Execution Copy


 


COMMON STOCK PURCHASE AGREEMENT


 


COMMON STOCK PURCHASE
AGREEMENT (the “Agreement”), dated as of March 27, 2013 by and between ATOSSA GENETICS, INC., a Delaware
corporation (the “Company”), and ASPIRE CAPITAL FUND, LLC, an Illinois limited liability company (the
“Buyer”). Capitalized terms used herein and not otherwise defined herein are defined in Section 10 hereof.


 


WHEREAS:


 


Subject to the terms
and conditions set forth in this Agreement, the Company wishes to sell to the Buyer, and the Buyer wishes to buy from the Company,
up to Thirty Million Dollars ($30,000,000) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”). The shares of Common Stock to be purchased hereunder are referred to herein as the “Purchase Shares.”


 


NOW THEREFORE,
the Company and the Buyer hereby agree as follows:


 


1.
PURCHASE OF COMMON STOCK.


 


Subject to the terms
and conditions set forth in this Agreement, the Company has the right to sell to the Buyer, and the Buyer has the obligation to
purchase from the Company, Purchase Shares as follows:


 


(a)Initial Purchase; Commencement
of Purchases of Common Stock. Immediately upon the execution of this Agreement, the Buyer shall purchase from the Company 83,333
Purchase Shares and upon receipt of such Purchase Shares pay to the Company as the purchase price therefor, via wire transfer,
One Million Dollars ($1,000,000) (such purchase the “Initial Purchase” and such Purchase Shares are referred
to herein as “Initial Purchase Shares”).  Upon issuance and payment therefor as provided herein, such
Initial Purchase Shares shall be validly issued and fully paid and non-assessable. The Initial Purchase Shares shall be issued
to the Buyer bearing the restrictive legend set forth in Section 4(e). Thereafter, the purchase and sale of Purchase Shares hereunder
shall occur from time to time upon written notices by the Company to the Buyer on the terms and conditions as set forth herein
following the satisfaction of the conditions (the “Commencement”) as set forth in Sections 6 and 7 below (the
date of satisfaction of such conditions, the “Commencement Date”). 


 


(b)The
Company’s Right to Require Regular Purchases. Subject to the terms and conditions of this Agreement, on any given Business
Day after the Commencement Date, the Company shall have the right but not the obligation to direct the Buyer by its delivery to
the Buyer of a Purchase Notice from time to time, and the Buyer thereupon shall have the obligation, to buy the number of Purchase
Shares specified in such notice, up to a maximum of 100,000 Purchase Shares, on such Business Day (as long as such notice is delivered
on or before 5:00 p.m. Eastern time on such Business Day) (each
such purchase, a “Regular Purchase”) at the Purchase Price on the Purchase Date; however, in no event shall
the Purchase Amount of a Regular Purchase exceed Four Hundred Thousand Dollars ($400,000) per Business Day. The Company may deliver
additional Purchase Notices to the Buyer from time to time so long as the most recent purchase has
been completed.  The share amounts in the first sentence of this Section 1(b) shall be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split, or other similar transaction.


 






    	 



    	 



    

 


(c)VWAP Purchases. Subject
to the terms and conditions of this Agreement, in addition to purchases of Purchase Shares as described in Section 1(b) above,
with one Business Day’s prior written notice (as long as such notice is delivered on or before 5:00 p.m. Eastern time on
the Business Day immediately preceding the VWAP Purchase Date), the Company shall also have the right but not the obligation to
direct Buyer by the Company’s delivery to Buyer of a VWAP Purchase Notice from time to time, and Buyer thereupon shall have
the obligation, to buy the VWAP Purchase Share Percentage of the trading volume of the Common Stock on the VWAP Purchase Date up
to the VWAP Purchase Share Volume Maximum on the VWAP Purchase Date (each such purchase, a “VWAP Purchase”)
at the VWAP Purchase Price. The Company may deliver a VWAP Purchase Notice to the Buyer on or before 5:00 p.m. Eastern time on
a date on which (i) the Company also submitted a Purchase Notice for a Regular Purchase of at least 100,000 Purchase Shares to
the Buyer and (ii) the Closing Sale Price is higher than $2.00. A VWAP Purchase shall automatically be deemed completed at such
time on the VWAP Purchase Date that the Sale Price falls below the VWAP Minimum Price Threshold; in such circumstance, the VWAP
Purchase Amount shall be calculated using (i) the VWAP Purchase Share Percentage of the aggregate shares traded on the Principal
Market for such portion of the VWAP Purchase Date prior to the time that the Sale Price fell below the VWAP Minimum Price Threshold
and (ii) a VWAP Purchase Price calculated using the volume weighted average price of Common Stock sold during such portion of the
VWAP Purchase Date prior to the time that the Sale Price fell below the VWAP Minimum Price Threshold. Each VWAP Purchase Notice
must be accompanied by instructions to the Company’s Transfer Agent to immediately issue to the Buyer an amount of Common
Stock equal to the VWAP Purchase Share Estimate, a good faith estimate by the Company of the number of Purchase Shares that the
Buyer shall have the obligation to buy pursuant to the VWAP Purchase Notice. In no event shall the Buyer, pursuant to any VWAP
Purchase, purchase a number of Purchase Shares that exceeds the VWAP Purchase Share Estimate issued on the VWAP Purchase Date in
connection with such VWAP Purchase Notice; however, the Buyer will immediately return to the Company any amount of Common Stock
issued pursuant to the VWAP Purchase Share Estimate that exceeds the number of Purchase Shares the Buyer actually purchases in
connection with such VWAP Purchase. Upon completion of each VWAP Purchase Date, the Buyer shall submit to the Company a confirmation
of the VWAP Purchase in form and substance reasonably acceptable to the Company. The Company may deliver additional VWAP Purchase
Notices to the Buyer from time to time so long as the most recent purchase has been completed. The Company may, by written notice
to the Buyer, in its sole discretion at any time after the date of this Agreement, irrevocably terminate this Section 1(c) and
its right to direct the Buyer to make VWAP Purchases.


 


(d)Payment for
Purchase Shares. For each Regular Purchase, the Buyer shall pay to the Company an amount equal to the Purchase Amount as full
payment for such Purchase Shares via wire transfer of immediately available funds on the same Business Day that the Buyer receives
such Purchase Shares. For each VWAP Purchase, the Buyer shall pay to the Company an amount equal to the VWAP Purchase Amount as
full payment for such Purchase Shares via wire transfer of immediately available funds on the third Business Day following the
VWAP Purchase Date. All payments made under this Agreement shall be made in lawful money of the United States of America via wire
transfer of immediately available funds to such account as the Company may from time to time designate by written notice in accordance
with the provisions of this Agreement. Whenever any amount expressed to be due by the terms of this Agreement is due on any day
that is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day.


 






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(e)Purchase
Price Floor. The Company and the Buyer shall not effect any sales under this Agreement on any Purchase Date where the Closing
Sale Price is less than the Floor Price. “Floor Price” means $2.00 per share of Common Stock, which shall be
appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar
transaction.


 


(f)Records of
Purchases. The Buyer and the Company shall each maintain records showing the remaining Available Amount at any given time and
the dates and purchase amounts for each purchase, or shall use such other method reasonably satisfactory to the Buyer and the Company
to reconcile the remaining Available Amount.


 


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


 


(h)Compliance
with Principal Market Rules. Notwithstanding anything in this Agreement to the contrary, and in addition to the limitations
set forth in Section 1(e), the total number of shares of Common Stock that may be issued under this Agreement, including the Commitment
Shares (as defined in Section 4(e) hereof), shall be limited to 2,833,519 shares of Common Stock (the “Exchange Cap”),
which equals 19.99% of the Company’s outstanding shares of Common Stock as of the date hereof, unless stockholder approval
is obtained to issue more than such 19.99%. The foregoing limitation shall not apply if stockholder approval has not been obtained
and at any time the Exchange Cap is reached and at all times thereafter the average price paid for all shares issued under this
Agreement is equal to or greater than $9.55 (the “Minimum Price”), a price equal to the Closing Sale Price on
the date hereof (in such circumstance, for purposes of the Principal Market, the transaction contemplated hereby would not be “below
market” and the Exchange Cap would not apply). Notwithstanding the foregoing, the Company shall not be required or permitted
to issue, and the Buyer shall not be required to purchase, any shares of Common Stock under this Agreement if such issuance would
violate the rules or regulations of the Principal Market.


 


(i)Beneficial
Ownership Limitation. The Company shall not issue, and the Buyer shall not purchase any shares of Common Stock under this Agreement,
if such shares proposed to be issued and sold, when aggregated with all other shares of Common Stock then owned beneficially (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the Buyer and its affiliates
would result in the beneficial ownership by the Buyer and its affiliates of more than 19.99% of the then issued and outstanding
shares of Common Stock of the Company.


 


2.BUYER’S
REPRESENTATIONS AND WARRANTIES.


 


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


 


(a)Investment
Purpose. The Buyer is entering into this Agreement and acquiring the Commitment Shares and the Purchase Shares (the Purchase
Shares and the Commitment Shares are collectively referred to herein as the “Securities”), for its own account
for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof; provided
however, by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other
specific term.


 






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(b)Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a)(3) of Regulation
D of the 1933 Act.


 


(c)Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and the Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings
of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire
the Securities.


 


(d)Information.
The Buyer has been furnished with all materials relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably requested by the Buyer, including, without limitation,
the SEC Documents (as defined in Section 3(f) hereof). The Buyer understands that its investment in the Securities involves a high
degree of risk. The Buyer (i) is able to bear the economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the
proposed investment in the Securities and (iii) has had an opportunity to ask questions of and receive answers from the officers
of the Company concerning the financial condition and business of the Company and other matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations conducted by the Buyer or its representatives shall
modify, amend or affect the Buyer’s right to rely on the Company’s representations and warranties contained in Section
3 below. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.


 


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


 


(f)Transfer
or Sale. The Buyer understands that except as provided in the Registration Rights Agreement (as defined in Section 4(a) hereof):
(i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently registered thereunder or (B) an exemption exists permitting such
Securities to be sold, assigned or transferred without such registration; (ii) any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities
under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that
term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations
of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register the Securities under
the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.


 


(g)Organization.
The Buyer is a limited liability company duly organized and validly existing in good standing under the laws of the jurisdiction
in which it is organized, and has the requisite organizational power and authority to own its properties and to carry on its business
as now being conducted.


 






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(h)Validity;
Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Buyer and is a valid
and binding agreement of the Buyer enforceable against the Buyer in accordance with its terms, subject as to enforceability to
(i) general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and (ii) public policy
underlying any law, rule or regulation (including any federal or state securities law, rule or regulation) with regards to indemnification,
contribution or exculpation. The execution and delivery of the Transaction Documents by the Buyer and the consummation by it of
the transactions contemplated hereby and thereby do not conflict with the Buyer’s certificate of organization or operating
agreement or similar documents, and do not require further consent or authorization by the Buyer, its managers or its members.


 


(i)Residency.
The Buyer is a resident of the State of Illinois.


 


(j)No Prior
Short Selling. The Buyer represents and warrants to the Company that at no time prior to the date of this Agreement has any
of the Buyer, its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly,
any (i) “short sale” (as such term is defined in Section 242.200 of Regulation SHO of the Securities Exchange Act of
1934, as amended (the “1934 Act”)) of the Common Stock or (ii) hedging transaction, which establishes a net
short position with respect to the Common Stock.


 


3.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


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


 


(a)Organization
and Qualification. The Company and its “Subsidiaries” (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns more than 50% of the voting stock or capital
stock or other similar equity interests) are corporations or limited liability companies duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are incorporated or organized, and have the requisite corporate
or organizational power and authority to own their properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation or limited liability company to do business and is in
good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so qualified or be in good standing could not reasonably
be expected to have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any
material adverse effect on any of: (i) the business, properties, assets, operations, results of operations or financial condition
of the Company and its Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 3(b) hereof). The Company has no material Subsidiaries except
as set forth on Schedule 3(a).


 


(b)Authorization;
Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations
under this Agreement, the Registration Rights Agreement and each of the other agreements entered into by the parties on the Commencement
Date and attached hereto as exhibits to this Agreement (collectively, the “Transaction Documents”), and to issue
the Securities in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance
of the Commitment Shares and the reservation for issuance and the issuance of the Purchase Shares issuable under this Agreement,
have been duly authorized by the Company’s Board of Directors or duly authorized committee thereof, do not conflict with
the Company’s Certificate of Incorporation or Bylaws, and do not require further consent or authorization by the Company,
its Board of Directors or its stockholders, (iii) this Agreement has been, and each other Transaction Document shall be on the
Commencement Date, duly executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction Document
upon its execution on behalf of the Company, shall constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be limited by (y) general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors' rights and remedies and (z) public policy underlying any law, rule or regulation (including any federal
or states securities law, rule or regulation) with regards to indemnification, contribution or exculpation. The Board of Directors
of the Company or duly authorized committee thereof has approved the resolutions (the “Signing Resolutions”)
substantially in the form as set forth as Exhibit B-1 attached hereto to authorize this Agreement and the transactions contemplated
hereby. The Signing Resolutions are valid, in full force and effect and have not been modified or supplemented in any material
respect other than by the resolutions set forth in Exhibit B-2 attached hereto regarding the registration statement referred
to in Section 4 hereof. The Company has delivered to the Buyer a true and correct copy of the Signing Resolutions as approved by
the Board of Directors of the Company.


 






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(c)Capitalization.
As of the date hereof, the authorized capital stock of the Company consists of (i) 75,000,000 shares of Common Stock, of which
as of the date hereof 14,174,686 shares are issued and outstanding, no shares are held as treasury shares, 2,555,274 shares are
reserved for future issuance pursuant to the Company’s equity incentive plan(s) and pursuant to options grants outside the
Company’s equity incentive plan(s), of which approximately 1,027,517 shares remain available for future option grants or
stock awards, and 5,671,800 shares are issuable and reserved for issuance pursuant to securities (other than stock options or equity
based awards issued pursuant to the Company’s stock incentive plans) exercisable or exchangeable for, or convertible into,
shares of Common Stock pursuant to warrants outstanding, and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share,
of which as of the date hereof no shares are designated, issued or outstanding. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and non-assessable. Except as disclosed in this Section 3(c) or Schedule 3(c),
(i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities of the Company or any of its Subsidiaries,
(iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, (iv) there are no material agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement and except such rights that have been satisfied), (v) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this Agreement and (vii) the Company does not have any
stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. The Company has
furnished or made available to the Buyer true and correct copies of the Company’s Certificate of Incorporation, as amended
and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s Bylaws, as
amended and as in effect on the date hereof (the “Bylaws”).


 






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(d)Issuance
of Securities. The Commitment Shares and Initial Purchase Shares have been duly authorized and, upon issuance in accordance
with the terms hereof, the Commitment Shares and Initial Purchase Shares shall be (i) validly issued, fully paid and non-assessable
and (ii) free from all taxes, liens and charges with respect to the issuance thereof. 2,500,186 shares of Common Stock have been
duly authorized and reserved for issuance upon future purchase under this Agreement. Upon issuance and payment therefore in accordance
with the terms and conditions of this Agreement, the Purchase Shares shall be validly issued, fully paid and non-assessable and
free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded
to a holder of Common Stock.


 


(e)No Conflicts.
Except as disclosed in Schedule 3(e), the execution, delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Purchase Shares) will not (i) result in a violation of the Certificate of Incorporation, any Certificate
of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the Bylaws or (ii) constitute
a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of
its Subsidiaries is a party, or result, to the Company’s knowledge, in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market applicable
to the Company or any of its Subsidiaries) or by which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of defaults, terminations, amendments, accelerations, cancellations and violations under clause
(ii), which could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 3(e), neither
the Company nor its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any Certificate
of Designation, Preferences and Rights of any outstanding series of preferred stock of the Company or Bylaws or their organizational
charter or bylaws, respectively. Except as disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is in violation
of any term of or is in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible violations,
defaults, terminations or amendments that could not reasonably be expected to have a Material Adverse Effect. The business of the
Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, or regulation
of any governmental entity, except for possible violations, the sanctions for which either individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. Except as specifically contemplated by this Agreement, reporting
obligations under the 1934 Act or as required under the 1933 Act or applicable state securities laws or the filing of a Listing
of Additional Shares Notification Form with the Principal Market, the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency
in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. Except for reporting obligations under the 1934 Act, all consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding sentence shall be obtained or effected on or
prior to the Commencement Date. The Company is not subject to any notices or actions from or to the Principal Market, other than
routine matters incident to listing on the Principal Market and not involving a violation of the rules of the Principal Market.
To the Company’s knowledge, the Principal Market has not commenced any delisting proceedings against the Company.


 






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(f)SEC Documents;
Financial Statements. Except as disclosed in Schedule 3(f), since November 7, 2012, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).
As of their respective dates (except as they have been correctly amended), the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC (except as they may have been properly amended), contained
any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective
dates (except as they have been properly amended), the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except for routine correspondence, such as comment letters and notices of effectiveness in connection
with previously filed registration statements or periodic reports publicly available on EDGAR, to the Company’s knowledge,
the Company or any of its Subsidiaries are not presently the subject of any inquiry, investigation or action by the SEC.


 


(g)Absence of
Certain Changes. Except as disclosed in Schedule 3(g), since December 31, 2012, there has been no material adverse change in
the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries taken as
a whole. For purposes of this Agreement, neither a decrease in cash or cash equivalents nor losses incurred in the ordinary course
of the Company’s business shall be deemed or considered a material adverse change. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency
proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.


 


(h)Absence of
Litigation. To the Company’s knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any
of its Subsidiaries, threatened against the Company, the Common Stock or any of the Company’s Subsidiaries or any of the
Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, which could reasonably
be expected to have a Material Adverse Effect (each, an “Action”). A description of each such Action, if any,
is set forth in Schedule 3(h).


 






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(i)Acknowledgment
Regarding Buyer’s Status. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Buyer or
any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that
the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.


 


(j)Intellectual
Property Rights. To the Company’s knowledge, the Company and its Subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets
and other intellectual property rights (collectively, “Intellectual Property”) necessary to conduct their respective
businesses as now conducted, except as set forth in Schedule 3(j) or to the extent that the failure to own, possess, license or
otherwise hold adequate rights to use Intellectual Property would not, individually or in the aggregate, have a Material Adverse
Effect. Except as disclosed in Schedule 3(j), to the Company’s knowledge, none of the Company’s active and registered
Intellectual Property have expired or terminated, or, by the terms and conditions thereof, will expire or terminate within two
years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company
or its Subsidiaries of any Intellectual Property of others, or of any such development of similar or identical trade secrets or
technical information by others with respect to the Company’s or its Subsidiaries’ Intellectual Property and, except
as set forth on Schedule 3(j), there is no claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company or its Subsidiaries regarding Intellectual Property, which could reasonably be
expected to have a Material Adverse Effect.


 


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


 


(l)Title.
The Company and its Subsidiaries have good and marketable title to all personal property owned by them that is material to the
business of the Company and its Subsidiaries, free and clear of all liens, encumbrances and defects except such as are described
in Schedule 3(l) or such as do not materially affect the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and any of its Subsidiaries or could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. Any real property and facilities held under lease by the Company and any of its
Subsidiaries, to the Company’s knowledge, are held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.


 






    	-9-



    	 



    

 


(m)Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be reasonable and customary in the businesses in which the Company
and its Subsidiaries are engaged. To the Company’s knowledge, since March 1, 2011, neither the Company nor any such Subsidiary
has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary, to the Company’s
knowledge, will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material
Adverse Effect.


 


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


 


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


 


(p)Transactions
With Affiliates. Except as set forth on Schedule 3(p), and other than the grant or exercise of stock options or
any other equity securities offered pursuant to duly adopted stock or incentive compensation plans as disclosed on Schedule 3(c),
none of the officers, directors or employees of the Company is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for services as employees, officers and directors and reimbursement for expenses incurred on behalf
of the Company), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee
or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any
such employee has a material interest or is an officer, director, trustee or general partner.


 






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


 


4.COVENANTS.


 


(a)Filing of
Form 8-K and Registration Statement. The Company agrees that it shall, within the time required under the 1934 Act, file a
Current Report on Form 8-K (or provide substantially equivalent disclosure in the Company’s Annual Report on Form 10-K to
be filed within that time period) disclosing this Agreement and the transaction contemplated hereby. The Company shall also file
within ten (10) Business Days from the date hereof a new registration statement, or a pre-effective amendment to the Company’s
registration statement on Form S-1 (File No. 333-186248), covering the sale of the Securities by the Buyer in accordance with the
terms of the Registration Rights Agreement between the Company and the Buyer, dated as of the date hereof (“Registration
Rights Agreement”).


 


(b)Blue Sky.
The Company shall take such action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify (i) the
initial sale of the Securities to the Buyer under this Agreement and (ii) any subsequent sale of the Securities by the Buyer, in
each case, under applicable securities or “Blue Sky” laws of the states of the United States in such states as is reasonably
requested by the Buyer from time to time, and shall provide evidence of any such action so taken to the Buyer at its written request.


 


(c)Listing.
The Company shall promptly secure the listing of all of the Securities upon each national securities
exchange and automated quotation system that requires an application by the Company for listing, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall maintain such listing, so long as any other
shares of Common Stock shall be so listed. The Company shall use its commercially reasonable efforts to maintain the Common Stock’s
listing on the Principal Market in accordance with the requirements of the Registration Rights Agreement. Neither the Company
nor any of its Subsidiaries shall take any action that would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market, unless the Common Stock is immediately thereafter traded on the New York Stock Exchange,
the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, or
the OTCQB or OTCQX market places of the OTC Markets. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section.


 


(d)Limitation
on Short Sales and Hedging Transactions. The Buyer agrees that beginning on the date of this Agreement and ending on the date
of termination of this Agreement as provided in Section 11(k), the Buyer and its agents, representatives and affiliates shall not
in any manner whatsoever enter into or effect, directly or indirectly, any (i) “short sale” (as such term is defined
in Section 242.200 of Regulation SHO of the 1934 Act) of the Common Stock or (ii) hedging transaction, which establishes a net
short position with respect to the Common Stock.


 


(e)Issuance
of Commitment Shares and Initial Purchase Shares. Immediately upon the execution of this Agreement, the Company shall issue
to the Buyer as consideration for the Buyer entering into this Agreement 250,000 shares of Common Stock (the “Commitment
Shares”) and, pursuant to Section 1(a), the Buyer shall purchase the Initial Purchase Shares. The Commitment Shares and
Initial Purchase Shares shall be issued in certificated form and (subject to Section 5 hereof) shall bear the following restrictive
legend:


 






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THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.


 


(f)Due Diligence.
The Buyer shall have the right, from time to time as the Buyer may reasonably deem appropriate, to perform reasonable due diligence
on the Company during normal business hours and subject to reasonable prior notice to the Company. The Company and its officers
and employees shall provide information and reasonably cooperate with the Buyer in connection with any reasonable request by the
Buyer related to the Buyer’s due diligence of the Company, including, but not limited to, any such request made by the Buyer
in connection with (i) the filing of the registration statement described in Section 4(a) hereof and (ii) the Commencement; provided,
however, that at no time is the Company required to disclose material nonpublic information to the Buyer
or breach any obligation of confidentiality or non-disclosure to a third party or make any disclosure that could cause a waiver
of attorney-client privilege. Each party hereto agrees not to disclose any Confidential Information of the other party
to any third party and shall not use the Confidential Information of such other party for any purpose other than in connection
with, or in furtherance of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information
shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy
of any Confidential Information disclosed by the other party. All disclosures of Confidential Information shall be subject to
the terms and conditions of the Non-Disclosure Agreement dated March 25, 2013 between the Company and the Buyer.


 


5.TRANSFER AGENT
INSTRUCTIONS.


 


Immediately upon the
execution of this Agreement, the Company shall deliver to the Transfer Agent a letter in the form as set forth as Exhibit D
attached hereto with respect to the issuance of the Commitment Shares and the Initial Purchase Shares. On the Commencement
Date, the Company shall cause any restrictive legend on the Commitment Shares and the Initial Purchase Shares to be removed upon
surrender of the originally issued certificate(s) for such shares. All of the Purchase Shares to be issued under this Agreement
shall be issued without any restrictive legend unless the Buyer expressly consents otherwise. The Company shall issue irrevocable
instructions to the Transfer Agent, and any subsequent transfer agent, to issue Common Stock in the name of the Buyer for the Purchase
Shares (the “Irrevocable Transfer Agent Instructions”). The Company warrants to the Buyer that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to the Transfer
Agent with respect to the Purchase Shares and that the Commitment Shares and the Purchase Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights
Agreement, subject to the provisions of Section 4(e) in the case of the Commitment Shares and the Initial Purchase Shares.


 






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6.
CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK UNDER THIS AGREEMENT.


 


The right of the Company
hereunder to commence sales of the Purchase Shares (other than the Initial Purchase Shares) is subject to the satisfaction of each
of the following conditions on or before the Commencement Date (the date that the Company may begin sales of Purchase Shares):


 


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



 


		(b)	The representations and warranties of the Buyer shall be true and correct as of the Commencement
Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true
and correct in all material respects as of such specific date) and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants and agreements required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Commencement Date; and



 


		(c)	A registration statement covering the sale of the Securities shall have been declared effective
under the 1933 Act by the SEC and no stop order with respect to the registration statement shall be pending or threatened by the
SEC.



 


7.CONDITIONS
TO THE BUYER’S OBLIGATION TO MAKEPURCHASES OF SHARES OF COMMON STOCK.


 


The obligation of the
Buyer to buy Purchase Shares (other than the Initial Purchase Shares) under this Agreement is subject to the satisfaction of each
of the following conditions on or before the Commencement Date (the date that the Company may begin sales of Purchase Shares other
than the Initial Purchase Shares) and once such conditions have been initially satisfied, there shall not be any ongoing obligation
to satisfy such conditions after the Commencement has occurred:


 


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


 


(b)The
Company shall have issued to the Buyer the Commitment Shares and,
in the event that the Buyer shall have surrendered the originally issued certificate(s),
shall have removed the restrictive transfer legend from the certificate representing the Commitment Shares and Initial Purchase
Shares; 


 


(c)The Common Stock
shall be authorized for quotation on the Principal Market, trading in the Common Stock shall not have been within the last 365
days suspended by the SEC or the Principal Market and the Securities shall be approved for listing upon the Principal Market;


 






    	-13-



    	 



    

 


(d)The Buyer shall
have received the opinion of the Company’s legal counsel dated as of the Commencement Date in
customary form and substance;


 


(e)The representations
and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations
and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall
be true and correct without further qualification) as of the date of this Agreement and as of the Commencement
Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true
and correct in all material respects as of such specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Commencement Date. The Buyer shall have received a certificate, executed
by the CEO, President or CFO of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached hereto
as Exhibit A;


 


(f)The Board of
Directors of the Company or a duly authorized committee thereof shall have adopted resolutions substantially
in the form attached hereto as Exhibit B-1 which shall be in full force and effect without any amendment or supplement
thereto as of the Commencement Date;


 


(g)As of the Commencement
Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting purchases
of Purchase Shares hereunder, 2,500,186 shares of Common Stock;


 


(h)The Irrevocable
Transfer Agent Instructions, in form acceptable to the Buyer shall have been signed by the Company and the Buyer and have been
delivered to the Transfer Agent;


 


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


 


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


 


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


 


(l)A registration
statement covering the sale of (i) all of the Commitment Shares, (ii) all of the Initial Purchase Shares and (iii) such number
of additional Purchase Shares as reasonably determined by the Company shall have been declared effective under the 1933 Act by
the SEC and no stop order with respect thereto shall be pending or threatened by the SEC. The Company shall have prepared and delivered
to the Buyer a final and complete form of prospectus, dated and current as of the Commencement Date, to be used by the Buyer in
connection with any sales of any Securities, and to be filed by the Company one (1) Business
Day after the Commencement Date pursuant to Rule 424(b). The Company shall have made all filings under all applicable federal and
state securities laws necessary to consummate the issuance of the Commitment Shares and the Purchase Shares pursuant to this Agreement
in compliance with such laws;


 






    	-14-



    	 



    

 


(m)No Event of
Default has occurred and is continuing, or any event which, after notice and/or lapse of time,
would become an Event of Default has occurred;


 


(n)On or prior
to the Commencement Date, the Company shall take all necessary action, if any, and such actions as reasonably requested by the
Buyer, in order to render inapplicable any control share acquisition, business combination, stockholder
rights plan or poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under
the Certificate of Incorporation or the laws of the state of its incorporation, other than Section 203 of the Delaware General
Corporation Law, that is or could become applicable to the Buyer as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and the Buyer's ownership of the Securities; and


 


(o)The Company
shall have provided the Buyer with the information reasonably requested by the Buyer in connection with its due diligence requests
made prior to, or in connection with, the Commencement, in accordance with the terms of Section 4(f) hereof.


 


8.
INDEMNIFICATION.


 


In
consideration of the Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities hereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless the Buyer and all of its affiliates, members, officers, directors, and employees, and any of the foregoing
person’s agents or other representatives (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company
in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of
any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, other than with respect to Indemnified Liabilities which directly
and primarily result from (A) a breach of any of the Buyer’s representations and warranties, covenants or agreements contained
in this Agreement, or (B) the gross negligence, bad faith or willful misconduct of the Buyer or any other Indemnitee. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.


 


9.EVENTS OF
DEFAULT. 


 


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


 






    	-15-



    	 



    

 


(a)during any period
in which the effectiveness of any registration statement is required to be maintained pursuant to the terms of the Registration
Rights Agreement, the effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer for the sale of all of the Registrable Securities
(as defined in the Registration Rights Agreement), and such lapse or unavailability continues for a period of ten (10) consecutive
Business Days or for more than an aggregate of thirty (30) Business Days in any 365-day period, which is not in connection with
a post-effective amendment to any such registration statement or the filing of a new registration statement; provided, however,
that in connection with any post-effective amendment to such registration statement or filing of a new registration statement that
is required to be declared effective by the SEC, such lapse or unavailability may continue for a period of no more than Twenty
(20) consecutive Business Days, which such period shall be extended for up to an additional Thirty (30) Business Days if the Company
receives a comment letter from the SEC in connection therewith;


 


(b)the suspension
from trading or failure of the Common Stock to be listed on a Principal Market for a period of three (3) consecutive Business Days;


 


(c)the delisting
of the Common Stock from the Principal Market, and the Common Stock is not immediately thereafter trading on the New York Stock
Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin
Board, or the OTCQB or OTCQX market places of the OTC Markets;


 


(d)the failure for any reason
by the Transfer Agent to issue Purchase Shares to the Buyer within five (5) Business Days after the
applicable Purchase Date that the Buyer is entitled to receive;


 


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


 


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


 


(g)if the Company
pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case, (B) consents to the entry of an order
for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it
or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors or (E)
becomes insolvent; or


 


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


 


(i)if at any time
after the Commencement Date, the Exchange Cap is reached unless and until stockholder approval is obtained pursuant to Section
1(h) hereof. The Exchange Cap shall be deemed to be reached at such time if, upon submission of a Purchase Notice or VWAP Purchase
Notice under this Agreement, the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue under this Agreement without breaching the Company’s obligations under the rules or regulations of
the Principal Market.


 






    	-16-



    	 



    

 


In addition to any other rights and remedies
under applicable law and this Agreement, including the Buyer termination rights under Section 11(k) hereof, so long as an Event
of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event of Default,
has occurred and is continuing, or so long as the Closing Sale Price is below the Floor Price, the Company may not require and
the Buyer shall not be obligated or permitted to purchase any shares of Common Stock under this Agreement. If pursuant to or within
the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company,
a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment
for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof)
this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by
any Person. No such termination of this Agreement under Section 11(k)(i) shall affect the Company’s or the Buyer’s
obligations under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.


 


10.CERTAIN DEFINED
TERMS. 


 


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


 


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


 


(b)“Available
Amount” means initially Thirty Million Dollars ($30,000,000) in the aggregate which amount shall be reduced by the Initial
Purchase and the Purchase Amount each time the Buyer purchases shares of Common Stock pursuant to Section 1 hereof.


 


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


 


(d)“Business
Day” means any day on which the Principal Market is open for trading during normal trading hours (i.e., 9:30 a.m. to
4:00 p.m. Eastern Time), including any day on which the Principal Market is open for trading for a period of time less than the
customary time.


 


(e)“Closing
Sale Price” means the last closing trade price for the Common Stock on the Principal Market as reported by the Principal
Market.


 


(f)“Confidential Information”
means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection
of tangible objects (including, without limitation, documents, protocols, development plans, commercialization plans, samples,
compounds and clinical and pre-clinical trial results). Confidential Information may also include information disclosed to a disclosing
party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made
generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving
party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by
the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party
from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently developed
by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents
and other competent evidence in the receiving party’s possession; or (vi) is required by law to be disclosed by the receiving
party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure
and assistance in obtaining an order protecting the information from public disclosure.


 






    	-17-



    	 



    

 


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


 


(h)“Maturity
Date” means the date that is thirty-six (36) months from the Commencement Date.


 


(i)“Person”
means an individual or entity including any limited liability company, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or agency thereof.


 


(j)“Principal
Market” means the Nasdaq Capital Market; provided however, that in the event the Company’s Common Stock is ever
listed or traded on the New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTC
Bulletin Board, or either one of the OTCQB or the OTCQX market places of the OTC Markets, then the “Principal Market”
shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded.


 


(k)“Purchase
Amount” means, with respect to any particular purchase made hereunder, the portion of the Available Amount to be purchased
by the Buyer pursuant to Section 1 hereof as set forth in a valid Purchase Notice or VWAP Purchase Notice which the Company delivers
to the Buyer.


 


(l)“Purchase
Date” means with respect to any Regular Purchase made hereunder, the Business Day of receipt by the Buyer of a valid
Purchase Notice that the Buyer is to buy Purchase Shares pursuant to Section 1(b) hereof.


 


(m) “Purchase Notice”
shall mean an irrevocable written notice from the Company to the Buyer directing the Buyer to buy Purchase Shares pursuant to Section
1(b) hereof as specified by the Company therein at the applicable Purchase Price on the Purchase Date.


 


(n) “Purchase
Price” means the lesser of (i) the lowest Sale Price of the Common Stock on the Purchase Date or (ii) the arithmetic
average of the three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12) consecutive Business Days ending
on the Business Day immediately preceding such Purchase Date (to be appropriately adjusted for any reorganization, recapitalization,
non-cash dividend, stock split, reverse stock split or other similar transaction).


 


(o)“Sale
Price” means any trade price for the shares of Common Stock on the Principal Market during normal trading hours, as reported
by the Principal Market.


 


(p)“SEC”
means the United States Securities and Exchange Commission.


 






    	-18-



    	 



    

 


(q)“Transfer
Agent” means the transfer agent of the Company as set forth in Section 11(f) hereof or such other person who is then
serving as the transfer agent for the Company in respect of the Common Stock.


 


(r)“VWAP
Minimum Price Threshold” means, with respect to any particular VWAP Purchase Notice, the Sale Price on the VWAP Purchase
Date equal to the greater of (i) 90% of the Closing Sale Price on the Business Day immediately preceding the VWAP Purchase Date
or (ii) such higher price as set forth by the Company in the VWAP Purchase Notice.


 


(s)“VWAP
Purchase Amount” means, with respect to any particular VWAP Purchase Notice, the portion of the Available Amount to be
purchased by the Buyer pursuant to Section 1(c) hereof as set forth in a valid VWAP Purchase Notice which requires the Buyer to
buy the VWAP Purchase Share Percentage of the aggregate shares traded on the Principal Market during normal trading hours on the
VWAP Purchase Date up to the VWAP Purchase Share Volume Maximum, subject to the VWAP Minimum Price Threshold.


 


(t)“VWAP
Purchase Date” means, with respect to any VWAP Purchase made hereunder, the Business Day following the receipt by
the Buyer of a valid VWAP Purchase Notice that the Buyer is to buy Purchase Shares pursuant to Section 1(c) hereof.


 


(u)“VWAP
Purchase Notice” shall mean an irrevocable written notice from the Company to the Buyer directing the Buyer to buy Purchase
Shares on the VWAP Purchase Date pursuant to Section 1(c) hereof as specified by the Company therein at the applicable VWAP Purchase
Price with the applicable VWAP Purchase Share Percentage specified therein.


 


(v)“VWAP
Purchase Share Percentage” means, with respect to any particular VWAP Purchase Notice pursuant to Section 1(c) hereof,
the percentage set forth in the VWAP Purchase Notice which the Buyer will be required to buy as a specified percentage of the aggregate
shares traded on the Principal Market during normal trading hours up to the VWAP Purchase Share Volume Maximum on the VWAP Purchase
Date subject to Section 1(c) hereof but in no event shall this percentage exceed thirty percent (30%) of such VWAP Purchase Date’s
share trading volume of the Common Stock on the Principal Market during normal trading hours.


 


(w) “VWAP
Purchase Price” means the lesser of (i) the Closing Sale Price on the VWAP Purchase
Date; or (ii) ninety-five percent (95%) of volume weighted average price for the Common Stock traded on the Principal Market during
normal trading hours on (A) the VWAP Purchase Date if the aggregate shares traded on the Principal Market on the VWAP Purchase
Date have not exceeded the VWAP Purchase Share Volume Maximum, or (B) the portion of the VWAP Purchase Date until such time as
the sooner to occur of (1) the time at which the aggregate shares traded on the Principal Market has exceeded the VWAP Purchase
Share Volume Maximum, or (2) the time at which the sale price of Common Stock falls below the VWAP Minimum Price Threshold (to
be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction).


 


(x) “VWAP
Purchase Share Estimate” means the number of shares of Common Stock that the Company has in its sole discretion irrevocably
instructed its Transfer Agent to issue to the Buyer via the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program in connection with a VWAP Purchase Notice pursuant to Section 1(c) hereof and issued to the Buyer’s
or its designee’s balance account with DTC through its Deposit Withdrawal At Custodian (DWAC) system on the VWAP Purchase
Date (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split
or other similar transaction).


 






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(y) “VWAP
Purchase Share Volume Maximum” means a number of shares of Common Stock traded on the Principal Market during normal
trading hours on the VWAP Purchase Date equal to: (i) the VWAP Purchase Share Estimate, divided by (ii) the VWAP Purchase Share
Percentage (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction).


 


11.MISCELLANEOUS.


 


(a)Governing
Law; Jurisdiction; Jury Trial. The laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of
the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City
of Chicago, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or
therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


 


(b)Counterparts.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other
party; provided that a facsimile or pdf (or other electronic reproduction) signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or
pdf (or other electronic reproduction) signature.


 


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


 


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


 






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(e)Entire Agreement.
This Agreement and the Registration Rights Agreement supersede all other prior oral or written agreements between the Buyer, the
Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement,
the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the
Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. The Company acknowledges and agrees
that is has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly
set forth in this Agreement.


 


(f)Notices.
Any notices, consents or other communications required or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii)
one (1) Business Day after timely deposit with a nationally recognized overnight delivery service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such communications shall be:


 


If to the Company:


 


Atossa Genetics, Inc.


1616 Eastlake Ave., East, Suite
510


Seattle, Washington 98102


Telephone: 800 351-3902


Facsimile:  206 430-1288


Attention:   Kyle Guse


Chief Financial Officer and
General Counsel


 


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


 


Ropes &
Gray LLP


Three Embarcadero
Center


San Francisco,
CA 94111


Telephone:
(415) 315-6395


Facsimile:   (415)
315-6026


Attention:   Ryan
A. Murr, Esq.


 


If to the Buyer:


 


Aspire Capital Fund, LLC


155 North Wacker Drive, Suite
1600


Chicago, IL 60606


Telephone:312-658-0400


Facsimile:  312-658-4005


Attention:  Steven G. Martin


 






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With a copy to (which
shall not constitute delivery to the Buyer):


 


O’Melveny & Myers LLP


1625 Eye Street, NW


Washington, DC 20006


Telephone:202-383-5418


Facsimile: 202-383-5414


Attention:  Martin P. Dunn, Esq.


 


If to the Transfer
Agent:


 


VStock Transfer


77 Spruce
Street , Suite 201


Cedarhurst,
New York


Telephone:
212 828-8436


Facsimile: 646
536-3179


Attention:  Chief
Executive Officer


 


or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has specified by written notice given to each other
party one (1) Business Day prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, and recipient facsimile number or (C) provided by a nationally recognized overnight delivery service,
shall be rebuttable evidence of receipt in accordance with clause (i), (ii) or (iii) above, respectively.


 


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


 


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


 


(i)Publicity.
The Buyer shall have the right to approve before issuance any press release, SEC filing or any other public disclosure made by
or on behalf of the Company whatsoever with respect to, in any manner, the Buyer, its purchases hereunder or any aspect of this
Agreement or the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval
of the Buyer, to make any press release or other public disclosure (including any filings with the SEC) with respect to such transactions
as is required by applicable law and regulations so long as the Company and its counsel consult with the Buyer in connection with
any such press release or other public disclosure at least one (1) Business Day prior to its release. The Buyer must be provided
with a copy thereof at least one (1) Business Day prior to any release or use by the Company thereof. 


 


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


 






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(k)Termination.
This Agreement may be terminated only as follows:


 


(i)By
the Buyer any time an Event of Default exists without any liability or payment to the Company. However, if pursuant to or within
the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company,
a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment
for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof)
this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by
any Person. No such termination of this Agreement under this Section 11(k)(i) shall affect the Company’s or the Buyer’s
obligations under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.


 


(ii)In
the event that the Commencement shall not have occurred the Company shall have the option to terminate this Agreement for any reason
or for no reason without any liability whatsoever of either party to the other party under this Agreement except as set forth in
Section 11(k)(viii) hereof.


 


(iii)In
the event that the Commencement shall not have occurred on or before June 1, 2013, due to the failure to satisfy any of the conditions
set forth in Sections 6 and 7 above with respect to the Commencement, either party shall have the option to terminate this Agreement
at the close of business on such date or thereafter without liability of either party to any other party; provided, however, that
the right to terminate this Agreement under this Section 11(k)(iii) shall not be available to either party if such failure to
satisfy any of the conditions set forth in Sections 6 and 7 is the result of a breach of this Agreement by such party or the failure
of any representation or warranty of such party included in this Agreement to be true and correct in
all material respects.


 


(iv)
At any time after the Commencement Date, the Company shall have the option to terminate this Agreement for any reason or for no
reason by delivering notice (a “Company Termination Notice”) to the Buyer electing to terminate this Agreement
without any liability whatsoever of either party to the other party under this Agreement except as set forth in Section 11(k)(viii)
hereof. The Company Termination Notice shall not be effective until one (1) Business Day after it has been received by the Buyer.


 


(v)This
Agreement shall automatically terminate on the date that the Company sells and the Buyer purchases the full Available Amount as
provided herein, without any action or notice on the part of any party and without any liability whatsoever of any party to any
other party under this Agreement except as set forth in Section 11(k)(viii) hereof.


 


(vi)If
by the Maturity Date for any reason or for no reason the full Available Amount under this Agreement has not been purchased as provided
for in Section 1 of this Agreement, this Agreement shall automatically terminate on the Maturity Date, without any action or notice
on the part of any party and without any liability whatsoever of any party to any other party under this Agreement except as set
forth in Section 11(k)(viii) hereof.


 






    	-23-



    	 



    

 


(vii)Except
as set forth in Sections 11(k)(i) (in respect of an Event of Default under Sections 9(f), 9(g) and 9(h)), 11(k)(v) and 11(k)(vi),
any termination of this Agreement pursuant to this Section 11(k) shall be effected by written notice from the Company to the Buyer,
or the Buyer to the Company, as the case may be, setting forth the basis for the termination hereof.


 


(viii)The
representations and warranties of the Company and the Buyer contained in Sections 2, 3 and 5 hereof, the indemnification provisions
set forth in Section 8 hereof and the agreements and covenants set forth in Sections 4(e) and 11, shall survive the Commencement
and any termination of this Agreement. No termination of this Agreement shall affect the Company’s or the Buyer’s rights
or obligations (A) under the Registration Rights Agreement which shall survive any such termination in accordance with its terms
or (B) under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations
with respect to any pending purchases under this Agreement.


 


(l)No Financial
Advisor, Placement Agent, Broker or Finder. Other than Dawson James Securities, Inc., the Company represents and warrants to
the Buyer that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Buyer represents and warrants to the Company that it has not engaged any financial advisor, placement
agent, broker or finder in connection with the transactions contemplated hereby. Each party shall be responsible for the payment
of any fees or commissions, if any, of any financial advisor, placement agent, broker or finder engaged by such party relating
to or arising out of the transactions contemplated hereby. Each party shall pay, and hold the other party harmless against, any
liability, loss or expense (including, without limitation, attorneys' fees and out of pocket expenses) arising in connection with
any such claim.


 


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


 


(n)Failure or Indulgence Not
Waiver. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege.


 


 


*    *    *    *    *


 









    	-24-



    	 



    

 


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


 


 


 


THE COMPANY:


 


ATOSSA GENETICS, INC.


 


By: /s/ Steven C. Quay                             


Name: Steven C. Quay


Title: Chairman, Chief Executive Officer
and President


 


 


BUYER:


 


ASPIRE CAPITAL FUND, LLC


BY: ASPIRE CAPITAL PARTNERS, LLC


BY: CHRISKO INVESTORS, INC.


 


By: /s/ Christos Komissopoulos            


Name: Christos Komissopoulos


Title: President


 






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