreements that have expired by their terms or whose termination is disclosed in documents filed by the Company
on EDGAR, are legal, valid and binding obligations of the Company enforceable in accordance with their respective terms, except
to the extent that (i) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles and (ii) the indemnification provisions of certain agreements
may be limited by federal or state securities laws or public policy considerations in respect thereof, and (iii) except for any
unenforceability that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

r.                   
No Litigation. There are no legal, governmental or regulatory actions, suits or proceedings pending, nor, to the
Company’s knowledge, any legal, governmental or regulatory investigations, to which the Company or a Subsidiary is a party
or to which any property of the Company or any Subsidiary is the subject that, individually or in the aggregate, if determined
adversely to the Company or any Subsidiary, would reasonably be expected to have a Material Adverse Effect or materially and adversely
affect the ability of the Company to perform its obligations under this Agreement; to the Company’s knowledge, no such actions,
suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others that, individually
or in the aggregate, if determined adversely to the Company or any Subsidiary, would reasonably be expected to have a Material
Adverse Effect; and (i) there are no current or pending legal, governmental or regulatory investigations, actions, suits or proceedings,
to the Company’s knowledge, that are required under the Securities Act to be described in the Prospectus that are not described
in the Prospectus including any Incorporated Document; and (ii) there are no material contracts or other documents that are required
under the Securities Act to be filed as exhibits to the Registration Statement that are not so filed.

 

s.                  
Licenses and Permits. The Company and the Subsidiaries possess or have obtained, all licenses, certificates, consents,
orders, approvals, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate
federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their
respective properties or the conduct of their respective businesses as described in the Registration Statement and the Prospectus
(the “Permits”), except where the failure to possess, obtain or make the same would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary have received written
notice of any proceeding relating to revocation or modification of any such Permit or has any reason to believe that such Permit
will not be renewed in the ordinary course, except where the failure to obtain any such renewal would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

t.                   
No Material Defaults. Neither the Company nor any Subsidiary has defaulted on any installment on indebtedness for
borrowed money or on any rental on one or more long-term leases, which defaults, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect. The Company has not filed a report pursuant to Section 13(a) or 15(d) of the Exchange
Act since the filing of its last Annual Report on Form 10-K, indicating that it (i) has failed to pay any dividend or sinking fund
installment on preferred stock or (ii) has defaulted on any installment on indebtedness for borrowed money or on any rental on
one or more long-term leases, which defaults, individually or in the aggregate, would reasonably be expected to have a Material
Adverse Effect.

 

 

 

 

    	 	7	 

     

    

 

u.                 
Certain Market Activities. Neither the Company, nor any Subsidiary, nor, to the Company’s knowledge, any of
their respective directors, officers or controlling persons has taken, directly or indirectly, any action designed, or that has
constituted or would reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of the Placement Shares.

 

v.                 
Broker/Dealer Relationships. Neither the Company nor any Subsidiary or any related entities (i) is required to register
as a “broker” or “dealer” in accordance with the provisions of the Exchange Act or (ii) directly or indirectly
through one or more intermediaries, controls or is a “person associated with a member” or “associated person
of a member” (within the meaning set forth in the FINRA Manual).

 

w.               
No Reliance. The Company has not relied upon the Agent or legal counsel for the Agent for any legal, tax or accounting
advice in connection with the offering and sale of the Placement Shares.

 

x.                 
Taxes. The Company and the Subsidiaries have filed all federal, state, local and foreign tax returns which have been
required to be filed and paid all taxes shown thereon through the date hereof, to the extent that such taxes have become due and
are not being contested in good faith, except where the failure to do so would not reasonably be expected to have a Material Adverse
Effect. Except as otherwise disclosed in or contemplated by the Registration Statement or the Prospectus, no tax deficiency has
been determined adversely to the Company or any Subsidiary which has had, or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. The Company has no knowledge of any federal, state or other governmental tax deficiency,
penalty or assessment which has been or might be asserted or threatened against it which could have a Material Adverse Effect.

 

y.                 
Title to Real and Personal Property. The Company and the Subsidiaries have good and valid title in fee simple to
all items of real property and good and valid title to all personal property described in the Registration Statement or Prospectus
as being owned by them that are material to the businesses of the Company or such Subsidiary, in each case free and clear of all
liens, encumbrances and claims, except those that (i) do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries or (ii) would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. Any real property described in the Registration Statement or Prospectus as being leased by the
Company and the Subsidiaries is held by them under valid, existing and enforceable leases, except those that (A) do not materially
interfere with the use made or proposed to be made of such property by the Company or the Subsidiaries or (B) would not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.

 

z.                  
Intellectual Property. The Company and the Subsidiaries own or possess adequate enforceable rights to use all patents,
patent applications, trademarks (both registered and unregistered), service marks, trade names, trademark registrations, service
mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures) (collectively, the “Intellectual Property”), necessary
for the conduct of their respective businesses as conducted as of the date hereof, except to the extent that the failure to own
or possess adequate rights to use such Intellectual Property would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect; the Company and the Subsidiaries have not received any written notice of any claim of infringement
or conflict which asserted Intellectual Property rights of others, which infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Effect; there are no pending, or to the Company’s knowledge, threatened judicial
proceedings or interference proceedings against the Company or its Subsidiaries challenging the Company’s or any of its Subsidiary’s
rights in or to or the validity of the scope of any of the Company’s or any Subsidiary’s patents, patent applications
or proprietary information; no other entity or individual has any right or claim in any of the Company’s or any of its Subsidiary’s
patents, patent applications or any patent to be issued therefrom by virtue of any contract, license or other agreement entered
into between such entity or individual and the Company or any Subsidiary or by any non-contractual obligation, other than by written
licenses granted by the Company or any Subsidiary; the Company and the Subsidiaries have not received any written notice of any
claim challenging the rights of the Company or its Subsidiaries in or to any Intellectual Property owned, licensed or optioned
by the Company or any Subsidiary which claim, if the subject of an unfavorable decision would result in a Material Adverse Effect.

 

aa.              
Environmental Laws. The Company and the Subsidiaries (i) are in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”);
(ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses as described in the Registration Statement and the Prospectus; and (iii) have not received
notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i), (ii) or (iii) above, for any such
failure to comply or failure to receive required permits, licenses, other approvals or liability as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

 

 

    	 	8	 

     

    

 

bb.             
Disclosure Controls. The Company maintains systems of internal accounting controls designed to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company is not aware of any material weaknesses in its internal control over financial reporting
(other than as set forth in the Registration Statement or the Prospectus). Since the date of the latest audited financial statements
of the Company included in the Prospectus, there has been no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting (other than as set forth in the Registration Statement or the Prospectus). The Company has established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company and the Subsidiaries is made known to the certifying officers by others
within those entities, particularly during the period in which the Company’s Annual Report on Form 10-K or Quarterly Report
on Form 10-Q, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of
the Company’s controls and procedures as of a date within 90 days prior to the filing date of the Form 10-K for the fiscal
year most recently ended (such date, the “Evaluation Date”). The Company presented in its Form 10-K for the
fiscal year most recently ended the conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the most recent Evaluation Date. Since the most recent Evaluation Date, there have
been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Securities Act) or, to the Company’s knowledge, in other factors that could significantly affect the Company’s
internal controls. To the knowledge of the Company, the Company’s “internal controls over financial reporting”
and “disclosure controls and procedures” are effective.

 

cc.              
Sarbanes-Oxley Act. There is and has been no failure on the part of the Company or, to the knowledge of the Company,
any of the Company’s directors or officers, in their capacities as such, to comply with any applicable provisions of the
Sarbanes-Oxley Act and the rules and regulations promulgated thereunder. Each of the principal executive officer and the principal
financial officer of the Company (or each former principal executive officer of the Company and each former principal financial
officer of the Company as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents required to be filed by it or furnished by it to the Commission
during the past 12 months. For purposes of the preceding sentence, “principal executive officer” and “principal
financial officer” shall have the meanings given to such terms in the Exchange Act Rules 13a-15 and 15d-15.

 

dd.             
Finder’s Fees. Neither the Company nor any Subsidiary has incurred any liability for any finder’s fees,
brokerage commissions or similar payments in connection with the transactions herein contemplated, except as may otherwise exist
with respect to the Agent pursuant to this Agreement.

 

ee.              
Labor Disputes. No labor disturbance by or dispute with employees of the Company or any Subsidiary exists or, to
the knowledge of the Company, is threatened which would reasonably be expected to result in a Material Adverse Effect.

 

ff.                
Investment Company Act. Neither the Company nor any Subsidiary is or, after giving effect to the offering and sale
of the Placement Shares, will be an “investment company” or an entity “controlled” by an “investment
company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

gg.             
Operations. The operations of the Company and the Subsidiaries are and have been conducted at all times in compliance
with applicable financial record keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, the money laundering statutes of all jurisdictions to which the Company or the Subsidiaries are subject, the rules
and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”), except as would not reasonably be expected
to result in a Material Adverse Effect; and no action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the
knowledge of the Company, threatened.

 

hh.             
Off-Balance Sheet Arrangements.There are no transactions, arrangements and other relationships between and/or
among the Company, and/or, to the knowledge of the Company, any of its affiliates and any unconsolidated entity, including, but
not limited to, any structured finance, special purpose or limited purpose entity (each, an “Off Balance Sheet Transaction”)
that could reasonably be expected to affect materially the Company’s liquidity or the availability of or requirements for
its capital resources, including those Off Balance Sheet Transactions described in the Commission’s Statement about Management’s
Discussion and Analysis of Financial Conditions and Results of Operations (Release Nos. 33-8056; 34-45321; FR-61), required to
be described in the Registration Statement or the Prospectus which have not been described as required.

 

 

 

 

    	 	9	 

     

    

 

ii.                 
Underwriter Agreements. The Company and/or its Subsidiaries is not a party to any agreement with an agent or underwriter
for any other “at the market” or continuous equity transaction.

 

jj.                 
ERISA. To the knowledge of the Company, each material employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is maintained, administered
or contributed to by the Company or any of its affiliates for employees or former employees of the Company and the Subsidiaries
has been maintained in material compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”); no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which would result in a material
liability to the Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative
exemption; and for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated
funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value
of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all
benefits accrued under such plan determined using reasonable actuarial assumptions.

 

kk.             
Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act) (a “Forward-Looking Statement”) contained in the Registration Statement
and the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. The Forward-Looking
Statements incorporated by reference in the Registration Statement and the Prospectus from the Company’s Annual Report on
Form 10-K for the fiscal year most recently ended (i) except for any Forward-Looking Statement included in any financial statements
and notes thereto, are, to the Company’s knowledge, within the coverage of the safe harbor for forward looking statements
set forth in Section 27A of the Securities Act, Rule 175(b) under the Securities Act or Rule 3b-6 under the Exchange Act, as applicable,
(ii) were made by the Company with a reasonable basis and in good faith and reflect the Company’s good faith commercially
reasonable best estimate of the matters described therein as of the respective dates on which such statements were made, and (iii)
have been prepared in accordance with Item 10 of Regulation S-K under the Securities Act.

 

ll.                 
Margin Rules. Neither the issuance, sale and delivery of the Placement Shares nor the application of the proceeds
thereof by the Company as described in the Registration Statement and the Prospectus will violate Regulation T, U or X of the Board
of Governors of the Federal Reserve System.

 

mm.         
Insurance. The Company and the Subsidiaries carry, or are covered by, insurance in such amounts and covering such
risks as the Company and the Subsidiaries reasonably believe are adequate for the conduct of their business and as is customary
for companies of similar size engaged in similar businesses in similar industries.

 

nn.             
No Improper Practices. (i) Neither the Company nor, to the Company’s knowledge, the Subsidiaries, nor to the
Company’s knowledge, any of their respective executive officers has, in the past five years, made any unlawful contributions
to any candidate for any political office (or failed fully to disclose any contribution in violation of law) or made any contribution
or other payment to any official of, or candidate for, any federal, state, municipal, or foreign office or other person charged
with similar public or quasi-public duty in violation of any law or of the character required to be disclosed in the Prospectus;
(ii) no relationship, direct or indirect, exists between or among the Company or, to the Company’s knowledge, the Subsidiaries
or any affiliate of any of them, on the one hand, and the directors, officers and stockholders of the Company or, to the Company’s
knowledge, the Subsidiaries, on the other hand, that is required by the Securities Act to be described in the Registration Statement
and the Prospectus that is not so described; (iii) no relationship, direct or indirect, exists between or among the Company or
the Subsidiaries or any affiliate of them, on the one hand, and the directors, officers, stockholders or directors of the Company
or, to the Company’s knowledge, the Subsidiaries, on the other hand, that is required by the rules of FINRA to be described
in the Registration Statement and the Prospectus that is not so described; (iv) there are no material outstanding loans or advances
or material guarantees of indebtedness by the Company or, to the Company’s knowledge, the Subsidiaries to or for the benefit
of any of their respective officers or directors or any of the members of the families of any of them; and (v) the Company has
not offered, or caused any placement agent to offer, Common Stock to any person with the intent to influence unlawfully (A) a customer
or supplier of the Company or the Subsidiaries to alter the customer’s or supplier’s level or type of business with
the Company or the Subsidiaries or (B) a trade journalist or publication to write or publish favorable information about the Company
or the Subsidiaries or any of their respective products or services, and, (vi) neither the Company nor the Subsidiaries nor, to
the Company’s knowledge, any employee or agent of the Company or the Subsidiaries has made any payment of funds of the Company
or the Subsidiaries or received or retained any funds in violation of any law, rule or regulation (including, without limitation,
the Foreign Corrupt Practices Act of 1977), which payment, receipt or retention of funds is of a character required to be disclosed
in the Registration Statement or the Prospectus.

 

oo.             
Status Under the Securities Act. The Company was not and is not an ineligible issuer as defined in Rule 405 at the
times specified in Rules 164 and 433 under the Securities Act in connection with the offering of the Placement Shares.

 

 

 

    	 	10	 

     

    

 

pp.             
No Misstatement or Omission in an Issuer Free Writing Prospectus. Each Issuer Free Writing Prospectus, as of its
issue date and as of each Applicable Time (as defined in Section 25 below), did not, does not and will not include any information
that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including
any incorporated document deemed to be a part thereof that has not been superseded or modified. The foregoing sentence does not
apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information
furnished to the Company by the Agent specifically for use therein.

 

qq.             
No Conflicts. Neither the execution of this Agreement by the Company, nor the issuance, offering or sale of the Placement
Shares by the Company, nor the consummation of any of the transactions contemplated herein and therein, nor the compliance by the
Company with the terms and provisions hereof and thereof will conflict with, or will result in a breach of, any of the terms and
provisions of, or has constituted or will constitute a default under, or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any contract or other agreement
to which the Company may be bound or to which any of the property or assets of the Company is subject, except (i) such conflicts,
breaches or defaults as may have been waived and (ii) such conflicts, breaches and defaults that would not reasonably be expected
to have a Material Adverse Effect; nor will such action result (x) in any violation of the provisions of the organizational or
governing documents of the Company, or (y) in any material violation of the provisions of any statute or any order, rule or regulation
applicable to the Company or of any court or of any federal, state or other regulatory authority or other government body having
jurisdiction over the Company, except where such violation would not reasonably be expected to have a Material Adverse Effect.

 

rr.                
Compliance with Applicable Laws. Except as previously disclosed in the Company’s filings with the Commission,
the Company and the Subsidiaries: (A) are and at all times have been in material compliance with all statutes, rules and regulations
applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling,
promotion, sale, offer for sale, storage, import, export or disposal of any product under development, manufactured or distributed
by the Company or the Subsidiaries (“Applicable Laws”), (b) have not received any Form 483 from the FDA, notice
of adverse finding, warning letter, or other written correspondence or notice from the FDA, the European Medicines Agency (the
“EMA”), or any other federal, state, local or foreign governmental or regulatory authority alleging or asserting
material noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable Laws (“Authorizations”), which would, individually
or in the aggregate, result in a Material Adverse Effect; (C) possess all material Authorizations and such Authorizations are valid
and in full force and effect and neither the Company nor the Subsidiaries is in material violation of any term of any such Authorizations;
(D) have not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or
other action from the FDA, the EMA, or any other federal, state, local or foreign governmental or regulatory authority or third
party alleging that any Company product, operation or activity is in material violation of any Applicable Laws or Authorizations
and has no knowledge that the FDA, the EMA, or any other federal, state, local or foreign governmental or regulatory authority
or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding against the Company;
(E) have not received notice that the FDA, EMA, or any other federal, state, local or foreign governmental or regulatory authority
has taken, is taking or intends to take action to limit, suspend, modify or revoke any material Authorizations and has no knowledge
that the FDA, EMA, or any other federal, state, local or foreign governmental or regulatory authority is considering such action;
and (F) have filed, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions
and supplements or amendments as required by any Applicable Laws or Authorizations except where the failure to file such reports,
documents, forms, notices, applications, records, claims, submissions and supplements or amendments would not result in a Material
Adverse Effect, and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements
or amendments were materially complete and correct on the date filed (or were corrected or supplemented by a subsequent submission).

 

ss.               
Clinical Studies. All animal and other preclinical studies and clinical trials conducted by the Company or on behalf
of the Company were, and, if still pending are, to the Company’s knowledge, being conducted in all material respects in compliance
with all Applicable Laws and in accordance with experimental protocols, procedures and controls generally used by qualified experts
in the preclinical study and clinical trials of new drugs and biologics as applied to comparable products to those being developed
by the Company; the descriptions of the results of such preclinical studies and clinical trials contained in the Registration Statement
and the Prospectus are accurate in all material respects, and, except as set forth in the Registration Statement and the Prospectus,
the Company has no knowledge of any other clinical trials or preclinical studies, the results of which reasonably call into question
the clinical trial or preclinical study results described or referred to in the Registration Statement and the Prospectus when
viewed in the context in which such results are described; and the Company has not received any written notices or correspondence
from the FDA, the EMA, or any other domestic or foreign governmental agency requiring the termination or suspension of any preclinical
studies or clinical trials conducted by or on behalf of the Company that are described in the Registration Statement and the Prospectus
or the results of which are referred to in the Registration Statement and the Prospectus.

 

 

 

 

    	 	11	 

     

    

 

tt.                 
Compliance Program. The Company has established and administers a compliance program applicable to the Company, to
assist the Company and the directors, officers and employees of the Company in complying with applicable regulatory guidelines
(including, without limitation, those administered by the FDA, the EMA, and any other foreign, federal, state or local governmental
or regulatory authority performing functions similar to those performed by the FDA or EMA); except where such noncompliance would
not reasonably be expected to have a Material Adverse Effect.

 

uu.             
OFAC.

 

(i)        
The Company represents that, neither the Company nor any Subsidiary (collectively, the “Entity”) or any
director, officer, employee, agent, affiliate or representative of the Entity, is a government, individual, or entity (in this
paragraph (ss), “Person”) that is, or is owned or controlled by a Person that is:

 

(a)            
the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign
Assets Control (“OFAC”), the United Nations Security Council (“UNSC”), the European Union
(“EU”), Her Majesty’s Treasury (“HMT”), or other relevant sanctions authority (collectively,
“Sanctions”), nor

 

(b)    
located, organized or resident in a country or territory that is the subject of Sanctions.

 

(ii) The
Entity represents and covenants that it will not, directly or indirectly, knowingly use the proceeds of the offering, or lend,
contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

 

(a)            
to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the
time of such funding or facilitation, is the subject of Sanctions; or

 

(b)    
in any other manner that will result in a violation of Sanctions by any Person (including any Person participating
in the offering, whether as underwriter, advisor, investor or otherwise).

 

(iii) The
Entity represents and covenants that, except as detailed in the Prospectus, for the past 5 years, it has not knowingly engaged
in, is not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or
territory, that at the time of the dealing or transaction is or was the subject of Sanctions.

 

vv.             
Stock Transfer Taxes. On each Settlement Date, all stock transfer or other taxes (other than income taxes) which
are required to be paid in connection with the sale and transfer of the Placement Shares to be sold hereunder will be, or will
have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied
with by the Company.

 

Any certificate
signed by an officer of the Company and delivered to the Agent or to counsel for the Agent pursuant to or in connection with this
Agreement shall be deemed to be a representation and warranty by the Company, as applicable, to the Agent as to the matters set
forth therein.

 

7.                    
Covenants of the Company. The Company covenants and agrees with the Agent that:

 

 

 

 

    	 	12	 

     

    

 

a.                  
Registration Statement Amendments. After the date of this Agreement and during any period in which a prospectus relating
to any Placement Shares is required to be delivered by the Agent under the Securities Act (including in circumstances where such
requirement may be satisfied pursuant to Rule 172 under the Securities Act) (the “Prospectus Delivery Period”)
(i) the Company will notify the Agent promptly of the time when any subsequent amendment to the Registration Statement, other than
documents incorporated by reference or amendments not related to any Placement, has been filed with the Commission and/or has become
effective or any subsequent supplement to the Prospectus has been filed and of any request by the Commission for any amendment
or supplement to the Registration Statement or Prospectus related to the Placement or for additional information related to the
Placement, (ii) the Company will prepare and file with the Commission, promptly upon the Agent’s request, any amendments
or supplements to the Registration Statement or Prospectus that, in the Agent’s reasonable opinion, may be necessary or advisable
in connection with the distribution of the Placement Shares by the Agent (provided, however, that the failure of the Agent
to make such request shall not relieve the Company of any obligation or liability hereunder, or affect the Agent’s right
to rely on the representations and warranties made by the Company in this Agreement and provided, further, that the only remedy
the Agent shall have with respect to the failure to make such filing shall be to cease making sales under this Agreement until
such amendment or supplement is filed); and (iii) the Company will cause each amendment or supplement to the Prospectus to be filed
with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act or, in the case of any
document to be incorporated therein by reference, to be filed with the Commission as required pursuant to the Exchange Act, within
the time period prescribed (the determination to file or not file any amendment or supplement with the Commission under this Section
7(a), based on the Company’s reasonable opinion or reasonable objections, shall be made exclusively by the Company).
Notwithstanding the foregoing, the Company will not file any amendment or supplement to the Registration Statement or Prospectus
relating to the Placement Shares or a security convertible into the Placement Shares unless a copy thereof has been submitted to
the Agent within a reasonable period of time before the filing and the Agent has not reasonably objected thereto (provided,
however, that (A) the failure of the Agent to make such objection shall not relieve the Company of any obligation or liability
hereunder, or affect the Agent’s right to rely on the representations and warranties made by the Company in this Agreement
and (B) the Company has no obligation to provide the Agent any advance copy of such filing or to provide the Agent an opportunity
to object to such filing if the filing does not name the Agent or does not related to the transaction herein provided; and provided,
further, that the only remedy the Agent shall have with respect to the failure by the Company to obtain such consent shall be to
cease making sales under this Agreement) and the Company will furnish to the Agent at the time of filing thereof a copy of any
document that upon filing is deemed to be incorporated by reference into the Registration Statement or Prospectus, except for those
documents available via EDGAR.

 

b.                 
Notice of Commission Stop Orders. The Company will advise the Agent, promptly after it receives notice or obtains
knowledge thereof, of the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose; and it will promptly use its commercially reasonable
efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued. The Company
will advise the Agent promptly after it receives any request by the Commission for any amendments to the Registration Statement
or any amendment or supplements to the Prospectus or any Issuer Free Writing Prospectus or for additional information related to
the offering of the Placement Shares or for additional information related to the Registration Statement, the Prospectus or any
Issuer Free Writing Prospectus.

 

c.                  
Delivery of Prospectus; Subsequent Changes. During the Prospectus Delivery Period, the Company will use its commercially
reasonable efforts to comply with all requirements imposed upon it by the Securities Act, as from time to time in force, and to
file on or before their respective due dates all reports and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange
Act. If the Company has omitted any information from the Registration Statement pursuant to Rule 430A under the Securities Act,
it will use its commercially reasonable efforts to comply with the provisions of and make all requisite filings with the Commission
pursuant to said Rule 430A and to notify the Agent promptly of all such filings. If during the Prospectus Delivery Period any event
occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not
misleading, or if during such Prospectus Delivery Period it is necessary to amend or supplement the Registration Statement or Prospectus
to comply with the Securities Act, the Company will promptly notify the Agent to suspend the offering of Placement Shares during
such period and the Company will promptly amend or supplement the Registration Statement or Prospectus (at the expense of the Company)
so as to correct such statement or omission or effect such compliance; provided, however, that the Company may delay the
filing of any amendment or supplement, if in the judgment of the Company, it is in the best interest of the Company.

 

d.                 
Listing of Placement Shares. During the Prospectus Delivery Period, the Company will use its commercially reasonable
efforts to cause the Placement Shares to be listed on the Exchange and to qualify the Placement Shares for sale under the securities
laws of such jurisdictions in the United States as the Agent reasonably designates and to continue such qualifications in effect
so long as required for the distribution of the Placement Shares; provided, however, that the Company shall not be required
in connection therewith to qualify as a foreign corporation or dealer in securities or file a general consent to service of process
in any jurisdiction.

 

 

 

    	 	13	 

     

    

 

e.                  
Delivery of Registration Statement and Prospectus. The Company will make available via EDGAR, or furnish to the Agent
and its counsel, upon written or oral request, (at the reasonable expense of the Company) copies of the Registration Statement,
the Prospectus (including all documents incorporated by reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during the Prospectus Delivery Period (including all documents filed
with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon as reasonably
practicable and in such quantities as the Agent may from time to time reasonably request and, at the Agent’s request, will
also furnish copies of the Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided,
however, that the Company shall not be required to furnish any document (other than the Prospectus) to the Agent to the extent
such document is available on EDGAR.

 

f.                   
Earnings Statement. The Company will make generally available to its security holders as soon as practicable, but
in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement covering
a 12-month period that satisfies the provisions of Section 11(a) and Rule 158 of the Securities Act.

 

g.                 
Use of Proceeds. The Company will use the Net Proceeds received as described in the Prospectus or Prospectus Supplement
in the section entitled “Use of Proceeds.”

 

h.                 
Notice of Other Sales. Without the prior written consent of the Agent, the Company will not, directly or indirectly,
offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Stock (other than the Placement
Shares offered pursuant to this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights
to purchase or acquire, Common Stock during the period beginning on the date on which any Placement Notice is delivered to the
Agent hereunder and ending on the third (3rd) Trading Day immediately following the final Settlement Date with respect to Placement
Shares sold pursuant to such Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of
all Placement Shares covered by a Placement Notice, the date of such suspension or termination); and will not directly or indirectly
in any other “at the market” or continuous equity transaction offer to sell, sell, contract to sell, grant any option
to sell or otherwise dispose of any Common Stock (other than the Placement Shares offered pursuant to this Agreement) or securities
convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire, Common Stock prior to the termination
of this Agreement; provided, however, that such restrictions will not be required in connection with the Company’s
issuance or sale of (i) Common Stock, options to purchase Common Stock or Common Stock issuable upon the exercise of options, pursuant
to any employee or director stock option or benefits plan, stock ownership plan or dividend reinvestment plan (but not Common Stock
subject to a waiver to exceed plan limits in its dividend reinvestment plan) of the Company whether now in effect or hereafter
implemented; (ii) Common Stock issuable upon conversion of securities or the exercise of warrants, options or other rights in effect
or outstanding, and disclosed in filings by the Company available on EDGAR or otherwise in writing to the Agent, and (iii) Common
Stock, or securities convertible into or exercisable for Common Stock, offered and sold in a privately negotiated transaction to
vendors, customers, strategic partners or potential strategic partners or other investors conducted in a manner so as not to be
integrated with the offering of Placement Shares hereby.

 

i.                   
Change of Circumstances. The Company will, at any time during the pendency of a Placement Notice advise the Agent
promptly after it shall have received notice or obtained knowledge thereof, of any information or fact that would alter or affect
in any material respect any opinion, certificate, letter or other document required to be provided to the Agent pursuant to this
Agreement.

 

j.                   
Due Diligence Cooperation. During the term of this Agreement, the Company will cooperate with any reasonable due
diligence review conducted by the Agent or its representatives in connection with the transactions contemplated hereby, including,
without limitation, providing information and making available documents and senior corporate officers, during regular business
hours and at the Company’s principal offices, as the Agent may reasonably request.

 

k.                 
Required Filings Relating to Placement of Placement Shares. The Company agrees that on such dates as the Securities
Act shall require, the Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule
424(b) under the Securities Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus
supplement will set forth, within the relevant period, the amount of Placement Shares sold through the Agent, the Net Proceeds
to the Company and the compensation payable by the Company to the Agent with respect to such Placement Shares, and (ii) deliver
such number of copies of each such prospectus supplement to each exchange or market on which such sales were effected as may be
required by the rules or regulations of such exchange or market.

 

 

 

    	 	14	 

     

    

 

l.                   
Representation Dates; Certificate. Each time during the term of this Agreement that the Company:

 

(i)        
amends or supplements (other than a prospectus supplement relating solely to an offering of securities other than the Placement
Shares) the Registration Statement or the Prospectus relating to the Placement Shares by means of a post-effective amendment, sticker,
or supplement but not by means of incorporation of documents by reference into the Registration Statement or the Prospectus relating
to the Placement Shares;

 

(ii)      
files an annual report on Form 10-K under the Exchange Act (including any Form 10-K/A containing amended financial information
or a material amendment to the previously filed Form 10-K);

 

(iii)     
files its quarterly reports on Form 10-Q under the Exchange Act; or

 

(iv)      
files a current report on Form 8-K containing amended financial information (other than information “furnished”
pursuant to Items 2.02 or 7.01 of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to the reclassification
of certain properties as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144) under
the Exchange Act;

 

(Each date of filing
of one or more of the documents referred to in clauses (i) through (iv) shall be a “Representation Date.”)
the Company shall furnish the Agent (but in the case of clause (iv) above only if the Agent determines that the information
contained in such Form 8-K is material) with a certificate, in the form attached hereto as Exhibit 7(1). The
requirement to provide a certificate under this Section 7(1) shall be waived for any Representation Date occurring at
a time at which no Placement Notice is pending, which waiver shall continue until the earlier to occur of the date the
Company delivers a Placement Notice hereunder (which for such calendar quarter shall be considered a Representation Date) and
the next occurring Representation Date on which the Company files its annual report on Form 10-K. Notwithstanding the
foregoing, (i) upon the delivery of the first Placement Notice hereunder and (ii) if the Company subsequently decides to sell
Placement Shares following a Representation Date when the Company relied on such waiver and did not provide the Agent with a
certificate under this Section 7(1), then before the Agent sells any Placement Shares, the Company shall provide the
Agent with a certificate, in the form attached hereto as Exhibit 7(1), dated the date of the Placement Notice.

 

m.               
Legal Opinion. On or prior to the date of the first Placement Notice given hereunder the Company shall cause to be
furnished to the Agent a written opinion and a negative assurance letter of Trombly Business Law, PC (“Company Counsel”),
or other counsel reasonably satisfactory to the Agent. Thereafter, within five (5) Trading Days of each Representation Date with
respect to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(l) for which no waiver
is applicable, the Company shall cause to be furnished to the Agent a written letter of Company Counsel, modified, as necessary,
to relate to the Registration Statement and the Prospectus as then amended or supplemented; provided that, in lieu of such
negative assurance for subsequent periodic filings under the Exchange Act, Company Counsel may furnish the Agent with a letter
(a “Reliance Letter”) to the effect that the Agent may rely on the negative assurance letter previously delivered
under this Section 7(m) to the same extent as if it were dated the date of such letter (except that statements in such prior letter
shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented as of the date of the Reliance
Letter)

 

n.                 
Comfort Letter. On or prior to the date of the first Placement Notice given hereunder and within five (5) Trading
Days after each subsequent Representation Date, other than pursuant to Section 7(l)(iii), the Company shall cause its independent
accountants to furnish the Agent letters (the “Comfort Letters”), dated the date the Comfort Letter is delivered,
which shall meet the requirements set forth in this Section 7(n); provided, that if requested by the Agent, the Company
shall cause a Comfort Letter to be furnished to the Agent within ten (10) Trading Days of such request following the date of occurrence
of any restatement of the Company’s financial statements. The Comfort Letter from the Company’s independent accountants
shall be in a form and substance reasonably satisfactory to the Agent, (i) confirming that they are an independent public accounting
firm within the meaning of the Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of such
firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters”
to underwriters in connection with registered public offerings (the first such letter, the “Initial Comfort Letter”)
and (iii) updating the Initial Comfort Letter with any information that would have been included in the Initial Comfort Letter
had it been given on such date and modified as necessary to relate to the Registration Statement and the Prospectus, as amended
and supplemented to the date of such letter.

 

o.                 
Market Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result
in, or that constitutes or would reasonably be expected to constitute, the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of Common Stock or (ii) sell, bid for, or purchase Common Stock in violation of
Regulation M, or pay anyone any compensation for soliciting purchases of the Placement Shares other than the Agent.

 

 

 

 

    	 	15	 

     

    

 

p.                 
Investment Company Act. The Company will conduct its affairs in such a manner so as to reasonably ensure that neither
it nor the Subsidiaries will be or become, at any time prior to the termination of this Agreement, an “investment company,”
as such term is defined in the Investment Company Act.

 

q.                 
No Offer to Sell. Other than an Issuer Free Writing Prospectus approved in advance by the Company and the Agent in
its capacity as agent hereunder pursuant to Section 23, neither the Agent nor the Company (including its agents and representatives,
other than the Agent in their capacity as such) will make, use, prepare, authorize, approve or refer to any written communication
(as defined in Rule 405), required to be filed with the Commission, that constitutes an offer to sell or solicitation of an offer
to buy Placement Shares hereunder.

 

r.                   
Sarbanes-Oxley Act. The Company will maintain and keep accurate books and records reflecting its assets and maintain
internal accounting controls in a manner designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with GAAP and including those policies and procedures
that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation
of the Company’s consolidated financial statements in accordance with GAAP, (iii) that receipts and expenditures of the Company
are being made only in accordance with management’s and the Company’s directors’ authorization, and (iv) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on its financial statements. The Company will maintain such controls and other procedures,
including, without limitation, those required by Sections 302 and 906 of the Sarbanes-Oxley Act, and the applicable regulations
thereunder that are designed to ensure that information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s
rules and forms, including, without limitation, controls and procedures designed to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive officer and principal financial officer, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure and to ensure that material information relating to the
Company or the Subsidiaries is made known to them by others within those entities, particularly during the period in which such
periodic reports are being prepared.

 

8.                     
Representations and Covenants of the Agent. The Agent represents and warrants that it is duly registered as a broker-dealer
under FINRA, the Exchange Act and the applicable statutes and regulations of each state in which the Placement Shares will be offered
and sold, except such states in which the Agent is exempt from registration or such registration is not otherwise required. The
Agent shall continue, for the term of this Agreement, to be duly registered as a broker-dealer under FINRA, the Exchange Act and
the applicable statutes and regulations of each state in which the Placement Shares will be offered and sold, except such states
in which the Agent is exempt from registration or such registration is not otherwise required, during the term of this Agreement.
The Agent shall comply with all applicable law and regulations, including but not limited to Regulation M, in connection with the
transactions contemplated by this Agreement, including the issuance and sale through the Agent of the Placement Shares.

 

9.                     
Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, filing, including any fees required by the Commission, and printing of the Registration
Statement (including financial statements and exhibits) as originally filed and of each amendment and supplement thereto and each
Free Writing Prospectus, in such number as the Agent shall deem reasonably necessary, (ii) the printing and delivery to the Agent
of this Agreement and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery
of the Placement Shares, (iii) the preparation, issuance and delivery of the certificates, if any, for the Placement Shares to
the Agent, including any stock or other transfer taxes and any capital duties, stamp duties or other duties or taxes payable upon
the sale, issuance or delivery of the Placement Shares to the Agent, (iv) the fees and disbursements of the counsel, accountants
and other advisors to the Company, (v) the reasonable fees and disbursements of counsel to the Agent up to a maximum of $25,000
incurred in connection with the drafting, negotiation, and implementation of this Agreement, including any amendments thereto,
and related documentation and filings; (vi) the fees and expenses of the transfer agent and registrar for the Common Stock, (vii)
the filing fees incident to any review by FINRA of the terms of the sale of the Placement Shares, and (viii) the fees and expenses
incurred in connection with the listing of the Placement Shares on the Exchange.

 

10.                  
Conditions to the Agent’s Obligations. The obligations of the Agent hereunder with respect to a Placement will
be subject to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the
due performance by the Company of its obligations hereunder, to the completion by the Agent of a due diligence review satisfactory
to it in its reasonable judgment, and to the continuing satisfaction (or waiver by the Agent in its sole discretion) of the following
additional conditions:

 

 

 

    	 	16	 

     

    

 

a.                  
Registration Statement Effective. The Registration Statement shall have become effective and shall be available for
the sale of all Placement Shares contemplated to be issued by any Placement Notice.

 

b.                 
No Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company
of any request for additional information from the Commission or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement, the response to which would, in the Company’s best judgment, require any
post-effective amendments or supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement
or the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Placement Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; or (iv) the occurrence of any event that makes any material statement made in
the Registration Statement or the Prospectus or any material document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in the Registration Statement, the Prospectus or documents
so that, in the case of the Registration Statement, it will not contain any materially 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, that in
the case of the Prospectus, it will not contain any materially 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, in the light of the circumstances under which they
were made, not misleading.

 

c.                  
No Misstatement or Material Omission. The Agent shall not have advised the Company that the Registration Statement
or Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in the Agent’s reasonable
opinion is material, or omits to state a fact that in the Agent’s reasonable opinion is material and is required to be stated
therein or is necessary to make the statements therein not misleading.

 

d.                 
Material Changes. Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with
the Commission, there shall not have been any Material Adverse Effect, or any development that could reasonably be expected to
cause a Material Adverse Effect, or a downgrading in or withdrawal of the rating assigned to any of the Company’s securities
(other than asset backed securities) by any rating organization or a public announcement by any rating organization that it has
under surveillance or review its rating of any of the Company’s securities (other than asset backed securities), the effect
of which, in the case of any such action by a rating organization described above, in the reasonable judgment of the Agent (without
relieving the Company of any obligation or liability it may otherwise have), is so material as to make it impracticable or inadvisable
to proceed with the offering of the Placement Shares on the terms and in the manner contemplated in the Prospectus.

 

e.                  
Legal Opinion. The Agent shall have received the opinions and negative assurances of Company Counsel required to
be delivered pursuant to Section 7(m) on or before the date on which such delivery of such opinions are required pursuant
to Section 7(m).

 

f.                   
Comfort Letter. The Agent shall have received the Comfort Letter required to be delivered pursuant Section 7(n)
on or before the date on which such delivery of such letter is required pursuant to Section 7(n).

 

g.                 
Representation Certificate. The Agent shall have received the certificate required to be delivered pursuant to Section
7(1) on or before the date on which delivery of such certificate is required pursuant to Section 7(1).

 

h.                 
Secretary’s Certificate. On or prior to the first Representation Date, the Agent shall have received a certificate,
signed on behalf of the Company by its corporate Secretary, in form and substance reasonably satisfactory to the Agent and its
counsel.

 

i.                   
No Suspension. Trading in the Common Stock shall not have been suspended on the Exchange and the Common Stock shall
not have been delisted from the Exchange.

 

j.                   
Other Materials. On each date on which the Company is required to deliver a certificate pursuant to Section 7(1),
the Company shall have furnished to the Agent such appropriate further information, certificates and documents as the Agent may
reasonably request. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof.
The Company will furnish the Agent with such conformed copies of such opinions, certificates, letters and other documents as the
Agent shall reasonably request.

 

 

 

    	 	17	 

     

    

 

k.                 
Securities Act Filings Made. All filings with the Commission required by Rule 424 under the Securities Act to have
been filed prior to the issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed
for such filing by Rule 424.

 

l.                   
Approval for Listing. The Placement Shares shall either have been approved for listing on the Exchange, subject only
to notice of issuance, or the Company shall have filed an application for listing of the Placement Shares on the Exchange at, or
prior to, the issuance of any Placement Notice.

 

m.               
No Termination Event. There shall not have occurred any event that would permit the Agent to terminate this Agreement
pursuant to Section 13(a).

 

11.                  
Indemnification and Contribution.

 

(a)       Company
Indemnification. The Company agrees to indemnify and hold

harmless the Agent, its partners, members,
directors, officers, employees and agents and each person, if any, who controls the Agent within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:

 

(i)            
against any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, arising
out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material
fact included in any related Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

 

(ii)          
against any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, to the
extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged
untrue statement or omission; provided that (subject to Section 11(d) below) any such settlement is effected with the written
consent of the Company, which consent shall not unreasonably be delayed or withheld; and

 

(iii)         against
any and all expense whatsoever, as incurred (including the actual fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above, provided,
however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent
arising, directly or indirectly, out of any untrue statement or omission or alleged untrue statement or omission made solely
in reliance upon and in conformity with written information furnished to the Company by the Agent expressly for use in the
Registration Statement (or any amendment thereto), or in any related Issuer Free Writing Prospectus or the Prospectus (or any
amendment or supplement thereto).

 

(b)       the
Agent Indemnification. The Agent agrees to indemnify and hold harmless the Company and its directors and each officer of the
Company who signed the Registration Statement, and each person, if any, who (i) controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with the Company
against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 11(a), as
incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendments thereto) or in any related Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with information relating to the Agent and furnished to the Company in writing by the
Agent expressly for use therein.

 

 

 

    	 	18	 

     

    

 

(c)       Procedure.
Any party that proposes to assert the right to be indemnified under this Section 11 will, promptly after receipt of notice
of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties
under this Section 11, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers
served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from (i) any liability that
it might have to any indemnified party otherwise than under this Section 11 and (ii) any liability that it may have to any
indemnified party under the foregoing provision of this Section 11 unless, and only to the extent that, such omission results
in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and,
to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred
by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in
any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which
case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or
(4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges
of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties
shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all
such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party
promptly after the indemnifying party receives a written invoice relating to fees, disbursements and other charges in reasonable
detail. An indemnifying party will not, in any event, be liable for any settlement of any action or claim effected without its
written consent. No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated
by this Section 11 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent
(1) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation,
proceeding or claim and (2) does not include a statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.

 

(d)       Contribution.
In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 11 is applicable in accordance with its terms but for any reason is held to be unavailable from
the Company or the Agent, the Company and the Agent will contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons
other than the Agent, such as persons who control the Company within the meaning of the Securities Act or the Exchange Act, officers
of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) to
which the Company and the Agent may be subject in such proportion as shall be appropriate to reflect the relative benefits received
by the Company on the one hand and the Agent on the other hand. The relative benefits received by the Company on the one hand and
the Agent on the other hand shall be deemed to be in the same proportion as the total Net Proceeds from the sale of the Placement
Shares (before deducting expenses) received by the Company bear to the total compensation received by the Agent (before deducting
expenses) from the sale of Placement Shares on behalf of the Company. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate
to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on
the one hand, and the Agent, on the other hand, with respect to the statements or omission that resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering.
Such relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the
Agent, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Agent agree that it would not be just and equitable if contributions pursuant to this
Section 11(d) were to be determined by pro rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this Section 11(d) shall
be deemed to include, for the purpose of this Section 11(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim to the extent consistent with Section 11(c)
hereof. Notwithstanding the foregoing provisions of this Section 11(d), the Agent shall not be required to contribute any
amount in excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 11(d), any person who controls a party to this Agreement
within the meaning of the Securities Act or the Exchange Act, and any officers, directors, partners, employees or agents of the
Agent, will have the same rights to contribution as that party, and each officer and director of the Company who signed the Registration
Statement will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim
for contribution may be made under this Section 11(d), will notify any such party or parties from whom contribution may
be sought, but the omission to so notify will not relieve that party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 11(d) except to the extent that the failure to so notify such other party
materially prejudiced the substantive rights or defenses of the party from whom contribution is sought. Except for a settlement
entered into pursuant to the last sentence of Section 11(c) hereof, no party will be liable for contribution with respect
to any action or claim settled without its written consent if such consent is required pursuant to Section 11(c) hereof.

 

 

    	 	19	 

     

    

 

12.                  
Representations and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section
11 of this Agreement and all representations and warranties of the Company herein or in certificates delivered pursuant hereto
shall survive, as of their respective dates, regardless of (i) any investigation made by or on behalf of the Agent, any controlling
persons, or the Company (or any of their respective officers, directors or controlling persons), (ii) delivery and acceptance of
the Placement Shares and payment therefor or (iii) any termination of this Agreement.

 

13.                  
Termination.

 

a.                  
the Agent may terminate this Agreement, by written notice to the Company, as hereinafter specified at any time (1) if there
has been, since the time of execution of this Agreement or since the date as of which information is given in the Prospectus, any
Material Adverse Effect, or any development that is reasonably likely to have a Material Adverse Effect or, in the reasonable judgment
of the Agent, is material and adverse and makes it impractical or inadvisable to market the Placement Shares or to enforce contracts
for the sale of the Placement Shares, (2) if there has occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or international political, financial or economic conditions,
in each case the effect of which is such as to make it, in the reasonable judgment of the Agent, impracticable or inadvisable to
market the Placement Shares or to enforce contracts for the sale of the Placement Shares, (3) if trading in the Common Stock has
been suspended or limited by the Commission or the Exchange, or if trading generally on the Exchange has been suspended or limited,
or minimum prices for trading have been fixed on the Exchange, (4) if any suspension of trading of any securities of the Company
on any exchange or in the over-the-counter market shall have occurred and be continuing, (5) if a major disruption of securities
settlements or clearance services in the United States shall have occurred and be continuing, or (6) if a banking moratorium has
been declared by either U.S. Federal or New York authorities. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution),
Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury
Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.
If the Agent elects to terminate this Agreement as provided in this Section 13(a), the Agent shall provide the required notice
as specified in Section 14 (Notices).

 

b.                 
The Company shall have the right, by giving five (5) days notice as hereinafter specified to terminate this Agreement in
its sole discretion at any time after the date of this Agreement. Any such termination shall be without liability of any party
to any other party except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and
Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time;
Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding
such termination.

 

c.                  
the Agent shall have the right, by giving five (5) days notice as hereinafter specified to terminate this Agreement in its
sole discretion at any time after the date of this Agreement. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution),
Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury
Trial) and Section 19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.

 

d.                 
Unless earlier terminated pursuant to this Section 13, this Agreement shall automatically terminate upon the issuance
and sale of all of the Placement Shares through the Agent on the terms and subject to the conditions set forth herein except that
the provisions of Section 9 (Payment of Expenses), Section 11 (Indemnification and Contribution), Section 12
(Representations and Agreements to Survive Delivery), Section 18 (Governing Law and Time; Waiver of Jury Trial) and Section
19 (Consent to Jurisdiction) hereof shall remain in full force and effect notwithstanding such termination.

 

e.                  
This Agreement shall remain in full force and effect unless terminated pursuant to Sections 13(a), (b), (c),
or (d) above or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual
agreement shall in all cases be deemed to provide that Section 9 (Payment of Expenses), Section 11 (Indemnification
and Contribution), Section 12 (Representations and Agreements to Survive Delivery), Section 18 (Governing Law and
Time; Waiver of Jury Trial) and Section 19 (Consent to Jurisdiction) shall remain in full force and effect. Upon termination
of this Agreement, the Company shall not have any liability to the Agent for any discount, commission or other compensation with
respect to any Placement Shares not otherwise sold by the Agent under this Agreement.

 

 

 

    	 	20	 

     

    

 

f.                   
Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however,
that such termination shall not be effective until the close of business on the date of receipt of such notice by the Agent or
the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares,
such Placement Shares shall settle in accordance with the provisions of this Agreement.

 

14.                  
Notices. All notices or other communications required or permitted to be given by any party to any other party pursuant
to the terms of this Agreement shall be in writing, unless otherwise specified, and if sent to the Agent, shall be delivered to:

 

B. Riley FBR, Inc.

299 Park Avenue

New York, NY 10171

Attention:General Counsel

Telephone: (212) 457-9947

Email:atmdesk@brileyfbr.com

 

with a copy to:

 

Duane Morris LLP

One Riverfront Plaza

1037 Raymond Boulevard, Suite 1800

Newark, New Jersey 07102-5429

Attention:James T. Seery

Telephone:(973) 424-2088

Email:jtseery@duanemorris.com

 

and if to the Company, shall be delivered to:

 

Sonoma Pharmaceuticals, Inc.

1129 N. McDowell Blvd.

Petaluma, CA 94954

Attention: Chief Financial Officer

Telephone: (707) 283-0550

Email: bmiller@sonomapharma.com

 

with a copy to:

 

Trombly Business Law, PC

1314 Main Street, Suite 102

Louisville, CO 80027

Attention: Amy Trombly

Telephone: (617) 243-0060 

Email: amy@tromblybusinesslaw.com

 

Each party to this
Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such
purpose. Each such notice or other communication shall be deemed given (i) when delivered personally, by email, or by verifiable
facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day
is not a Business Day, on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to a nationally-recognized
overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall mean any day
on which the Exchange and commercial banks in the City of New York are open for business.

 

 

 

    	 	21	 

     

    

 

An electronic communication
(“Electronic Notice”) shall be deemed written notice for purposes of this Section 14 if sent to the electronic
mail address specified by the receiving party under separate cover. Electronic Notice shall be deemed received at the time the
party sending Electronic Notice receives confirmation of receipt by the receiving party. Any party receiving Electronic Notice
may request and shall be entitled to receive the notice on paper, in a nonelectronic form (“Nonelectronic Notice”)
which shall be sent to the requesting party within ten (10) days of receipt of the written request for Nonelectronic Notice.

 

15.                  
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and the Agent
and their respective successors and the affiliates, controlling persons, officers and directors referred to in Section 11
hereof. References to any of the parties contained in this Agreement shall be deemed to include the successors and permitted assigns
of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other party.

 

16.                  
Adjustments for Stock Splits. The parties acknowledge and agree that all share-related numbers contained in this
Agreement shall be adjusted to take into account any share consolidation, stock split, stock dividend, corporate domestication
or similar event effected with respect to the Placement Shares.

 

17.                  
Entire Agreement; Amendment; Severability. This Agreement (including all schedules and exhibits attached hereto and
Placement Notices issued pursuant hereto) constitutes the entire agreement and supersedes all other prior and contemporaneous agreements
and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument executed by the Company and the Agent. In the event
that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable as written by a court of competent jurisdiction, then such provision shall be given full force and effect to the
fullest possible extent that it is valid, legal and enforceable, and the remainder of the terms and provisions herein shall be
construed as if such invalid, illegal or unenforceable term or provision was not contained herein, but only to the extent that
giving effect to such provision and the remainder of the terms and provisions hereof shall be in accordance with the intent of
the parties as reflected in this Agreement.

 

18.                  
GOVERNING LAW AND TIME; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS. SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

19.                  
CONSENT TO JURISDICTION. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH ANY TRANSACTION CONTEMPLATED HEREBY, 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
(CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT
AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.

 

20.                  
Use of Information. The Agent may not use any information gained in connection with this Agreement and the transactions
contemplated by this Agreement, including due diligence, to advise any party with respect to transactions not expressly approved
by the Company.

 

 

 

    	 	22	 

     

    

 

21.                  
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery of an executed Agreement by one party to the other
may be made by facsimile transmission.

 

22.                  
Effect of Headings. The section and Exhibit headings herein are for convenience only and shall not affect the construction
hereof.

 

23.                  
Permitted Free Writing Prospectuses.

 

The
Company represents, warrants and agrees that, unless it obtains the prior consent of the Agent, and the Agent represents, warrants
and agrees that, unless it obtains the prior consent of the Company, it has not made and will not make any offer relating to the
Placement Shares that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing
prospectus,” as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented
to by the Agent or by the Company, as the case may be, is hereinafter referred to as a “Permitted Free Writing Prospectus.”
The Company represents and warrants that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as
an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements
of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending
and record keeping. For the purposes of clarity, the parties hereto agree that all free writing prospectuses, if any, listed in
Exhibit 23 hereto are Permitted Free Writing Prospectuses.

 

24.                  
Absence of Fiduciary Relationship. The Company acknowledges and agrees that:

 

a.                  
the Agent is acting solely as agent in connection with the public offering of the Placement Shares and in connection with
each transaction contemplated by this Agreement and the process leading to such transactions, and no fiduciary or advisory relationship
between the Company or any of its respective affiliates, stockholders (or other equity holders), creditors or employees or any
other party, on the one hand, and the Agent, on the other hand, has been or will be created in respect of any of the transactions
contemplated by this Agreement, irrespective of whether or not the Agent has advised or is advising the Company on other matters,
and the Agent has no obligation to the Company with respect to the transactions contemplated by this Agreement except the obligations
expressly set forth in this Agreement;

 

b.                 
it is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions
contemplated by this Agreement;

 

c.                  
the Agent has not provided any legal, accounting, regulatory or tax advice with respect to the transactions contemplated
by this Agreement and it has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate;

 

d.                 
it is aware that the Agent and its affiliates are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and the Agent has no obligation to disclose such interests and transactions to the Company by
virtue of any fiduciary, advisory or agency relationship or otherwise; and

 

e.                  
it waives, to the fullest extent permitted by law, any claims it may have against the Agent for breach of fiduciary duty
or alleged breach of fiduciary duty in connection with the sale of Placement Shares under this Agreement and agrees that the Agent
shall not have any liability (whether direct or indirect, in contract, tort or otherwise) to it in respect of such a fiduciary
duty claim or to any person asserting a fiduciary duty claim on its behalf or in right of it or the Company, employees or creditors
of Company, other than in respect of the Agent’s obligations under this Agreement and to keep information provided by the
Company to the Agent and the Agent’s counsel confidential to the extent not otherwise publicly-available.

 

 

 

    	 	23	 

     

    

 

25.                  
Definitions.

 

As used
in this Agreement, the following terms have the respective meanings set forth below:

 

“Applicable
Time” means (i) each Representation Date and (ii) the time of each sale of any Placement Shares pursuant to this Agreement.

 

“Issuer
Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433, relating to
the Placement Shares that (1) is required to be filed with the Commission by the Company, (2) is a “road show” that
is a “written communication” within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission,
or (3) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Placement Shares or of the
offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or,
if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Securities Act.

 

“Rule
172,” “Rule 405,” “Rule 415,” “Rule 424,” “Rule 424(b),”
“Rule 430B,” and “Rule 433” refer to such rules under the Securities Act.

 

All references
in this Agreement to financial statements and schedules and other information that is “contained,” “included”
or “stated” in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other information that is incorporated by reference in the
Registration Statement or the Prospectus, as the case may be.

 

All references
in this Agreement to the Registration Statement, the Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to EDGAR; all references in this Agreement to any Issuer Free Writing
Prospectus (other than any Issuer Free Writing Prospectuses that, pursuant to Rule 433, are not required to be filed with the Commission)
shall be deemed to include the copy thereof filed with the Commission pursuant to EDGAR; and all references in this Agreement to
“supplements” to the Prospectus shall include, without limitation, any supplements, “wrappers” or similar
materials prepared in connection with any offering, sale or private placement of any Placement Shares by the Agent outside of the
United States.

 

[Remainder of the page intentionally left
blank]

 

 

    	 	24	 

     

    

 

If the foregoing correctly sets forth the
understanding between the Company and the Agent, please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between the Company and the Agent.

 

 

	 	       Very truly yours,
	 	 
	 	SONOMA PHARMACEUTICALS, INC.
	 	 
	 	By: 	/s/ Jim Schutz
	 	 	Name: Jim Schutz
Title: Chief Executive Officer
	 	 	 
	 	 	 
	 	ACCEPTED as of the date first-above written:
	 	 	 
	 	B. RILEY FBR, INC.
	 	 	 
	 	By:	/s/ Patrice McNicoll
	 	 	Name: Patrice McNicoll
	 	 	Title: Co-Head of Investment Banking
	 	 	 

 

 

 

 

 

 

    	 	25	 

     

    

SCHEDULE 1

 

___________________________________________

 

FORM
OF PLACEMENT NOTICE

 

___________________________________________

 

	 	From:	Sonoma Pharmaceuticals, Inc.
	 	 	 
	 	To:	B. Riley FBR, Inc.
	 	 	 
	 	Attention:	Patrice McNicoll
	 	 	 
	 	Subject:	At Market Issuance--Placement Notice

 

 

 

Gentlemen:

 

Pursuant
to the terms and subject to the conditions contained in the At Market Issuance Sales Agreement between Sonoma Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), and B. Riley FBR, Inc. (the “Agent”), dated
December 8, 2017, the Company hereby requests that the Agent sell up to [_______] shares of the Company’s Common Stock, $0.0001
par value per share, at a minimum market price of $per share, during the time period beginning [month, day, time] and ending
[month, day, time].

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	26	 

     

    

 

SCHEDULE 2

 

 

___________________________________________

 

Compensation

 

___________________________________________

 

 

The
Company shall pay to the Agent in cash, upon each sale of Placement Shares pursuant to this Agreement, an amount equal to 3.0%
of the aggregate gross proceeds from each sale of Placement Shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	27	 

     

    

 

SCHEDULE 3

 

___________________________________________

  

Notice Parties

 

___________________________________________

 

 

 

The Company

 

Jim Schutz

Bob Miller

John Dal Poggetto

 

with a copy to:

 

B. Riley FBR

 

Matthew Feinberg

Ryan Loforte

Patrice McNicoll

Keith Pompliano

 

with a copy to:

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	28	 

     

    

 

SCHEDULE 6(g)

 

___________________________________________

 

Subsidiaries

 

___________________________________________

 

Aquamed Technologies, Inc.

 

Oculus Technologies of Mexico, S.A. de C.V.

 

Sonoma Pharmaceuticals Netherlands B.V.

 

MicroMed Laboratories, Inc., Petaluma, CA*

 

*Inactive in terms of operation.

 

 

 

 

 

 

 

 

 

 

 

 

    	 	29	 

     

    

 

EXHIBIT 7(1)

Form of Representation Date Certificate 

 

______________, 20___

 

This Representation
Date Certificate (this “Certificate”) is executed and delivered in connection with Section 7(1) of the
At Market Issuance Sales Agreement (the “Agreement”), dated December 8, 2017, and entered into between Sonoma
Pharmaceuticals, Inc. (the “Company”) and B. Riley FBR, Inc. All capitalized terms used but not defined herein
shall have the meanings given to such terms in the Agreement.

 

The Company hereby
certifies as follows:

 

1.                    
As of the date of this Certificate, (i) the Registration Statement does 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 not misleading,
(ii) neither the Registration Statement nor the Prospectus 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, not misleading, and (iii) no event has occurred as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or misleading for this paragraph 1 to be true.

 

2.                    
Each of the representations and warranties of the Company contained in the Agreement were, when originally made, and are,
as of the date of this Certificate, true and correct in all material respects.

 

3.                    
Except as waived by the Agent in writing, each of the covenants required to be performed by the Company in the Agreement
on or prior to the date of the Agreement, this Representation Date, and each such other date prior to the date hereof as set forth
in the Agreement, has been duly, timely and fully performed in all material respects and each condition required to be complied
with by the Company on or prior to the date of the Agreement, this Representation Date, and each such other date prior to the date
hereof as set forth in the Agreement has been duly, timely and fully complied with in all material respects.

 

4.                    
Subsequent to the date of the most recent financial statements in the Prospectus, and except as described in the Prospectus,
including Incorporated Documents, there has been no Material Adverse Effect.

 

5.                    
No stop order suspending the effectiveness of the Registration Statement or of any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or threatened by any securities or other governmental authority
(including, without limitation, the Commission).

 

6.                     No
order suspending the effectiveness of the Registration Statement or the qualification or registration of the Placement Shares
under the securities or Blue Sky laws of any jurisdiction are in effect and no proceeding for such purpose is pending
before, or threatened, to the Company’s knowledge or in writing by, any securities or other governmental authority
(including, without limitation, the Commission).

 

 

 

 

    	 	30	 

     

    

 

The undersigned has executed
this Representation Date Certificate as of the date first written above.

 

	 	SONOMA PHARMACEUTICALS, INC.
	 	 
	 	By: ____________________________________
	 	 
	 	 
	 	Name: _________________________________
	 	Title: __________________________________
	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	31	 

     

    

 

 

EXHIBIT 23

 

Permitted Issuer Free Writing Prospectuses

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	32

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