Document:

EX-10.9

 Exhibit 10.9 

ALBIREO PHARMA, INC. 

2016 EQUITY INCENTIVE PLAN 
  

	 	1.	DEFINITIONS. 

 Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Albireo Pharma, Inc. 2016 Equity Incentive Plan, have the following meanings: 

Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the term
Administrator means the Committee. 
 Affiliate means a corporation which, for purposes of Section 424 of the Code, is a parent or
subsidiary of the Company, direct or indirect. 
 Agreement means an agreement between the Company and a Participant pertaining to a
Stock Right delivered pursuant to the Plan in such form as the Administrator shall approve. 
 Board of Directors means the Board of
Directors of the Company. 
 Cause means, with respect to a Participant: (a) dishonesty with respect to the Company or any Affiliate,
(b) insubordination, substantial malfeasance or non-feasance of duty, (c) unauthorized disclosure of confidential information, (d) breach by a Participant of any provision of any employment, consulting,
advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, and (e) conduct substantially prejudicial to the business of the Company or any Affiliate; provided, however, that any provision
in an agreement between a Participant and the Company or an Affiliate, which contains a conflicting definition of Cause for termination and which is in effect at the time of such termination, shall supersede this definition with respect to that
Participant. The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company. 

Change of Control means the occurrence of any of the following events (unless otherwise specified in an Agreement): 

Ownership. Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “Beneficial
Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (excluding
for this purpose any such voting securities held by the Company or its Affiliates or by any employee benefit plan of the Company) pursuant to a transaction or a series of related transactions which the Board of Directors does not approve; or 

Merger/Sale of Assets. (A) A merger or consolidation of the Company whether or not approved by the Board of Directors, other than a
merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or
the parent of such corporation) more than 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or
consolidation; or (B) the sale or disposition by the Company of all or substantially all of the Company’s assets in a transaction requiring stockholder approval; or 

Change in Board Composition. A change in the composition of the Board of Directors, as a result of which fewer than a majority of the
directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company immediately following the closing of the Acquisition (as defined in the Share Exchange Agreement), or (B) are
elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination
is in connection with an actual or threatened proxy contest relating to the election of directors to the Company). 

 provided, that if any payment or benefit payable hereunder upon or following a Change of
Control would be required to comply with the limitations of Section 409A(a)(2)(A)(v) of the Code in order to avoid an additional tax under Section 409A of the Code, such payment or benefit shall be made only if such Change of Control constitutes a
change in ownership or control of the Company, or a change in ownership of the Company’s assets in accordance with Section 409A of the Code. 

Code means the United States Internal Revenue Code of 1986, as amended, including any successor statute, regulation and guidance
thereto. 
 Committee means the committee of the Board of Directors to which the Board of Directors has delegated power to act under
or pursuant to the provisions of the Plan, the composition of which shall at all times satisfy the provisions of Section 162(m) of the Code. 

Common Stock means shares of the Company’s common stock, $.01 par value per share. 

Company means Albireo Pharma, Inc., a Delaware corporation. 

Consultant means any natural person who is an advisor or consultant that provides bona fide services to the Company or its Affiliates,
provided that such services are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s or its Affiliates’ securities. 

Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code. 

Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an
officer or director of the Company or of an Affiliate), designated by the Administrator to be eligible to be granted one or more Stock Rights under the Plan. 

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

Fair Market Value of a Share of Common Stock means: 

If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the closing or, if not applicable, the last price of the Common Stock on the composite tape or other comparable reporting
system for the trading day on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; 

If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (1), and if bid and asked prices for the Common Stock are regularly reported,
the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the trading day on which Common Stock was traded on the applicable date and if such applicable date is not a trading day,
the last market trading day prior to such date; and 
 If the Common Stock is neither listed on a national securities exchange nor traded in
the over-the-counter market, such value as the Administrator, in good faith, shall determine in compliance with applicable laws. 

ISO means an option intended to qualify as an incentive stock option under Section 422 of the Code. 

Non-Qualified Option means an option which is not intended to qualify as an ISO.

 Option means an ISO or Non-Qualified Option granted under the Plan. 

Participant means an Employee, director or Consultant of the Company or an Affiliate to whom one or more Stock Rights are granted under
the Plan. As used herein, “Participant” shall include Participant’s Survivors where the context requires. 

Performance Based Award means a Stock Grant or Stock-Based Award which vests based on the attainment of written Performance Goals as set
forth in Paragraph 9 hereof. 

  
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 Performance Goals means performance goals based on one or more of the following criteria:
(i) pre-tax income or after-tax income; (ii) income or earnings including operating income, earnings before or after taxes, interest, depreciation, amortization, and/or extraordinary or special items; (iii) net income excluding amortization of
intangible assets, depreciation and impairment of goodwill and intangible assets and/or excluding charges attributable to the adoption of new accounting pronouncements; (iv) earnings or book value per share (basic or diluted); (v) return on
assets (gross or net), return on investment, return on capital, return on invested capital or return on equity; (vi) return on revenues; (vii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by
operations, or cash flow in excess of cost of capital; (viii) economic value created; (ix) operating margin or profit margin; (x) stock price or total stockholder return; (xi) income or earnings from continuing operations; (xii) cost targets,
reductions and savings, expense management, productivity and efficiencies; (xiii) operational objectives, consisting of one or more objectives based on achieving progress in research and development programs or achieving regulatory milestones
related to development and or approval of products; and (xiv) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share of one or more products or customers, geographic business
expansion, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures, collaborations and licensing or similar transactions. Where
applicable, the Performance Goals may be expressed in terms of a relative measure against a set of identified peer group companies, attaining a specified level of the particular criterion or the attainment of a percentage increase or decrease in the
particular criterion, and may be applied to one or more of the Company or an Affiliate of the Company, or a division or strategic business unit of the Company, all as determined by the Committee. The Performance Goals may include a threshold level
of performance below which no Performance-Based Award will be issued or no vesting will occur, levels of performance at which Performance-Based Awards will be issued or specified vesting will occur, and a maximum level of performance above which no
additional issuances will be made or at which full vesting will occur. Each of the foregoing Performance Goals shall be evaluated in an objectively determinable manner in accordance with Section 162(m) of the Code and in accordance with generally
accepted accounting principles where applicable, unless otherwise specified by the Committee, and shall be subject to certification by the Committee. The Committee shall have the authority to make equitable adjustments to the Performance Goals in
recognition of unusual or non-recurring events affecting the Company or any Affiliate or the financial statements of the Company or any Affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or
expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles provided that any such change shall at all times satisfy
the provisions of Section 162(m) of the Code. 
 Plan means this Albireo Pharma, Inc. 2016 Equity Incentive Plan. 

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

Share Exchange Agreement means the Amended and Restated Share Exchange Agreement, dated as of July 13, 2016, by and among the
Company (f/k/a Biodel Inc.), Albireo Limited and the sellers listed on Schedule I thereto. 
 Shares means shares of the Common
Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Paragraph 3 of the Plan. The Shares issued
under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both. 
 Stock-Based Award
means a grant by the Company under the Plan of an equity award or an equity based award which is not an Option or a Stock Grant, which the Committee may, in its sole discretion, structure to qualify in whole or in part as “performance-based
compensation” under Section 162(m) of the Code. 

  
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 Stock Grant means a grant by the Company of Shares under the Plan, which the Committee
may, in its sole discretion, structure to qualify in whole or in part as “performance-based compensation” under Section 162(m) of the Code. 

Stock Right means a right to Shares or the value of Shares of the Company granted pursuant to the Plan — an ISO, a Non-Qualified
Option, a Stock Grant or a Stock-Based Award. 
 Survivor means a deceased Participant’s legal representatives and/or any person
or persons who acquired the Participant’s rights to a Stock Right by will or by the laws of descent and distribution. 
  

	 	2.	PURPOSES OF THE PLAN. 

 The Plan is intended to encourage ownership of Shares by
Employees and directors of and certain Consultants to the Company and its Affiliates in order to attract and retain such people, to induce them to work for the benefit of the Company or of an Affiliate and to provide additional incentive for them to
promote the success of the Company or of an Affiliate. The Plan provides for the granting of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards. 

 

	 	3.	SHARES SUBJECT TO THE PLAN. 

 (a) The number of Shares which may be issued from time to
time pursuant to this Plan shall be the sum of: (i) 635,000 Shares, plus (ii) no more than 249,059 Shares that are represented by awards granted under the Biodel Inc. 2010 Stock Incentive Plan, if and to the extent that any of
such Shares are forfeited, expire or are cancelled without delivery of Shares or which result in the forfeiture of Shares back to the Company after the closing of the Acquisition (as defined in the Share Exchange Agreement), or the equivalent of
such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 25 of the Plan; provided,
however, that the numbers in this Paragraph 3(a) shall not be adjusted to reflect the 30:1 reverse stock split to be effected following the 2016 annual meeting of stockholders of Biodel Inc. 

(b) If an Option ceases to be “outstanding,” in whole or in part (other than by exercise), or if the Company shall reacquire (at not
more than its original issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued or
reacquired Shares which were subject to such Stock Right shall again be available for issuance from time to time pursuant to this Plan, subject, in the case of ISOs, to any limitations under the Code. Notwithstanding the foregoing: (i) if a Stock
Right is exercised, in whole or in part, by the tender or withholding of Shares or if the Company or an Affiliate’s tax withholding obligation is satisfied by the tender or withholding of Shares, the number of Shares deemed to have been issued
under the Plan for purposes of the limitation set forth in Paragraph 3(a) above shall be the gross number of Shares that were subject to the Stock Right or portion thereof and not the net number of Shares actually issued; and (ii) any Shares
purchased on the open market from the proceeds of an exercise of a Stock Right shall not be available for issuance pursuant to this Plan. 
  

	 	4.	ADMINISTRATION OF THE PLAN. 

 The Administrator of the Plan will be the Board of
Directors, except to the extent the Board of Directors delegates its authority to the Committee, in which case the Committee shall be the Administrator. Notwithstanding the foregoing, the Board of Directors may not take any action that would
cause any outstanding Stock Right that would otherwise qualify as performance-based compensation under Section 162(m) of the Code to fail to so qualify. Subject to the provisions of the Plan, the Administrator is authorized to: 

(a) Interpret the provisions of the Plan and all Stock Rights and to make all rules and determinations which it deems necessary or advisable
for the administration of the Plan; 
 (b) Determine which Employees, directors and Consultants shall be granted Stock Rights; 

  
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 (c) Determine the number of Shares for which a Stock Right or Stock Rights shall be granted,
provided, however, that in no event shall Stock Rights with respect to more than 200,000 Shares be granted to any Participant in any fiscal year; and provided, further, however, that this number shall not be adjusted to reflect the 30:1 reverse
stock split to be effected following the 2016 annual meeting of stockholders of Biodel Inc.; 
 (d) Specify the terms and conditions upon
which a Stock Right or Stock Rights may be granted, provided, however, except in the case of (i) death, disability or retirement of the Participant or (ii) a Change of Control, Stock Rights shall not vest in full, and any right of the Company to
restrict or reacquire Shares subject to a Stock Grant shall not lapse completely, less than one (1) year from the date of grant, provided that any time-based vesting with respect to such Stock Right or Stock Grant may continue incrementally
pursuant to the terms of such Stock Right or Stock Grant over such one-year period; and provided further that, notwithstanding the foregoing, Stock Rights may be granted to non-employee directors having time-based vesting of less than one (1) year
from the date of grant so long as no more than ten percent (10%) of the Shares reserved for issuance under the Plan pursuant to Paragraph 3(a) above (as adjusted under Paragraph 25 of this Plan) may be granted in the aggregate
pursuant to such awards; 
 (e) Determine Performance Goals no later than such time as required to ensure that a Performance-Based Award
which is intended to comply with the requirements of Section 162(m) of the Code so complies; 
 (f) Amend any term or condition of any
outstanding Stock Right, other than reducing the exercise price or purchase price or extending the expiration date of an Option, provided that (i) such term or condition as amended is not prohibited by the Plan; (ii) any such amendment shall not
impair the rights of a Participant under any Stock Right previously granted without such Participant’s consent or in the event of death of the Participant the Participant’s Survivors; and (iii) any such amendment shall be made only after
the Administrator determines whether such amendment would cause any adverse tax consequences to the Participant, including, but not limited to, the annual vesting limitation contained in Section 422(d) of the Code and described in Paragraph 6(b)(iv)
below with respect to ISOs and pursuant to Section 409A of the Code; 
 (g) Make any adjustments in the Performance Goals included in any
Performance-Based Awards provided that such adjustments comply with the requirements of Section 162(m) of the Code; and 
 (h) Adopt any
sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other laws applicable to the Company, any Affiliate or to Participants or to otherwise
facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock Right; 

provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of not causing any
adverse tax consequences under Section 409A of the Code and preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs and in accordance with Section 162(m) of the Code for all other Stock Rights to which
the Committee has determined Section 162(m) is applicable. Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right granted under it shall be final, unless otherwise
determined by the Board of Directors, if the Administrator is the Committee. In addition, if the Administrator is the Committee, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the
Committee. 
 To the extent permitted under applicable law, the Board of Directors or the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate all or any portion of its responsibilities and powers to any other person selected by it. The Board of Directors or the Committee may revoke any such allocation or
delegation at any time. Notwithstanding the foregoing, only the Board of Directors or the Committee shall be authorized to grant a Stock Right to any director of the Company or to any “officer” of the Company as defined by Rule 16a-1 under
the Exchange Act. 

  
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	 	5.	ELIGIBILITY FOR PARTICIPATION. 

 The Administrator will, in its sole discretion, name the
Participants in the Plan; provided, however, that each Participant must be an Employee, director or Consultant of the Company or of an Affiliate at the time a Stock Right is granted. Notwithstanding the foregoing, the Administrator may
authorize the grant of a Stock Right to a person not then an Employee, director or Consultant of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to
become a Participant at or prior to the time of the execution of the Agreement evidencing such Stock Right. ISOs may be granted only to Employees who are deemed to be residents of the United States for tax
purposes. Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to any Employee, director or Consultant of the Company or an Affiliate. The granting of any Stock Right to any
individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights or any grant under any other benefit plan established by the Company or any Affiliate for Employees, directors or
Consultants. 
  

	 	6.	TERMS AND CONDITIONS OF OPTIONS. 

 Each Option shall be set forth in writing in an Option
Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms
and conditions specifically required under this Plan, as the Administrator may deem appropriate including, without limitation, subsequent approval by the stockholders of the Company of this Plan or any amendments thereto. The Option Agreements
shall be subject to at least the following terms and conditions: 
 (a) Non-Qualified
Options: Each Option intended to be a Non-Qualified Option shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company,
subject to the following minimum standards for any such Non-Qualified Option: 
  

	 	(i)	Exercise Price: Each Option Agreement shall state the exercise price (per share) of the Shares covered by each Option, which exercise price shall be determined by the Administrator and shall be at least equal to
the Fair Market Value per share of Common Stock on the date of grant of the Option. 

  

	 	(ii)	Number of Shares: Each Option Agreement shall state the number of Shares to which it pertains. 

  

	 	(iii)	Vesting: Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become
exercisable in installments over a period of months or years, or upon the occurrence of certain performance conditions or the attainment of stated goals or events. 

 

	 	(iv)	Additional Conditions: Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the Administrator providing for certain protections for
the Company and its other stockholders, including requirements that: 

  

	 	A.	The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and 

  

	 	B.	The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions.

  

	 	(v)	Term of Option: Each Option shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide. 

  
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 (b) ISOs: Each Option intended to be an ISO shall be issued only to an Employee who
is deemed to be a resident of the United States for tax purposes, and shall be subject to the following terms and conditions, with such additional restrictions or changes as the Administrator determines are appropriate but not in conflict with
Section 422 of the Code and relevant regulations and rulings of the Internal Revenue Service: 
  

	 	(i)	Minimum Standards: The ISO shall meet the minimum standards required of Non-Qualified Options, as described in Paragraph 6(a) above, except clause (i) and (v)
thereunder. 

  

	 	(ii)	Exercise Price: Immediately before the ISO is granted, if the Participant owns, directly or by reason of the applicable attribution rules in Section 424(d) of the Code: 

 

	 	A.	10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 100% of the Fair Market
Value per share of the Common Stock on the date of grant of the Option; or 

  

	 	B.	More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 110% of the Fair Market
Value per share of the Common Stock on the date of grant of the Option. 

  

	 	(iii)	Term of Option: For Participants who own: 

  

	 	A.	10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than ten years from the date of the grant or at such earlier time as the
Option Agreement may provide; or 

  

	 	B.	More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than five years from the date of the grant or at such earlier time as the Option
Agreement may provide. 

  

	 	(iv)	Limitation on Yearly Exercise: The Option Agreements shall restrict the amount of ISOs which may become exercisable in any calendar year (under this or any other ISO plan of the Company or an Affiliate) so
that the aggregate Fair Market Value (determined on the date each ISO is granted) of the stock with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed $100,000. 

 

	 	7.	TERMS AND CONDITIONS OF STOCK GRANTS. 

 Each Stock Grant to a Participant shall state the
principal terms in an Agreement duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall contain terms and
conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards: 

(a) Each Agreement shall state the purchase price per share, if any, of the Shares covered by each Stock Grant, which purchase price shall be
determined by the Administrator but shall not be less than the minimum consideration required by the Delaware General Corporation Law, if any, on the date of the grant of the Stock Grant; 

(b) Each Agreement shall state the number of Shares to which the Stock Grant pertains; and 

(c) Each Agreement shall include the terms of any right of the Company to restrict or reacquire the Shares subject to the Stock Grant,
including the time period or attainment of Performance Goals or such other performance criteria upon which such rights shall accrue and the purchase price therefor, if any. 
  

	 	8.	TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS. 

 The Administrator shall have the
right to grant other Stock-Based Awards based upon the Common Stock having such terms and conditions as the Administrator may determine, including, without limitation, the grant of 

  
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Shares based upon certain conditions, the grant of securities convertible into Shares and the grant of stock appreciation rights, phantom stock awards or stock units. The principal terms of
each Stock-Based Award shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall
contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company. Each Agreement shall include the terms of any right of the Company including the right to terminate the Stock-Based Award
without the issuance of Shares, the terms of any vesting conditions, Performance Goals or events upon which Shares shall be issued. Under no circumstances may the Agreement covering stock appreciation rights (a) have an exercise price (per
share) that is less than the Fair Market Value per share of Common Stock on the date of grant or (b) expire more than ten years following the date of grant. 

The Company intends that the Plan and any Stock-Based Awards granted hereunder be exempt from the application of Section 409A of the Code or
meet the requirements of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of the Code, to the extent applicable, and be operated in accordance with Section 409A so that any compensation deferred under any Stock-Based Award (and
applicable investment earnings) shall not be included in income under Section 409A of the Code. Any ambiguities in the Plan shall be construed to effect the intent as described in this Paragraph 8. 

 

	 	9.	PERFORMANCE BASED AWARDS. 

 Notwithstanding anything to the contrary herein, during any period
when Section 162(m) of the Code is applicable to the Company and the Plan, Stock Rights granted under Paragraph 7 and Paragraph 8 may be granted by the Committee in a manner which is deductible by the Company under Section 162(m) of the Code
(“Performance-Based Awards”). A Participant’s Performance-Based Award shall be determined based on the attainment of written Performance Goals, which must be objective and approved by the Committee for a performance period of between
one and five years established by the Committee (I) while the outcome for that performance period is substantially uncertain and (II) no more than 90 days after the commencement of the performance period to which the Performance Goal relates or, if
less, the number of days which is equal to 25% of the relevant performance period. The Committee shall determine whether, with respect to a performance period, the applicable Performance Goals have been met with respect to a given Participant and,
if they have, to so certify and ascertain the amount of the applicable Performance-Based Award. No Performance-Based Awards will be issued for such performance period until such certification is made by the Committee. The number of shares issued in
respect of a Performance-Based Award to a given Participant may be less than the amount determined by the applicable Performance Goal formula, at the discretion of the Committee. The number of shares issued in respect of a Performance-Based Award
determined by the Committee for a performance period shall be paid to the Participant at such time as determined by the Committee in its sole discretion after the end of such performance period. Nothing in this Section shall prohibit the Company
from granting Stock-Based Awards subject to performance criteria that do not comply with this Paragraph. 
  

	 	10.	EXERCISE OF OPTIONS AND ISSUE OF SHARES. 

 An Option (or any part or installment thereof)
shall be exercised by giving written notice to the Company or its designee (in a form acceptable to the Administrator, which may include electronic notice), together with provision for payment of the aggregate exercise price in accordance with this
Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement. Such notice shall be signed by the person exercising the Option (which signature may be
provided electronically in a form acceptable to the Administrator), shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement. Payment
of the exercise price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check; or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held
for at least six months (if required to avoid negative accounting treatment) having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised; or
(c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise 

  
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issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the
Option is being exercised; or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator; or (e) at the discretion of the Administrator,
by any combination of (a), (b), (c) and (d) above or (f) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine. Notwithstanding the foregoing, the Administrator shall accept only
such payment on exercise of an ISO as is permitted by Section 422 of the Code. 
 The Company shall then reasonably promptly deliver the
Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be). In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery
of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior
to their issuance. The Shares shall, upon delivery, be fully paid, non-assessable Shares. 
  

	 	11.	PAYMENT IN CONNECTION WITH THE ISSUANCE OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES. 

Any Stock Grant or Stock-Based Award requiring payment of a purchase price for the Shares as to which such Stock Grant or Stock-Based Award is
being granted shall be made (a) in United States dollars in cash or by check; or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment)
and having a Fair Market Value equal as of the date of payment to the purchase price of the Stock Grant or Stock-Based Award; or (c) at the discretion of the Administrator, by any combination of (a) and (b) above; or (d) at the discretion of the
Administrator, by payment of such other lawful consideration as the Administrator may determine. 
 The Company shall when required by the
applicable Agreement, reasonably promptly deliver the Shares as to which such Stock Grant or Stock-Based Award was made to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the
applicable Agreement. In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including,
without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance. 
  

	 	12.	RIGHTS AS A STOCKHOLDER. 

 No Participant to whom a Stock Right has been granted shall
have rights as a stockholder with respect to any Shares covered by such Stock Right except after due exercise of an Option or issuance of Shares as set forth in any Agreement, tender of the aggregate exercise or purchase price, if any, for the
Shares being purchased and registration of the Shares in the Company’s share register in the name of the Participant. 
  

	 	13.	ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS. 

 By its terms, a Stock Right granted
to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the Administrator in its discretion and set forth in the applicable Agreement provided that no
Stock Right may be transferred by a Participant for value. Notwithstanding the foregoing, an ISO transferred except in compliance with clause (i) above shall no longer qualify as an ISO. The designation of a beneficiary of a Stock Right by a
Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph. Except as provided above during the Participant’s lifetime a Stock
Right shall only be exercisable by or issued to such Participant (or his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Stock Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar
process upon a Stock Right, shall be null and void. 

  
 9 

	 	14.	EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY. 

Except as otherwise provided in a Participant’s Option Agreement, in the event of a termination of service (whether as an Employee,
director or Consultant) with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply: 
 (a) A
Participant who ceases to be an Employee, director or Consultant of the Company or of an Affiliate (for any reason other than termination for Cause, Disability, or death for which events there are special rules in Paragraphs 15, 16, and 17,
respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in a Participant’s Option
Agreement. 
 (b) Except as provided in Subparagraph (c) below, or Paragraph 16 or 17, in no event may an Option intended to be an ISO, be
exercised later than three months after the Participant’s termination of employment. 
 (c) The provisions of this Paragraph, and not
the provisions of Paragraph 16 or 17, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, director status or consultancy; provided, however, in the case of a Participant’s Disability or
death within three months after the termination of employment, director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one year after the date of the Participant’s termination of
service, but in no event after the date of expiration of the term of the Option. 
 (d) Notwithstanding anything herein to the contrary, if
subsequent to a Participant’s termination of employment, termination of director status or termination of consultancy, but prior to the exercise of an Option, the Administrator determines that, either prior or subsequent to the
Participant’s termination, the Participant engaged in conduct which would constitute Cause, then such Participant shall forthwith cease to have any right to exercise any Option. 

(e) A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary
disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated
such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide; provided, however, that, for ISOs, any leave of absence granted by the
Administrator of greater than ninety days, unless pursuant to a contract or statute that guarantees the right to reemployment, shall cause such ISO to become a Non-Qualified Option on the 181st
day following such leave of absence. 
 (f) Except as required by law or as set forth in a Participant’s Option Agreement, Options
granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an Employee, director or Consultant of the Company or any Affiliate.

  

	 	15.	EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE. 

 Except as otherwise provided in
a Participant’s Option Agreement, the following rules apply if the Participant’s service (whether as an Employee, director or Consultant) with the Company or an Affiliate is terminated for Cause prior to the time that all his or her
outstanding Options have been exercised: 
 (a) All outstanding and unexercised Options as of the time the Participant is notified his or her
service is terminated for Cause will immediately be forfeited. 

  
 10 

 (b) Cause is not limited to events which have occurred prior to a Participant’s termination
of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either
prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then the right to exercise any Option is forfeited. 
  

	 	16.	EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY. 

 Except as otherwise
provided in a Participant’s Option Agreement: 
 (a) A Participant who ceases to be an Employee, director or Consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to such Participant to the extent that the Option has become exercisable but has not been exercised on the date of the Participant’s termination of service due to
Disability; and in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant’s termination of service due to Disability of any additional vesting rights that would have
accrued on the next vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant’s termination of service due to
Disability. 
 (b) A Disabled Participant may exercise the Option only within the period ending one year after the date of the
Participant’s termination of service due to Disability, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not been terminated due to
Disability and had continued to be an Employee, director or Consultant or, if earlier, within the originally prescribed term of the Option. 

(c) The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure
for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for by the Company. 
  

	 	17.	EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT. 

 Except as
otherwise provided in a Participant’s Option Agreement: 
 (a) In the event of the death of a Participant while the Participant is an
Employee, director or Consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors to the extent that the Option has become exercisable but has not been exercised on the date of death; and in the
event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died. The proration
shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death. 
 (b) If the
Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the
Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an Employee, director or Consultant or, if earlier, within the originally prescribed term of the Option. 

 

	 	18.	EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS AND STOCK-BASED AWARDS. 

 In the event
of a termination of service (whether as an Employee, director or Consultant) with the Company or an Affiliate for any reason before the Participant has accepted a Stock Grant or a Stock-Based Award and paid the purchase price, if required, such
grant shall terminate. 

  
 11 

 For purposes of this Paragraph 18 and Paragraph 19 below, a Participant to whom a Stock Grant or
a Stock-Based Award has been issued under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence
for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide. 
 In addition, for purposes of this Paragraph 18 and Paragraph 19 below, any change of
employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, director status or consultancy so long as the Participant continues to be an Employee, director or Consultant of the
Company or any Affiliate. 
  

	 	19.	EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE, DEATH OR DISABILITY. 

Except as otherwise provided in a Participant’s Agreement, in the event of a termination of service for any reason (whether as an
Employee, director or Consultant), other than termination for Cause, death or Disability for which there are special rules in Paragraphs 20, 21, and 22 below, before all forfeiture provisions or Company rights of repurchase shall have lapsed, then
the Company shall have the right to cancel or repurchase that number of Shares subject to a Stock Grant or Stock-Based Award as to which the Company’s forfeiture or repurchase rights have not lapsed. 

 

	 	20.	EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE FOR CAUSE. 

Except as otherwise provided in a Participant’s Agreement, the following rules apply if the Participant’s service (whether as an
Employee, director or Consultant) with the Company or an Affiliate is terminated for Cause: 
 (a) All Shares subject to any Stock Grant or
Stock-Based Award that remain subject to forfeiture provisions or as to which the Company shall have a repurchase right shall be immediately forfeited to the Company as of the time the Participant is notified his or her service is terminated for
Cause. 
 (b) Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary
that the Administrator’s finding of Cause occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the
Participant engaged in conduct which would constitute Cause, then all Shares subject to any Stock Grant or Stock-Based Award that remained subject to forfeiture provisions or as to which the Company had a repurchase right on the date of termination
shall be immediately forfeited to the Company. 
  

	 	21.	EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF TERMINATION OF SERVICE FOR DISABILITY. 

Except as otherwise provided in a Participant’s Agreement, the following rules apply if a Participant ceases to be an Employee, director
or Consultant of the Company or of an Affiliate by reason of Disability: to the extent the forfeiture provisions or the Company’s rights of repurchase have not lapsed on the date of Disability, they shall be exercisable; provided, however, that
in the event such forfeiture provisions or rights of repurchase lapse periodically, such provisions or rights shall lapse to the extent of a pro rata portion of the Shares subject to such Stock Grant or Stock-Based Award through the date of
Disability as would have lapsed had the Participant not become Disabled. The proration shall be based upon the number of days accrued prior to the date of Disability. 

The Administrator shall make the determination both as to whether Disability has occurred and the date of its occurrence (unless a procedure
for such determination is set forth in another agreement between the Company 

  
 12 

 
and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the
Administrator, the cost of which examination shall be paid for by the Company. 
  

	 	22.	EFFECT ON STOCK GRANTS AND STOCK-BASED AWARDS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT. 

Except as otherwise provided in a Participant’s Agreement, the following rules apply in the event of the death of a Participant while the
Participant is an Employee, director or Consultant of the Company or of an Affiliate: to the extent the forfeiture provisions or the Company’s rights of repurchase have not lapsed on the date of death, they shall be exercisable; provided,
however, that in the event such forfeiture provisions or rights of repurchase lapse periodically, such provisions or rights shall lapse to the extent of a pro rata portion of the Shares subject to such Stock Grant or Stock-Based Award through the
date of death as would have lapsed had the Participant not died. The proration shall be based upon the number of days accrued prior to the Participant’s date of death. 
  

	 	23.	PURCHASE FOR INVESTMENT. 

 Unless the offering and sale of the Shares shall have been
effectively registered under the Securities Act, the Company shall be under no obligation to issue Shares under the Plan unless and until the following conditions have been fulfilled: 

(a) The person who receives a Stock Right shall warrant to the Company, prior to the receipt of Shares, that such person is acquiring such
Shares for his or her own account, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person acquiring such Shares shall be bound by the provisions of the following legend
(or a legend in substantially similar form) which shall be endorsed upon the certificate evidencing the Shares issued pursuant to such exercise or such grant of a Stock Right: 

“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise
transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel
satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.” 

(b) At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued in
compliance with the Securities Act without registration thereunder. 
  

	 	24.	DISSOLUTION OR LIQUIDATION OF THE COMPANY. 

 Upon the dissolution or liquidation of the
Company, all Options granted under this Plan which as of such date shall not have been exercised and all Stock Grants and Stock-Based Awards which have not been accepted, to the extent required under the applicable Agreement, will terminate and
become null and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to
such dissolution or liquidation to exercise or accept any Stock Right to the extent that the Stock Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation. Upon the dissolution or liquidation
of the Company, any outstanding Stock-Based Awards shall immediately terminate unless otherwise determined by the Administrator or specifically provided in the applicable Agreement. 

 

	 	25.	ADJUSTMENTS. 

 Upon the occurrence of any of the following events, a Participant’s
rights with respect to any Stock Right granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in a Participant’s Agreement. 

(a) Stock Dividends and Stock Splits. If (i) the shares of Common Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any shares of Common Stock as a stock 

  
 13 

 
dividend on its outstanding Common Stock, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to
such shares of Common Stock, each Stock Right and the number of shares of Common Stock deliverable thereunder shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made including, in the exercise or
purchase price per share, to reflect such events. The number of Shares subject to the limitations in Paragraph 3(a) and 4(c) shall also be proportionately adjusted upon the occurrence of such events and the Performance Goals applicable
to outstanding Performance-Based Awards. 
 (b) Corporate Transactions. If the Company is to be consolidated with or acquired by
another entity in a merger, consolidation, or sale of all or substantially all of the Company’s assets other than a transaction to merely change the state of incorporation (a “Corporate Transaction”), the Administrator or the board of
directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable
basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that such Options must be exercised (either (A) to the extent then exercisable or, (B) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of
this Subparagraph), within a specified number of days of the date of such notice, at the end of which period such Options which have not been exercised shall terminate; or (iii) terminate such Options in exchange for payment of an amount equal to
the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock into which such Option would have been exercisable (either (A) to the extent then exercisable or, (B) at the discretion of
the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph) less the aggregate exercise price thereof. For purposes of determining the payments to be made pursuant to Subclause (iii)
above, in the case of a Corporate Transaction the consideration for which, in whole or in part, is other than cash, the consideration other than cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors.

 Notwithstanding the foregoing, in the event the Corporate Transaction also constitutes a Change of Control, then all Options outstanding
on the date of the Corporate Transaction shall vest in full immediately prior to the occurrence of the Change of Control, unless such Options are to be assumed by the acquiring or surviving entity in the Corporate Transaction, in which case they
shall retain their original vesting schedule. 
 With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall
make appropriate provision for the continuation of such Stock Grants on the same terms and conditions by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the
outstanding Shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity. In lieu of the foregoing, in connection with any Corporate Transaction, the Administrator may provide that, upon
consummation of the Corporate Transaction, each outstanding Stock Grant shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares
of Common Stock comprising such Stock Grant (to the extent such Stock Grant is no longer subject to any forfeiture or repurchase rights then in effect or, at the discretion of the Administrator, all forfeiture and repurchase rights being waived upon
such Corporate Transaction). 
 In taking any of the actions permitted under this Paragraph 25(b), the Administrator shall not be obligated
by the Plan to treat all Stock Rights, all Stock Rights held by a Participant, or all Stock Rights of the same type, identically. 
 (c)
Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, a Participant upon exercising an Option or 

  
 14 

 
accepting a Stock Grant after the recapitalization or reorganization shall be entitled to receive for the price paid upon such exercise or acceptance if any, the number of replacement securities
which would have been received if such Option had been exercised or Stock Grant accepted prior to such recapitalization or reorganization. 

(d) Adjustments to Stock-Based Awards. Upon the happening of any of the events described in Subparagraphs (a), (b) or (c) above,
any outstanding Stock-Based Award shall be appropriately adjusted to reflect the events described in such Subparagraphs. The Administrator or the Successor Board shall determine the specific adjustments to be made under this Paragraph 25,
including, but not limited to, the effect of any Corporate Transaction and Change of Control, and subject to Paragraph 4, its determination shall be conclusive. 

(e) Modification of Options. Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph (a), (b) or (c) above
with respect to Options shall be made only after the Administrator determines whether such adjustments would (i) constitute a “modification” of any ISOs (as that term is defined in Section 424(h) of the Code) or (ii) cause any adverse
tax consequences for the holders of Options, including, but not limited to, pursuant to Section 409A of the Code. If the Administrator determines that such adjustments made with respect to Options would constitute a modification or other adverse tax
consequence, it may refrain from making such adjustments, unless the holder of an Option specifically agrees in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such
“modification” on his or her income tax treatment with respect to the Option. This paragraph shall not apply to the acceleration of the vesting of any ISO that would cause any portion of the ISO to violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in Paragraph 6(b)(iv). 
 (f) Modification of Performance-Based Awards.
Notwithstanding the foregoing, with respect to any Performance-Based Award that is intended to comply as “performance based compensation” under Section 162(m) of the Code, the Committee may adjust downwards, but not upwards, the number of
Shares payable pursuant to a Performance-Based Award, and the Committee may not waive the achievement of the applicable Performance Goals except in the case of death or disability of the Participant. 

 

	 	26.	ISSUANCES OF SECURITIES. 

 Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Stock Rights. Except
as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Stock Right. 

 

	 	27.	FRACTIONAL SHARES. 

 No fractional shares shall be issued under the Plan and the person
exercising a Stock Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof. 
  

	 	28.	CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs. 

The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such
Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the
Participant is an Employee of the Company or an Affiliate at the time of such conversion. At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any Participant the
right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action. The Administrator, with the
consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion. 

  
 15 

	 	29.	WITHHOLDING. 

 In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection
with the issuance of a Stock Right or Shares under the Plan or for any other reason required by law, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory
note, is authorized by the Administrator (and permitted by law). For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner set forth under the definition of Fair Market
Value provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise. If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to
advance the difference in cash to the Company or the Affiliate employer. The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional
withholding. 
  

	 	30.	NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. 

 Each Employee who receives an ISO must
agree to notify the Company in writing immediately after the Employee makes a Disqualifying Disposition of any Shares acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is defined in Section 424(c) of the Code and includes
any disposition (including any sale or gift) of such Shares before the later of (a) two years after the date the Employee was granted the ISO, or (b) one year after the date the Employee acquired Shares by exercising the ISO, except as otherwise
provided in Section 424(c) of the Code. If the Employee has died before such Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter. 

 

	 	31.	TERMINATION OF THE PLAN. 

 The Plan will terminate on August 24, 2026, the date which is ten years from the earlier of the date of its adoption by the Board of Directors and the date of its approval by the stockholders of the Company. The Plan may be
terminated at an earlier date by vote of the stockholders or the Board of Directors of the Company; provided, however, that any such earlier termination shall not affect any Agreements executed prior to the effective date of such
termination. Termination of the Plan shall not affect any Stock Rights theretofore granted. 
  

	 	32.	AMENDMENT OF THE PLAN AND AGREEMENTS. 

 The Plan may be amended by the stockholders of
the Company. The Plan may also be amended by the Administrator; provided that any amendment approved by the Administrator which the Administrator determines is of a scope that requires stockholder approval shall be subject to obtaining such
stockholder approval including, without limitation, to the extent necessary to qualify any or all outstanding Stock Rights granted under the Plan or Stock Rights to be granted under the Plan for favorable federal income tax treatment as may be
afforded incentive stock options under Section 422 of the Code and to the extent necessary to qualify the Shares issuable under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of
securities dealers and in order to continue to comply with Section 162(m) of the Code. Other than as set forth in Paragraph 25 of the Plan, the Administrator may not without stockholder approval reduce the exercise price of an Option or cancel
any outstanding Option in exchange for a replacement option having a lower exercise price, any Stock Grant, any other Stock-Based Award or for cash. In addition, the Administrator not take any other action that is considered a direct or indirect
“repricing” for purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Shares are listed, including any other action that is treated as a repricing under generally
accepted accounting principles. Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a 

  
 16 

 
Stock Right previously granted to him or her. With the consent of the Participant affected, the Administrator may amend outstanding Agreements in a manner which may be adverse to the Participant
but which is not inconsistent with the Plan. In the discretion of the Administrator, outstanding Agreements may be amended by the Administrator in a manner which is not adverse to the Participant. Nothing in this Paragraph 32 shall limit the
Administrator’s authority to take any action permitted pursuant to Paragraph 25. 
  

	 	33.	EMPLOYMENT OR OTHER RELATIONSHIP. 

 Nothing in this Plan or any Agreement shall be deemed
to prevent the Company or an Affiliate from terminating the employment, consultancy or director status of a Participant, nor to prevent a Participant from terminating his or her own employment, consultancy or director status or to give any
Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time. 
  

	 	34.	SECTION 409A. 

 If a Participant is a “specified employee” as defined in
Section 409A of the Code (and as applied according to procedures of the Company and its Affiliates) as of his separation from service, to the extent any payment under this Plan or pursuant to the grant of a Stock-Based Award constitutes deferred
compensation (after taking into account any applicable exemptions from Section 409A of the Code), and to the extent required by Section 409A of the Code, no payments due under this Plan or pursuant to a Stock-Based Award may be made until the
earlier of: (i) the first day of the seventh month following the Participant’s separation from service, or (ii) the Participant’s date of death; provided, however, that any payments delayed during this six-month period shall be paid in the
aggregate in a lump sum, without interest, on the first day of the seventh month following the Participant’s separation from service. 

The Administrator shall administer the Plan with a view toward ensuring that Stock Rights under the Plan that are subject to Section 409A of
the Code comply with the requirements thereof and that Options under the Plan be exempt from the requirements of Section 409A of the Code, but neither the Administrator nor any member of the Board, nor the Company nor any of its Affiliates, nor any
other person acting hereunder on behalf of the Company, the Administrator or the Board shall be liable to a Participant or any Survivor by reason of the acceleration of any income, or the imposition of any additional tax or penalty, with respect to
a Stock Right, whether by reason of a failure to satisfy the requirements of Section 409A of the Code or otherwise. 
  

	 	35.	INDEMNITY. 

 Neither the Board nor the Administrator, nor any members of either, nor any
employees of the Company or any parent, subsidiary, or other Affiliate, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with their responsibilities with respect to this Plan, and
the Company hereby agrees to indemnify the members of the Board, the members of the Committee, and the employees of the Company and its parent or subsidiaries in respect of any claim, loss, damage, or expense (including reasonable counsel fees)
arising from any such act, omission, interpretation, construction or determination to the full extent permitted by law. 
  

	 	36.	CLAWBACK. 

 Notwithstanding anything to the contrary contained in this Plan, the Company
may recover from a Participant any compensation received from any Stock Right (whether or not settled) or cause a Participant to forfeit any Stock Right (whether or not vested) in the event that the Company’s Clawback Policy as then in effect,
if any, is triggered. 
  

	 	37.	GOVERNING LAW. 

 This Plan shall be construed and enforced in accordance with the laws of
the State of Delaware. 

  
 17Blueprint

 

Exhibit 10.1

SECURITIES
PURCHASE AGREEMENT

This
Securities Purchase Agreement (this “Agreement”) is dated as
of November 3, 2016, between Bridgeline Digital, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.

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

ARTICLE
I.

DEFINITIONS

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

“Acquiring
Person” shall have the
meaning ascribed to such term in Section 4.5.

“Action” shall have the
meaning ascribed to such term in Section 3.1(j).

“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

“Board of Directors” means
the board of directors of the Company.

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

“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.

“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived.

“Commission” means the
United States Securities and Exchange Commission.

 

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“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.

“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, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.

“Company Counsel” means
Morse, Barnes-Brown & Pendleton, P.C., with offices located at
CityPoint, 230 Third Avenue, 4th Floor, Waltham, MA
02451.

“Disclosure Schedules”
shall have the meaning ascribed to such term in Section
3.1.

“EGS” means Ellenoff
Grossman & Schole LLP, with offices located at 1345 Avenue of
the Americas, New York, New York 10105-0302.

“Escrow Agent” means
Alerus Financial, N.A., with offices at 401 Demers Avenue, Grand
Forks, ND 58201.

“Escrow Agreement” means
the escrow agreement entered into prior to the date hereof, by and
among the Company, the Escrow Agent and the Placement Agent
pursuant to which the Purchasers shall deposit Subscription Amounts
with the Escrow Agent to be applied to the transactions
contemplated hereunder.

“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(s).

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

 

“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose for services rendered to the Company, (b) securities
upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock 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 such securities or to decrease the
exercise price, exchange price or conversion price of such
securities (other than in connection with stock splits or
combinations) or to extend the term of such securities, (c)
securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Company, provided that any such issuance shall only be to a
Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an
asset in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to
the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is
investing in securities and (d) shares of Common Stock and Common
Stock purchase warrants to officers and directors of the Company
pursuant to that certain securities purchase agreement, by and
among the Company and such officers and directors, dated as of the
date hereof, on substantially similar terms and conditions as this
Agreement, except that such offering shall be priced at-the-market
for Nasdaq purposes.

 

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“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.

“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(bb).

 “Intellectual
Property Rights” shall have the meaning ascribed to
such term in Section 3.1(p).

“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(c).

“Liens” means a lien,
charge pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“Lock-Up Agreement” means
the Lock-Up Agreement, dated as of the date hereof, by and among
the Company and the directors, officers, and 10% stockholders of
the Company, in the form of Exhibit B attached
hereto.

“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).

“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(n).

“Per Share Purchase Price”
equals $0.48, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this
Agreement.

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

“Placement Agent” means
Craig-Hallum Capital Group LLC.

“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.

 

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“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.2(b).

“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.2(b).

 “Purchaser
Party” shall have the meaning ascribed to such term in
Section 4.8.

“Registration Rights
Agreement” means the Registration Rights Agreement,
dated the date hereof, among the Company and the Purchasers, in the
form of Exhibit A
attached hereto.

“Registration Statement”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale by the
Purchasers of the Shares and the Warrant Shares.

“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).

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

“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.

 

“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(h).

“Securities” means the
Shares, the Warrants and the Warrant Shares.

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

“Shares” means the shares
of Common Stock issued or issuable to each Purchaser pursuant to
this Agreement.

“Short Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock). 

“Special Company Counsel”
means Disclosure Law Group, A Professional Corporation, with
offices located at One America Plaza, 600 West Broadway, Suite 700,
San Diego, CA 92101.

 

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“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for
Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and
next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.

“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and shall,
where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.

“Trading Day” means a day
on which the principal Trading Market is open for
trading.

“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange (or any
successors to any of the foregoing).

“Transaction Documents”
means this Agreement, the Warrants, the Registration Rights
Agreement, the Lock-Up Agreement, all exhibits and schedules
thereto and hereto and any other documents or agreements executed
in connection with the transactions contemplated
hereunder.

“Transfer Agent” means
American Stock Transfer & Trust Company, the current transfer
agent of the Company, with a mailing address of 6201 15th Avenue, Brooklyn,
New York 11219 and a facsimile number of (718) 921-8310, and any
successor transfer agent of the Company.

“Variable Rate
Transaction” shall have the meaning ascribed to such
term in Section 4.12(b).

“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b)  if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the
Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets Group, Inc. (or
a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.

 

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“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable six months from the date of
issuance and have a term of exercise equal to five (5) years from
the initial exercise date, in the form of Exhibit C attached
hereto.

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

ARTICLE
II.

PURCHASE
AND SALE

2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $_______ of Shares and
Warrants. Each Purchaser shall deliver to the Escrow Agent, via
wire transfer or a certified check, immediately available funds
equal to such Purchaser’s Subscription Amount as set forth on
the signature page hereto executed by such Purchaser, and the
Company shall deliver to each Purchaser its respective Shares and a
Warrant, as determined pursuant to Section 2.2(a), and the Company
and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of EGS or such other location as
the parties shall mutually agree.

2.2 Deliveries.

(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

(i) this Agreement duly
executed by the Company;

(ii) a
legal opinion of Company Counsel, substantially in the form of
Exhibit B-1
attached hereto;

(iii) a
legal opinion of Special Company Counsel, substantially in the form
of Exhibit B-2
attached hereto;

(iv) a
copy of the irrevocable instructions to the Transfer Agent
instructing the Transfer Agent to deliver, on an expedited basis, a
certificate evidencing a number of Shares equal to such
Purchaser’s Subscription Amount divided by the Per Share
Purchase Price, registered in the name of such
Purchaser;

(v) a Warrant
registered in the name of such Purchaser to purchase up to a number
of shares of Common Stock equal to 50% of such Purchaser’s
Shares, with an exercise price equal to $0.70, subject to
adjustment therein;

(vi) the
Lock-Up Agreements; and

 

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(vii) the
Registration Rights Agreement duly executed by the
Company.

(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company or the Escrow Agent, as applicable, the
following:

(i) this Agreement duly
executed by such Purchaser;

(ii) to
Escrow Agent, such Purchaser’s Subscription Amount by wire
transfer to the account specified in the Escrow Agreement;
and

(iii) the
Registration Rights Agreement duly executed by such
Purchaser.

2.3 Closing
Conditions.

(a)           The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being
met:

(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) on the Closing Date of the representations and warranties
of the Purchasers contained herein (unless as of a specific date
therein in which case they shall be accurate as of such
date);

(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and

(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.

(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:

(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);

(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;

(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and

 

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(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.

ARTICLE
III.

REPRESENTATIONS
AND WARRANTIES

3.1 Representations
and Warranties of the Company.
Except as set forth in the Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations
and warranties to each Purchaser:

(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a).
The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be
disregarded.

(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material
Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.

 

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

(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.

 

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(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission pursuant to the Registration Rights Agreement,
(iii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing
of the Shares and Warrant Shares for trading thereon in the time
and manner required thereby, and (iv) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws (collectively, the
“Required
Approvals”).

(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Warrant
Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants.

(g) Capitalization. The
capitalization of the Company is as set forth on Schedule 3.1(g), which
Schedule 3.1(g)
shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the
date hereof. The Company has not issued any capital stock since its
most recently filed periodic report under the Exchange Act, other
than pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee
stock purchase plans and pursuant to the conversion and/or exercise
of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person
has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities, there are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire any shares of Common Stock or the capital stock of
any Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents or capital stock of any Subsidiary. The issuance
and sale of the Securities will not obligate the Company or any
Subsidiary to issue shares of Common Stock or other securities to
any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities.
There are no outstanding securities or instruments of the Company
or any Subsidiary that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may
become bound to redeem a security of the Company or such
Subsidiary. The company does not have any stock appreciation rights
or “phantom stock” plans or any similar plan or
agreement. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. There are
no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.

 

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(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Except as set forth on
Schedule 3.1(i),
since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report filed prior to the date hereof: (i) there has
been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this
Agreement or as set forth on Schedule 3.1(i), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists, or is reasonably expected to occur or exist,
with respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.

 

11

 

 

(j) Litigation. There is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.

(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.

 

12

 

 

(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree, or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.

(m)   Environmental
Laws.  The Company and its Subsidiaries (i) are in
compliance with all federal, state, local and foreign laws relating
to pollution or protection of human health or the environment
(including ambient air, surface water, groundwater, land surface or
subsurface strata), including laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or
wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder
(“Environmental Laws”); (ii) have received all permits
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and
(iii) are in compliance with all terms and conditions of any such
permit, license or approval where in each clause (i), (ii) and
(iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse
Effect.

(n) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.

(o) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and the payment of which
is neither delinquent nor subject to penalties. Any real property
and facilities held under lease by the Company and the Subsidiaries
are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in
compliance.

 

13

 

 

(p) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
as described in the SEC Reports as necessary or required for use in
connection with their respective businesses and which the failure
to so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise)
that any of, the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included
within the SEC Reports, a written notice of a claim or otherwise
has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(q) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.

(r) Transactions With Affiliates and
Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than 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,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

 

14

 

 

(s) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the
Closing Date. 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 and the Subsidiaries have
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the
effectiveness of the disclosure controls and procedures of the
Company and the Subsidiaries as of the end of the period covered by
the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange 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 changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control
over financial reporting of the Company or its
Subsidiaries.

(t) Certain Fees. Except with
respect to compensation paid to the Company’s Placement Agent
in connection with the placement of the Shares, no brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.

 

15

 

 

(u) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.

(v) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.

(w) Registration Rights. Except as
set forth on Schedule
3.1(w), other than each of the Purchasers, no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiary.

(x) Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. Except as set forth on Schedule 3.1(x), the Company
has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such
Trading Market. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements. The Common
Stock is currently eligible for electronic transfer through the
Depository Trust Company or another established clearing
corporation and the Company is current in payment of the fees to
the Depository Trust Company (or such other established clearing
corporation) in connection with such electronic
transfer.

(y) Application of Takeover
Protections. The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

 

16

 

 

(z) Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents and the non-public
information with respect to the Company shared by the Company with
the Purchasers at investor presentations (the “Presentation Materials”)
which Presentation Materials shall be disclosed by 9:30 a.m. (New
York City time) on the Trading Day immediately following the date
hereof pursuant to Section 4.4, the Company confirms that neither
it nor any other Person acting on its behalf has provided any of
the Purchasers or their agents or counsel with any information that
it believes constitutes or might constitute material, non-public
information. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting
transactions in securities of the Company. All of the disclosure
furnished by or on behalf of the Company to the Purchasers
regarding the Company and its Subsidiaries, their respective
businesses and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, is true and correct and
does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made
and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.2
hereof.

(aa) No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.

(bb) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule
3.1(bb) sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.

 

17

 

 

(cc) Tax
Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i)
has made or filed all United States federal, state and local income
and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside
on its books provision reasonably adequate for the payment of all
material taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any
Subsidiary know of no basis for any such claim.

(dd) No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.

(ee) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary,
has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law or (iv) violated in any material respect any
provision of FCPA.

 

18

 

 

(ff) Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(ff) of the
Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the
Company’s Annual Report for the fiscal year ending September
30, 2016.

(gg) No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.

(hh)  Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.

(ii) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to
the contrary notwithstanding (except for Sections 3.2(g) and 4.14
hereof), it is understood and acknowledged by the Company that: (i)
none of the Purchasers has been asked by the Company to agree, nor
has any Purchaser agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable
with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted.  The Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction
Documents.

 

19

 

 

(jj) Regulation
M Compliance.  The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company, other than, in the
case of clauses (ii) and (iii), compensation paid to the Placement
Agent in connection with the placement of the
Securities.

(kk) Form
S-3 Eligibility. The Company is eligible to register the
resale of the Securities for resale by the Purchaser on Form S-3
promulgated under the Securities Act.

(ll) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.

(mm) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).

(nn) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.

(oo) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.

 

20

 

 

(pp) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no Action or Proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.

(qq) No
Disqualification Events.  With respect to the
Securities to be offered and sold hereunder in reliance on Rule 506
under the Securities Act, none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an "Issuer Covered Person" and,
together, "Issuer Covered
Persons") is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (a "Disqualification Event"),
except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification
Event. The Company has complied, to the extent applicable, with its
disclosure obligations under Rule 506(e), and has furnished to the
Purchasers a copy of any disclosures provided
thereunder.

(rr) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any
Securities.

(ss) Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer
Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer
Covered Person.

3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of
such date):

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

 

21

 

 

(b) Own Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.

(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it exercises any
Warrants, an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act.

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

(e) General Solicitation. Such
Purchaser is not, to such Purchaser’s knowledge, purchasing
the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or any other general
solicitation or general advertisement.

 

22

 

 

(f) Access to Information. Such
Purchaser acknowledges that it has had the opportunity to review
the Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment.  Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent has provided such Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired.  Neither the
Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities.
The Parties agree and acknowledge that the Placement Agent, any
Affiliate, and the Purchaser may have acquired the Presentation
Materials, which Presentation Materials shall be disclosed by 9:30
a.m. (New York City time) on the Trading Day immediately following
the date hereof pursuant to Section 4.4.  In connection with
the issuance of the Securities to such Purchaser, neither the
Placement Agent nor any of its Affiliates has acted as a financial
advisor or fiduciary to such Purchaser.

(g) Certain Transactions
and Confidentiality. Other than
consummating the transactions contemplated hereunder, such
Purchaser has not directly or indirectly, nor has any Person acting
on behalf of or pursuant to any understanding with such Purchaser,
executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of
the time that such Purchaser first received a term sheet (written
or oral) from the Company or any other Person representing the
Company setting forth the material terms of the transactions
contemplated hereunder and ending immediately prior to the
execution hereof. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets,
the representation set forth above shall only apply with respect to
the portion of assets managed by the portfolio manager that made
the investment decision to purchase the Securities covered by this
Agreement. Other than to other Persons party to this Agreement or
to such Purchaser’s representatives, including, without
limitation, its officers, directors, partners, legal and other
advisors, agents and Affiliates, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for the avoidance of
doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar
transactions in the future.

The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transactions contemplated hereby.

 

23

 

 

ARTICLE
IV.

OTHER
AGREEMENTS OF THE PARTIES

4.1 Transfer
Restrictions.

(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require
the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and the Registration Rights Agreement and shall
have the rights and obligations of a Purchaser under this Agreement
and the Registration Rights Agreement.

(b) The Purchasers
agree to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Shares or Warrant Shares in the
following form:

THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders (as defined in the Registration
Rights Agreement) thereunder.

 

24

 

 

(c) Certificates
evidencing the Shares and Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof),
(i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Shares or
Warrant Shares pursuant to Rule 144, (iii) if such Shares or
Warrant Shares are eligible for sale under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Shares and
Warrant Shares and without volume or manner-of-sale restrictions,
or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent if required by the Transfer Agent to
effect the removal of the legend hereunder. If all or any portion
of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares,
or if such Shares or Warrant Shares may be sold under Rule 144 and
the Company is then in compliance with the current public
information required under Rule 144, or if the Shares or Warrant
Shares may be sold under Rule 144 without the requirement for the
Company to be in compliance with the current public information
required under Rule 144 as to such Shares or Warrant Shares or if
such legend is not otherwise required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) then such
Warrant Shares shall be issued free of all legends; provided,
however, any request to remove the legend hereunder shall be
accompanied by such customary documents as reasonably requested by
counsel for the Company necessary for the issuance of a legal
opinion (“Supporting Documents”). The Company agrees
that following the Effective Date or at such time as such legend is
no longer required under this Section 4.1(c), it will, no later
than the earlier of (i) three (3) Trading Days and (ii) the number
of Trading Days comprising the Standard Settlement Period (as
defined below) following the delivery by a Purchaser to the Company
or the Transfer Agent of a certificate representing Shares or
Warrant Shares, as the case may be, issued with a restrictive
legend (such third Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and
other legends. The Company may not make any notation on its records
or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4. Certificates
for Securities subject to legend removal hereunder shall be
transmitted by the Transfer Agent to the Purchaser by crediting the
account of the Purchaser’s prime broker with the Depository
Trust Company System as directed by such Purchaser. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of a certificate representing Shares
or Warrants Shares, as the case may be, issued with a restrictive
legend.

 

25

 

 

(d) In addition to such
Purchaser’s other available remedies and assuming the
delivery of the Supporting Documents to counsel for the Company by
such Purchaser, the Company shall pay to a Purchaser, in cash, (i)
as partial liquidated damages and not as a penalty, for each $1,000
of Shares or Warrant Shares (based on the VWAP of the Common Stock
on the date such Shares or Warrant Shares are submitted to the
Transfer Agent) delivered for removal of the restrictive legend and
subject to Section 4.1(c), $10 per Trading Day (increasing to $20
per Trading Day five (5) Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend (an
“Issuance
Failure”) and (ii) if the Company fails to (a) issue
and deliver (or cause to be delivered) to a Purchaser by the Legend
Removal Date a certificate representing the Shares or Warrant
Shares so delivered to the Company by such Purchaser that is free
from all restrictive and other legends and (b) if after the Legend
Removal Date such Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Purchaser of all or any portion of
the number of shares of Common Stock, or a sale of a number of
shares of Common Stock equal to all or any portion of the number of
shares of Common Stock that such Purchaser anticipated receiving
from the Company without any restrictive legend, then, an amount
equal to the excess of such Purchaser’s total purchase price
(including brokerage commissions and other out-of-pocket expenses,
if any) for the shares of Common Stock so purchased (including
brokerage commissions and other out-of-pocket expenses, if any)
(the “Buy-In
Price”) over the product of (A) such number of Shares
or Warrant Shares that the Company was required to deliver to such
Purchaser by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such Purchaser
to the Company of the applicable Shares or Warrant Shares (as the
case may be) and ending on the date of such delivery and payment
under this clause (ii); provided, however, the Buy-In Price shall
be reduced by the amount required to be paid to a Purchaser as a
result of an Issuance Failure.

(e) Each Purchaser,
severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant
to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.

4.2 Furnishing
of Information; Public Information.

 

26

 

 

(a) If the Common Stock
is not registered under Section 12(b) or 12(g) of the Exchange Act
on the date hereof, the Company agrees to cause the Common Stock to
be registered under Section 12(g) of the Exchange Act on or before
the 60th
calendar day following the date hereof. Until the earliest of the
time that no Purchaser owns Shares, the Company covenants to
maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act even if the Company is not
then subject to the reporting requirements of the Exchange
Act.

(b) At the time during
the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may
be sold without the requirement for the Company to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company (i) shall fail for any reason
to satisfy the current public information requirement under Rule
144(c) or (ii) has ever been an issuer described in Rule
144(i)(1)(i) or becomes an issuer in the future, and the Company
shall fail to satisfy any condition set forth in Rule 144(i)(2) (a
“Public Information
Failure”) then, in addition to such Purchaser’s
other available remedies, the Company shall pay to a Purchaser, in
cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities
on the day of a Public Information Failure and on every thirtieth
(30th) day
(pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure
is cured and (b) such time that such public information is no
longer required  for the Purchasers to transfer the Shares and
Warrant Shares pursuant to Rule 144.  The payments to which a
Purchaser shall be entitled pursuant to this Section 4.2(b) are
referred to herein as “Public Information Failure
Payments.”  Public Information
Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public
Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and such
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.

4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.

 

27

 

 

4.4 Securities
Laws Disclosure; Publicity. The
Company shall by 9:30 a.m. (New York City time) on the Trading Day
immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated
hereby and file a Current Report on Form 8-K, including the
Presentation Materials and the Transaction Documents as exhibits
thereto, with the Commission. From and after the issuance of such
press release, the Company represents to the Purchasers that it
shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers by the Company or any of its
Subsidiaries, or any of their respective officers, directors,
employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and any
of the Purchasers or any of their Affiliates on the other hand,
shall terminate. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities law in
connection with (i) any registration statement contemplated by the
Registration Rights Agreement and (ii) the filing of final
Transaction Documents with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations,
in which case the Company
shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).

4.5 Shareholder
Rights Plan. No claim will be
made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an
“Acquiring
Person” under any control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover
plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement
between the Company and the Purchasers.

4.6 Non-Public
Information. Except with
respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents and the Presentation
Materials which shall be disclosed by 9:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof
pursuant to Section 4.4, the Company covenants and agrees that
neither it, nor any other Person acting on its behalf will provide
any Purchaser or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes,
material non-public information, unless prior thereto such
Purchaser shall have consented to the receipt of such information
and agreed with the Company to keep such information confidential.
The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in
securities of the Company. To the extent that the Company delivers
any material, non-public information to a Purchaser without such
Purchaser’s consent, the Company hereby covenants and agrees
that such purchaser shall not have any duty of confidentiality to
Company, any of its Subsidiaries, or any of their respective
officers, directors, agents, employees or Affiliates, or a duty to
the Company, and of its Subsidiaries or any of their respective
officers, directors, agents, employees or Affiliates not to trade
on the basis of, such material, non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the
Company.

 

28

 

 

4.7 Use
of Proceeds. Except as set
forth on Schedule 4.7
attached hereto, the Company shall use
the net proceeds from the sale of the Securities hereunder for
working capital purposes and shall not use such proceeds: (a) for
the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the
Company’s business and prior practices), (b) for the
redemption of any Common Stock or Common Stock Equivalents, (c) for
the settlement of any outstanding litigation or (d) in violation of
FCPA or OFAC regulations.

4.8 Indemnification
of Purchasers. Subject to the
provisions of this Section 4.8, the Company will indemnify and hold
each Purchaser and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, shareholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any
and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid
in settlements, court costs and reasonable attorneys’ fees
and costs of investigation that any such Purchaser Party may suffer
or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents or
(b) any action instituted against the Purchaser Parties in any
capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such
Purchaser Parties, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser
Parties may have with any such stockholder or any violations by
such Purchaser Parties of state or federal securities laws or any
conduct by such Purchaser Parties which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser
Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of
its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict
on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall
be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or
(z) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the
other Transaction Documents. The indemnification required by this Section 4.8
shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.

 

29

 

 

4.9 Reservation
of Common Stock. As of the date
hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Shares pursuant to this Agreement and
Warrant Shares pursuant to any exercise of the
Warrants.

4.10 Listing
of Common Stock. The Company
hereby agrees to use best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Shares and Warrant Shares
on such Trading Market and promptly secure the listing of all of
the Shares and Warrant Shares on such Trading Market. The Company
further agrees, if the Company applies to have the Common Stock
traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take
such other action as is necessary to cause all of the Shares and
Warrant Shares to be listed or quoted on such other Trading Market
as promptly as possible. The Company will then take all action
reasonably necessary to continue the listing or quotation and
trading of its Common Stock on a Trading Market and will comply in
all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market. The
Company agrees to maintain the eligibility of the Common Stock for
electronic transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such
electronic transfer.

4.11 [Reserved]

4.12 Subsequent
Equity Sales.

(a) From the date
hereof until ninety (90) days after the date the Registration
Statement is declared effective by the Commission, neither the
Company nor any Subsidiary shall issue, enter into any agreement to
issue or announce the issuance or proposed issuance of any shares
of Common Stock or Common Stock Equivalents.

 

30

 

 

(b) From the date
hereof until the one (1) year anniversary of the Closing Date, the
Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents (or a
combination of units thereof) involving a Variable Rate
Transaction. “Variable Rate
Transaction” means a transaction in which the Company
(i) issues or sells 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 price, exercise price 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,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit, whereby the Company may issue
securities at a future determined price. Any Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages.

(c) Notwithstanding the
foregoing, this Section 4.12 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be
an Exempt Issuance.

4.13 Equal
Treatment of Purchasers. No
consideration (including any modification of any Transaction
Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of this
Agreement unless the same consideration is also offered to all of
the parties to this Agreement. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by
the Company and negotiated separately by each Purchaser, and is
intended for the Company to treat the Purchasers as a class and
shall not in any way be construed as the Purchasers acting in
concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

4.14 Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with
the other Purchasers, covenants that neither it, nor any Affiliate
acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales, of any of
the Company’s securities during the period commencing with
the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.4.  Each Purchaser, severally and not jointly with
the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the initial press release as described
in Section 4.4, such Purchaser will maintain the confidentiality of
the existence and terms of this transaction and the information
included in the Transaction Documents and the Disclosure
Schedules.  Notwithstanding the foregoing, and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage
in effecting transactions in any securities of the Company after
the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as
described in Section 4.4, (ii) no Purchaser shall be restricted or
prohibited from effecting any transactions in any securities of the
Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4 and (iii) no Purchaser shall have any
duty of confidentiality or duty not to trade in the securities of
the Company to the Company or its Subsidiaries after the issuance
of the initial press release as described in Section 4.4. 
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the covenant set forth
above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Shares covered by this
Agreement.

 

31

 

 

4.15 Form
D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall
take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.

4.16 Capital
Changes. Except as otherwise
necessary to maintain its listing or quotation of its Common Stock
on the Trading Market, until the one year anniversary of the
Closing Date, the Company shall not undertake a reverse or forward
stock split or reclassification of the Common Stock without the
prior written consent of the Purchasers holding a majority in
interest of the Shares.

4.17 Acknowledgment
of Dilution. The Company
acknowledges that the issuance of the Securities may result in
dilution of the outstanding shares of Common Stock, which dilution
may be substantial under certain market conditions. The Company
further acknowledges that its obligations under the Transaction
Documents, including, without limitation, its obligation to issue
the Shares and Warrant Shares pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that
such issuance may have on the ownership of the other stockholders
of the Company.

 

32

 

 

ARTICLE
V.

MISCELLANEOUS

5.1 Termination. 
This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before November 14, 2016;
provided,
however,
that such termination will not affect the right of any party to sue
for any breach by any other party (or parties).

5.2 Fees
and Expenses. Except as
expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any exercise notice
delivered by a Purchaser), stamp taxes and other taxes and duties
levied in connection with the delivery of any Shares to the
Purchasers.

5.3 Entire
Agreement. The Transaction
Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior
agreements and understandings, oral or written, with respect to
such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.

5.4 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment as set forth
on the signature pages attached hereto at or prior to 5:30 p.m.
(New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or email attachment
as set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time)
on any Trading Day, (c) the second (2nd)
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto. To the extent that
any notice provided pursuant to any Transaction Document
constitutes, or contains material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.

5.5 Amendments;
Waivers. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Company and Purchasers holding at least 50.1% in interest of the
Shares then outstanding or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought,
provided that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required. No
waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such right. Any
proposed amendment or waiver that disproportionately, materially
and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other
Purchasers shall require the prior written consent of such
adversely affected Purchaser, Any amendment effected in accordance
with accordance with this Section 5.5 shall be binding upon each
Purchaser and holder of Securities and the
Company.

 

33

 

 

5.6 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

5.7 Successors
and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any
Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the
“Purchasers.”

5.8 No
Third-Party Beneficiaries. The
Placement Agent shall be the third party beneficiary of the
representations and warranties of the Company in Section 3.1 and
the representations and warranties of the Purchasers in Section
3.2. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8
and this Section 5.8.

5.9 Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof.
Each party agrees that all legal Proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough
of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any
of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any Action or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court,
that such Action or Proceeding is improper or is an inconvenient
venue for such Proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such Action or Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law. If any party hereto shall commence an Action or Proceeding to
enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.8, the
prevailing party in such Action or Proceeding shall be reimbursed
by the non-prevailing party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Action or
Proceeding.

 

34

 

 

5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.

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

5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.

5.13 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does
not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights;
provided,
however,
that in the case of a rescission of an exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded exercise notice
concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of
a replacement warrant certificate evidencing such restored
right).

5.14 Replacement
of Securities. If any
certificate or instrument evidencing any Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft
or destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.

 

35

 

 

5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

5.16 Payment
Set Aside. To the extent that
the Company makes a payment or payments to any Purchaser pursuant
to any Transaction Document or a Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

5.17 Independent
Nature of Purchasers’ Obligations and
Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance or non-performance of
the obligations of any other Purchaser under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Purchaser pursuant hereof or
thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers 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
Purchaser 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 Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through EGS.
EGS does not represent any of the Purchasers and only represents
the Placement Agent. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers.

 

36

 

 

5.18 Liquidated
Damages.  The
Company’s obligations to pay any partial liquidated damages
or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until
all unpaid partial liquidated damages and other amounts have been
paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts
are due and payable shall have been canceled.

5.19 Saturdays,
Sundays, Holidays, etc.  If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such
right may be exercised on the next succeeding Business
Day.

5.20 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.

5.21 WAIVER
OF JURY TRIAL.
IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

 

37

 

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

 

	

BRIDGELINE DIGITAL, INC.

 

 

	

Address
for Notice:

	

By:__________________________________________

     Name:

     Title:

With a
copy to (which shall not constitute notice):

	

Fax:

	
 

	
 

 

 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

 

38

 

[PURCHASER
SIGNATURE PAGES TO BLIN SECURITIES PURCHASE AGREEMENT]

 

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

Name of
Purchaser:
________________________________________________________

Signature of Authorized Signatory of
Purchaser: __________________________________

Name of
Authorized Signatory:
____________________________________________________

Title
of Authorized Signatory:
_____________________________________________________

Email
Address of Authorized Signatory:
______________________________________________

Facsimile Number of
Authorized Signatory:
_____________________________________________

Address
for Notice to Purchaser:

 

 

 

 

Address
for Delivery of Shares to Purchaser (if not same as address for
notice):

 

 

 

 

 

Subscription
Amount: $_________________

 

Shares:
_________________

 

Warrant
Shares: _____________

 

EIN
Number: _______________________

 

 

[SIGNATURE
PAGES CONTINUE]

 

 

39

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