Exhibit
10.1


 


SECURITIES
PURCHASE AGREEMENT


 


SECURITIES
PURCHASE AGREEMENT (the "Agreement"), dated as of April 22, 2015, by and among Ener-Core, Inc., a Nevada
corporation, with headquarters located at 9400 Toledo Way, Irvine, California 92618 (the "Company"), and the
investors listed on the Schedule of Buyers attached hereto (individually, a "Buyer" and collectively, the "Buyers").


 


WHEREAS:


 


A.The
Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506(b) of Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "SEC")
under the 1933 Act.


 


B.The
Company has authorized a new series of senior secured notes of the Company, in substantially the form attached hereto as Exhibit
A (the "Notes"), which Notes shall be convertible into the Company's common stock, par value $0.0001 per
share (the "Common Stock") (the shares of Common Stock issuable pursuant to the terms of the Notes, including,
without limitation, upon conversion, upon payment of interest, or otherwise, collectively, the "Conversion Shares"),
in accordance with the terms of the Notes.


 


C.Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate
principal amount of Notes set forth opposite such Buyer's name in column (3) on the Schedule of Buyers attached hereto (which
aggregate principal amount of Notes for all Buyers shall be $5,000,000), and (ii) Warrants, in substantially the form attached
hereto as Exhibit B (the "Warrants"), representing the right to acquire that number of shares of Common
Stock set forth opposite such Buyer's name in column (4) on the Schedule of Buyers (as exercised, collectively, the "Warrant
Shares").


 


D.The
Notes will rank senior to all outstanding and future indebtedness of the Company, and its Subsidiaries (as defined below), will
be guaranteed by all direct and indirect Subsidiaries (as defined in Section 3(a)) of the Company, currently formed or formed
in the future, as evidenced by a guarantee agreement, in the form attached hereto as Exhibit C (as amended or modified
from time to time in accordance with its terms, the "Guarantee Agreement"), and will be secured by a first priority
perfected security interest (subject to Permitted Liens under and as defined in the Notes) in all of the current and future assets
of the Company and all direct and indirect Subsidiaries of the Company, except for the “Excluded Assets” (as such
term is defined in the Security Agreement), currently formed or formed in the future, as evidenced by that certain Pledge and
Security Agreement, substantially in the form attached hereto as Exhibit D, (as amended or modified from time to time in
accordance with its terms, the "Security Agreement" and together with the Guarantee Agreement and any ancillary
documents related thereto, collectively, the "Security Documents").


 






    	 



    	 



    

 


E.The
Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively are referred to herein as the "Securities".


 


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


 


1.PURCHASE
AND SALE OF NOTES AND WARRANTS.


 


(a)Purchase
of Notes and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the
Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the Company on
the Closing Date (as defined below), (x) a principal amount of Notes as is set forth opposite such Buyer's name in column (3)
on the Schedule of Buyers and (y) Warrants to acquire up to that number of Warrant Shares as is set forth opposite such Buyer's
name in column (4) on the Schedule of Buyers (the "Closing").


 


(b)Closing.
The date and time of the Closing (the "Closing Date") shall be 10:00 a.m., New York City time, on the date hereof
(or such other date and time as is mutually agreed to by the Company and each Buyer) after notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below, at the offices of Schulte Roth & Zabel LLP, 919 Third
Avenue, New York, New York 10022.


 


(c)Purchase
Price. The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer at the Closing (the "Purchase
Price") shall be the amount set forth opposite each Buyer's name in column (5) of the Schedule of Buyers. Each Buyer
shall pay $1,000 for each $1,000 of principal amount of Notes and related Warrants to be purchased by such Buyer at the Closing.
The Buyers and the Company agree that the Notes and the Warrants constitute an "investment unit" for purposes of Section
1273(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). The Buyers and the Company mutually
agree that the allocation of the issue price of such investment unit between the Notes and the Warrants in accordance with Section
1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be $79.50 per $1,000 of Purchase Price to be allocated
to the Warrants and the balance of each $1,000 of Purchase Price to be allocated to the Notes, and neither the Buyers nor the
Company shall take any position inconsistent with such allocation in any tax return or in any judicial or administrative proceeding
in respect of taxes.


 


(d)Form
of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for the Notes and the Warrants
to be issued and sold to such Buyer at the Closing (less, in the case of Empery Asset Master, Ltd. ("Empery"),
the amounts withheld pursuant to Section 4(h)), by wire transfer of immediately available funds in accordance with the Company's
written wire instructions and (ii) the Company shall deliver to each Buyer the Notes (allocated in the principal amounts
as such Buyer shall request) which such Buyer is then purchasing hereunder along with the Warrants (allocated in the amounts as
such Buyer shall request) which such Buyer is purchasing hereunder, in each case duly executed on behalf of the Company and registered
in the name of such Buyer or its designee.


 






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2.BUYER'S
REPRESENTATIONS AND WARRANTIES. Each Buyer, severally and not jointly, represents and warrants with respect to only itself
that:


 


(a)No
Public Sale or Distribution. Such Buyer is (i) acquiring the Notes and the Warrants and (ii) upon issuance of the Conversion
Shares pursuant to the terms of the Notes and upon exercise of the Warrants will acquire the Conversion Shares issuable pursuant
to the terms of the Notes and the Warrant Shares issuable upon exercise of the Warrants, for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold
any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Such Buyer is acquiring the Securities
hereunder in the ordinary course of its business. Such Buyer does not presently have any agreement or understanding, directly
or indirectly, with any Person (as defined below) to distribute any of the Securities. For purposes of this Agreement, "Person"
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.


 


(b)Accredited
Investor Status. Such Buyer is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D.


 


(c)Reliance
on Exemptions. Such 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 such Buyer's compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of such Buyer to acquire the Securities.


 


(d)Information.
Such Buyer and its advisors, if any, have 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 requested by such Buyer. Such Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other
due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect
such Buyer's right to rely on the Company's representations and warranties contained herein. Such Buyer understands that its investment
in the Securities involves a high degree of risk. Such 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. Such 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.


 






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(f)Transfer
or Resale. Such Buyer understands that (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,
(B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant
to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule thereto) (collectively, "Rule
144"); (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. Notwithstanding the foregoing, the Securities may
be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities and
such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer effecting
a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement or any other Transaction Document (as defined in Section 3(b)), including, without limitation,
this Section 2(f).


 


(g)Legends.
Such Buyer understands that the certificates or other instruments representing the Notes and the Warrants and, until such time
as the resale of the Conversion Shares and the Warrant Shares have been registered under the 1933 Act, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth below, shall bear any legend as required by the
"blue sky" laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order
may be placed against transfer of such stock certificates):


 


[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES [MAY
BE CONVERTIBLE] [ARE EXERCISABLE] HAVE BEEN][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 MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES.


 






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The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities
upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust
Company ("DTC"), if, unless otherwise required by state securities laws, (i) such Securities are registered for
resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with
an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities
may be made without registration under the applicable requirements of the 1933 Act, or (iii) the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A. The Company shall be responsible for the fees of its transfer agent and all
DTC fees associated with such issuance.


 


(h)Validity;
Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective
terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights
and remedies.


 


(i)No
Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument
to which such Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse
effect on the ability of such Buyer to perform its obligations hereunder.


 


3.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


The
Company represents and warrants to each of the Buyers that:


 


(a)Organization
and Qualification. Each of the Company and its "Subsidiaries" (which for purposes of this Agreement means
any entity in which the Company, directly or indirectly, owns any of the capital stock or holds an equity or similar interest)
are entities duly organized and validly existing in good standing under the laws of the jurisdiction in which they are formed,
and have the requisite power and authorization 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 entity 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 would not reasonably be expected to have a Material
Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results of operations, condition (financial or otherwise) or prospects of the Company
and its Subsidiaries, individually or taken as a whole, or on the transactions contemplated hereby or on the other Transaction
Documents or by the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or
ability of the Company to perform its obligations under the Transaction Documents. The Company has no Subsidiaries except as set
forth on Schedule 3(a).


 






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(b)Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Warrants, the Lock-Up Agreements (as defined in Section 7(viii)), the Irrevocable Transfer Agent Instructions
(as defined in Section 5(b)), the Security Documents and each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the "Transaction Documents") and to issue
the Securities in accordance with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation,
the issuance of the Notes and the Warrants, and the reservation for issuance and the issuance of the Conversion Shares and the
reservation for issuance and issuance of Warrant Shares issuable upon exercise of the Warrants have been duly authorized by the
Company's Board of Directors and (other than filings as may be required by state securities agencies) no further filing, consent,
or authorization is required by the Company, its Board of Directors or its shareholders. This Agreement and the other Transaction
Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. Each of the Subsidiaries party
to any of the Transaction Documents has the requisite power and authority to enter into and perform its obligations under such
Transaction Documents. The execution and delivery by the Subsidiaries party to any of the Transaction Documents of such Transaction
Documents and the consummation by such Subsidiaries of the transactions contemplated thereby have been duly authorized by such
Subsidiaries' respective boards of directors (or other applicable governing body) and (other than filings as may be required by
state securities agencies) no further filing, consent, or authorization is required by such Subsidiaries, their respective boards
of directors (or other applicable governing body) or shareholders (or other applicable owners of equity of such Subsidiaries).
The Transaction Documents to which any of the Subsidiaries are parties have been duly executed and delivered by such Subsidiaries,
and constitute the legal, valid and binding obligations of such Subsidiaries, enforceable against them in accordance with their
respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.


 






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(c)Issuance
of Securities. The issuance of the Notes and the Warrants are duly authorized and, upon issuance, shall be validly issued
and free from all taxes, liens and charges with respect to the issue thereof. As of the ninetieth (90th) day following
the Closing, a number of shares of Common Stock shall have been duly authorized and reserved for issuance which equals or exceeds
(the "Required Reserved Amount) the sum of (i) 200% of the maximum number of Conversion Shares issued and issuable
pursuant to the Notes based on an assumed Conversion Price (as defined in the Notes) of $0.2275 (as adjusted for any stock dividend,
stock split, stock combination, reclassification or similar transaction occurring after the date hereof and without taking into
account any limitations on the issuance thereof pursuant to the terms of the Notes) (the “Assumed Conversion Price”)
plus (ii) 100% of the maximum number of Warrant Shares issued and issuable pursuant to the Warrants, each as of the Trading Day
(as defined in the Warrants) immediately preceding the applicable date of determination (without taking into account any limitations
on the exercise of the Warrants set forth in the Warrants). As of the date hereof, there are 82,206,245 shares of Common Stock
authorized and unissued, of which 19,660,551 are reserved for issuance upon full exercise of all outstanding options and warrants.
Upon conversion of the Notes in accordance with the Notes or exercise of the Warrants in accordance with the Warrants, as the
case may be, the Conversion Shares and the Warrant Shares, respectively, will be validly issued, fully paid and nonassessable
and free from all preemptive or similar rights, 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. Assuming the accuracy of each of the representations and warranties
set forth in Section 2 of this Agreement, the offer and issuance by the Company of the Securities is exempt from registration
under the 1933 Act.


 


(d)No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and any of its Subsidiaries
parties to any of the Transaction Documents and the consummation by the Company and any of its Subsidiaries of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the Warrants and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the Articles of Incorporation
(as defined in Section (3(q)) or Bylaws (as defined in Section (3(q)), any memorandum of association, certificate of incorporation,
certificate of formation, bylaws, any certificate of designations or other constituent documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or the articles of association or bylaws of the Company
or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree (including other foreign, federal and state securities
laws and regulations and the rules and regulations of the OTC QB (the "Principal Market") and including all applicable
laws of the State of Nevada and any foreign, federal and state laws, rules and regulations) 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.


 






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(e)Consents.
Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case
in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company
or any of its Subsidiaries is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior
to the Closing Date, and the Company and its Subsidiaries are unaware of any facts or circumstances that might prevent the Company
or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings pursuant to the preceding
sentence. The Company is not in violation of the listing requirements of the Principal Market and has no knowledge of any facts
that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. The issuance by the Company
of the Securities shall not have the effect of delisting or suspending the Common Stock from the Principal Market.


 


(f)Acknowledgment
Regarding Buyer's Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and
that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an "affiliate" of the Company
or any of its Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of
more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "1934 Act")). The Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and
the transactions contemplated hereby and thereby, and any advice given by a 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 such Buyer's purchase
of the Securities. The Company further represents to each 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.


 


(g)No
General Solicitation; Placement Agent's Fees. Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person
acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation
D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any placement agent's
fees, financial advisory fees, or brokers' commissions (other than for persons engaged by any Buyer or its investment advisor)
relating to or arising out of the transactions contemplated hereby, including, without limitation, placement agent fees payable
to Cowen and Company, LLC, as placement agent (the "Placement Agent") in connection with the sale of the Securities.
The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney's
fees and out-of-pocket expenses) arising in connection with any such claim. The Company acknowledges that it has engaged the Placement
Agent in connection with the sale of the Securities. Other than the Placement Agent, neither the Company nor any of its Subsidiaries
has engaged any placement agent or other agent in connection with the sale of the Securities.


 






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(h)No
Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on 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 require registration of any of the Securities under the 1933 Act, whether through integration with prior offerings
or otherwise, or cause this offering of the Securities to require approval of shareholders of the Company for purposes of the
1933 Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to in
the preceding sentence that would require registration of any of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings for purposes of any such applicable shareholder approval provisions.


 


(i)Application
of Takeover Protections; Rights Agreement. The Company and its 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 Articles of Incorporation or the laws of the jurisdiction
of its formation which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and any Buyer's ownership of the Securities. The Company
has not adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock
or a change in control of the Company.


 


(j)SEC
Documents; Financial Statements. Except as disclosed in Schedule 3(j), during the two (2) years prior to the date hereof,
the Company has timely 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, notes and schedules thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). The Company has delivered to the Buyers or their respective representatives
true, correct and complete copies of the SEC Documents not available on the EDGAR system. As of their respective filing dates,
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, 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. As of their
respective filing dates, 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 ("GAAP") (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). No other information provided by or on behalf of the Company to the Buyers which is not included
in the SEC Documents, including, without limitation, information referred to in Section 2(d) of this Agreement or in the disclosure
schedules to this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.


 






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(k)Absence
of Certain Changes. Except as disclosed in Schedule 3(k), since December 31, 2014, there has been no material adverse
change and no material adverse development in the business, assets, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company or its Subsidiaries. Except as disclosed in Schedule 3(k), since December
31, 2014, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually
or in the aggregate, in excess of $100,000 outside of the ordinary course of business or (iii) had capital expenditures, individually
or in the aggregate, in excess of $100,000. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to do so. The Company
and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes of this Section
3(k), "Insolvent" means, with respect to any Person, (i) the present fair saleable value of such Person's assets
is less than the amount required to pay such Person's total Indebtedness (as defined in Section 3(r)), (ii) such Person is unable
to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured,
(iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts
mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it is engaged as such business
is now conducted and is proposed to be conducted.


 


(l)No
Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred
or exists, or is contemplated to occur with respect to the Company, its Subsidiaries or their respective business, properties,
prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities
laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced.


 


(m)Conduct
of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default
under any certificate of designations of any outstanding series of preferred stock of the Company (if any), its Articles of Incorporation
or Bylaws or their organizational charter or memorandum of association or certificate of incorporation or articles of association
or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of
its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations which could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has
no knowledge of any facts or circumstances that would reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Except as set forth in Schedule 3(m), during the two (2) years prior to the date hereof,
the Common Stock has been designated for quotation on the Principal Market. Except as set forth in Schedule 3(m), during
the two (2) years prior to the date hereof, (i) trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (ii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the
suspension or delisting of the Common Stock from the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.


 






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(n)Foreign
Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official
or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.


 


(o)Sarbanes-Oxley
Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended,
that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that
are effective as of the date hereof.


 


(p)
Transactions With Affiliates. Except as set forth on Schedule 3(p), none of the officers, directors or employees
of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries,
any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest
or is an officer, director, trustee or partner.


 






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(q)Equity
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 200,000,000 shares of Common
Stock, of which as of the date hereof, 117,793,755 shares are issued and outstanding, 21,000,000 shares are reserved for issuance
pursuant to the Company's stock option and purchase plans and 5,687,000 shares are reserved for issuance pursuant to securities
(other than the aforementioned options, the Notes and the Warrants) exercisable or exchangeable for, or convertible into, Common
Stock, (ii) 50,000,000 shares of preferred stock, par value $0.0001 per share, none of which are issued and outstanding as of
the date hereof and (iii) there are 78,597,827 shares of Common Stock held by non-affiliates of the Company. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable. Except as disclosed in (i) Schedule
3(q)(i), none of the Company's capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) Schedule 3(q)(ii), 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, or exercisable
or exchangeable for, 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, or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its Subsidiaries; (iii) Schedule 3(q)(iii), there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) Schedule 3(q)(iv), there are
no financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its Subsidiaries; (v) Schedule 3(q)(v), there are no agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act; (vi) Schedule 3(q)(vi),
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; (vii) Schedule 3(q)(vii), there
are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the
Securities; (viii) Schedule 3(q)(viii), the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement; and (ix) Schedule 3(q)(ix), the Company and its Subsidiaries have
no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company's or any of its Subsidiary's' respective businesses and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect. The Company has furnished or made available to the Buyers
true, correct and complete copies of the Company's Articles of Incorporation, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Company's Bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and the terms of all securities convertible into, or exercisable or exchangeable for shares of Common Stock and the material rights
of the holders thereof in respect thereto.


 






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(r)Indebtedness
and Other Contracts. Neither the Company nor any of its Subsidiaries (i) except as disclosed in Schedule 3(r)(i), has
any outstanding Indebtedness (as defined below), (ii) except as disclosed in Schedule 3(r)(ii), is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or
instrument could reasonably be expected to result in a Material Adverse Effect, (iii) except as disclosed in Schedule 3(r)(iii),
is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv) except
as disclosed in Schedule 3(r)(iv), is a party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is expected to have a Material Adverse Effect. Schedule
3(r) provides a detailed description of the material terms of any such outstanding Indebtedness. For purposes of this Agreement:
(x) "Indebtedness" of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of property or services, including, without limitation,
"capital leases" in accordance with GAAP (other than trade payables entered into in the ordinary course of business
consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest
or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though
the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G)
above; and (y) "Contingent Obligation" means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with,
or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.


 


(s)Absence
of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company's Subsidiaries or any of the
Company's or its Subsidiaries' officers or directors, whether of a civil or criminal nature or otherwise, in their capacities
as such, except as set forth in Schedule 3(s). The matters set forth in Schedule 3(s) would not reasonably be expected
to have a Material Adverse Effect.


 


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


 






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(u)Employee
Relations.


 


(i)Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The
Company and its Subsidiaries believe that their relations with their employees are good. No executive officer of the Company or
any of its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer's employment with the Company
or any such Subsidiary. No executive officer of the Company or any of its Subsidiaries, to the knowledge of the Company or any
of its Subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive
covenant, 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.


 


(ii)The
Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure
to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.


 


(v)Title.
The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title
to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects except for Permitted Liens which 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. Any
real property and facilities held under lease by the Company and any of its Subsidiaries 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.


 


(w)Intellectual
Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade
names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications
and registrations therefor ("Intellectual Property Rights") necessary to conduct their respective businesses
as now conducted. Each of patents owned by the Company or any of its Subsidiaries is listed on Schedule 3(w)(i). Except
as set forth in Schedule 3(w)(ii), none of the Company's Intellectual Property Rights have expired or terminated or have
been abandoned or are expected to expire or terminate or are expected to be abandoned, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of
its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property Rights.
Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property Rights.


 






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(x)Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with any and all Environmental Laws (as hereinafter defined),
(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 of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect. The term "Environmental Laws" means all federal, state, local
or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata), including, without limitation, 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.


 


(y)Subsidiary
Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company
or such Subsidiary.


 


(z)Investment
Company Status. Neither the Company nor any Subsidiary is, and upon consummation of the sale of the Securities, and for so
long any Buyer holds any Securities, will be, an "investment company," a company controlled by an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as amended.


 


(aa)Tax
Status. The Company and each of its Subsidiaries (i) has made or filed all U.S. federal, state and foreign income and all
other 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,
except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of
no basis for any such claim.


 






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(bb)Internal
Accounting and Disclosure Controls. Except as set forth in Schedule 3(bb), the Company and each of its 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 generally accepted accounting principles and to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization
and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15 under the 1934 Act) that are effective in ensuring that information required to be disclosed
by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within
the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed
to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act
is accumulated and communicated to the Company's management, including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. During the twelve months
prior to the date hereof neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant
relating to any material weakness in any part of the system of internal accounting controls of the Company or any of its Subsidiaries.


 


(cc)Off
Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company and an unconsolidated
or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed
or that otherwise would be reasonably likely to have a Material Adverse Effect.


 


(dd)Ranking
of Notes. Except as set forth in Schedule 3(dd), no Indebtedness of the Company or any of its Subsidiaries is senior
to or ranks pari passu with the Notes in right of payment, whether with respect of payment of redemptions, interest, damages
or upon liquidation or dissolution or otherwise.


 


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


 


(ff)Manipulation
of Price. 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, or that could reasonably be expected to cause or 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) other than the Placement
Agent, sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) other than
the Placement Agent, paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities
of the Company.


 






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(gg)Acknowledgement
Regarding Buyers' Trading Activity. The Company acknowledges and agrees that, except as set forth in Section 4(x), (i) none
of the Buyers has been asked to agree, nor has any Buyer 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) any Buyer, and counter-parties in "derivative" transactions to which any such Buyer is a party,
directly or indirectly, presently may have a "short" position in the Common Stock, and (iii) each Buyer 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, except as set forth in Section 4(x), one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Conversion Shares and/or the Warrant Shares are being determined and (b) such hedging
and/or trading activities, if any, can reduce the value of the existing shareholders' equity interest in the Company both at and
after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement, the Notes, the Warrants or any of the documents executed
in connection herewith.


 


(hh)U.S.
Real Property Holding Corporation. The Company is not, has never been, and so long as any Securities remain outstanding, shall
not become, a U.S. real property holding corporation within the meaning of Section 897 of the Code and the Company shall so certify
upon any Buyer's request.


 


(ii)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 (25%)
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.


 


(jj)No
Additional Agreements. Neither the Company nor any of its Subsidiaries has any agreement or understanding with any Buyer with
respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.


 






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(kk)Disclosure.
The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyers or their agents
or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information.
The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Buyers regarding the Company, or any of its Subsidiaries, their business
and the transactions contemplated hereby, including the disclosure schedules to this Agreement, furnished by or on behalf of the
Company 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 the light of the circumstances under which they were made, not misleading. Each
press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release 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 the light of the circumstances under which they were made,
not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries
or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. The Company
acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.


 


(ll)Shell
Company Status. The Company is not, and has not been since July 14, 2013, an issuer identified in Rule 144(i)(1) of the 1933
Act. As of July 14, 2013, the Company filed current "Form 10 information" (as defined in Rule 144 (i)(3)) with the SEC
reflecting its status as an entity that was no longer an issuer described in Rule 144(i)(1)(i).


 


(mm)Stock
Option Plans. Each stock option granted by the Company was granted (i) in accordance with the terms of the applicable stock
option plan of the Company 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 policy or practice
of the Company 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.


 


(nn)No
Disagreements with Accountants and Lawyers. There are no material 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. In addition, on or prior to the date hereof,
the Company had discussions with its accountants about its financial statements previously filed with the SEC. Based on those
discussions, the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.


 


(oo)No
Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the
1933 Act ("Regulation D Securities"), 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 1933 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 1933 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 Buyers a copy of any disclosures provided thereunder.


 






    	- 18 -



    	 



    

 


(pp)Other
Covered Persons. The Company is not aware of any Person (other than the Placement Agent) that has been or will be paid (directly
or indirectly) remuneration for solicitation of Buyers or potential purchasers in connection with the sale of any Regulation D
Securities.


 


4.COVENANTS.


 


(a)Best
Efforts. Each party shall use its best efforts timely to satisfy each of the covenants and the conditions to be satisfied
by it as provided in Sections 6 and 7 of this Agreement.


 


(b)Form
D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide
a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, 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 Buyers at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to the Closing Date. The Company shall make all filings and reports relating to the offer and sale of
the Securities required under applicable securities or "Blue Sky" laws of the states of the United States following
the Closing Date.


 


(c)Reporting
Status. Until the date on which the Buyers shall have sold all of the Conversion Shares and Warrant Shares and none
of the Notes or Warrants are outstanding (the "Reporting Period"), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise
permit such termination.


 


(d)Use
of Proceeds. The Company will use the proceeds from the sale of the Securities solely as set forth on Schedule 4(d).


 


(e)Financial
Information. The Company agrees to send the following to each Buyer during the Reporting Period (i) unless the following are
filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, any Quarterly Reports on Form 10-Q, any Current Reports
on Form 8-K (or any analogous reports under the 1934 Act) and any registration statements (other than on Form S-8) or amendments
filed pursuant to the 1933 Act, (ii) unless the following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system, on the same day as the release thereof, facsimile or e-mailed copies of all press releases issued by
the Company or any of its Subsidiaries, and (iii) copies of any notices and other information made available or given to the shareholders
of the Company generally, contemporaneously with the making available or giving thereof to the shareholders. As used herein, "Business
Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.


 






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(f)Listing.
The Company shall commence trading of its Common Stock on either The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ
Capital Market, The NASDAQ Global Select Market or The Nasdaq Global Market (collectively,
the "Qualified Eligible Markets") no later than six (6) months following the Closing Date (the "Listing
Deadline"). The Company shall promptly secure the listing of all of the Conversion Shares and the Warrant Shares upon
each national securities exchange and automated quotation system, if any, upon which the Common Stock then listed (subject to
official notice of issuance) and shall maintain such listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Transaction Documents. The Company shall maintain the authorization for quotation of the Common Stock on
the Principal Market or any other Eligible Market (as defined in the Warrants). From and after the Listing Deadline, the Company
shall maintain the authorization for quotation of the Common Stock on a Qualified Eligible Market and neither the Company nor
any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the
Common Stock on the applicable Qualified Eligible Market. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section 4(f).


 


(g)Transfer
Agent. For so long any Securities are outstanding, the Company shall cause its transfer agent to participate in the Depository
Trust Company Fast Automated Securities Transfer Program.


 


(h)Fees.
The Company shall reimburse Empery (a Buyer) or its designee(s) (in addition to any other expense amounts paid to any Buyer or
its counsel prior to the date of this Agreement) for all costs and expenses incurred in connection with the transactions contemplated
by the Transaction Documents (including all legal fees and disbursements in connection therewith, documentation and implementation
of the transactions contemplated by the Transaction Documents and due diligence in connection therewith)(hereinafter, collectively,
the “Empery Expenses”), which amount may be withheld by such Buyer from its purchase price for any Notes purchased
at the Closing to the extent not previously reimbursed by the Company. Notwithstanding the foregoing, in no event will the Empery
Expenses reimbursed by the Company pursuant to this Section 4(h) exceed $50,000 without the prior approval from the Company. The
Company shall be responsible for the payment of any placement agent's fees, financial advisory fees, or broker's commissions (other
than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby, including, without
limitation, any fees or commissions payable to the Placement Agent. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable attorney's fees and out-of-pocket expenses) arising
in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party
to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.


 






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(i)Pledge
of Securities. The Company acknowledges and agrees that the Securities may be pledged by a Buyer in connection with a bona
fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without limitation, Section 2(f) hereof; provided that a Buyer
and its pledgee shall be required to comply with the provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of
the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a Buyer.


 


(j)Disclosure
of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on April 23, 2015, (i) the Company
shall issue a press release reasonably acceptable to the Buyers and (ii) file a Current Report on Form 8-K describing the terms
of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all schedules and exhibits to this Agreement), the form
of the Warrants, the form of Lock-Up Agreement, the form of Notes and the Security Documents as exhibits to such filing (including
all attachments), the "8-K Filing"). From and after the filing of the 8-K Filing with the SEC, no Buyer shall
be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates, employees or agents, that is not disclosed in the 8-K Filing. In addition, effective upon the
filing of the 8-K Filing, 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,
affiliates, employees or agents, on the one hand, and any of the Buyers or any of their affiliates, on the other hand, shall terminate.
The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, affiliates,
employees and agents, not to, provide any Buyer with any material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the date hereof without the express prior written consent of such Buyer. If a Buyer has, or believes it has, received
any such material, nonpublic information regarding the Company or any of its Subsidiaries from the Company, any of its Subsidiaries
or any of their respective officers, directors, affiliates, employees or agents, it may provide the Company with written notice
thereof. The Company shall, within two (2) Trading Days of receipt of such notice, make public disclosure of such material, nonpublic
information. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, affiliates, employees and agents, in addition to any other remedy provided herein or in the Transaction
Documents, a Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective
officers, directors, affiliates, employees or agents. No Buyer shall have any liability to the Company, its Subsidiaries, or any
of its or their respective officers, directors, affiliates, employees, shareholders or agents for any such disclosure. To the
extent that the Company delivers any material, non-public information to a Buyer without such Buyer's consent, the Company hereby
covenants and agrees that such Buyer shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any
of their respective officers, directors, employees, affiliates or agents with respect to, or a duty not to trade on the basis
of, such material, non-public information or any other obligation with respect to such information. Subject to the foregoing,
neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of
any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity
with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in
the case of clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other public
disclosure prior to its release). Without the prior written consent of any applicable Buyer, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of such Buyer in any filing, announcement, release or otherwise.


 






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(k)Additional
Notes; Variable Securities. So long as any Buyer beneficially owns any Notes, the Company will not issue any Notes (other
than to the Buyers as contemplated hereby and Additional Notes (as defined below)), and the Company shall not issue any other
securities that would cause a breach or default under the Notes. Notwithstanding anything to the contrary contained in this Section
or in any of the Transaction Documents, the Company shall be permitted on or prior to the fourteenth calendar day following the
Closing Date to issue to one or more investors up to an aggregate of $1.0 million principal amount of senior secured notes with
the same percentage of warrants issuable hereunder, all on substantially the same terms as the Notes and Warrants issuable pursuant
to this Agreement (the "Additional Subscription"), but in any event with no terms more favorable to the investors
in the Additional Subscription than those of the Buyers hereunder. Any notes issued pursuant to the Additional Subscription (the
"Additional Notes"), for purposes of any amendment provisions, for purposes of calculating whether the approval
of the Required Holders shall have occurred and for purposes of the Security Documents, shall be deemed to have been issued pursuant
to this Agreement on the Closing Date. Any warrants issued pursuant to the Additional Subscription (the "Additional Warrants"),
for purposes of determining whether the approval of the Required Holders shall have occurred, shall be deemed to have been issued
pursuant to this Agreement as of the Closing Date. For so long as any Notes remain outstanding, the Company shall not, in any
manner, issue or sell any rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible
into or exchangeable or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock,
including by way of one or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such security
cannot be less than the then applicable Conversion Price (as defined in the Notes) with respect to the Common Stock into which
any Note is convertible or the then applicable Exercise Price (as defined in the Warrants) with respect to the Common Stock into
which any Warrant is exercisable.


 






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(l)Corporate
Existence. So long as any Buyer beneficially owns any Securities, the Company shall (i) maintain its corporate existence and
(ii) not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the Warrants.


 


(m)Reservation
of Shares. So long as any Buyer owns any Securities, the Company shall take all action necessary to at all times have authorized,
and reserved for the purpose of issuance, no less than the Required Reserve Amount. If at any time the number of shares of Common
Stock authorized and reserved for issuance is not sufficient to meet the Required Reserved Amount, the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling
a special meeting of shareholders to authorize additional shares to meet the Company's obligations under Section 3(c), in the
case of an insufficient number of authorized shares, obtain shareholder approval of an increase in such authorized number of shares,
and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure that
the number of authorized shares is sufficient to meet the Required Reserved Amount.


 


(n)Conduct
of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect.


 


(o)Public
Information. At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities, if a registration statement is not available for the resale of all of the Securities, may
be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1),
if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the
failure to satisfy the current public information requirement under Rule 144(c) or (ii) if the Company has ever been an issuer
described in Rule 144(i)(1)(i) or becomes such 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, as partial relief for the damages to any holder
of Securities by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to each such holder an amount in cash equal to two
percent (2.0%) of the aggregate Purchase Price of such holder's Securities on the day of a Public Information Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such Public
Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144. The payments
to which a holder shall be entitled pursuant to this Section 4(o) 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 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.


 






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(p)Lock-Up.
The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements except to extend the term
of the lock-up period and shall enforce the provisions of each Lock-Up Agreement in accordance with its terms. If any Person that
is a party to a Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company shall promptly use its best efforts
to seek specific performance of the terms of such Lock-Up Agreement.


 


(q)Notice
of Disqualification Events. The Company will notify the Buyers 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.


 


(r)Collateral
Agent.


 


(i)Each
Buyer hereby (a) appoints Empery Tax Efficient, LP as the collateral agent hereunder and under the Security Documents (in such
capacity, the "Collateral Agent"), and (b) authorizes the Collateral Agent (and its officers, directors, employees
and agents) to take such action on such Buyer's behalf in accordance with the terms hereof and thereof. The Collateral Agent shall
not have, by reason hereof or pursuant to any Security Documents, a fiduciary relationship in respect of any Buyer. Neither the
Collateral Agent nor any of its officers, directors, employees and agents shall have any liability to any Buyer for any action
taken or omitted to be taken in connection hereof or the Security Documents except to the extent caused by its own gross negligence
or willful misconduct, and each Buyer agrees to defend, protect, indemnify and hold harmless the Collateral Agent and all of its
officers, directors, employees and agents (collectively, the "Collateral Agent Indemnitees") from and
against any losses, damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses (including,
without limitation, reasonable attorneys' fees, costs and expenses) incurred by such Collateral Agent Indemnitee, whether direct,
indirect or consequential, arising from or in connection with the performance by such Collateral Agent Indemnitee of the duties
and obligations of Collateral Agent pursuant hereto or any of the Security Documents.


 


(ii)The
Collateral Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person,
and with respect to all matters pertaining to this Agreement or any of the other Transaction Documents and its duties hereunder
or thereunder, upon advice of counsel selected by it.


 






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(iii)The
Collateral Agent may resign from the performance of all its functions and duties hereunder and under the Notes and the Security
Documents at any time by giving at least ten (10) Business Days prior written notice to the Company and each holder of the Notes.
Such resignation shall take effect upon the acceptance by a successor Collateral Agent of appointment as provided below. Upon
any such notice of resignation, the holders of a majority of the outstanding principal amount of Notes shall appoint a successor
Collateral Agent. Upon the acceptance of the appointment as Collateral Agent, such successor Collateral Agent shall succeed to
and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral
Agent shall be discharged from its duties and obligations under this Agreement, the Notes and the Security Agreement. After any
Collateral Agent's resignation hereunder, the provisions of this Section 4(r) shall inure to its benefit. If a successor Collateral
Agent shall not have been so appointed within said ten (10) Business Day period, the retiring Collateral Agent shall then appoint
a successor Collateral Agent who shall serve until such time, if any, as the holders of a majority of the outstanding principal
amount of Notes appoints a successor Collateral Agent as provided above.


 


(iv)The
Company hereby covenants and agrees to take all actions as promptly as practicable reasonably requested by either the holders
of a majority of the outstanding principal amount of Notes or the Collateral Agent (or its successor), from time to time pursuant
to the terms of this Section 4(r), to secure a successor Collateral Agent satisfactory to such requesting part(y)(ies), in their
sole discretion, including, without limitation, by paying all fees of such successor Collateral Agent, by having the Company agree
to indemnify any successor Collateral Agent and by each of the Company executing a collateral agency agreement or similar agreement
and/or any amendment to the Security Documents reasonably requested or required by the successor Collateral Agent.


 


(v)The
Company agrees to pay the Collateral Agent, by wire transfer of immediately available funds in accordance with the Collateral
Agent’s written wire instructions, a quarterly agency fee of $3,000 within three (3) Business Days following the end of
each calendar quarter that the Collateral Agent acted as collateral agent in accordance with this Section 3(r) and the Security
Documents during such calendar quarter.


 


(s)Reverse
Stock Split. The Company shall, no later than the date that is ninety (90) days following the Closing Date, effect a reverse
stock split of the Common Stock that initially yields a post-split stock price of at least $4.00 per share of Common Stock.


 


(t)Public
Offering. The Company shall, no later than the date that is six (6) months following the Closing Date, complete a Qualified
Public Offering (as defined in the Notes).


 


(u)Closing
Documents. On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be
delivered, to each Buyer and Schulte Roth & Zabel LLP a complete closing set of the executed Transaction Documents, Securities
and any other documents required to be delivered to any party pursuant to Section 7 hereof or otherwise.


 


(v)
Pledges of Intellectual Property Rights. The Company hereby agrees that it shall not pledge, mortgage, encumber or
otherwise permit the Intellectual Property Rights to be subject to any lien, security interest, encumbrances, or charge (such
actions hereinafter referred to collectively as “Pledge”) any of its Intellectual Property Rights except for
Pledges related to current commercial development agreements as listed on Schedule 4(v) or for future commercial development agreements
entered into in the ordinary course of business. The Company hereby further agrees: (a) to promptly notify the Collateral Agent
of any such future commercial development agreements (but only if the Collateral Agent executes a confidentiality agreement with
respect to any material, non-public information regarding or related to such commercial development agreements prior to its receipt
of any such material, non-public information), and (b) to amend Schedule 4(v) in connection with such additional Pledges, with
the approval of the Collateral Agent, which approval shall not be unreasonably withheld.


 






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(w)Additional
Insured. Within thirty (30) days following the Closing Date (or such later date as the Collateral Agent may agree in its sole
discretion), the Company shall deliver to the Collateral Agent insurance certificates and loss payable and additional insured
endorsement in favor of the Collateral Agent, in each case, in form and substance satisfactory to the Collateral Agent, with respect
to each insurance policy of the Company and/ or each of its subsidiaries.


 


(x)Certain
Trading Activities.  Each Buyer hereby covenants and agrees not to, and shall cause its affiliates not to, engage, directly
or indirectly, in any Short Sales or hedging transactions relating to any of the Securities at any time prior to June 2, 2015. 
As used herein, “Short Sales” means all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act (but shall not be deemed to include the location and/or reservation of borrowable shares of
Common Stock).  Such Buyer is aware that Short Sales and other hedging activities may be subject to applicable federal and
state securities laws, rules and regulations and such Buyer acknowledges that the responsibility of compliance with any such federal
or state securities laws, rules and regulations is solely the responsibility of such Buyer.


 


5.REGISTER;
TRANSFER AGENT INSTRUCTIONS.


 


(a)Register.
The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate
by notice to each holder of Securities), a register for the Notes and the Warrants in which the Company shall record the name
and address of the Person in whose name the Notes and the Warrants have been issued (including the name and address of
each transferee), the principal amount of Notes held by such Person, the number of Conversion Shares issuable pursuant to the
terms of the Notes and the number of Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives.


 


(b)Transfer
Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent,
in the form of Exhibit E attached hereto (the "Irrevocable Transfer Agent Instructions") to issue certificates
or credit shares to the applicable balance accounts at DTC, registered in the name of each Buyer or its respective nominee(s),
for the Conversion Shares and the Warrant Shares issued at the Closing or pursuant to the terms of the Notes or exercise of the
Warrants in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or exercise
of the Warrants. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in
this Section 5(b), and stop transfer instructions to give effect to Section 2(f) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities
in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue
one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves
the Conversion Shares or the Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant
to Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee or transferee, as the case may be, without
any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section
5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other
security being required.


 






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6.CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.


 


The
obligation of the Company hereunder to issue and sell the Notes and the related Warrants to each Buyer at the Closing is subject
to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:


 


(i)Such
Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company.


 


(ii)Such
Buyer shall have delivered its Purchase Price to the Company (less, in the case of Empery, the amounts withheld pursuant to Section
4(h)), for the Notes and the related Warrants being purchased by such Buyer at the Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.


 


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


 


7.CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.


 


The
obligation of each Buyer hereunder to purchase the Notes and the related Warrants at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer's sole benefit
and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:


 


(i)The
Company and each of its Subsidiaries shall have duly executed and delivered to such Buyer each of the following documents to which
it is a party: (A) each of the Transaction Documents, (B) the Notes (allocated in such principal amounts as such Buyer shall request),
being purchased by such Buyer at the Closing pursuant to this Agreement and (C) the related Warrants (allocated in such amounts
as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement.


 






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(ii)Such
Buyer shall have received the opinion of LKP Global Law, LLP, the Company's outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit F attached hereto.


 


(iii)The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit E
attached hereto, which instructions shall have been delivered to and acknowledged in writing by the Company's transfer agent.


 


(iv)The
Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and each of
its Subsidiaries in such entity's jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction,
as of a date within ten (10) days of the Closing Date.


 


(v)The
Company shall have delivered to such Buyer a certificate evidencing the Company's and each of its Subsidiaries' qualification
as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which
the Company and its Subsidiaries conduct business, as of a date within ten (10) days of the Closing Date.


 


(vi)The
Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing
Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company's and each of its Subsidiaries' Board of
Directors in a form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation of the Company and each of its Subsidiaries
and (iii) the Bylaws of the Company and each of its Subsidiaries, each as in effect at the Closing, in the form attached hereto
as Exhibit G.


 


(vii)The
representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak as of a specific date which shall be true and correct
as of such specified date) and the Company shall have performed, satisfied and complied in all 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 Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated
as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the
form attached hereto as Exhibit H.


 






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(viii)The
Company shall have delivered to each Buyer a lock-up agreement in the form attached hereto as Exhibit I executed and delivered
by each of the Persons listed on Schedule 7(viii) (collectively, the "Lock Up Agreements").


 


(ix)
The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended,
as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC
or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum listing maintenance requirements of the Principal Market.


 


(x)The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.


 


(xi)Each
of the Company's Subsidiaries shall have executed and delivered to such Buyer the Guarantee Agreement.


 


(xii)The
Collateral Agent shall have received certified copies of request for copies of information on Form UCC-11, listing all effective
financing statements which name as debtor the Company or any of its Subsidiaries and which are filed in such office or offices
as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests purported to be created
by the Security Agreement, together with copies of such financing statements, none of which, except as otherwise agreed in writing
by the Collateral Agent, shall cover any of the Collateral, and the results of searches for any tax lien and judgment lien filed
against such person or its property, which results, except as otherwise agreed to in writing by the Collateral Agent, shall not
show any such liens.


 


(xiii)The
Collateral Agent shall have received the Security Agreement, duly executed by the Company and each of its Subsidiaries, together
with the original stock certificates representing all of the equity interests and all promissory notes required to be pledged
thereunder, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer..


 


(xiv)The
Company shall have delivered to such Buyer such other documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.


 


8.TERMINATION.
In the event that the Closing shall not have occurred with respect to a Buyer on or before five (5) Business Days from the date
hereof due to the Company's or such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement
with respect to such breaching party at the close of business on such date by delivering a written notice to that effect to each
other party to this Agreement and without liability of any party to any other party; provided, however, that if
this Agreement is terminated pursuant to this Section 8, the Company shall remain obligated to reimburse Empery or its designee(s),
as applicable, for the expenses described in Section 4(h) above.


 






    	- 29 -



    	 



    

 


9.MISCELLANEOUS.


 


(a)Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The 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, 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
WITH 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” electronic format 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” electronic
format 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 is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity
or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).


 






    	- 30 -



    	 



    

 


(e)Entire
Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written agreements
between the Buyers, 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 and therein 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 any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. Provisions
of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the aggregate
number of the Conversion Shares and the Warrant Shares issued or issuable under the Notes (calculated using the Assumed Conversion
Price) and Warrants (without regard to any limitation on conversion or exercise set forth therein) and shall include Empery so
long as Empery or any of its affiliates holds any Securities (the "Required Holders"); provided that any such
amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely affects the rights
and obligations of any Buyer relative to the comparable rights and obligations of the other Buyers shall require the prior written
consent of such adversely affected Buyer; provided, further, that the provisions of Section 4(r) cannot be amended
without the additional prior written approval of the Collateral Agent or its successor. Any amendment or waiver effected in accordance
with this Section 9(e) shall be binding upon each Buyer and holder of Securities and the Company. No such amendment shall be effective
to the extent that it applies to less than all of the Buyers or holders of Securities. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the
same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to the Transaction Documents,
holders of Notes or holders of the Warrants, as the case may be. The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement,
no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise.


 


(f)Notices.
Any notices, consents, waivers 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); (iii) upon receipt, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise)
by the sending party and the sending party does not immediately receive an automatically generated message from the recipient’s
e-mail server that such e-mail could not be delivered to such recipient) or (iv) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail
addresses for such communications shall be:


 


If to the
Company:


 


Ener-Core,
Inc.


9400
Toledo Way

Irvine, California 92618


	 	Telephone:	(949) 616-3333




	 	Facsimile:

Attention:	(949) 616-3399

Mr. Domonic J. Carney, CFO




	 	Email:	DJ.Carney@ener-core.com




 






    	- 31 -



    	 



    

 


With a copy
(for informational purposes only) to:


 


LKP
Global Law, LLP 


1901
Avenue of the Stars, Suite 480 


Los
Angeles, California 90067 


	 	Telephone:	(424) 239-1890




	 	Facsimile:	(424) 239-1882 




	 	Attention:	Kevin K. Leung, Esq. 




	 	E-mail:	kleung@lkpgl.com




 


If to the
Transfer Agent:


 


VStock
Transfer, LLC. 


18
Lafayette Place 


Woodmere,
New York 11598


	 	Telephone:	(212) 828-8436 




	 	Facsimile:	(646) 536-3179 




	 	Attention:	Yoel Goldfeder 




	 	E-mail:	yoel@vstocktransfer.com




 


If
to a Buyer, to its address, facsimile number and e-mail address set forth on the Schedule of Buyers, with copies to such Buyer's
representatives as set forth on the Schedule of Buyers,


 


with a copy
(for informational purposes only) to:


 


Schulte
Roth & Zabel LLP

919 Third Avenue

New York, New York 10022





	 	Telephone:	(212) 756-2000




	 	Facsimile:	(212)
593-5955




	 	Attention:	Eleazer N. Klein, Esq.




	 	E-mail:	eleazer.klein@srz.com




 


or
to such other address, facsimile number and/or e-mail address and/or to the attention of such other Person as the recipient party
has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine or e-mail containing the time, date, recipient facsimile number and an image of the
first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iv) above, respectively.
A copy of the e-mail transmission containing the time, date and recipient e-mail address shall be rebuttable evidence of receipt
by e-mail in accordance with clause (iii) above.


 






    	- 32 -



    	 



    

 





(g)Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Notes or the Warrants. The Company shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the Required Holders, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes
and the Warrants). A Buyer may assign some or all of its rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.


 


(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, except that
each Indemnitee shall have the right to enforce the obligations of the Company with respect to Section 9(k).


 


(i)Survival.
Unless this Agreement is terminated under Section 8, the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, and the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each Buyer shall
be responsible only for its own representations, warranties, agreements and covenants hereunder.


 


(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 any 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, including without limitation taking such reasonable action as is necessary or desirable to perfect a security interest
in the Company's or one or more of its Subsidiaries' Intellectual Property. Also, without limiting the generality of the requirements
of the Company set forth in the Transaction Documents, the Company hereby covenants and agrees to provide prompt notice to the
Collateral Agent upon the issuance of any patents in the name of the Company or any of their Subsidiaries anywhere in the world.


 






    	- 33 -



    	 



    

 


(k)Indemnification.
(i)In consideration of each Buyer's execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their shareholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the foregoing Persons' 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 by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement
of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii)
any disclosure made by such Buyer pursuant to Section 4(j), or (iv) the status of such Buyer or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the Transaction Documents. 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 that is permissible under applicable law.


 


(ii)Promptly
after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim for indemnification in
respect thereof is to be made against any indemnifying party under this Section 9(k), deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnitee; provided, however, that an Indemnitee
shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnitee to
be paid by the indemnifying party, if, in the reasonable opinion of the Indemnitee, the representation by such counsel of the
Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnitee
and any other party represented by such counsel in such proceeding. Legal counsel referred to in the immediately preceding sentence
shall be selected by the Buyer holding at least a majority of the aggregate principal amount of the Notes. The Indemnitee shall
cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Indemnified Liabilities
by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnitee that
relates to such action or Indemnified Liabilities. The indemnifying party shall keep the Indemnitee fully apprised at all times
as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior written consent, provided, however,
that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld conditioned or delayed, consent
to entry of any judgment or enter into any settlement or other compromise which (i) does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified
Liabilities or litigation, (ii) requires any admission of wrongdoing by such Indemnitee, or (iii) obligates or requires an Indemnitee
to take, or refrain from taking, any action. Following indemnification as provided for hereunder, the indemnifying party shall
be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnitee under this
Section 9(k), except to the extent that the indemnifying party is prejudiced in its ability to defend such action.


 






    	- 34 -



    	 



    

 


(iii)The
indemnification required by this Section 9(k) 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 Indemnified Liabilities are incurred.


 


(iv)The
indemnity agreements contained herein shall be in addition to (x) any cause of action or similar right of the Indemnitee against
the indemnifying party or others, and (y) any liabilities the indemnifying party may be subject to pursuant to the law.


 


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


 


(m)Remedies.
Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law
may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or
other security.


 


(n)Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever any Buyer 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 Buyer 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.


 






    	- 35 -



    	 



    

 


(o)Payment
Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder or 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, foreign, 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.


 


(p)Independent
Nature of Buyers' Obligations and Rights. The obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations
of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action
taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that
the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Buyers are in any way acting in concert or as a group, and the Company shall not assert any such claim with respect to
such obligations or the transactions contemplated by the Transaction Documents and the Company acknowledges that the Buyers are
not acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.
The Company acknowledges and each Buyer confirms that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose.


 


[Signature
Page Follows]


 






    	- 36 -



    	 



    

 





IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the date first written above.


 





	 	 	 	COMPANY:
	 	 	 	 
	 	 	 	ENER - CORE, INC.
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	Name: Alain J. Castro
	 	 	 	 	Title: Chief Executive Officer  




  





[Signature Page to Securities Purchase Agreement]





 






    	 



    	 



    

 


IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the date first written above.


 





	 	 	 	BUYERS:
	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	Name:
	 	 	 	 	Title:


 






    	 



    	 



    

 


SCHEDULE
OF BUYERS


 


	(1)	(2)	(3)	(4)	(5)	(6)
	 	 	 	 	 	 
	Buyer	Address and

Facsimile Number	Aggregate Principal Amount of Notes	Number of

Warrant Shares	Purchase Price	Legal

Representative's

Address

and

Facsimile

Number
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 




 









    	 



    	 



    

 


EXHIBITS


 





	Exhibit A	Form of Notes
	Exhibit B	Form of Warrants
	Exhibit C	Form of Guarantee Agreement
	Exhibit D	Form of Security Agreement
	Exhibit E	Form of Irrevocable Transfer Agent Instructions
	Exhibit F	Form of Opinion of Company Counsel
	Exhibit G	Form of Secretary's Certificate
	Exhibit H	Form of Officer's Certificate
	Exhibit I	Form of Lock-Up Agreement




 


SCHEDULES


 





	Schedule 3(a)	Subsidiaries
	Schedule 3(j)	SEC Documents
	Schedule 3(k)	Absence of Certain Changes
	Schedule 3(m)	Regulatory Permits
	Schedule 3(p)	Transactions with Affiliates
	Schedule 3(q)	Equity Capitalization
	Schedule 3(r)	Indebtedness and Other Contracts
	Schedule 3(s)	Absence of Litigation
	Schedule 3(w)	Intellectual Property Rights
	Schedule 3(bb)	Internal Accounting and Disclosure Controls
	Schedule 3(dd)	Ranking of Notes
	Schedule 4(d)	Use of Proceeds
	Schedule 7(viii)	Lock-Up Parties










 






    	 



    	 



    

 


DISCLOSURE
SCHEDULES TO SECURITIES PURCHASE AGREEMENT


  


(Note:
Capitalized terms used herein and not otherwise defined shall have the definitions


ascribed to such terms in the Securities Purchase
Agreement.)


 


Schedule
3(a)


(Subsidiaries)


 


Ener-Core
Power, Inc., a Delaware corporation


 


Schedule
3(j)


(SEC
Documents)


 


On August
14, 2013, the Company failed to file its Form 10-Q filing for the quarter ended June 30, 2013 on time and failed to file an extension
for its Form 10-Q filing on August 15, 2013. The Company resolved the filing delinquency by filing a Form 12b-25 on August 16,
2013 and completed its Form 10-Q filing on August 19, 2013.


 


Schedule
3(k)


(Material
Adverse Change/Development since December 31, 2014)


 


None, except
as noted below:


 


On
March 24, 2015 the Company reduced the exercise price of warrants (the “April 2014 Warrants”) for the purchase
of up to 4,097,015 issued in April 2014 from $0.50 per share to $0.11 per share. On April 2, 2015, the Company entered in an Exchange
Agreement (the “Exchange Agreement”) with each holder of the April 2014 Warrants (the “April 2014
Investors”) whereby the Company agreed to issue an aggregate 3,687,316 shares of the Company’s common stock in
exchange for the cancellation of all of the April 2014 Warrants (the “Warrant Exchange”). The completion of
the delivery of the Exchange Shares and the closing of the Warrant Exchange occurred on April 17, 2015. See also our Current Report
on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on April 7, 2015 and Exhibit 10.1 thereto
and our Current Report on Form 8-K filed with the SEC on April 17, 2015. The Exchange Shares to be issued are subject to certain
lockup provisions until the earlier of 60 days after April 17, 2015, or the date that the weighted average price of the Company’s
common stock equals or exceeds $0.30 per share for ten consecutive trading days. See also Exhibit 10.2 on Form 8-K filed April
7, 2015 with the Securities and Exchange Commission for additional details on the lock up provisions.


 


On
March 25, 2015 the Company increased the shares available for issuance under the Company’s 2013 Equity Incentive Award Plan
to 21,000,000 shares from 14,000,000 shares.


 






    	 



    	 



    

 


Schedule
3(m)


(Regulatory
Permits)


 


On August
14, 2013, the Company failed to file its Form 10-Q filing for the quarter ended June 30, 2013 and failed to file an extension
for its Form 10-Q filing on August 15, 2013. The Company resolved the filing delinquency by filing a Form 12b-25 on August 16,
2013 and completed its Form 10-Q filing on August 19, 2013. The Company did not receive a notice relating to its trading eligibility
for the one day of delinquency.


 


Schedule
3(p)


(Related
Party Transactions)


 


None


 


Schedule
3(q)


(Equity
Capitalization)


 


		(i)	Capital
                                         stock subject to preemptive or similar rights, liens or encumbrances



  


None.


  


		(ii)	Outstanding
                                         options, warrants, scrip, rights to subscribe to, calls or commitments of any character
                                         whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
                                         for, 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, or exercisable or exchangeable for, any shares of capital stock of the Company
                                         or any of its Subsidiaries



  


On
April 2, 2015 the Company and the holders of the April 2014 Warrants (the “April 2014 Investors”) entered in
Exchange Agreements pursuant to which the Company agreed to issue an aggregate 3,687,316 shares of the Company’s Common
Stock to the April 2014 Investors in exchange for the cancellation of all of the April 2014 Warrants. The exchange was completed
on April 17, 2015. The figures below are shown after the completion of the exchange on April 17, 2015.


  


The
Company has 117,793,755 shares of Common Stock outstanding.


 


The
Company has 13,973,051 options granted to purchase a like number of common shares with exercise prices ranging between $0.15 and
$0.48 per share out of a total 2013 Equity Incentive Award Plan pool of 21,000,000. 


 






    	 



    	 



    

 


The Company
has 5,687,000 warrants outstanding with exercise prices ranging from $0.50 per share to $1.00 per share as described more fully
in the SEC Documents.


 


		(iii)	Outstanding
                                         debt securities, notes, credit agreements, credit facilities or other agreements, documents
                                         or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by
                                         which the Company or any of its Subsidiaries is or may become bound



  


The
Company leases certain assets, primarily computer equipment under agreements expiring in 2017. The total amount of the Capital
leases is approximately $55,000.


 


The
Company leases office and research locations under operating leases which expires December 31, 2016 for the office location and
January 1, 2025 for our research location. Combined monthly rent is $27,500.


 


The
Company expects to enter into a material credit facility so as to deliver a $2.1 million performance bond for the benefit of Dresser-Rand
Company (“Dresser-Rand”). 


 


The
Company expects to enter into up to $1 million of Capital Lease financing over the next 6 months to finance R&D related equipment
and prototypes


 


The
Company expects to enter into a material operating lease to rent a Dresser-Rand turbine in order to build a prototype.


 


		(iv)	Financing
                                         statements securing obligations in any material amounts, either singly or in the aggregate,
                                         filed in connection with the Company or any of its Subsidiaries



 


None


 


		(v)	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 pursuant to the Registration
                                         Rights Agreement)



  


		(1)	Registration
                                         Rights Agreement dated as of April 22, 2013, whereby the Company is obligated to register
                                         6,613,530 shares of its common stock. The registration statement for such shares has
                                         been filed and declared effective (SEC File No. 333-192612).






 


		(2)	Registration
                                         Rights Agreement dated as of August 24, 2013, whereby the Company is obligated to register
                                         413,334 shares of its common stock. The registration statement for such shares has been
                                         filed and declared effective (SEC File No. 333-192612).






 






    	 



    	 



    

 


		(3)	Letter
                                         Agreement dated as of April 27, 2013, between Flex Power Generation, Inc. (now Ener-Core
                                         Power, Inc.) and Roth, granting registration rights to shares underlying warrants issued
                                         to Roth. The registration statement for such shares has been filed and declared effective
                                         (SEC File No. 333-192612).



 





		(4)	Letter
                                         Agreement dated as of October 28, 2013, between Ener-Core Power Inc. and Colorado, granting
                                         registration rights to shares underlying warrants issued to Colorado. The registration
                                         statement for such shares has been filed and declared effective (SEC File No. 333-192612).



  


		(5)	Registration
                                         Rights Agreement dated as of November 18, 2013, whereby the Company is obligated to register
                                         1,500,000 shares of its common stock. The registration statement for such shares has
                                         been filed and declared effective (SEC File No. 333-196046)



  


		(6)	Letter
                                         Agreement dated as of October 25, 2013, between Ener-Core Power Inc. and Merriman, granting
                                         registration rights to 120,000 shares underlying warrants issued to Merriman. The registration
                                         statement for such shares has been filed and declared effective (SEC File No. 333-196046).



  


		(7)	Registration
                                         Rights Agreement dated as of April 16, 2014, whereby the company is obligated to register
                                         23,378,502 shares of its common stock. The registration statement for such shares has
                                         been filed and declared effective (SEC File No. 333-196046)



  


		(8)	Registration
                                         Rights Agreement dated as of September 22, 2014, whereby the Company is obligated to
                                         register up to 26,666,667 shares of its common stock. The registration statement for
                                         25,719,984 shares has been filed and declared effective (SEC File No. 333-199553). The
                                         remaining shares were issued to insiders who waived their registration rights.



  


		(9)	Warrants
                                         issued in December 2014 to Rufus Dufus LLC, Dylana Dreams, LLC, Island Pickle, LLC and
                                         Pilly Boy, LLC contain piggyback registration rights for an aggregate 1,923,078 shares
                                         issuable upon exercise of such warrants for registration in the Company’s next
                                         available registration statement under the Securities Act unless registration would cause
                                         the Company undue harm or is prohibited by securities laws, rules or regulations.



  


		(vi)	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



  


None


 






    	 



    	 



    

  


		(vii)	Securities
                                         or instruments containing anti-dilution or similar provisions that will be triggered
                                         by the issuance of the Securities



  


None


 


		(viii)	Stock
                                         appreciation rights or "phantom stock" plans or agreements or any similar plan
                                         or agreement



 


None





 


		(ix)	Liabilities
                                         or obligations required to be disclosed in the SEC Documents but not so disclosed in
                                         the SEC Documents, other than those incurred in the ordinary course of the Company's
                                         or any of its Subsidiary's' respective businesses and which, individually or in the aggregate,
                                         do not or would not have a Material Adverse Effect



 


None


  


Schedule
3(r) 


(Indebtedness
and Other Contracts)


 


		(i)	Outstanding
                                         indebtedness, including (A) all indebtedness for borrowed money, (B) all obligations
                                         issued, undertaken or assumed as the deferred purchase price of property or services,
                                         including, without limitation, "capital leases" in accordance with GAAP (other
                                         than trade payables entered into in the ordinary course of business consistent with past
                                         practice), (C) all reimbursement or payment obligations with respect to letters of credit,
                                         surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds,
                                         debentures or similar instruments, including obligations so evidenced incurred in connection
                                         with the acquisition of property, assets or businesses, (E) all indebtedness created
                                         or arising under any conditional sale or other title retention agreement, or incurred
                                         as financing, in either case with respect to any property or assets acquired with the
                                         proceeds of such indebtedness (even though the rights and remedies of the seller or bank
                                         under such agreement in the event of default are limited to repossession or sale of such
                                         property), (F) all monetary obligations under any leasing or similar arrangement which,
                                         in connection with GAAP, consistently applied for the periods covered thereby, is classified
                                         as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above
                                         secured by (or for which the holder of such Indebtedness has an existing right, contingent
                                         or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest
                                         or other encumbrance upon or in any property or assets (including accounts and contract
                                         rights) owned by any Person, even though the Person which owns such assets or property
                                         has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent
                                         Obligations in respect of indebtedness or obligations of others of the kinds referred
                                         to in clauses (A) through (G) above



 






    	 



    	 



    

 


Capital
Leases Payable 


 


Capital
leases payable consisted of the following as of December 31, 2014: 


 





	 	 	December 31,

2014	 	 	December 31,

2013	 
	Capital lease payable to De Lange Landon secured by forklift, 10.0% interest, due on October 1, 2018, monthly payment of $451.50.	 	$	17,000	 	 	$	20,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on November 16, 2016, monthly payment of $592.	 	 	12,000	 	 	 	17,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on December 15, 2016, monthly payment of $590.	 	 	8,000	 	 	 	-	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on January 3, 2017, monthly payment of $405.	 	 	8,000	 	 	 	-	 
	Total capital leases	 	 	49,000	 	 	 	37,000	 



 


The
Company entered into additional capital leases totaling $13,680 payable to Dell Computers in January, 2015.


 


The
Company is obligated to enter into a performance bond of $2,100,000 (the “Bond”) payable for the benefit of
Dresser-Rand in order to secure performance on delivery of two Power Oxidizer units. The Bond is required within 45 days of the
placement of an order for the Power Oxidizer units.


 


Pursuant
to the Exchange Agreement, the Company granted the April 2014 Investors a right of first refusal to participate in any future
sale of the Company’s equity or equity equivalent securities on a pro rata basis up to 50% of the securities offered in
such sale, from the closing date of the Warrant Exchange (April 17, 2015) until April 16, 2016 except for a registered underwritten
public offering. In the event that the Company engages in a registered underwritten public offering of its common stock and the
offering price per share in such registered offering is more than 85% of the closing sale price of the registrant’s common
stock on the date of pricing of such offering, then the participation right shall be 20% of the securities offered in such registered
offering. Such participation rights are also more fully described in our Current Report on Form 8-K filed with the SEC April 7,
2015 and in Section 4(b)(xvii) of the form of Exchange Agreement attached as Exhibit 10.1 to such Current Report.


 


The
Company expects to enter into up to $1 million of additional secured financings within the next 12 months consisting of approximately
$500,000 of capital lease financing for the Company’s multi-fuel test facility under construction and approximately $500,000
of secured financing for the 1.75MW power station prototype under development with Dresser-Rand.


 


		(ii)	Violation
                                         of any contract, agreement or instrument, the violation of which, or default under which,
                                         by the other party(ies) to such contract, agreement or instrument could reasonably be
                                         expected to result in a Material Adverse Effect



 


None


 






    	 



    	 



    

 


		(iii)	Violation
                                         of any term of or in default under any contract, agreement or instrument relating to
                                         any Indebtedness, except where such violations and defaults would not result, individually
                                         or in the aggregate, in a Material Adverse Effect



  


None


 


		(iv)	Any
                                         contract, agreement or instrument relating to any Indebtedness, the performance of which,
                                         in the judgment of the Company's officers, has or is expected to have a Material Adverse
                                         Effect



 


None





 


Schedule
3(s)


(Litigation)


 


None


 


Schedule
3(w)


(Intellectual
Property Rights)


 


		(i)	All
                                         patents owned by the Company and its Subsidiaries



  


	Country
    Name	Application
    Number	Application
    Title	File
    Date	Issue
    Date	Patent
    Number
	USA	12/050,734	Oxidizing
    Fuel	3/18/2008	3/18/2014	8,671,658
	USA	12/288,238	Managing
    Leaks in a Gas Turbine System	10/17/2008	3/12/2013	8,393,160
	USA	12/330,151	Oxidizing
    Fuel in Multiple Operating Modes	12/8/2008	4/22/2014	8,701,413
	USA	12/772,622	Distributing
    Fuel Flow in a Reaction Chamber	5/3/2010	 	 
	USA	09/713,574	Method
    for Collection and Use of Low-Level Methane Emissions	11/14/2000	5/28/2002	6,393,821
	USA	12/870,021	Heating
    a Reaction Chamber	8/27/2010	1/7/2014	8,621,869
	PCT	PCT/US12/46112	Speed
    Controls for Turbine	7/10/2012	 	 
	USA	13/289,989	Controls
    for Multi-Combustor Turbine with Gradual Oxidizer	11/4/2011	 	 



 






    	 



    	 



    




 


	Country
    Name	Application
    Number	Application
    Title	File
    Date	Issue
    Date	Patent
    Number
	USA	13/289,996	Multi-Combustor
    Turbine with Gradual Oxidizer	11/4/2011	 	 
	USA	13/115,910	Integrated
    Gasifier Power Plant	5/25/2011	 	 
	USA	13/048,796	Processing
    Fuel and Water	3/15/2011	11/25/2014	8,893,468
	PCT	PCT/US11/28547	Processing
    Fuel and Water	3/15/2011	 	 
	USA	13/115,902	Gasifier
    Power Plant with Management of Wastes	5/25/2011	 	 
	PCT	PCT/US2011/037,974	Gasifier
    Power Plant with Management of Wastes	5/25/2011	 	 
	China	200980155514.1	Method
    of Operating a Fuel Oxidizer in Multiple Operating Modes and Fuel Oxidizer System	7/27/2011	 	 
	EPO	09764677.2	Method
    of Operating a Fuel Oxidizer in Multiple Operating Modes and Fuel Oxidizer System	6/27/2011	8/20/2014	2,370,681
	India	09764677.2	Method
    of Operating a Fuel Oxidizer in Multiple Operating Modes and Fuel Oxidizer System	6/7/2011	 	 
	Japan	2011-540778	Oxidizing
    Fuel in Multiple Operating Modes	12/1/2009	13-Dec-13	5,428,102
	South
    Korea	2011-7015389	Method
    of Operating a Fuel Oxidizer in Multiple Operating Modes and Fuel Oxidizer System	7/4/2011	8/23/2013	10-1301454
	Russia	2011126266.0	Method
    of Operating a Fuel Oxidizer in Multiple Operating Modes and Fuel Oxidizer System	12/1/2009	3/20/2014	2,509,904
	USA	13/417,129	Gradual
    Oxidation with Heat Transfer	3/9/2012	 	 
	USA	13/417,140	Gradual
    Oxidation with Heat Transfer	3/9/2012	 	 
	USA	13/417,142	Gradual
    Oxidation with Heat Transfer	3/9/2012	 	 
	USA	13/417,149	Gradual
    Oxidation with Heat Control	3/9/2012	 	 
	USA	13/417,027	Gradual
    Oxidation with Heat Control	3/9/2012	 	 



 






    	 



    	 



    

 


	Country
    Name	Application
    Number	Application
    Title	File
    Date	Issue
    Date	Patent
    Number
	USA	13/417,050	Gradual
    Oxidation with Heat Control	3/9/2012	 	 
	USA	13/417,095	Gradual
    Oxidation with Heat Control	3/9/2012	 	 
	USA	13/417,105	Gradual
    Oxidation with Heat Control	3/9/2012	 	 
	USA	13/417,134	Gradual
    Oxidation with Heat Control	3/9/2012	 	 
	USA	13/417,060	Gradual
    Oxidation with Heat Exchange Media	3/9/2012	 	 
	USA	13/417,074	Gradual
    Oxidation with Reciprocating Engine	3/9/2012	9/30/2014	               8,844,473
    
	USA	13/417,083	Gradual
    Oxidation with Reciprocating Engine	3/9/2012	3/18/2014	8,671,917
	USA	13/417,090	Gradual
    Oxidation with Flue Gas	3/9/2012	 	 
	USA	13/417,162	Staged
    Gradual Oxidation	3/9/2012	8/19/2014	8,807,989
	USA	13/417,164	Staged
    Gradual Oxidation	3/9/2012	 	 
	USA	13/417,165	Hyrbid
    Gradual Oxidation	3/9/2012	 	 
	USA	13/417,167	Gradual
    Oxidation Below Flameout Temperature	3/9/2012	 	 
	USA	13/417,094	Gradual
    Oxidation with Adiabatic Temperature Above Flameout Temperature	3/9/2012	 	 
	USA	13/417,100	Gradual
    Oxidation Below Flameout Temperature	3/9/2012	3/17/2015	8,980,192
	USA	13/417,110	Gradual
    Oxidation with Adiabatic Temperature Above Flameout Temperature	3/9/2012	1/6/2015	8,926,917
	USA	13/417,048	Gradual
    Oxidation with Gradual Oxidizer Warmer	3/9/2012	 	 
	USA	13/417,122	Gradual
    Oxidation and Autoignition Temperature Controls	3/9/2012	 	 
	USA	13/417,125	Gradual
    Oxidation and Autoignition Temperature Controls	3/9/2012	 	 
	USA	13/417,132	Gradual
    Oxidation and Multiple Flow Paths	3/9/2012	 	 



  






    	 



    	 



    

 


	Country
    Name	Application
    Number	Application
    Title	File
    Date	Issue
    Date	Patent
    Number
	USA	13/417,130	Gradual
    Oxidation and Multiple Flow Paths	3/9/2012	3/17/2015	8,980,193
	PCT	PCT/US12/46115	Multi-Combustor
    Turbine	7/10/2012	 	 
	EPO	PCT/US2011/028547
    / 11756873.3	Processing
    Fuel and Water	9/14/2012	 	 
	PCT	PCT/US13/30024	Gradual
    Oxidation with Heat Transfer	3/8/2013	 	 
	EPO	PCT/US2011/037974
    / 11866252.7	Gasifier
    Power Plant and Management of Wastes	12/16/2013	 	 
	Japan	PCT/US2011/037974
    / 2014-512805	Gasifier
    Power Plant and Management of Wastes	3/20/2014	 	 
	China	 No.
    201180070736.0 	Gasifier
    Power Plant and Management of Wastes	11/8/2013	 	 
	Russia	2013157525	Gasifier
    Power Plant and Management of Wastes	12/24/2013	 	 
	USA	14/217,106	Oxidizing
    Fuel	3/17/2014	 	 
	USA	14/221,216	Oxidizing
    Fuel in Multiple Operating Modes	3/20/2014	 	 
	EPO	PCT/US2012/046112
    / 12845461.8	Controls
    for Multi-Combustor Turbine	5/23/2014	 	 
	Russia	2014120545	Controls
    for Multi-Combustor Turbine	5/21/2014	 	 
	EPO	12846778.4	Multi-Combustor
    Turbine	5/28/2014	 	 
	Australia	2013229851	Gradual
    Oxidation with Heat Transfer	9/27/2014	 	 
	Brazil	BR1120140222525	Gradual
    Oxidation with Heat Transfer	9/9/2014	 	 
	Canada	2866824	Gradual
    Oxidation with Heat Transfer	9/5/2014	 	 
	China	2.01378E+13	Gradual
    Oxidation with Heat Transfer	11/6/2014	 	 
	EPO	12757916.5	Gradual
    Oxidation with Heat Transfer	10/2/2014	 	 
	India	7127/CHENP/2014	Gradual
    Oxidation with Heat Transfer	9/25/2014	 	 
	Japan	2014-561169	Gradual
    Oxidation with Heat Transfer	9/5/2014	 	 
	South
    Korea	2014-7028417	Gradual
    Oxidation with Heat Transfer	10/8/2014	 	 
	Russia	2014140734	Gradual
    Oxidation with Heat Transfer	10/8/2014	 	 


 






    	 



    	 



    




 


		(i)	Terminated/expired
                                         Intellectual Property Rights



   


None


  


Schedule
3(bb)


(Internal
Accounting and Disclosure Controls)


 


As
of December 31, 2014, the Company’s management, under the supervision and with the participation of its Chief Executive
Officer and Chief Financial Officer, performed an evaluation of the effectiveness of its disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).


 


Based
on such evaluation, the disclosure controls and procedures of the Company and the Subsidiary as of December 31, 2014 were ineffective
at the reasonable assurance level due to the following material weaknesses in internal control over financial reporting:


 


		1.	We
                                         do not have written documentation of our internal control policies and procedures.  Management
                                         evaluated the impact of our failure to have written documentation of our internal controls
                                         and procedures on our assessment of our disclosure controls and procedures and has concluded
                                         that the control deficiency that resulted, represented a material weakness.



  


		2.	We
                                         do not have sufficient segregation of duties within accounting functions, which is a
                                         basic internal control.  Due to our size and nature, segregation of all conflicting
                                         duties may not always be possible and may not be economically feasible. However, to the
                                         extent possible, the initiation of transactions, the custody of assets and the recording
                                         of transactions should be performed by separate individuals.  Management evaluated
                                         the impact of our failure to have segregation of duties on our assessment of our disclosure
                                         controls and procedures and has concluded that the control deficiency that resulted,
                                         represented a material weakness.



 


		3.	For
                                         the year ending December 31, 2014 we did not have accounting and finance staff with sufficient
                                         technical accounting training and experience capable to manage and process the Company’s
                                         derivative equity accounting including stock options and warrants.  In addition,
                                         the Company had 100% turnover during the year of accounting and finance management and
                                         staff.  This turnover resulted in periods of time where there was insufficient
                                         review of internal and external reports and proof of key internal controls. Management
                                         evaluated the impact of our failure to have inadequate technical accounting experience,
                                         coupled with the turnover, on our assessment of our disclosure controls and procedures
                                         and has concluded that the control deficiency that resulted, represented a material weakness.



 


		4.	For
                                         the year ending December 31, 2014 we did not have a majority of our Directors considered
                                         to be independent Directors.  Until December 1, 2014, we had a majority of
                                         our Board of Directors considered to the not independent.  Between December
                                         1, 2014 and December 31, 2014 our Board was split evenly between independent Directors
                                         and non-independent Directors.  Management evaluated the impact of our failure
                                         to have a fully independent Board of Directors, on our assessment of our disclosure controls
                                         and procedures and has concluded that the control deficiency that resulted, represented
                                         a material weakness.



 






    	 



    	 



    

 


		5.	For
                                         the year ending December 31, 2014, our audit committee consisted of the Chairman of the
                                         committee only.  Management evaluated the impact of our failure to have an
                                         adequate audit committee and an internal audit function on our assessment of our disclosure
                                         controls and procedures and has concluded that the control deficiency that resulted,
                                         represented a material weakness.



 


		6.	For
                                         the year ending December 31, 2014, management concluded that the Company’s management
                                         information systems and information technology internal control design was deficient
                                         because the potential for unauthorized access to certain information systems and software
                                         applications existed during 2014 in several departments, including corporate accounting.
                                         Additionally, certain key controls for maintaining the overall integrity of systems and
                                         data processing were not properly designed and operating effectively. These deficiencies
                                         increased the likelihood of potential material errors in our financial reporting






 


Schedule
3(dd)


(Ranking
of Notes)


 


Senior
secured debt - proforma (if deal is closed)


Capital
Leases Payable


 


Schedule
4(d)


(Use
of Proceeds)


 


Working
Capital


 


General
Corporate purposes


Collateral
for Dresser-Rand Bond (if required)


 


Schedule
4(v)


(Pledges
of Intellectual Property Rights)


 


List
of current commercial development agreements:


 


1.     Commercial
License Agreement, as amended, with Dresser-Rand Company, a New York general Partnership” dated November 14, 2014


 






    	 



    	 



    

 


Schedule
7(viii)


(Lock
Up Agreements)


 


Sail
Exit Partners, LLC


Sail
Venture Management, LLC


Sail
Venture Partners II, LLC