Document:

Form of Purchase Agreement

 EXHIBIT 10.11 
 PURCHASE AGREEMENT 
 THIS PURCHASE AGREEMENT (“Agreement”) is made as of the
         day of             , 2007 by and among Interlink Electronics, Inc., a Delaware corporation (the “Company”), and the
Investors set forth on the signature pages affixed hereto (each an “Investor” and collectively the “Investors”). 
 Recitals 
 A. The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from
securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended; and 
 B. The Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, upon the terms and conditions stated in
this Agreement, (i) $5,000,000 in aggregate principal amount of the Company’s 8% Convertible Notes in the form attached hereto as Exhibit A (the “Notes”), which Notes are convertible into shares of the Company’s
Common Stock, par value $0.00001 per share (together with any securities into which such shares may be reclassified the “Common Stock”), at a conversion price of $1.26 per share (subject to adjustment), and (ii) warrants to purchase
an aggregate of 1,984,126 shares of Common Stock (subject to adjustment) at an exercise price of $1.51 per share (subject to adjustment) in the form attached hereto as Exhibit B (the “Warrants”); and 
 C. Contemporaneous with the sale of the Notes and Warrants, the parties hereto will execute and deliver a Registration Rights Agreement, in the form
attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws. 
 In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
 1.
Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below: 
 “Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls,
is controlled by, or is under common control with, such Person. 
 “Business Day” means a day, other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of business. 

 “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock. 
 “Company’s Knowledge” means the actual knowledge of the
executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry. 
 “Confidential
Information” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code,
performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information). 
 “Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 
 “Effective Date” means the date on which the initial Registration Statement is declared effective by the SEC. 
 “Conversion Shares” means the shares of Common Stock issuable upon the conversion of the Notes. 
 “Effectiveness Deadline” means the date on which the initial Registration Statement is required to be declared effective by the SEC
under the terms of the Registration Rights Agreement. 
 “Intellectual Property” means all of the following:
(i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation). 
 “Lien” means any lien, mortgage, deed of trust,
pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any of the foregoing). 
 “Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition
(financial or otherwise), business, or prospects of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the Transaction Documents. 
  

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 “Permitted Liens” means: 
 (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate reserves have been established on the
Company’s books and records in accordance with U.S. generally accepted accounting principles, consistently applied; 
 (b)
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are
being contested in good faith and by appropriate proceedings; 
 (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; 
 (d) deposits to secure
the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; and 
 (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business
that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company or any of its Subsidiaries. 
 “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock
company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. 
 “Purchase Price” means Five Million Dollars ($5,000,000). 
 “Registration
Statement” has the meaning set forth in the Registration Rights Agreement. 
 “SEC Filings” has the meaning set
forth in Section 4.6. 
 “Securities” means the Notes, the Conversion Shares, the Warrants and the Warrant Shares.

 “Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by
such first Person. 
  

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 “Transaction Documents” means this Agreement, the Notes, the Warrants and the
Registration Rights Agreement. 
 “Warrant Shares” means the shares of Common Stock issuable upon the exercise of the
Warrants. 
 “1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and
regulations promulgated thereunder. 
 “1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder. 
 2. Purchase and Sale of the Notes and the Warrants. Subject to the
terms and conditions of this Agreement, on the Closing Date, each of the Investors shall severally, and not jointly, purchase, and the Company shall sell and issue to the Investors, the Notes and Warrants in the respective amounts set forth opposite
the Investors’ names on the signature pages attached hereto in exchange for the Purchase Price as specified in Section 3 below. 
 3. Closing. Upon confirmation that the other conditions to closing specified herein have been satisfied or duly waived by the Investors, the Company shall deliver to
                        , in trust, the Notes and the Warrants, registered in such name or names as the Investors may
designate, with instructions that such Notes and Warrants are to be held for release to the Investors only upon payment in full of the Purchase Price to the Company by all the Investors. Upon such receipt by
                         of the Notes and the Warrants, each Investor shall promptly, but no more than one Business Day
thereafter, cause a wire transfer in same day funds to be sent to the account of the Company as instructed in writing by the Company, in an amount representing such Investor’s pro rata portion of the Purchase Price as set forth on the signature
pages to this Agreement. On the date (the “Closing Date”) the Company receives the Purchase Price, the Notes and the Warrants shall be released to the Investors (the “Closing”). The Closing of the purchase and sale of the Notes
and the Warrants shall take place at the offices of
                                        
                , or at such other location and on such other date as the Company and the Investors shall mutually agree. 
 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the “Disclosure Schedules”): 
 4. 1 Organization, Good Standing and
Qualification. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry
on its business as now conducted and to own its properties. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in 

  

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good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary
unless the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect. The Company’s Subsidiaries are listed on Schedule 4.1 hereto. 
 4.2 Authorization. The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally. 
 4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Notes and the Warrants) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company. All of the issued and outstanding shares of the Company’s capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable state and federal securities law and any rights of third parties. Except as described on Schedule
4.3, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in full compliance with applicable state
and federal securities law and any rights of third parties and are owned by the Company, beneficially and of record, subject to no Lien. Except as described on Schedule 4.3, no Person is entitled to pre-emptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as described on Schedule 4.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which
the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of
any equity securities of any kind. Except as described on Schedule 4.3 and except for the Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of
any kind between the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Except as described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no Person has
the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.

 Except as described on Schedule 4.3, the issuance and sale of the Securities hereunder will not obligate the Company to issue
shares of Common Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security. 
  

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 Except as described on Schedule 4.3, the Company does not have outstanding stockholder purchase
rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events. 
 4.4 Valid Issuance. The Conversion Shares have been duly and validly authorized and, when issued upon the due conversion of the Notes, will be
validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws. The Warrants have been duly and validly authorized. Upon the due exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors. The Company has reserved a sufficient number of shares of Common Stock for issuance
upon the conversion of the Notes and the exercise of the Warrants, free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investors. 
 4.5 Consents. The execution, delivery and performance by the Company of the Transaction
Documents and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. Subject to the accuracy of the representations and warranties of each Investor
set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii) the issuance of the Conversion Shares upon the due conversion of the Notes, (iii) the issuance
of the Warrant Shares upon due exercise of the Warrants, and (iv) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws that
is or could reasonably be expected to become applicable to the Investors as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by
the Investors or the exercise of any right granted to the Investors pursuant to this Agreement or the other Transaction Documents. 
 4.6
Delivery of SEC Filings; Business. The Company has made available to the Investors through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31,
2006 (as amended prior to the date hereof, the “10-K”), and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof (collectively, the “SEC 

  

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Filings”). The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. The Company and its Subsidiaries are
engaged in all material respects only in the business described in the SEC Filings and the 10-K contains a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole as of
December 31, 2006. 
 4.7 Use of Proceeds. The net proceeds of the sale of the Notes and the Warrants hereunder shall be used by
the Company for working capital and general corporate purposes. 
 4.8 No Material Adverse Change. Since December 31, 2006,
except as identified and described in the SEC Filings or as described on Schedule 4.8, there has not been: 
 (i) any change in the
consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, except
for changes in the ordinary course of business which have not had and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; 
 (ii) any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any
redemption or repurchase of any securities of the Company; 
 (iii) any material damage, destruction or loss, whether or not covered by
insurance to any assets or properties of the Company or its Subsidiaries; 
 (iv) any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt owed to it; 
 (v) any satisfaction or discharge of any Lien or payment
of any obligation by the Company or a Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of the Company and its Subsidiaries taken as a whole
(as such business is presently conducted and as it is proposed to be conducted); 
 (vi) any change or amendment to the Company’s
Certificate of Incorporation or Bylaws, or material change to any material contract or arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject; 
 (vii) any material labor difficulties or labor union organizing activities with respect to employees of the Company or any Subsidiary; 
 (viii) any material transaction entered into by the Company or a Subsidiary other than in the ordinary course of business; 
  

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 (ix) the loss of the services of any key employee, or material change in the composition or duties of
the senior management of the Company or any Subsidiary; 
 (x) the loss or threatened loss of any customer which has had or could reasonably
be expected to have a Material Adverse Effect; or 
 (xi) any other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect. 
 4.9 SEC Filings. At the time of filing thereof, the SEC Filings complied as to form in
all material respects with the requirements of the 1934 Act and did not, as of the date of filing, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. 
 4.10 No Conflict, Breach, Violation or Default. The
execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default
under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Investors through the EDGAR system), or (ii)(a) any
statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (b) any agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject. 
 4.11 Tax Matters. The Company and each Subsidiary has timely prepared and filed all tax returns required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and
timely paid all taxes shown thereon or otherwise owed by it. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority
except for any assessment which is not material to the Company and its Subsidiaries, taken as a whole. All taxes and other assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party when due. There are no tax Liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any Subsidiary or any of their respective
assets or property. Except as described on Schedule 4.11, there are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity. 
 4.12 Title to Properties. Neither the Company nor any Subsidiary owns any real property. Except as disclosed in the SEC Filings, the Company and
each Subsidiary has good and marketable title to all properties and assets owned by it, in each case free from Liens, 

  

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other than Permitted Liens, that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently
planned to be made thereof by them. 
 4.13 Certificates, Authorities and Permits. The Company and each Subsidiary possess adequate
certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate. 
 4.14 Labor Matters. 
 (a) Except as
set forth on Schedule 4.14, the Company is not a party to or bound by any collective bargaining agreements or other agreements with labor organizations. The Company has not violated in any material respect any laws, regulations, orders or
contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and
hours. 
 (b) (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened, involving strikes, slow-downs, work
stoppages, job actions, disputes, lockouts or any other disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions for election pending or, to the Company’s Knowledge, threatened before the
National Labor Relations Board or any other federal, state or local labor commission relating to the Company’s employees, (iii) no demand for recognition or certification heretofore made by any labor organization or group of employees is
pending with respect to the Company and (iv) to the Company’s Knowledge, the Company enjoys good labor and employee relations with its employees and labor organizations. 
 (c) The Company is, and at all times has been, in compliance in all material respects with all applicable laws respecting employment (including laws
relating to classification of employees and independent contractors) and employment practices, terms and conditions of employment, wages and hours, and immigration and naturalization. There are no claims pending against the Company before the Equal
Employment Opportunity Commission or any other administrative body or in any court asserting any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal,
state or local Law, statute or ordinance barring discrimination in employment. 
 (d) Except as disclosed in the SEC Filings or as described
on Schedule 4.14, the Company is not a party to, or bound by, any employment or other contract or agreement that contains any severance, termination pay or change of control liability or obligation, including, without limitation, any
“excess parachute payment,” as defined in Section 280G(b) of the Internal Revenue Code. 
  

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 (e) Except as specified in Schedule 4.14, to the Company’s Knowledge, each of the
Company’s employees is a Person who is either a United States citizen or a permanent resident entitled to work in the United States. To the Company’s Knowledge, the Company has no liability for the improper classification by the Company of
such employees as independent contractors or leased employees prior to the Closing. 
 4.15 Intellectual Property. 
 (a) To the Company’s Knowledge, all Intellectual Property of the Company and its Subsidiaries is currently in compliance with all legal requirements
(including timely filings, proofs and payments of fees) and is valid and enforceable. No Intellectual Property of the Company or its Subsidiaries which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted has been or is now involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no such action is threatened. No patent of the Company or its
Subsidiaries is now or has since January 1, 2002 been involved in any interference, reissue, re-examination or opposition proceeding. 
 (b) All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound (other than generally commercially available, non-custom, off-the-shelf software application
programs having a retail acquisition price of less than $10,000 per license) (collectively, “License Agreements”) are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company’s
Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists no event or condition which will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company
or any of its Subsidiaries under any such License Agreement. 
 (c) The Company and its Subsidiaries own or have the valid right to use all
of the Intellectual Property that is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and clear of all Liens, other than Permitted Liens, or obligations to license all such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and enforceable right to use all material third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company and its Subsidiaries. 
  

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 (d) To the Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party, and, to the
Company’s Knowledge, the Intellectual Property and Confidential Information of the Company and its Subsidiaries which are necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted are not being Infringed by any third party. There is no litigation or order pending or outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or
that concerns the ownership, use, validity or enforceability of any Intellectual Property or Confidential Information of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual Property or
Confidential Information owned by a third party, and, to the Company’s Knowledge, there is no valid basis for the same. 
 (e) The
consummation of the transactions contemplated hereby and by the other Transaction Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or any of its Subsidiaries’ ownership or right to use any of
the Intellectual Property or Confidential Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted. 
 (f) The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in their Intellectual
Property and Confidential Information. Each employee, consultant and contractor who has had access to Confidential Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of such Confidential Information. Except under confidentiality obligations, there has been no material disclosure of any of the
Company’s or its Subsidiaries’ Confidential Information to any third party. 
 4.16 Environmental Matters. To the
Company’s Knowledge, neither the Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), or, to the Company’s Knowledge, operates any real
property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which
violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that
might lead to such a claim. 
 4.17 Litigation. Except as described in the SEC Filings or on Schedule 4.17, there are no
pending actions, suits or proceedings against or affecting the Company, its 

  

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Subsidiaries or any of its or their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is or since January 1, 2002 has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. Except as disclosed in the SEC Filings, there has not been, and to the Company’s Knowledge, there is not pending or contemplated, any investigation by the SEC involving the Company or any current or former director or
officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the 1933 Act or the 1934 Act. 
 4.18 Financial Statements. The financial statements included in each SEC Filing present fairly, in all material respects, the consolidated
financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the
financial statements of the Company included in the SEC Filings filed prior to the date hereof or as described on Schedule 4.18, neither the Company nor any of its Subsidiaries has incurred any liabilities, contingent or otherwise, except
those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or could reasonably be expected to
have a Material Adverse Effect. 
 4.19 Insurance Coverage. The Company and each Subsidiary maintains in full force and effect
insurance coverage that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company and each Subsidiary, and the Company reasonably believes such insurance coverage to be adequate
against all liabilities, claims and risks against which it is customary for comparably situated companies to insure. 
 4.20 Brokers and
Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than as described in Schedule 4.20. 
 4.21 No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities. 
 4.22 No Integrated Offering. Neither the Company nor
any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance
by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act. 
  

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 4.23 Private Placement. Assuming the accuracy of the representations and warranties of the
Investors in Section 5, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration requirements of the 1933 Act. 
 4.24 Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former stockholders, directors, officers,
employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful
or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature. 
 4.25 Transactions with Affiliates. Except as disclosed in the SEC Filings or as disclosed on
Schedule 4.25, none of the officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than as holders of
stock options and/or warrants, and for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director,
trustee or partner. 
 4.26 Internal Controls. The Company is in material compliance with the provisions of the Sarbanes-Oxley Act of
2002 currently applicable to the Company. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP 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 has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company,
including the Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the 1934 Act, 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 the end of the period covered by 

  

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the most recently filed periodic report under the 1934 Act (such date, the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no
significant changes in the Company’s internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other factors that could significantly affect the Company’s internal controls. The
Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP and the applicable requirements of the 1934 Act. 
 4.27 Disclosures. Neither the Company nor any Person acting on its behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public information, other than the terms of the transactions contemplated hereby except for information provided to an Investor pursuant to a written confidentiality agreement entered
into with such Investor. The written materials delivered to the Investors in connection with the transactions contemplated by the Transaction Documents do not contain any untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 
 5.
Representations and Warranties of the Investors. Each of the Investors hereby severally, and not jointly, represents and warrants to the Company that: 
 5.1 Organization and Existence. Such Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power
and authority to invest in the Securities pursuant to this Agreement. 
 5.2 Authorization. The execution, delivery and performance by
such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and each will constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally. 
 5.3 Purchase Entirely for Own Account. The Securities to be received by such Investor hereunder will be acquired for such Investor’s own
account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the
same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a
business that would require it to be so registered. 
  

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 5.4 Investment Experience. Such Investor acknowledges that it can bear the economic risk and
complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. 
 5.5 Disclosure of Information. Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. Such Investor acknowledges receipt of copies of the SEC Filings. Neither such inquiries nor any
other due diligence investigation conducted by such Investor shall modify, limit or otherwise affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. 
 5.6 Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities” under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act
only in certain limited circumstances. 
 5.7 Legends. It is understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend: 
 (a) “The securities represented hereby may not be transferred unless
(i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel reasonably
satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.” 
 (b) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

 5.8 Accredited Investor. Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the
1933 Act. 
 5.9 No General Solicitation. Such Investor did not learn of the investment in the Securities as a result of any general
solicitation or general advertising. 
 5.10 Brokers and Finders. No Person will have, as a result of the transactions contemplated by
the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on
behalf of such Investor. 
 5.11 Prohibited Transactions. During the last thirty (30) days prior to the date hereof, neither such
Investor nor any Affiliate of such Investor which (x) had knowledge of the 

  

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transactions contemplated hereby, (y) has or shares discretion relating to such Investor’s investments or trading or information concerning such
Investor’s investments, including in respect of the Securities, or (z) is subject to such Investor’s review or input concerning such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has, directly
or indirectly, effected or agreed to effect any short sale, whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any other
right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock or otherwise sought to hedge
its position in the Securities (each, a “Prohibited Transaction”). Prior to the earliest to occur of (i) the termination of this Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such Investor shall
not, and shall cause its Trading Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction. Such Investor acknowledges that the representations, warranties and covenants contained in this Section 5.11 are being made for the
benefit of the Investors as well as the Company and that each of the other Investors shall have an independent right to assert any claims against such Investor arising out of any breach or violation of the provisions of this Section 5.11.

 6. Conditions to Closing. 
 6.1 Conditions to the Investors’ Obligations. The obligation of each Investor to purchase the Notes and the Warrants at the Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing
Date, of the following conditions, any of which may be waived by such Investor (as to itself only): 
 (a) The representations and warranties
made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in
which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all
material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date. 
 (b) The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect. 
 (c) The Company shall have executed and delivered the Registration Rights Agreement. 
  

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 (d) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or
magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other Transaction Documents. 
 (e) The Company shall have delivered a
Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b), (d) and (h) of
this Section 6.1. 
 (f) The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as
of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Securities, certifying the current
versions of the Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company. 
 (g) The Investors shall have received an opinion from
                    , the Company’s counsel, dated as of the Closing Date, in form and substance reasonably acceptable to the Investors
and addressing such legal matters as the Investors may reasonably request. 
 (h) No stop order or suspension of trading shall have been
imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock. 
 6.2 Conditions to
Obligations of the Company. The Company’s obligation to sell and issue the Notes and the Warrants at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions,
any of which may be waived by the Company: 
 (a) The representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investment Representations shall be true and correct in all respects when made, and shall be true and correct in all respects
on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the
Closing Date. 
 (b) The Investors shall have executed and delivered the Registration Rights Agreement. 
  

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 (c) The Investors shall have delivered the Purchase Price to the Company. 
 6.3 Termination of Obligations to Effect Closing; Effects. 
 (a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to effect the Closing shall terminate as follows: 
 (i) Upon the mutual written consent of the Company and the Investors; 
 (ii) By the Company if any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company; 
 (iii) By an Investor (with respect to itself only) if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment,
and shall not have been waived by the Investor; or 
 (iv) By either the Company or any Investor (with respect to itself only) if the
Closing has not occurred on or prior to July 31, 2007; 
 provided, however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the
circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing. 
 (b) In the event of termination
by the Company or any Investor of its obligations to effect the Closing pursuant to this Section 6.3, written notice thereof shall forthwith be given to the other Investors by the Company and the other Investors shall have the right to
terminate their obligations to effect the Closing upon written notice to the Company and the other Investors. Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents. 
 7. Covenants and Agreements of the Company. 
 7.1 Reservation of Common Stock. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the conversion of the Notes and the
exercise of the Warrants, such number of shares of Common Stock as shall from time to time equal the Conversion Shares issuable upon the due conversion of the Notes and the Warrant Shares issuable upon the due exercise of the Warrants in accordance
with their respective terms. 
  

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 7.2 No Conflicting Agreements. The Company will not take any action, enter into any agreement or
make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction Documents. 
 7.3 Listing of Underlying Shares and Related Matters. If the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it shall include in such
application the Conversion Shares and the Warrant Shares and will take such other action as is necessary to cause such Common Stock to be so listed. The Company will use commercially reasonable efforts to continue the listing and trading of its
Common Stock on such exchange or market and, in accordance, therewith, will use commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such exchange or
market, as applicable. 
 7.4 Termination of Covenants. The provisions of Sections 7.1 and 7.2 shall terminate and be of no further
force and effect on the date on which the Company’s obligations under the Registration Rights Agreement to register or maintain the effectiveness of any registration covering the Registrable Securities (as such term is defined in the
Registration Rights Agreement) shall terminate. 
 7.5 Removal of Legends. Upon the earlier of (i) registration for resale
pursuant to the Registration Rights Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable instructions that the Transfer Agent
shall issue certificates representing the Conversion Shares and the Warrant Shares without legends upon receipt by such Transfer Agent of the Notes and/or the Warrants or any legended certificates previously issued for such shares, together with
either (1) a customary representation by the Investor that Rule 144(k) applies to the shares of Common Stock to be represented thereby or (2) a statement by the Investor that such Investor has sold the shares of Common Stock represented
thereby in accordance with the Plan of Distribution contained in the Registration Statement, and (B) cause its counsel to deliver to the Transfer Agent one or more blanket opinions to the effect that issuance of such unlegended certificates in
such circumstances may be effected under the 1933 Act. From and after the earlier of such dates, upon an Investor’s written request, the Company shall promptly cause replacement Securities to be issued without restrictive legends and/or
legended certificates representing previously issued Conversion Shares or Warrant Shares to be replaced with certificates which do not bear such restrictive legends, and Conversion Shares subsequently issued upon due conversion of the Notes and
Warrant Shares subsequently issued upon due exercise of the Warrants shall not bear such restrictive legends provided the provisions of either clause (i) or clause (ii) above, as applicable, are satisfied with respect to such Conversion
Shares and/or Warrant Shares. When the Company is required to cause unlegended Securities be issued, if: (1) the unlegended Securities are not delivered to an Investor within three (3) Business Days of submission by that Investor of
legended Securities and supporting documentation to the Transfer Agent as provided above and (2) prior to the time such unlegended Securities are received by the Investor, the Investor, or any third party on behalf of such Investor or for the
Investor’s account, purchases (in an open market transaction or otherwise) such Securities to deliver in satisfaction of a sale by the Investor of such Securities (a “Buy-In”), then the Company shall pay in cash to 

  

 -19- 

 
the Investor (for costs incurred either directly by such Purchaser or on behalf of a third party) the amount by which the total purchase price paid for the
Securities as a result of the Buy-In (including brokerage commissions, if any) exceeds the proceeds received by such Investor as a result of the sale to which such Buy-In relates. The Investor shall provide the Company written notice indicating the
amounts payable to the Investor in respect of the Buy-In. 
 7.6 Right of First
Refusal on Future Financings. From the date hereof until the 18-month anniversary of the Closing Date, upon any financing by the Company of its Common Stock or Common Stock Equivalents (a “Subsequent Financing”), each Investor shall
have the right to participate in such Subsequent Financing as provided herein. At least five (5) Business Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Investor a written notice of its intention to
effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Investor if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of an
Investor, and only upon a request by such Investor, for a Subsequent Financing Notice, the Company shall promptly, but no later than one Business Day after such request, deliver a Subsequent Financing Notice to such Investor. The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder, the Person with whom such Subsequent Financing is proposed to be effected, and attached to
which shall be a term sheet or similar document relating thereto. Each Investor shall notify the Company by 6:30 p.m. (New York City time) on the fifth (5th) Business Day after their receipt of the Subsequent Financing Notice of its willingness to provide the Subsequent Financing on the terms described in the Subsequent Financing Notice, subject to
completion of mutually acceptable documentation. If one or more Investors shall fail to so notify the Company of their willingness to participate in the Subsequent Financing, the Investors agreeing to participate in the Subsequent Financing (the
“Participating Investors”) shall have the right to provide all of the Subsequent Financing. If one or more Investors fail to notify the Company of their willingness to provide all of the Subsequent Financing and the Participating Investors
do not agree to provide all of the Subsequent Financing, the Company may effect the remaining portion of such Subsequent Financing on the terms and to the Persons set forth in the Subsequent Financing Notice; provided that the Company must provide
the Investors with a second Subsequent Financing Notice, and the Investors will again have the right of first refusal set forth above in this Section 7.6, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent Financing Notice within 60 Business Days after the date of the initial Subsequent Financing Notice with the Person identified in the Subsequent Financing Notice. In the event the
Company receives responses to Subsequent Financing Notices from Investors seeking to purchase more than the financing sought by the Company in the Subsequent Financing such Investors shall have the right to purchase their Pro Rata Portion (as
defined below) of the Common Stock or Common Stock Equivalents to be issued in such Subsequent Financing. “Pro Rata Portion” is the ratio of (x) the amount invested by such Investor pursuant to this Agreement (the “Subscription
Amount”) and (y) the aggregate sum of all of the Subscription Amounts. Notwithstanding the foregoing, this Section 7.6 shall not apply in respect of the issuance of (a) shares of Common Stock or options to employees, consultants,
officers or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee 

  

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directors established for such purpose and (b) securities upon the exercise of or conversion of any convertible securities, options or warrants issued
and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price
thereof. 
 7.7 Subsequent Equity Sales. 
 (a) From the date hereof until ninety (90) days after the Effective Date, without the consent of the Required Investors, neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock
Equivalents; provided, however, the ninety (90) day period set forth in this Section shall be extended for the number of days during such period in which (i) trading in the Common Stock is suspended by any exchange or market on which the
Common Stock is listed or quoted, or (ii) following the Effective Date, the Registration Statement is not effective or the prospectus included in the Registration Statement may not be used by the Investors for the resale of the Conversion
Shares or Warrant Shares. 
 (b) From the date hereof until such time as no Investor holds any of the Securities, the Company shall be
prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction”. The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or
sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock
or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price. 
 7.8 Equal Treatment of Investors. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same
consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Investor by the Company and negotiated separately by each Investor, and is
intended for the Company to treat the Investors as a class and shall not in any way be construed as the Investors acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise. 
 8. Survival and Indemnification. 
 8.1
Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement. 
  

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 8.2 Indemnification. The Company agrees to indemnify and hold harmless each Investor and its
Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and will reimburse any such Person for all such amounts as they are incurred by such Person.

 8.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the “Indemnified
Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 8.2, such
Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is materially prejudiced by such failure
to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified
Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding. 
 9. Miscellaneous. 
 9.1 Successors
and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investors, as applicable, provided, however, that an Investor may assign its rights and delegate its duties hereunder in
whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a transaction complying with applicable securities laws without the prior written consent of the Company or the other Investors. The provisions of this
Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 
  

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 9.2 Counterparts; Faxes. 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. This Agreement may also be executed via facsimile, which shall be deemed an original. 
 9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing
or interpreting this Agreement. 
 9.4 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall
be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice
is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier. All notices shall be addressed
to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party: 
 If to the Company: 
 Interlink Electronics, Inc. 
 546 Flynn Road 
 Camarillo, California 93012 
 Attention: 
 Fax: 
 With a copy to: 
  

			
	  
	 	
	  
	 	
	  
	 	

 If to the Investors: 
 to the addresses set forth on the signature pages hereto. 
 9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection herewith, except that the Company shall pay the reasonable fees and expenses of
                     not to exceed $40,000; it being understood that
                     

  

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has only rendered legal advice to the
                     participating in this transaction and not to the Company or any other Investor in connection with the transactions
contemplated hereby, and that each of the Company and each Investor has relied for such matters on the advice of its own respective counsel. Such expenses shall be paid not later than the Closing. The Company shall reimburse the Investors upon
demand for all reasonable out-of-pocket expenses incurred by the Investors, including without limitation reimbursement of attorneys’ fees and disbursements, in connection with any amendment, modification or waiver of this Agreement or the other
Transaction Documents. In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings. 
 9.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of
any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company. 
 9.7
Publicity. Except as set forth below, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or the Investors without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Investors (in the case of a release or announcement by the Company) (which consents shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or
regulations of any securities exchange or securities market, in which case the Company or the Investors, as the case may be, shall allow the Investors or the Company, as applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such issuance. By 8:30 a.m. (New York City time) on the trading day immediately following the Closing Date, the Company shall issue a press release disclosing the consummation
of the transactions contemplated by this Agreement. No later than the fourth trading day following the Closing Date, the Company will file a Current Report on Form 8-K attaching the press release described in the foregoing sentence as well as copies
of the Transaction Documents. In addition, the Company will make such other filings and notices in the manner and time required by the SEC. 
 9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect. 
  

 -24- 

 9.9 Entire Agreement. This Agreement, including the Exhibits and the Disclosure Schedules, and the
other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect
to the subject matter hereof and thereof. 
 9.10 Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. 
 9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the
United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection
with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT
TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. 
 9.12 Independent Nature of
Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of
the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained
herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other Investor has acted as agent for such Investor in
connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall
be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges that each of 

  

 -25- 

 
the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was
required or requested to do so by any Investor. 
 9.13 Information Deemed Requested. Any information required to be delivered by the
Company to any Investor hereunder shall be deemed to have been requested by such Investor. 
 [signature pages follow] 
  

 -26- 

 IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to
execute this Agreement as of the date first above written. 
  

							
	The Company:	 	INTERLINK ELECTRONICS, INC.
				
		 		 	By:	 	 /s/ E. Michael Thoben, III

		 		 	Name:	 	E. Michael Thoben, III
		 		 	Title:	 	Chairman, Chief Executive Officer and President

  

 -27- 

 The Investors: 
  

					
	[Name of Investor]	 	
			
	 By:
	 	  
	 	
	 Name:
	 	  
	 	
	 Title:
	 	  
	 	

 Aggregate Purchase Price:          
 Principal Amount of Notes:          
 Number of Warrants:          
  

									
	Address for Notice:	 		 		 	  
	 	
		 		 		 	  
	 	
		 		 		 	  
	 	

  

									
		 		 		 	with a copy to:	 	
					
		 		 		 	  
	 	
		 		 		 	  
	 	
		 		 		 	  
	 	

  

 -28-Form of 8% Convertible Note

 EXHIBIT 10.12 
 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III)
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 
 8% CONVERTIBLE NOTE 
  

			
	$            	  	July     , 2007                              
          

 FOR VALUE RECEIVED, Interlink Electronics, Inc., a Delaware corporation (the
“Company”), hereby unconditionally promises to pay to the order of
                                 (the “Holder”), having an
address at
                                        
                    , at such address or at such other place as may be designated in writing by the Holder, or its assigns, the aggregate
principal sum of _______ United States Dollars ($            ), together with interest from the date set forth above on the unpaid principal balance of this Note outstanding at a
rate equal to eight percent (8%) (computed on the basis of the actual number of days elapsed in a 360-day year) per annum and continuing on the outstanding principal until this 8% Convertible Note (this “Note”) is converted
into Common Stock as provided herein or indefeasibly and irrevocably paid in full by the Company. Interest on this Note shall accrue and shall be payable semiannually on each January 15 and July 15 (each, an “Interest Payment
Date”), commencing on January 15, 2008, to the Holder of record on the immediately preceding January 1 or July 1, as applicable (each, an “Interest Record Date”). Subject to the other provisions of this Note,
the principal of this Note and all accrued and unpaid interest hereon shall mature and become due and payable on July 19, 2010 (the “Stated Maturity Date”). All payments of principal and interest by the Company under this Note
shall be made in United States dollars in immediately available funds to an account specified by the Holder. 
 In the event that any amount
due hereunder is not paid when due, such overdue amount shall bear interest at an annual rate of fifteen percent (15%) until paid in full. In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate
then permitted by applicable law and if any such payment is paid by the Company, then such excess sum shall be credited by the Holder as a payment of principal. 
 1. Definitions. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated: 
 “Additional Rights” has the meaning set forth in
Section 4 hereof. 

 “Affiliate” shall mean, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person. 
 “Board” shall mean the Board of Directors of Company. 
 “Business Day” other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of business. 
 “Change of Control” shall be
deemed to have occurred if, at any time (i) any Person or any Persons acting together that would constitute a “group” for purposes of Section 13(d) under the Exchange Act, or any successor provision thereto, shall acquire
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision thereto) in a single transaction or a series of related transactions, of more than 50% of the aggregate voting power of the Company;
(ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction
own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction; (iii) the Company sells or transfers its assets, as an entirety or substantially as an entirety, to another Person, or (iv) the
Persons who were directors of the Company as of the Closing Date (together with any new directors whose election or appointment was approved by the directors then in office who were either directors as of the Closing Date or whose election or
appointment was previously approved) ceasing to constitute a majority of the Company’s board of directors or the board of directors of the surviving or resulting entity (or its parent). 
 “Closing Date” has the meaning set forth in the Purchase Agreement. 
 “Common Stock” shall mean the Common Stock, par value $0.00001 per share, of the Company or any securities into which shares of Common
Stock may be reclassified after the date hereof. 
 “Company” has the meaning set forth in the first paragraph hereof.

 “Company Notes” has the meaning set forth in the third paragraph hereof. 
 “Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 
 “Conversion Price” shall mean initially $1.26 per share, subject to adjustment as provided in Section 4. 
 “Conversion Shares” means the shares of Common Stock issuable upon conversion of this Note. 
  

 2 

 “Convertible Securities” has the meaning set forth in Section 4 hereof. 

“Event of Default” has the meaning set forth in Section 6 hereof. 
 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
 “Excluded Issuances” has the meaning set forth in Section 4(j) hereof. 
 “Forced Redemption Date” has the meaning set forth in Section 3(b) hereof. 
 “Forced Redemption Notice” has the meaning set forth in Section 3(b) hereof. 
 “Forced Redemption Price” has the meaning set forth in Section 3(b) hereof. 
 “Hedging Agreement” means any interest rate swap, collar, cap, floor or forward rate agreement or other agreement regarding the hedging
of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Person and any confirming letter executed pursuant to such agreement, all as amended, supplemented, restated or otherwise modified from time to
time. 
 “Holder” has the meaning set forth in the first paragraph hereof. 
 “Indebtedness” means any liability or obligation (i) for borrowed money, other than trade payables incurred in the ordinary course
of business, (ii) evidenced by bonds, debentures, notes, or other similar instruments, (iii) in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto), except letters of credit or
other similar instruments issued to secure payment of trade payables or obligations in respect of workers’ compensation, unemployment insurance and other social security laws or regulation, all arising in the ordinary course of business
consistent with past practices, (iv) to pay the deferred purchase price of property or services, except trade payables arising in the ordinary course of business consistent with past practices, (v) as lessee under capitalized leases,
(vi) secured by a Lien on any asset of the Company or a Subsidiary, whether or not such obligation is assumed by the Company or such Subsidiary. 
 “Interest Payment Date” has the meaning set forth in the first paragraph hereof. 
 “Interest Record Date” has the meaning set forth in the first paragraph hereof. 
 “Investment”
means, for any Person: (a) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any
agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) the making of any deposit
with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person), but
excluding any such advance, loan or extension of credit having a term not exceeding 90 days arising in connection with the sale of inventory or supplies by such Person in the ordinary course of 

  

 3 

 
business; (c) the entering into of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Hedging Agreement. 
 “Investors” has the meaning set forth in the Purchase Agreement. 
 “Lien”
means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any of the
foregoing). 
 “Majority Holders” has the meaning set forth in Section 8 hereof. 
 “Market Price”, as of a particular date (the “Valuation Date”), shall mean the following: (a) if the Common Stock
is then listed on the Nasdaq Global Market or the Nasdaq Capital Market (“Nasdaq”) or another national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last Trading Day prior to the
Valuation Date; (b) if the Common Stock is then quoted on the National Association of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar quotation system or association, the closing sale price of
one share of Common Stock on the Bulletin Board or such other quotation system or association on the last Trading Day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price
quoted thereon on the last trading day prior to the Valuation Date; (c) if such security is then included in the “pink sheets,” the closing sale price of one share of Common Stock on the “pink sheets” on the last Trading Day
prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low ask price quoted on the “pink sheets” as of the end of the last Trading Day prior to the Valuation Date; or (d) if the
Common Stock is not then listed on a national stock exchange or quoted on the Bulletin Board, the “pink sheets” or such other quotation system or association, the fair market value of one share of Common Stock as of the Valuation Date, as
determined in good faith by the Board of Directors of the Company and the Holder. If the Common Stock is not then listed on a national securities exchange or quoted on the Bulletin Board, the “pink sheets” or other quotation system or
association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Holder as to the fair market value of a share of Common Stock as determined by the Board of Directors of the Company. In the event that the
Board of Directors of the Company and the Holder are unable to agree upon the fair market value in respect of subpart (d) of this paragraph, the Company and the Holder shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne equally by the Company and the Holder. 
 “Note” has the meaning set forth in the first paragraph hereof. 
 “Options” has the meaning set
forth in Section 4 hereof. 
 “Permitted Indebtedness” means: 
 (a) Unsecured Indebtedness existing on the Closing Date and refinancings, renewals and extensions of any such Indebtedness if (i) the average life to
maturity thereof is 

  

 4 

 
greater than or equal to that of the Indebtedness being refinanced or extended (ii) the principal amount thereof or interest payable thereon is not
increased, and (iii) the terms thereof are not less favorable to the Company or the Subsidiary incurring such Indebtedness than the Indebtedness being refinanced, renewed or extended; 
 (b) Secured Indebtedness to a bank or other institutional lender on terms and conditions satisfactory to the Majority Holders; provided, however, that
the aggregate principal amount of Indebtedess permitted pursuant to this clause (b) shall not exceed $5,000,000; 
 (c) Unsecured
Indebtedness which ranks pari passu with the Notes as to payment or upon liquidation with the Notes; provided, however, that the aggregate principal amount of Indebtedess permitted pursuant to this clause (c) and clause (d) below
shall not exceed $1,000,000; 
 (d) Indebtedness representing the deferred purchase price of property and capital lease obligations ;
provided, however, that the aggregate principal amount of Indebtedess permitted pursuant to this clause (d) and clause (c) above shall not exceed $1,000,000; 
 (e) Guaranties by any Subsidiary of any “Permitted Indebtedness” of the Company or another Subsidiary; and 
 (f) Indebtedness of the Company to any wholly owned Subsidiary and Indebtedness of any wholly owned Subsidiary to the Company or another wholly owned Subsidiary which constitutes “Permitted Indebtedness.”

 “Permitted Investments” means: 
 (a) direct obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to principal and interest by the United States of America, or of any agency thereof, in either case
maturing not more than 90 days from the date of acquisition thereof; 
 (b) certificates of deposit issued by any bank or trust company
organized under the laws of the United States of America or any State thereof and having capital, surplus and undivided profits of at least $500,000,000, maturing not more than 90 days from the date of acquisition thereof; 
 (c) commercial paper rated A-1 or better or P-1 by Standard & Poor’s Ratings Services or Moody’s Investors Services, Inc.,
respectively, maturing not more than 90 days from the date of acquisition thereof; in each case so long as the same (x) provide for the payment of principal and interest (and not principal alone or interest alone) and (y) are not subject
to any contingency regarding the payment of principal or interest. 
 “Permitted Liens” means: 
 (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate reserves have been established on the
Company’s books and records in accordance with U.S. generally accepted accounting principles, consistently applied; 
  

 5 

 (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; 
 (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; 
 (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; 
 (e) easements,
zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Company or any of its Subsidiaries; and 
 (f) Liens granted to secure the
obligations of the Company or any Subsidiary under any Indebtedness permitted under clause (b) or clause (c) of the definition of “Permitted Indebtedness;” provided, however, that in the case of clause (c) only, the Lien is
limited to the property acquired or so financed (and any accessions thereto and proceeds thereof). 
 “Person” means an
individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not
specifically listed herein. 
 “Purchase Agreement” means the Purchase Agreement, dated as of July 18, 2007, by and
among the Company and the Investors as that agreement may be amended from time to time in accordance with its terms. 
 “Registration
Rights Agreement” shall mean the Registration Rights Agreement, dated as of July 19, 2007, and as that agreement may be amended from time to time, by and among the Company and the Investors. 
 “Restricted Payment” has the meaning set forth in Section 5(b)(iv) hereof. 
 “Stated Maturity Date” has the meaning set forth in the first paragraph hereof. 
 “Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first
Person. 
  

 6 

 “Trading Day” means (i) if the relevant stock or security is listed or admitted for
trading on The New York Stock Exchange, Inc., Nasdaq or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on a system of automated dissemination of
quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on any system of
automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter market and for which a closing bid and a closing asked price for such stock or security are
available, shall mean a day, other than a Saturday or Sunday, on which The New York Stock Exchange, Inc. is open for trading. 
 “Trigger Issuance” has the meaning set forth in Section 4(i) hereof. 
 2. Purchase Agreement. This
Note is one of the several 8% Convertible Notes of the Company issued pursuant to the Purchase Agreement (the “Company Notes”). This Note is subject to the terms and conditions of, and entitled to the benefit of, the provisions of
the Purchase Agreement. Defined terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein. This Note is transferable and assignable to any Person to whom such transfer is permissible
under the Purchase Agreement and applicable law. The Company agrees to issue from time to time a replacement Note in the form hereof to facilitate such transfers and assignments. In addition, after delivery of an indemnity in form and substance
reasonably satisfactory to the Company, the Company also agrees to promptly issue a replacement Note if this Note is lost, stolen, mutilated or destroyed. 
 3. Prepayment; Forced Conversion; Forced Redemption. Except as provided in this Section 3, this Note shall not be prepayable or redeemable by the Company prior to the Stated Maturity Date. 
 (a) Subject to the provisions of this clause (a), in the event that the closing bid price of a share of Common Stock as traded on Nasdaq (or such other
exchange or stock market on which the Common Stock may then be listed or quoted) equals or exceeds $2.52 (appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock
occurring after the date hereof) for twenty (20) consecutive trading days commencing on or after the 18-month anniversary of the Closing Date, the Company, upon prior written notice given to Holder within one Business Day following the end of
such twenty (20) trading day period, may automatically and without any action on the part of the Holder convert all or any portion of the principal amount of this Note, together with all accrued and unpaid interest on the portion of this Note
being converted, at the Conversion Price then in effect; provided that (i) such conversion applies to all of the Company Notes then outstanding on the same terms, (ii) all of the shares of Common Stock issuable hereunder upon such
conversion either (A) are registered pursuant to an effective Registration Statement (as defined in the Registration Rights Agreement) which has not been suspended and for which no stop order is in effect, and pursuant to which the Holder is
able to sell such shares of Common Stock immediately following such conversion or (B) no longer constitute Registrable Securities (as defined in the Registration Rights Agreement). 
  

 7 

 (b) From and after the occurrence of Change of Control, the Majority Holders shall have the right to
require the Company to redeem all, but not less than all, of the Company Notes at a redemption price equal 108% of the principal amount of the Company Notes, plus any accrued and unpaid interest (the “Forced Redemption Price”);
provided that such redemption applies to all of the Company Notes then outstanding on the same terms. In the event that the Majority Holders elect to require the Company to redeem the Company Notes pursuant to this Section 3(b), the Majority
Holders shall deliver written notice thereof to the Company and the other holders of the Company Notes (the “Forced Redemption Notice”) specifying the date on which such redemption shall occur (the “Forced Redemption
Date”) which date shall not be less than ten (10) days after the date of such Forced Redemption Notice. On the Forced Redemption Date, the Company shall pay the Forced Redemption Price to the Holder in immediately available funds to an
account previously specified in writing by the Holder unless the Holder has converted the principal and accrued and unpaid interest on this Note on or prior to the Forced Redemption Date. Notwithstanding the giving of any Forced Redemption Notice,
the Holder shall have the right to convert the principal and accrued and unpaid interest on this Note pursuant to Section 4 at any time on or prior to 5:00 p.m., New York time, on the Forced Redemption Date. The Holder shall not be required to
surrender this Note prior to payment of the Forced Redemption Price. Unless the principal and interest on this Note are converted pursuant to Section 4 prior to the Forced Redemption Date, upon the indefeasible payment in full of the Forced
Redemption Price to the Holder as provided in this Section 3, this Note shall be deemed to have been paid in full and shall no longer be outstanding for any purpose. 
 4. Conversion. 
 (a) Prior to the Stated Maturity Date, the Holder shall have the right, at its option
at any time, to convert some or all of the Note into such number of fully paid and nonassessable shares of Common Stock as is obtained by: (i) adding (A) the principal amount of this Note to be converted and (B) the amount of any
accrued but unpaid interest with respect to such portion of this Note to be converted; and (ii) dividing the result obtained pursuant to clause (i) above by the Conversion Price then in effect. The rights of conversion set forth in this
Section 4 shall be exercised by the Holder by giving written notice to the Company that the Holder elects to convert a stated amount of this Note into Common Stock and by surrender of this Note (or, in lieu thereof, by delivery of an
appropriate lost security affidavit in the event this Note shall have been lost or destroyed) to the Company at its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder) at
any time on the date set forth in such notice (which date shall not be earlier than the Company’s receipt of such notice), together with a statement of the name or names (with address) in which the certificate or certificates for shares of
Common Stock shall be issued. 
 (b) Promptly after receipt of the written notice referred to in Section 4(a) above and surrender of this
Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed), but in no event more than three (3) Business Days thereafter, the Company shall issue and deliver, or
cause to be issued and delivered, to the Holder, registered in such name or names as the Holder may direct in writing, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such portion of this
Note. To the extent permitted by law, such conversion shall be deemed to have been effected, and the Conversion Price shall be determined, as of the close 

  

 8 

 
of business on the date on which such written notice shall have been received by the Company and this Note shall have been surrendered as aforesaid (or, in
lieu thereof, an appropriate lost security affidavit has been delivered to the Company), and at such time, the rights of the Holder shall cease with respect to the principal amount of the Notes being converted, and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. 
 (c) No fractional shares shall be issued upon any conversion of this Note into Common Stock. If any fractional share of Common Stock would, except for
the provisions of the first sentence of this Section 4(c), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price of such fractional share
of Common Stock. In case the principal amount of this Note exceeds the principal amount being converted, the Company shall, upon such conversion, execute and deliver to the Holder, at the expense of the Company, a new Note for the principal amount
of this Note surrendered which is not to be converted. 
 (d) If the Company shall, at any time or from time to time while this Note is
outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller
number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing
corporation), then (i) the Conversion Price in effect immediately prior to the date on which such change shall become effective shall be adjusted by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such change and the denominator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such change and (ii) the number of Conversion Shares
issuable upon conversion of this Note shall be adjusted by multiplying the number of Conversion Shares issuable upon conversion of this Note immediately prior to the date on which such change shall become effective by a fraction, the numerator of
which is shall be the Conversion Price in effect immediately prior to the date on which such change shall become effective and the denominator of which shall be the Conversion Price in effect immediately after giving effect to such change,
calculated in accordance with clause (i) above. Such adjustments shall be made successively whenever any event listed above shall occur. 
 (e) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all
or substantially all of the Company’s assets to another Person shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be
made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Conversion Shares immediately theretofore issuable upon conversion of this Note such
shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Conversion Shares equal to the number of Conversion Shares immediately 

  

 9 

 
theretofore issuable upon conversion of this Note, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion hereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at the last address of the Holder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Holder may be entitled to purchase, without regard to any conversion limitation specified in Section 4, and the other obligations under this Note. The provisions of this paragraph (e) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. 
 (f) In case the Company
shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of
indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 4(e)), or subscription rights or warrants, the Conversion Price
to be in effect after such payment date shall be determined by multiplying the Conversion Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding
multiplied by the Market Price of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Board in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights
or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price immediately prior to such payment date. Such adjustment shall be made successively whenever such a payment date
is fixed. 
 (g) An adjustment to the Conversion Price shall become effective immediately after the payment date in the case of each dividend
or distribution and immediately after the effective date of each other event which requires an adjustment. 
 (h) In the event that, as a
result of an adjustment made pursuant to this Section 4, the Holder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon conversion of
this Note shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Note. 
 (i) Except as provided in Section 4(j) hereof, if and whenever the Company shall issue or sell, or is, in accordance with any of Sections 4(i)(i)
through 4(i)(vii) hereof, deemed to have issued or sold, any Additional Shares of Common Stock (as defined below) for no consideration or for a consideration per share less than the Conversion Price in effect immediately prior to the time of such
issuance or sale, then and in each such case (a “Trigger Issuance”) the then-existing Conversion Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to a price determined as follows:

  

					
	 Adjusted Conversion Price
	 	 =
	  	(A x B) + D
		 		  	      A+C

  

 10 

 where 
 “A” equals the number of shares of Common Stock outstanding, including Additional Shares of Common Stock (as defined below) deemed to be issued hereunder, immediately preceding such Trigger Issuance;

 “B” equals the Conversion Price in effect immediately preceding such Trigger Issuance; 
 “C” equals the number of Additional Shares of Common Stock issued or deemed issued hereunder as a result of the Trigger Issuance; and

 “D” equals the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance;

 provided, however, that in no event shall the Conversion Price after giving effect to such Trigger Issuance be greater than the Conversion Price in effect
prior to such Trigger Issuance. 
 For purposes of this subsection (i), “Additional Shares of Common Stock” shall mean all shares
of Common Stock issued or sold by the Company or deemed to be issued or sold pursuant to this subsection (i), other than Excluded Issuances (as defined in subsection (j) hereof). 
 For purposes of this Section 4(i), the following subsections (i)(i) to (i)(viii) shall also be applicable (subject, in each such case, to the
provisions of Section 4(j) hereof): 
 (i) In case at any time the Company shall in any manner grant (directly and not by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being
called “Options” and such convertible or exchangeable stock or securities being called “Convertible Securities”) whether or not such Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the 

  

 11 

 
exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than
the Conversion Price immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be
outstanding for purposes of adjusting the Conversion Price. Except as otherwise provided in subsection 4(i)(iii), no adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities
upon exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. 
 (ii) In case the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount
received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof,
by (ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price immediately prior to the time of such issuance or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issuance or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding for purposes of adjusting the Conversion Price, provided that (a) except as otherwise provided in subsection 4(i)(iii), no adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Conversion Price shall be made by reason of the issuance or sale of Convertible Securities upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the Conversion Price have been made pursuant to the other provisions of Section 4(j). 
 (iii) Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in subsection 4(i)(i) hereof, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subsections 4(i)(i) or 4(i)(ii), or the rate at which Convertible Securities referred to in subsections 4(i)(i) or 4(i)(ii) are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Conversion Price in effect at the time of such event shall forthwith be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted,
issued or sold. On the termination of any Option for which any adjustment was made pursuant to this subsection 4(i) or any right to convert or exchange Convertible Securities for which any adjustment was made pursuant to this subsection 4(i)
(including without limitation upon the redemption or purchase for consideration of such Convertible Securities by the 

  

 12 

 
Company), the Conversion Price then in effect hereunder shall forthwith be changed to the Conversion Price which would have been in effect at the time of
such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. 
 (iv) Subject to the provisions of this Section 4(i), in case the Company shall declare a dividend or make any other distribution upon any stock of the Company (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration; provided, that if any
adjustment is made to the Conversion Price as a result of a declaration of a dividend and such dividend is rescinded, the Conversion Price shall be appropriately readjusted to the Conversion Price in effect had such dividend not been declared.

 (v) In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any
shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration
as determined in good faith by the Board, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any Options shall be issued in connection with the
issuance and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the Company. If Common Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith, other Options or Convertible Securities (the
“Additional Rights”) are issued, then the consideration received or deemed to be received by the Company shall be reduced by the fair market value of the Additional Rights (as determined using the Black-Scholes option pricing model
or another method mutually agreed to by the Company and the Holder). The Board shall respond promptly, in writing, to an inquiry by the Holder as to the fair market value of the Additional Rights. In the event that the Board and the Holder are
unable to agree upon the fair market value of the Additional Rights, the Company and the Holder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne evenly by the Company and the Holder. 
 (vi) In case the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be. 
  

 13 

 (vii) The number of shares of Common Stock outstanding at any given time shall not include shares owned
or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issuance or sale of Common Stock for the purpose
of this subsection (i). 
 (viii) Notwithstanding any other provision in this subsection (i) to the contrary, if a reduction in the
Conversion Price pursuant to this subsection (i) (other than as set forth in this clause (viii)) would require the Company to obtain stockholder approval of the transactions contemplated by the Purchase Agreement to be consummated on the
Closing Date pursuant to Nasdaq Marketplace Rule 4350(i) and such stockholder approval has not been obtained, (i) the Conversion Price shall be reduced to the maximum extent that would not require stockholder approval under such Rule, and
(ii) the Company shall use its commercially reasonable efforts to obtain such stockholder approval as soon as reasonably practicable, including by calling a special meeting of stockholders to vote on such Conversion Price adjustment. This
provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a transaction
contemplated by Section 4 of this Note. 
 (j) Anything herein to the contrary notwithstanding, the Company shall not be required to
make any adjustment of the Conversion Price in the case of the issuance of (A) capital stock, Options or Convertible Securities issued to directors, officers, employees or consultants of the Company in connection with their service as directors
of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of
the Company, (B) shares of Common Stock issued upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof, provided such securities are not amended after the date hereof to increase the number of shares
of Common Stock issuable thereunder or to lower the exercise or conversion price thereof, (C) securities issued pursuant to the Purchase Agreement and securities issued upon the exercise or conversion of those securities, (D) shares of
Common Stock issued or issuable by reason of a dividend, stock split or other distribution on shares of Common Stock (but only to the extent that such a dividend, split or distribution results in an adjustment in the Conversion Price pursuant to the
other provisions of this Note) and (E) securities issued pursuant to a joint venture or other partnering arrangement involving the joint undertaking of a business venture, the primary purpose of which is not the raising of capital
(collectively, “Excluded Issuances”). 
 (k) In case at any time: 
 (i) the Company shall declare any dividend upon its Common Stock or any other class or series of capital stock of the Company payable in cash or stock or
make any other distribution to the holders of its Common Stock or any such other class or series of capital stock; 
 (ii) the Company shall
offer for subscription pro rata to the holders of its Common Stock or any other class or series of capital stock of the Company any additional shares of stock of any class or other rights; or 
  

 14 

 (iii) there shall be any capital reorganization or reclassification of the capital stock of the Company,
any acquisition or a liquidation, dissolution or winding up of the Company; 
 then, in any one or more of said cases, the Company shall give, by delivery in
person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, (a) at least 20 Business Days’ prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any event set forth in clause (iii) of this Section 4(k) and (b) in the
case of any event set forth in clause (iii) of this Section 4(k), at least 20 Business Days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock or such other class or series of capital stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock and such other series or class of capital stock shall be entitled to exchange their Common Stock and other stock for securities or other property deliverable upon
consummation of the applicable event set forth in clause (iii) of this Section 4(k). 
 (l) Upon any adjustment of the Conversion
Price, then and in each such case the Company shall give prompt written notice thereof, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books
of the Company, which notice shall state the Conversion Price resulting from such adjustment and setting forth in reasonable detail the method upon which such calculation is based. 
 (m) The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon conversion of
this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of this Note. The Company covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued and fully
paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, and that the Company will from time to time take all such action as may be requisite to
assure that the par value per share of the Common Stock is at all times equal to or less than the Conversion Price in effect at the time. The Company shall take all such action as may be necessary to assure that all such shares of Common Stock may
be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or trading market upon which the Common Stock may be listed. The Company shall not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of this Note would exceed the total number of shares of Common Stock then authorized by the Company’s
Certificate of Incorporation. 
 (n) The issuance of certificates for shares of Common Stock upon conversion of this Note shall be made
without charge to the holders thereof for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in
a name other 

  

 15 

 
than that of the Holder. When the Company is required to issue Conversion Shares hereunder, if: (1) certificates representing such Conversion Shares are
not delivered to the Holder within three (3) Business Days of date on which such conversion is effective and (2) prior to the time such certificates are received, the Holder, or any third party on behalf of such Holder or for the
Holder’s account, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of such certificates (a “Buy-In”), then the Company shall pay in cash to the Holder
(for costs incurred either directly by such Holder or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the proceeds received by
the Holder as a result of the sale to which such Buy-In relates. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. 
 (o) The Company will not at any time close its transfer books against the transfer, as applicable, of this Note or of any shares of Common Stock issued
or issuable upon the conversion of this Note in any manner which interferes with the timely conversion of this Note, except as may otherwise be required to comply with applicable securities laws. 
 5. Covenants. 
 (a) So long as any
amount due under this Note is outstanding and until the earlier of (i) the indefeasible payment in full of all amounts payable by the Company hereunder and (ii) the conversion of this Note: 
 (i) The Company shall and shall cause each of its Subsidiaries to (A) carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducting, (B) do all things necessary to remain duly organized, validly existing, and in good standing as a domestic corporation under the laws of its state of incorporation and
(C) maintain all requisite authority to conduct its business in those jurisdictions in which its business is conducted. 
 (ii) The
Company shall promptly notify the Holder of the occurrence of any Event of Default or any event which, with the giving of notice, the lapse of time or both would constitute an Event of Default, which notice shall include a written statement as to
such occurrence, specifying the nature thereof and the action (if any) which is proposed to be taken with respect thereto. 
 (iii) The
Company shall promptly notify the Holder of any action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency against the Company or any Subsidiary or to which the Company or any Subsidiary may be
subject which alleges damages in excess of One Hundred Thousand United States Dollars ($100,000). 
 (iv) The Company shall promptly notify
the Holder of any default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Company or any Subsidiary is a party which default could reasonably be
expected to have a Material Adverse Effect. 
  

 16 

 (v) The Company shall and shall cause each Subsidiary to pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or property, except those that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. 
 (vi) The Company shall and shall cause each Subsidiary to all times maintain with financially sound and reputable insurance companies insurance covering
its assets and its businesses in such amounts and covering such risks (including, without limitation, hazard, business interruption and public liability) as is consistent with sound business practice and as may be obtained at commercially reasonable
rates. 
 (vii) The Company shall and shall cause each Subsidiary to comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which they may be subject except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. 
 (viii) The Company shall and shall cause each Subsidiary to use commercially reasonable efforts to do all things necessary to maintain, preserve, protect and keep its properties in good repair, working order and
condition and use commercially reasonable efforts to make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted. 
 (ix) At its own expense, the Company shall and shall cause each Subsidiary to make, execute, endorse, acknowledge, file and/or deliver any documents and
take all commercially reasonable actions necessary or required to maintain its ownership rights in its Intellectual Property, including, without limitation, (i) any action reasonably required to protect the Intellectual Property in connection
with any infringement, suspected infringement, passing off, act of unfair competition or other unlawful interference with the rights of the Company or any Subsidiary in and to such Intellectual Property, and (ii) any registrations with the
United States Patent & Trademark Office and any corresponding foreign patent and/or trademark office required for the Company or any Subsidiary to carry on its business as presently conducted and as presently proposed to be conducted.
Except for non-exclusive licenses granted in the ordinary course of business, the Company shall not and shall cause each Subsidiary not to transfer, assign or otherwise convey the Intellectual Property, any registrations or applications thereof and
all goodwill associated therewith, to any person or entity. 
 (b) So long as any amount due under this Note is outstanding and until the
earlier of (i) the indefeasible payment in full of all amounts payable by the Company hereunder and (ii) the conversion of this Note, without the prior written consent of the Majority Holders (for purposes of this Section 5(b), any
Company Notes held by any employee, director or officer of the Company or any Subsidiary shall not be deemed to be outstanding): 
 (i) The
Company shall not and shall cause each Subsidiary not to create, incur, guarantee, issue, assume or in any manner become liable in respect of any Indebtedness, other than Permitted Indebtedness. 
  

 17 

 (ii) The Company shall not and shall cause each Subsidiary not to create, incur, assume or suffer to
exist any Lien upon any of its property, whether now owned or hereafter acquired other than (i) Permitted Liens and (ii) Liens securing Indebtedness permitted pursuant to clause (b) of the definition of Permitted Indebtedness. The
Company shall not, and shall cause each Subsidiary not to, be bound by any agreement which limits the ability of the Company or any Subsidiary to grant Liens. 
 (iii) The Company shall not and shall cause each Subsidiary not to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service (other than service as an employee)) with, or for the benefit of, any of its Affiliates other than a wholly owned Subsidiary, except for compensation arrangement with directors
and employees of the Company or any Subsidiary entered into in the ordinary course of business consistent with past practice and consulting arrangements with directors approved by the Board. 
 (iv) The Company shall not, and shall cause each of its Subsidiaries not to, directly or indirectly, declare or pay any dividends on account of any
shares of any class or series of its capital stock now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of its capital
stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or pay any
interest, premium if any, or principal of any Indebtedness or redeem, retire, defease, repurchase or otherwise acquire any Indebtedness (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set
apart any sum, or make any other payment in respect thereof or agree to do any of the foregoing (each of the foregoing is herein called a “Restricted Payment”); provided, that (i) the Company may make payments of interest,
premium if any, and principal of the Notes in accordance with the terms hereof, (ii) provided that no Event of Default or event which, with the giving of notice, the lapse of time or both would constitute an Event of Default has occurred and is
continuing, the Company and its Subsidiaries may make regularly scheduled payments of interest and principal of any Permitted Indebtedness, (iv) any Subsidiary directly or indirectly wholly owned by the Company may pay dividends on its capital
stock and (v) the Company may repurchase capital stock from a former employee in connection with the termination or other departure of such employee, strictly in accordance with the terms of any agreement entered into with such employee and in
effect on the Closing Date (as defined in the Purchase Agreement), provided that (A) such repurchase is approved by a majority of the Board, (B) payments permitted under this clause (v) shall not exceed Five Hundred Thousand United
States Dollars ($500,000) in the aggregate, and (C) no such payment may be made if an Event of Default or an event which, with the giving of notice, the lapse of time or both would constitute an Event of Default has occurred and is continuing
or would result from such payment. 
 (v) The Company shall not and shall cause each Subsidiary not to, directly or indirectly, engage in any
line of business other than the business of developing, marketing and selling human interface technologies and products. 
 (vi) The Company
shall not and shall cause each Subsidiary not to make or own any Investment in any Person, including without limitation any joint venture, other than (A)

  

 18 

 
Permitted Investments, (B) operating deposit accounts with banks, (C) Hedging Agreements entered into in the ordinary course of the Company’s
financial planning and not for speculative purposes and (D) investments by the Company in the capital stock of any wholly owned Subsidiary. 
 (vii) The Company shall not and shall cause each Subsidiary not to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, which the Company or any Subsidiary (a) has sold or transferred or is to sell or to transfer to any other Person, or (b) intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by the Company or any Subsidiary to any Person in connection with such lease. 
 (viii) The Company
shall not and shall cause each Subsidiary not to settle, or agree to indemnify or defend third parties against, any material lawsuit, except as may be required by judicial or regulatory order, the Company’s Certificate of Incorporation and
Bylaws (as in effect as of the date hereof) or by agreements entered into prior to the date hereof on a basis consistent with past practice. A material lawsuit shall be any lawsuit in which the amount in controversy exceeds One Hundred Thousand
United States Dollars ($100,000). 
 (ix) The Company shall not and shall cause each Subsidiary not to amend its bylaws, certificate of
incorporation or other charter document in a manner adverse to the Holder, as such. 
 6. Event of Default. The occurrence of any of
following events shall constitute an “Event of Default” hereunder: 
 (a) the failure of the Company to make any payment of
principal on this Note when due, whether at maturity, upon acceleration or otherwise; 
 (b) the failure of the Company to make any payment
of interest on this Note, or any other amounts due under the other Transaction Documents when due, whether at maturity, upon acceleration or otherwise, and such failure continues for more than five (5) days; 
 (c) the Company and/or its Subsidiaries fail to make a required payment or payments on Indebtedness of One Hundred Thousand United States Dollars
($100,000) or more in aggregate principal amount and such failure continues for more than ten (10) days; 
 (d) there shall have
occurred an acceleration of the stated maturity of any Indebtedness of the Company or its Subsidiaries of One Hundred Thousand United States Dollars ($100,000) or more in aggregate principal amount (which acceleration is not rescinded, annulled or
otherwise cured within ten (10) days of receipt by the Company or a Subsidiary of notice of such acceleration); 
 (e) the Company makes
an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company as bankrupt or insolvent; or any order for relief with
respect to the Company is entered under title 11 of the United States Code or any other 

  

 19 

 
bankruptcy or insolvency law; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the
Company or of any substantial part of the assets of the Company, or commences any proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or
any such petition or application is filed, or any such proceeding is commenced, against the Company and either (i) the Company by any act indicates its approval thereof, consents thereto or acquiescence therein or (ii) such petition
application or proceeding is not dismissed within sixty (60) days; 
 (f) a final, non-appealable judgment which, in the aggregate with
other outstanding final judgments against the Company and its Subsidiaries, exceeds One Hundred Thousand United States Dollars ($100,000) shall be rendered against the Company or a Subsidiary and within sixty (60) days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or within sixty (60) days after the expiration of such stay, such judgment is not discharged; provided, however, that a judgment that provides for the payment of royalties
subsequent to the date of the judgment shall be deemed to be discharged so long as the Company or the Subsidiary affected thereby is in compliance with the terms of such judgment; 
 (g) the Company is in breach of the requirements of Section 5(b) hereof; 
 (h) if any representation or statement of fact made in any Transaction Document, certificate or other document furnished to the Holder at any time by or
on behalf of the Company proves to have been false in any material respect when made or furnished; or 
 (i) if the Company fails to observe
or perform in any material respect any of its covenants contained in the Transaction Documents (other than any failure covered by Section 6(a), (b) or (g)), and such failure continues for thirty (30) days after receipt by the Company
of notice thereof. 
 Upon the occurrence of any such Event of Default all unpaid principal and accrued interest under this Note shall become
immediately due and payable (A) upon election of the Holder, with respect to (a) through (d) and (f) through (i), and (B) automatically, with respect to (e). Upon the occurrence of any Event of Default, the Holder may, in
addition to declaring all amounts due hereunder to be immediately due and payable, pursue any available remedy, whether at law or in equity, including, without limitation, exercising its rights under the other Transaction Documents. If an Event of
Default occurs, the Company shall pay to the Holder the reasonable attorneys’ fees and disbursements and all other reasonable out-of-pocket costs incurred by the Holder in order to collect amounts due and owing under this Note or otherwise to
enforce the Holder’s rights and remedies hereunder and under the other Transaction Documents. 
 7. No Waiver. To the extent
permitted by applicable law, no delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any future occasion. 
  

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 8. Amendments in Writing. Any term of this Note may be amended or waived upon the written consent
of the Company and the holders of Company Notes representing at least 50% of the principal amount of Company Notes then outstanding (the “Majority Holders”); provided, that (x) any such amendment or waiver must apply to
all outstanding Company Notes; and (y) without the consent of the Holder hereof, no amendment or waiver shall (i) change the Stated Maturity Date of this Note, (ii) reduce the principal amount of this Note or the interest rate due
hereon, (iii) change the Conversion Price or (iv) change the place of payment of this Note. No such waiver or consent on any one instance shall be construed to be a continuing waiver or a waiver in any other instance unless it expressly so
provides. 
 9. Waivers. The Company hereby forever waives presentment, demand, presentment for payment, protest, notice of protest,
notice of dishonor of this Note and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. 
 10. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT,
BREACH OF DUTY AND ALL OTHER CLAIMS. THE COMPANY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 
 11. Governing Law; Consent to
Jurisdiction. This Note shall be governed by and construed under the law of the State of New York, without giving effect to the conflicts of law principles thereof. The Company and, by accepting this Note, the Holder, each irrevocably submits to
the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Note and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Note. The Company and, by accepting this Note, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by
accepting this Note, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. 
 12. Costs. If action is instituted to collect on this Note, the Company promises
to pay all reasonable costs and expenses, including reasonable attorney’s fees, incurred in connection with such action. 
 13.
Notices. All notices hereunder shall be given in writing and shall be deemed delivered when received by the other party hereto at the address set forth in the Purchase Agreement or at such other address as may be specified by such party from
time to time in accordance with the Purchase Agreement. 
 14. Successors and Assigns. This Note shall be binding upon the successors
or assigns of the Company and shall inure to the benefit of the successors and assigns of the Holder. 
  

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 [Remainder of Page Intentionally Left Blank] 
  

 22 

 IN WITNESS WHEREOF, the Company has caused this 8% Convertible Note to be signed in its name, effective
as of the date first above written. 
  

			
	INTERLINK ELECTRONICS, INC.
		
	By:	 	 /s/ E. Michael Thoben, III

	Name:	 	E. Michael Thoben, III
	Title:	 	Chairman, Chief Executive Officer and President

  

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