Exhibit 10.1


 


FOURTH AMENDED AND RESTATED SECURITIES
PURCHASE AGREEMENT


 


This FOURTH AMENDED
AND RESTATED SECURITIES PURCHASE AGREEMENT (the “Agreement”), is made as of March 26, 2018, by and among
Ener-Core, Inc., a Delaware corporation, with headquarters located at 8965 Research Drive, Suite 100, Irvine, California 92618
(the “Company”), and the investors listed on the Schedule of Buyers attached hereto (each individually, an “Initial
Buyer” and collectively, the “Initial Buyers”), and amends and restates that certain Securities Purchase
Agreement, dated as of September 19, 2017, by and among the Company and the Buyers (the “Original Agreement”),
as previously amended and restated on November 1, 2017 (the “November Agreement”), on December 20, 2017 (the
“December Agreement”), and on January 25, 2018 (the “Prior Agreement”).


 


WHEREAS:


 


A.  The
Company and each Initial Buyer executed and delivered the Original Agreement on September 19, 2017 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 authorized the issuance of senior secured notes of the Company, in substantially the form attached hereto as Exhibit
A (the “Notes”), which Notes are convertible into shares of the Company’s common stock, par value
$0.0001 per share (the “Common Stock”), in accordance with the terms of the Notes.


 


C.  Each
Initial Buyer purchased, and the Company sold at the Initial Closing (as defined below), upon the terms and conditions stated in
the Original Agreement, (i) that aggregate principal amount of Notes set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers attached thereto (which aggregate principal amount of Notes for all Buyers was $555,555.57) (the “Initial
Notes”) (the shares of Common Stock issuable pursuant to the terms of the Initial Notes, including, without limitation,
upon conversion or otherwise, collectively, the “Initial Conversion Shares”), and (ii) Warrants, in substantially
the form attached hereto as Exhibit B (the “Initial Warrants”), representing the right to acquire that
number of shares of Common Stock set forth opposite such Initial Buyer’s name in column (4) on the Schedule of Buyers (as
exercised, collectively, the “Initial Warrant Shares”).


 


D.  Pursuant
to Section 9(e) of the Prior Agreement, any term of the Prior Agreement may be amended only with the written consent of the Required
Holders (as defined therein) and any amendment effected in accordance with Section 9(e) of the Prior Agreement is binding upon
each Initial Buyer and the Company.


 


E.  On November
1, 2017, the Company and the Required Holders amended and restated the Original Agreement to allow for the issuance to certain
Persons (as defined below) (the “November Subsequent Buyers”) of (i) up to $444,445 aggregate principal
amount of additional Notes (the “November Subsequent Notes”) (the shares of Common Stock issuable pursuant to
the terms of the November Subsequent Notes, including, without limitation, upon conversion or otherwise, collectively, the “November
Subsequent Conversion Shares”) and (ii) additional Warrants (the “November Subsequent Warrants”),
representing the right to acquire four hundred (400) shares of Common Stock for each $1,000 of principal amount of November Subsequent
Notes purchased by such Subsequent Buyer on the Subsequent Closing Date (without regard to any limitation on conversion set forth
in the Subsequent Notes) (as exercised, collectively, the “November Subsequent Warrant Shares”), which November
Subsequent Notes ranked pari passu to all of the Company’s then outstanding senior debt.


 






    


     


    

 


F.  On
December 20, 2017, the Company and the Required Holders (as defined in the November Agreement) further amended and restated the
November Agreement to allow for the issuance to certain Persons (the “December Subsequent Buyers”) of (i) up
to $1,111,112 aggregate principal amount of additional Notes (the “December Subsequent Notes”) (the shares of
Common Stock issuable pursuant to the terms of the December Subsequent Notes, including, without limitation, upon conversion or
otherwise, collectively, the “December Subsequent Conversion Shares”) and (ii) additional Warrants (the
“December Subsequent Warrants”), representing the right to acquire four hundred (400) shares of Common Stock
for each $1,000 of principal amount of December Subsequent Notes purchased by such Subsequent Buyer on the Subsequent Closing Date
(without regard to any limitation on conversion set forth in the Subsequent Notes) (as exercised, collectively, the “December
Subsequent Warrant Shares”), which December Subsequent Notes ranked pari passu to all of the Company’s then
outstanding senior debt.


 


G.  On
December 20, 2017, the Company issued December Subsequent Notes to certain December Subsequent Buyers in an aggregate principal
amount of $555,556, along with related December Subsequent Warrants.


 


H.  On
January 25, 2018, the Company and the Required Holders (as defined in the December Agreement) further amended and restated the
December Agreement to allow for the issuance of, and the Company issued, the remaining $555,556 aggregate principal amount of December
Subsequent Notes to certain December Subsequent Buyers along with related December Subsequent Warrants.


 


I.  The
Company and the Required Holders (as defined in the Prior Agreement) wish to further amend and restate the Prior Agreement to allow,
subject to the terms and conditions set forth in this Agreement, any Person that, upon approval of the Company and the Required
Holders (as defined in the Prior Agreement), becomes a Buyer hereunder by duly executing and delivering to the Company a Joinder
Agreement (each, a “Joinder Agreement”) in the form attached hereto as Exhibit C (individually, a “March
Subsequent Buyer” and collectively, the “March Subsequent Buyers” and together with the November Subsequent
Buyers and the December Subsequent Buyers, individually, a “Subsequent Buyer” and collectively, the “Subsequent
Buyers,” and together with the Initial Buyers, individually, a “Buyer” and collectively, the “Buyers”),
at one or more Subsequent Closings (as defined below) occurring after the Third Subsequent Closing Date (as defined below) of (i)
up to an additional $1,111,112 aggregate principal amount of Notes (the “March Subsequent Notes”, and together
with the November Subsequent Notes and the December Subsequent Notes, the “Subsequent Notes”, and together with
the Initial Notes, the “Notes”) (the shares of Common Stock issuable pursuant to the terms of the March Subsequent
Notes, including, without limitation, upon conversion or otherwise, collectively, the “March Subsequent Conversion Shares”,
and together with the Initial Conversion Shares, the November Subsequent Conversion Shares and the December Subsequent Conversion
Shares, the “Conversion Shares”) and (ii) additional Warrants, in substantially the form attached hereto
as Exhibit B (the “March Subsequent Warrants”, and together with the November Subsequent Warrants and
the December Subsequent Warrants, the “Subsequent Warrants”, and together with the Initial Warrants, the “Warrants”),
representing the right to acquire four hundred (400) shares of Common Stock for each $1,000 of principal amount of March Subsequent
Notes purchased by such March Subsequent Buyer on a Subsequent Closing Date (without regard to any limitation on conversion set
forth in the March Subsequent Notes) (as exercised, collectively, the “March Subsequent Warrant Shares”, and
together with the Initial Warrant Shares, the November Subsequent Warrant Shares and the December Subsequent Warrant Shares, the
“Warrant Shares”).


 






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J.  The
Notes will rank pari passu to all of the Company’s outstanding senior debt as of the date of this Agreement, and senior
to all other 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 that certain First Amendment to Guaranty (the “Guaranty Amendment”), dated as of September 19,
2017, in the form attached as Exhibit C to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on
September 20, 2017, which amends that certain Guaranty dated November 23, 2016, (as amended or modified from time to time in accordance
with its terms, the “Guaranty 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 Third Amendment to the Pledge and Security Agreement,
dated as of September 19, 2017, in the form attached as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with
the SEC on September 20, 2017 (as amended or modified from time to time in accordance with its terms, the “Security Amendment
Agreement”), which further amends that certain Pledge and Security Agreement, dated as of April 23, 2015 by and among
the Company and the Collateral Agent attached as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the
SEC on April 23, 2015 (as amended prior to the date hereof and by the Third Amendment to the Pledge and Security Agreement dated
as of the date hereof, and as further amended or modified from time to time in accordance with its terms, the “Security
Agreement” and together with the Guaranty Agreement and any ancillary documents related thereto, collectively, the “Security
Documents”).


 


K.  The
Notes, Conversion Shares, Warrants and 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.


 


(i)  Initial
Closing. Upon the satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the Company issued
and sold to each Initial Buyer, and each Initial Buyer severally, but not jointly, agreed to purchase from the Company on the Initial
Closing Date (as defined below), (x) a principal amount of Initial Notes as is set forth opposite such Initial Buyer’s name
in column (3) on the Schedule of Buyers and (y) Initial Warrants to acquire up to that number of Initial Warrant Shares as is set
forth opposite such Initial Buyer’s name in column (4) on the Schedule of Buyers (the “Initial Closing”).


 


(ii)  First
Subsequent Closing. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b) below,
the Company shall issue and sell to each Subsequent Buyer, and each Subsequent Buyer severally, but not jointly, agrees to purchase
from the Company on the First Subsequent Closing Date (as defined below), (x) a principal amount of Subsequent Notes as set forth
on the signature page of such Subsequent Buyer attached to such Subsequent Buyer’s Joinder Agreement or in the Subsequent
Closing Notice (as defined below), as applicable and (y) Subsequent Warrants to acquire four hundred (400) shares of Common Stock
for each $1,000 of principal amount of Subsequent Notes purchased by such Subsequent Buyer on the First Subsequent Closing Date
(without regard to any limitation on conversion set forth in the Subsequent Notes) (the “First Subsequent Closing”).


 



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(iii)  Second
Subsequent Closing. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b) below,
the Company shall issue and sell to each Subsequent Buyer, and each Subsequent Buyer severally, but not jointly, agrees to purchase
from the Company on the Second Subsequent Closing Date (as defined below), (x) a principal amount of Subsequent Notes as set forth
on the signature page of such Subsequent Buyer attached to such Subsequent Buyer’s Joinder Agreement or in the Subsequent
Closing Notice (as defined below), as applicable and (y) Subsequent Warrants to acquire four hundred (400) shares of Common Stock
for each $1,000 of principal amount of Subsequent Notes purchased by such Subsequent Buyer on the Second Subsequent Closing Date
(without regard to any limitation on conversion set forth in the Subsequent Notes) (the “Second Subsequent Closing”).


 


(iv)  Third
Subsequent Closing. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b) below,
the Company shall issue and sell to each Subsequent Buyer, and each Subsequent Buyer severally, but not jointly, agrees to purchase
from the Company on the Third Subsequent Closing Date (as defined below), (x) a principal amount of Subsequent Notes as set forth
on the signature page of such Subsequent Buyer attached to such Subsequent Buyer’s Joinder Agreement or in the Subsequent
Closing Notice (as defined below), as applicable and (y) Subsequent Warrants to acquire four hundred (400) shares of Common Stock
for each $1,000 of principal amount of Subsequent Notes purchased by such Subsequent Buyer on the Third Subsequent Closing Date
(without regard to any limitation on conversion set forth in the Subsequent Notes) (the “Third Subsequent Closing”).


 


(v)  Additional
Subsequent Closings. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b) below,
the Company shall issue and sell to each Subsequent Buyer, and each Subsequent Buyer severally, but not jointly, agrees to purchase
from the Company on one or more Subsequent Closing Dates occurring after the Third Subsequent Closing Date, (x) a principal amount
of Subsequent Notes as set forth on the signature page of such Subsequent Buyer attached to such Subsequent Buyer’s Joinder
Agreement or in the Subsequent Closing Notice (as defined below), as applicable and (y) Subsequent Warrants to acquire four hundred
(400) shares of Common Stock for each $1,000 of principal amount of Subsequent Notes purchased by such Subsequent Buyer on the
applicable Subsequent Closing Date (without regard to any limitation on conversion set forth in the Subsequent Notes) (each such
Subsequent Closing hereunder, together with the First Subsequent Closing, the Second Subsequent Closing and the Third Subsequent
Closing, are each hereinafter referred to as a, “Subsequent Closing”, and together with the Initial Closing,
each a “Closing”).


 


(b)  Initial
Closing Date. The date and time of the Initial Closing (the “Initial Closing Date”) was 10:00 a.m., New
York City time, on September 19, 2017, upon notification of satisfaction (or waiver) of the conditions to the Initial Closing set
forth in Sections 6(a) and 7(a) below, at the offices of the Company.


 


(c)  Subsequent
Closing Dates.


 


(i)  The
date and time of the First Subsequent Closing (the “First Subsequent Closing Date”) shall be 10:00 a.m., New
York City time, on November 1, 2017, upon notification of satisfaction (or waiver) of the conditions to the Subsequent Closing
set forth in Sections 6(b) and 7(b) and the conditions contained in this Section 1(c), at the offices of the Company. Any Person
approved by the Company and the Required Holders may become a Subsequent Buyer and may purchase Subsequent Notes and Subsequent
Warrants by duly executing and delivering a Joinder Agreement to the Company. Any Initial Buyer may also purchase, at such Initial
Buyer’s option, Subsequent Notes and Subsequent Warrants by delivering written notice to the Company (each, a “Subsequent
Closing Notice”). Notwithstanding anything herein, in a Joinder Agreement or in a Subsequent Closing Notice to the contrary,
the number of Subsequent Notes to be purchased by the Subsequent Buyers at the First Subsequent Closing shall not exceed $444,445
aggregate principal amount of Subsequent Notes.


 






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(ii)  The
date and time of the Second Subsequent Closing (the “Second Subsequent Closing Date”) shall be 10:00 a.m., New
York City time, on December 20, 2017, subject to satisfaction (or waiver) of the conditions to the Subsequent Closing set forth
in Sections 6(b) and 7(b) and the conditions contained in this Section 1(c), at the offices of the Company. Any Person approved
by the Company and the Required Holders may become a Subsequent Buyer and may purchase Subsequent Notes and Subsequent Warrants
by duly executing and delivering a Joinder Agreement to the Company. Any Initial Buyer may also purchase, at such Initial Buyer’s
option, Subsequent Notes and Subsequent Warrants by delivering a Subsequent Closing Notice to the Company. Notwithstanding anything
herein, in a Joinder Agreement or in a Subsequent Closing Notice to the contrary, the number of Subsequent Notes to be purchased
by the Subsequent Buyers at the Second Subsequent Closing shall not exceed $555,555.56 aggregate principal amount of Subsequent
Notes.


 


(iii)  The
date and time of the Third Subsequent Closing (the “Third Subsequent Closing Date”) shall be 10:00 a.m., New
York City time, on January 25, 2018, subject to satisfaction (or waiver) of the conditions to the Subsequent Closing set forth
in Sections 6(b) and 7(b) and the conditions contained in this Section 1(c), at the offices of the Company. Any Person approved
by the Company and the Required Holders may become a Subsequent Buyer and may purchase Subsequent Notes and Subsequent Warrants
by duly executing and delivering a Joinder Agreement to the Company. Any Initial Buyer may also purchase, at such Initial Buyer’s
option, Subsequent Notes and Subsequent Warrants by delivering a Subsequent Closing Notice to the Company. Notwithstanding anything
herein, in a Joinder Agreement or in a Subsequent Closing Notice to the contrary, the number of Subsequent Notes to be purchased
by the Subsequent Buyers at the Third Subsequent Closing shall not exceed $555,555.56 aggregate principal amount of Subsequent
Notes.


 


(iv)  The
date and time of any Subsequent Closing occurring after the Third Subsequent Closing Date (each such Subsequent Closing Date hereunder,
together with the First Subsequent Closing Date, the Second Subsequent Closing Date and the Third Subsequent Closing Date, each
a “Subsequent Closing Date”, and together with Initial Closing Date, each a “Closing Date”
and collectively, the “Closing Dates”) shall be 10:00 a.m., New York City time, on the date hereof, subject
to satisfaction (or waiver) of the conditions to the Subsequent Closing set forth in Sections 6(b) and 7(b) and the conditions
contained in this Section 1(c), at the offices of the Company. Any Person approved by the Company and the Required Holders may
become a Subsequent Buyer and may purchase Subsequent Notes and Subsequent Warrants by duly executing and delivering a Joinder
Agreement to the Company. Any Initial Buyer may also purchase, at such Initial Buyer’s option, Subsequent Notes and Subsequent
Warrants by delivering a Subsequent Closing Notice to the Company. Notwithstanding anything herein, in a Joinder Agreement or in
a Subsequent Closing Notice to the contrary, the number of Subsequent Notes to be purchased by the Subsequent Buyers at any Subsequent
Closing occurring after the Third Subsequent Closing Date shall not exceed $1,111,112 aggregate principal amount of Subsequent
Notes.


 


(v)  The
Required Holders (as defined in the Original Agreement), the Required Holders (as defined in the November Agreement), the Required
Holders (as defined in the December Agreement) and the Required Holders (as defined in the Prior Agreement) hereby consent to the
transactions contemplated by this Section 1(c).


 






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(d)  Purchase
Price. The aggregate purchase price for the Initial Notes and Initial Warrants purchased by each Initial Buyer at the Initial
Closing (the “Initial Purchase Price”) was the amount set forth opposite each Initial Buyer’s name in
column (5) of the Schedule of Buyers. The aggregate purchase price for the Subsequent Notes and the Subsequent Warrants to be purchased
by each Subsequent Buyer at the applicable Subsequent Closing (the “Subsequent Purchase Price” and together
with the Initial Purchase Price, the “Purchase Price”) shall be the amount set forth on the signature page of
such Subsequent Buyer attached to such Subsequent Buyer’s Joinder Agreement or in the Subsequent Closing Notice (as defined
below), as applicable. Each Buyer shall pay $900 for each $1,000 of principal amount of Notes and related Warrants to be purchased
by such Buyer at the applicable 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 $145.91 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.


 


(e)  Form
of Payment.


 


(i)  Initial
Closing. On the Initial Closing Date, (i) each Initial Buyer paid its Initial Purchase Price to the Company for the Initial
Notes and Initial Warrants issued and sold to such Initial Buyer at the Initial Closing (less, in the case of Empery Asset Master
Ltd. (“Empery”) and affiliated funds of 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 delivered
to each Initial Buyer the Initial Notes (allocated in the principal amounts requested by such Initial Buyer) and Initial Warrants
which such Initial Buyer purchased hereunder, in each case duly executed on behalf of the Company and registered in the name of
such Initial Buyer or its designee.


 


(ii)  First
Subsequent Closing. On the First Subsequent Closing Date, (i) each Subsequent Buyer shall pay its Subsequent Purchase
Price to the Company for the Subsequent Notes and the Subsequent Warrants to be issued and sold to such Subsequent Buyer at the
First Subsequent Closing by wire transfer of immediately available funds in accordance with the Company’s written wire instructions
and (ii) the Company shall deliver to each Subsequent Buyer the Subsequent Notes (allocated in the principal amounts as such Subsequent
Buyer shall request) which such Subsequent Buyer is then purchasing hereunder along with the Subsequent Warrants (allocated in
the amounts as such Subsequent Buyer shall request) which such Subsequent Buyer is purchasing hereunder, in each case duly executed
on behalf of the Company and registered in the name of such Subsequent Buyer or its designee.


 


(iii)  Second
Subsequent Closing. On the Second Subsequent Closing Date, (i) each Subsequent Buyer shall pay its Subsequent Purchase Price
to the Company for the Subsequent Notes and the Subsequent Warrants to be issued and sold to such Subsequent Buyer at the Second
Subsequent Closing by wire transfer of immediately available funds in accordance with the Company’s written wire instructions
and (ii) the Company shall deliver to each Subsequent Buyer the Subsequent Notes (allocated in the principal amounts as such Subsequent
Buyer shall request) which such Subsequent Buyer is then purchasing hereunder along with the Subsequent Warrants (allocated in
the amounts as such Subsequent Buyer shall request) which such Subsequent Buyer is purchasing hereunder, in each case duly executed
on behalf of the Company and registered in the name of such Subsequent Buyer or its designee.


 






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(iv)  Third
Subsequent Closing. On the Third Subsequent Closing Date, (i) each Subsequent Buyer shall pay its Subsequent Purchase Price
to the Company for the Subsequent Notes and the Subsequent Warrants to be issued and sold to such Subsequent Buyer at the Third
Subsequent Closing by wire transfer of immediately available funds in accordance with the Company’s written wire instructions
and (ii) the Company shall deliver to each Subsequent Buyer the Subsequent Notes (allocated in the principal amounts as such Subsequent
Buyer shall request) which such Subsequent Buyer is then purchasing hereunder along with the Subsequent Warrants (allocated in
the amounts as such Subsequent Buyer shall request) which such Subsequent Buyer is purchasing hereunder, in each case duly executed
on behalf of the Company and registered in the name of such Subsequent Buyer or its designee.


 


(v)  Additional
Subsequent Closings. On any Subsequent Closing Date occurring after the Third Subsequent Closing Date, (i) each Subsequent
Buyer shall pay its Subsequent Purchase Price to the Company for the Subsequent Notes and the Subsequent Warrants to be issued
and sold to such Subsequent Buyer at the applicable Subsequent Closing by wire transfer of immediately available funds in accordance
with the Company’s written wire instructions and (ii) the Company shall deliver to each Subsequent Buyer the Subsequent Notes
(allocated in the principal amounts as such Subsequent Buyer shall request) which such Subsequent Buyer is then purchasing hereunder
along with the Subsequent Warrants (allocated in the amounts as such Subsequent Buyer shall request) which such Subsequent Buyer
is purchasing hereunder, in each case duly executed on behalf of the Company and registered in the name of such Subsequent Buyer
or its designee.


 


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 (i) is acquiring the Notes and Warrants, (ii) upon issuance of the Conversion Shares
pursuant to the terms of the Notes will acquire the Conversion Shares issuable pursuant to the terms of the Notes and (iii) upon
exercise of the Warrants will acquire the Warrant Shares pursuant to the terms 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.
Such Buyer has executed and delivered to the Company a questionnaire (the “Investor Questionnaire”), substantially
in the form attached hereto as Exhibit D, which such Buyer represents and warrants is true, correct and complete.


 


(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.


 






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(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 and is able to afford a complete loss of such investment.
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. Such Buyer confirms and agrees that (i) it has independently evaluated the investment
risks and the merits of its decision to purchase the Securities, (ii) it has not relied on the advice of, or any representations
by, any other Person, other than the Company and its officers and directors, in making such decision, and (iii) no Person, other
than the Company and its officers and directors, has any responsibility with respect to the completeness or accuracy of any information
or materials furnished to such Buyer in connection with the transactions contemplated hereby.


 


(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.


 


(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 form and substance reasonably acceptable to the Company,
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 promulgated under the 1933 Act (“Rule 144”) or Rule 144A promulgated under
the 1933 Act, as amended (or successor rules thereto) (collectively, “Resale Exemptions”); (ii) any sale of
the Securities made in reliance on the Resale Exemptions may be made only in accordance with the terms of Rule 144 or Rule 144A,
as applicable, and further, if a Resale Exemption 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).


 






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(g)  Legends.
Such Buyer understands that the certificates or other instruments representing the Notes and Warrants, and any certificates representing
the Conversion Shares and 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 or other instruments):


 


[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 FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, 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.


 


The legend
set forth above shall be removed and the Company shall issue a certificate or other instrument 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 form and substance reasonably acceptable to the Company, 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.


 






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3.  REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


The Company
represents and warrants to each of the Buyers, as of the date hereof and as of each applicable Closing Date (unless otherwise provided
herein), 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,
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).


 


(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 Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the Security Documents,
any Joinder Agreements 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, the
issuance of the Warrants, and the reservation for issuance and the issuance of the Conversion Shares and Warrant Shares have been
duly authorized by the Company’s Board of Directors, and (other than the filing with the SEC of a Form D and any other 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 stockholders. 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., as applicable 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
stockholders (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 is 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 applicable 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) the maximum number of Conversion Shares issued and issuable pursuant to the Notes to be issued in such Closing based
on the initial Conversion Price (as defined in the Notes) of $2.50 (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 “Initial Conversion Price”) plus (ii) the maximum
number of Warrant Shares issued and issuable pursuant to the Warrants to be issued in such Closing, 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 195,918,607 shares of Common Stock
authorized and unissued, of which 11,750,054 are reserved for issuance upon full exercise of all outstanding options and warrants
and upon conversion of all convertible promissory notes. 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 Certificate 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 OTCQB (the “Principal Market”) and including
all applicable laws of the State of Delaware 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 (other than the filing with the SEC of a Form D and any other filings as may be required by any state securities
agencies), 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 Initial 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 J Streicher Capital, LLC (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 stockholders of the Company for purposes of the 1933
Act or any applicable stockholder 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 stockholder 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 Certificate 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 stockholder 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.


 


(k)  Absence
of Certain Changes. Except as disclosed in Schedule 3(k), since December 31, 2016, 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, 2016, 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.


 






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(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 Certificate 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 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.


 


(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. Except as disclosed in Schedule 3(o), 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.


 






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(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.


 


(q)  Equity
Capitalization. As of the Initial Closing Date, the authorized capital stock of the Company consists of (i) 200,000,000 shares
of Common Stock, of which as of the date hereof, 4,081,393 shares are issued and outstanding, 709,876 shares are reserved for issuance
pursuant to the Company’s stock option and purchase plans, 6,084,600 shares are reserved for issuance upon exercise of warrants
outstanding and 4,774,624 shares are reserved for issuance pursuant to securities (other than the aforementioned options, warrants
and 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 2,776,367
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 set forth in the SEC Documents or as disclosed in 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) 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) 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) 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) 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) 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) there are
no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities;
(viii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement; and (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 Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”),
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. Except as disclosed on Schedule 3(r), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (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) 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) 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.


 






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(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.


 


(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 (as defined in Rule 501(f) under the 1933 Act) of the Company or any of its Subsidiaries 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. 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 that 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. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i)
neither the Company nor its Subsidiaries is in violation of any Environmental Laws (as hereinafter defined), (ii) the Company and
its Subsidiaries have received all permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) the Company and its Subsidiaries are in compliance with all terms and conditions
of any such permit, license or approval. 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) or as set forth in the SEC Documents, 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.
Except as set forth in Schedule 3(bb) or as set forth in the SEC Documents, 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.


 


(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 each Closing Date, all stock transfer or other taxes (other than income or similar taxes) that 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.


 


(gg)  Acknowledgement
Regarding Buyers’ Trading Activity. The Company acknowledges and agrees that (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 one or
more Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding
and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ 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.


 






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(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.


 


(kk)  Disclosure.
Except for the transaction contemplated hereby, 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.


 






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(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. 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. Except as set forth in Schedule 3(oo), 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.


 


(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 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 each 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 such 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 applicable 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 applicable 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.


 






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(d)  Use
of Proceeds. The Company will use the proceeds from the sale of the Securities solely for working capital and general corporate
purposes.


 


(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 stockholders
of the Company generally, contemporaneously with the making available or giving thereof to the stockholders. 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.


 


(f)  [Reserved].


 


(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 Initial 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 $10,000 without the prior approval from the
Company. In addition, with respect to all costs and expenses owed by the Company to a Buyer, including, without limitation, unpaid
collateral agent fees, unpaid interest or other unpaid fees and expenses, such Buyer may withhold such amount from its Purchase
Price for any Notes purchased at the Closing. 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.


 


(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.


 






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(j)  Disclosure
of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on March 27, 2018, (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 Notes,
the form of the Warrants and the Security Documents as exhibits to such filing (including all attachments, the “8-K Filing”).
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 its capacity as a Buyer in any filing, announcement,
release or otherwise.


 


(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 the Company shall not issue any other securities that would cause a breach or default
under the Notes; provided, however, the Company may amend its outstanding Indebtedness to provide for the approved
issuance of these Notes and adjust any relevant terms accordingly. 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.


 


(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 stockholders 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 stockholder 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.


 






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(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 Initial 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.


 


(p)  Notice
of Disqualification Events. The Company will notify the Buyers in writing, prior to the applicable 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.


 


(q)  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.


 






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(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.


 


(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(q) 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(q), 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 $10,000 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 4(q) and the Security Documents during
such calendar quarter, provided, such fee shall be non-duplicative to any existing fee arrangements with the Collateral
Agent arising from existing Indebtedness.


 


(r)  Closing
Documents. On or prior to the tenth (10th) Business Day after each applicable Subsequent Closing Date occurring after the Third
Subsequent Closing Date, the Company agrees to deliver, or cause to be delivered, to each Buyer a complete closing set of the executed
Transaction Documents, Securities and any other documents relating to each applicable Subsequent Closing occurring after the Third
Subsequent Closing Date required to be delivered to any party pursuant to Section 7(b) hereof or otherwise.


 






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(s)  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(s) 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(s) in connection with such additional Pledges, with
the approval of the Collateral Agent, which approval shall not be unreasonably withheld.


 


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 Warrant Shares issued at each 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
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.


 


(a)  The
obligation of the Company hereunder to issue and sell the Initial Notes and the related Initial Warrants to each Initial Buyer
at the Initial Closing was subject to the satisfaction, at or before the Initial Closing Date, of each of the following conditions,
provided that these conditions are for the Company’s sole benefit and could have been waived by the Company at any
time in its sole discretion by providing each Buyer with prior written notice thereof:


 


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


 


(ii)  Such
Initial Buyer shall have executed and delivered to the Company the flow of funds memorandum (“Flow of Funds”),
confirming the Initial Purchase Price payable by such Initial Buyer and the wiring instructions applicable thereto.


 


(iii)  Such
Initial Buyer shall have delivered its Initial Purchase Price to the Company for the Initial Notes and Initial Warrants purchased
by such Initial Buyer at the Initial Closing by wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company provided, if the Initial Buyer is directed to wire its funds to a third party pursuant to the Flow
of Funds, the receipt of funds by such designated third party shall constitute delivery of its Purchase Price, in part or in whole
as indicated in the Flow of Funds, hereunder.


 


(iv)  The
representations and warranties of such Initial Buyer shall be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or material adverse effect, which shall be true and correct in all respects) as
of the date when made and as of the Initial 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 Initial 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 Initial Buyer at or prior to the Initial Closing Date.


 


(b)  The
obligation of the Company hereunder to issue and sell the Subsequent Notes and the related Subsequent Warrants to each Subsequent
Buyer at the applicable Subsequent Closing is subject to the satisfaction, at or before the applicable Subsequent 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 Subsequent Buyer with prior written notice thereof:


 


(i)  Such
Subsequent Buyer shall have executed the Investor Questionnaire and delivered the same to the Company.


 


(ii)  Such
Subsequent Buyer shall have executed either (x) a Joinder Agreement or (y) a Subsequent Closing Notice and delivered the same to
the Company.


 


(iii)  Such
Subsequent Buyer shall have delivered its Subsequent Purchase Price to the Company for the Subsequent Notes and the Subsequent
Warrants being purchased by such Subsequent Buyer at the applicable Subsequent Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.


 






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(iv)  The
representations and warranties of such Subsequent Buyer shall be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or material adverse effect, which shall be true and correct in all respects) as
of the date when made and as of the applicable Subsequent 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 Subsequent
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 Subsequent Buyer at or prior to the applicable Subsequent
Closing Date.


 


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


 


(a)  The
obligation of each Initial Buyer hereunder to purchase the Initial Notes and Initial Warrants at the Initial Closing was subject
to the satisfaction, at or before the Initial Closing Date, of each of the following conditions, provided that these conditions
are for each Initial Buyer’s sole benefit and could have been waived by such Initial 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 Initial Buyer each of the following documents
to which it is a party: (A) each of the Transaction Documents, and (B) the Initial Notes (allocated in such principal amounts as
such Initial Buyer shall request) and the related Initial Warrants, in each case being purchased by such Initial Buyer at the Initial
Closing pursuant to this Agreement.


 


(ii)  The
Company shall have delivered to such Initial 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.


 


(iii)  The
Company shall have delivered to such Initial 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 Initial Closing Date.


  


(iv)  The
Company shall have delivered to such Initial 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 Initial Closing Date.


 


(v)  The
Company shall have delivered to such Initial Buyer a certificate, executed by the Secretary of the Company and dated as of the
Initial 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 Initial Buyer, (ii) the Certificate 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 Initial Closing, in the form attached hereto as Exhibit F.


 






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(vi)  The
representations and warranties of the Company shall be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as
of the date when made and as of the Initial 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 Initial Closing Date. Such Initial Buyer shall have received
a certificate, executed by the Chief Executive Officer of the Company, dated as of the Initial Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Initial Buyer in the form attached hereto as Exhibit G.


 


(vii)  The
Common Stock (I) shall be designated for quotation on the Principal Market and (II) shall not have been suspended, as of the Initial
Closing Date, by the SEC or the Principal Market from quotation on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Initial Closing Date, in writing by the SEC or the Principal Market.


 


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


 


(ix)  Each
of the Company’s Subsidiaries shall have executed and delivered to such Initial Buyer the Guaranty Amendment.


 


(x)  The
Collateral Agent shall have received (x) the Second Amendment to the Subordination and Intercreditor Agreement, in the form attached
as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2017 (the “September
Subordination Amendment”), which further amends that certain Subordination and Intercreditor Agreement dated as of September
1, 2016 by and among Longboard Capital Advisors LLC, the Company, Ener-Core Power, Inc., Anthony Tang, as a Senior Lender (as defined
therein) and Empery Tax Efficient, LP in its capacity as collateral agent for the Senior Note Lenders (as defined therein), as
amended to date, and (x) the Second Amendment to the Subordination and Intercreditor Agreement, in the form attached as Exhibit
10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2017 (the “October Subordination
Amendment”), which further amends that certain Subordination and Intercreditor Agreement dated as of November 2, 2015
by and among Anthony Tang, the Company and Empery Tax Efficient, LP in its capacity as collateral agent for the Senior Lenders
(as defined therein), as amended to date, in each case, duly executed and delivered by all parties thereto.


 


(xi)  The
Collateral Agent shall have received the Security Amendment 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.


 


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


 






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(b)  The
obligation of each Subsequent Buyer hereunder to purchase the Subsequent Notes and the related Subsequent Warrants at the applicable
Subsequent Closing is subject to the satisfaction, at or before the Subsequent Closing Date, of each of the following conditions,
provided that these conditions are for each Subsequent Buyer’s sole benefit and may be waived by such Subsequent 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 Subsequent Buyer each of the following documents
to which it is a party: (A) each of the Transaction Documents, and (B) the Subsequent Notes (allocated in such principal amounts
as such Subsequent Buyer shall request) and the related Subsequent Warrants, in each case being purchased by such Subsequent Buyer
at the applicable Subsequent Closing pursuant to this Agreement.


 


(ii)  If
applicable, the Company shall have duly executed and delivered to such Subsequent Buyer the Joinder Agreement of such Subsequent
Buyer.


 


(iii)  The
Company shall have delivered to such Subsequent 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 Subsequent 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 Initial Closing Date, and a bringdown of such certificate(s) as
of a date within ten (10) days of the applicable Subsequent Closing Date.


 


(v)  The
Company shall have delivered to such Subsequent 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 Initial Closing Date, and
a bringdown of such certificate(s) as of a date within ten (10) days of the applicable Subsequent Closing Date.


 


(vi)  The
Company shall have delivered to such Subsequent Buyer a certificate, executed by the Secretary of the Company and dated as of the
Initial 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 Subsequent Buyer, (ii) the Certificate 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 applicable Subsequent Closing, in the form attached hereto as Exhibit F.


 


(vii)  The
representations and warranties of the Company shall be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as
of the date when made and as of the applicable Subsequent 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 applicable Subsequent Closing Date. Such
Subsequent Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the applicable
Subsequent Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Subsequent
Buyer in the form attached hereto as Exhibit G.


 


(viii)  The
Common Stock (I) shall be designated for quotation on the Principal Market and (II) shall not have been suspended, as of the applicable
Subsequent Closing Date, by the SEC or the Principal Market from quotation on the Principal Market nor shall suspension by the
SEC or the Principal Market have been threatened, as of the applicable Subsequent Closing Date, in writing by the SEC or the Principal
Market.


 






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


 


(x)  Each
of the Company’s Subsidiaries shall have executed and delivered to such Subsequent Buyer the Guaranty Amendment.


 


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


 


8.  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).


 






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(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, Anthony Tang so long as Anthony Tang or any of his
affiliates holds any Securities and 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(q) 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 8(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. 


8965 Research Drive, Suite 100

Irvine, California 92618


Telephone: (949) 616-3333


Facsimile: (949) 616-3399

Attention: Mr. Domonic J. Carney, CFO


Email:  DJ.Carney@ener-core.com


 



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With a copy (for informational purposes only) to:


 


K&L Gates LLP


1 Park Plaza, 12th Floor


Irvine CA 92614


Telephone: (949) 623-3545


Facsimile: (949) 623-4477


Attention: Shoshannah D. Katz,
Esq.


Email: shoshannah.katz@klgates.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,


 


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.


 


(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 and 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.


 






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(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 8(k).


 


(i)  Survival.
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 8 shall survive each 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.


 


(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 stockholders, 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.


 






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(ii)  Promptly
after receipt by an Indemnitee under this Section 8(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 8(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 8(k), except to the extent that the indemnifying party is prejudiced in its
ability to defend such action.


 


(iii)  The
indemnification required by this Section 8(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.


 






    - 35 -


     


    

 


(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.


 


(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 Pages Follow]


 






    - 36 -


     


    

 





IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Fourth Amended and Restated 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 Fourth Amended and Restated Securities Purchase Agreement


 






    


     


    

 





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


 


	 	INITIAL BUYER:
	 	 
	 	By:	

	 	 	Name: 
	 	 	Title: 


 


Signature
Page to Fourth Amended and Restated Securities Purchase Agreement




 






    


     


    

 





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	 
	TOTAL	 	 		 	 	$	555,555.56	 	 	 	222,222	 	 	$	500,000.00	 	 	 		 








 






    


     


    

 


EXHIBITS


 


	Exhibit A	Form of Notes
	Exhibit B	Form of Warrant
	Exhibit C	Form of Joinder Agreement
	Exhibit D	Form of Investor Questionnaire
	Exhibit E	Form of Irrevocable Transfer Agent Instructions
	Exhibit F	Form of Secretary’s Certificate
	Exhibit G	Form of Officer’s Certificate




 


 


 


SCHEDULES


 


	Schedule 3(a)	Subsidiaries




	Schedule 3(j)	SEC Documents




	Schedule 3(m)	Regulatory Permits




	Schedule 3(o)	Sarbanes-Oxley Act




	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(bb)	Internal Accounting and Disclosure Controls




	Schedule 3(dd)	Ranking of Notes
	Schedule 3(nn)	No Disagreements with Accountants and Lawyers
	Schedule 3(oo)	No Disqualification Events
	Schedule 4(s)	Pledges of Intellectual Property Rights




 






    


     


    

 





EXHIBIT A


 


Form of Notes


 


[Omitted]


 






    


     


    

 





EXHIBIT B


  


Form of Warrant


  


[Omitted]


 






    


     


    

 





EXHIBIT C


 


Form of Joinder Agreement


 






    


     


    

 


JOINDER AGREEMENT 


 


Reference is hereby
made to that certain Securities Purchase Agreement by and among Ener-Core, Inc., a Delaware corporation, with headquarters located
at 8965 Research Drive, Irvine, California 92618 (the “Company”), and the Initial Buyers (as defined therein),
dated as of September 19, 2017, as amended and restated on November 1, 2017, as further amended and restated on December 20, 2017,
as further amended and restated on January 25, 2018, and as further amended and restated on March 26, 2018 and attached hereto
as Exhibit A (as amended and/or restated to date, the “Securities Purchase Agreement”). Capitalized terms
not defined herein shall be as defined in the Securities Purchase Agreement.


 


(a)  The
party signatory hereto as the “Subsequent Buyer” (the “Subsequent Buyer”) desires to purchase a
March Subsequent Note and March Subsequent Warrant for the applicable Subsequent Purchase Price, as set forth under the signature
line of the Subsequent Buyer attached hereto. The date of the Subsequent Closing (the “Subsequent Closing Date”)
shall occur on the date hereof.


 


(b)  The
Subsequent Buyer acknowledges, represents and warrants that it has reviewed the Securities Purchase Agreement, and subject to the
satisfaction (or waiver) of the conditions of Sections 1(c), 6(b) and 7(b), as of the Subsequent Closing Date, the Subsequent Buyer
shall be a “Buyer” and a “March Subsequent Buyer”, in each case as defined in the Securities Purchase Agreement,
with all the rights and obligations of a “Buyer” and a “March Subsequent Buyer” set forth therein.


 


(c)  Having
read the representations in Section 2 of the Securities Purchase Agreement, the Subsequent Buyer hereby makes the representations
and warranties contained in Section 2 of the Securities Purchase Agreement, as set forth therein, to the Company as of the date
hereof and as of the Subsequent Closing Date.


 


(d)  With
regards to the Company’s representations and warranties in Section 3 of the Securities Purchase Agreement, the Company hereby
makes the representations and warranties contained in Section 3 of the Securities Purchase Agreement, as set forth therein, to
the Subsequent Buyer as of the date hereof and as of the Subsequent Closing Date, as modified or affected by the schedules attached
to the Securities Purchase Agreement.


 


(e)  The
Subsequent Buyer has executed and delivered to the Company an investor questionnaire, substantially in the form attached hereto
as Attachment 1, which such Subsequent Buyer represents and warrants is true, correct and complete. The Subsequent Buyer
agrees to furnish the Company with any additional information it reasonably requests to ensure compliance with applicable federal
and state securities laws in connection with the purchase of the Subsequent Note and Subsequent Warrant. 


 


(f)  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.


 


(g)  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.


 


[Signature Page Follows]


 






    


     


    

 





IN WITNESS WHEREOF,
the Subsequent Buyer and the Company have caused their respective signature page to this Agreement to be duly executed, in counterparts,
as of the date set forth below.


 


	 	 	SUBSEQUENT BUYER:
	 	 	 
	 	 	 	 
	 	 	By:	

	 	 	 	Name: 
	 	 	 	Title: 
	 	 	

	 	 	Aggregate Principal Amount of Subsequent Note Purchased:
	 	 	

	 	 	Number of Subsequent Warrant Shares:
	 	 	
	 	 	Subsequent Purchase Price:
	 	 	

	 	 	Address:
	 	 	 
	 	 	 
	 	 	
	 	 	 
	 	 	Attention:
	 	 	
	 	 	 
	 	 	Facsimile:
	 	 	

	 	 	 
	 	 	Telephone:
	 	 	
	 	 	Email:
	 	 	


 


Accepted by:


 


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





 


 


Signature
Page to Joinder Agreement






    


     


    

 


EXHIBITS


 


 


	Exhibit A:	Securities Purchase Agreement
	Attachment 1: 	Investor Questionnaire




 






    


     


    

 





EXHIBIT A


  


Securities Purchase Agreement


  


[Omitted]


 






    


     


    

 





ATTACHMENT 1


 


Investor Questionnaire


  


[Omitted]


 






    


     


    

 





EXHIBIT D


  


Form of Investor Questionnaire


 






    


     


    

 


Ener-Core, Inc.


 


ACCREDITED INVESTOR QUESTIONNAIRE


 


PLEASE READ
CAREFULLY 


 


This
investor questionnaire is being submitted by the undersigned to Ener-Core, Inc., a Delaware corporation (“Issuer”)
in order to determine whether the undersigned qualifies as an “accredited investor” under Regulation D promulgated
under the Securities Act of 1933 (the “Securities Act”). The undersigned understands that Issuer will rely upon
the accuracy and completeness of the information provided in this questionnaire in determining whether certain issuances of securities
of Issuer may qualify for an exemption from the registration requirements of the Securities Act. Please return your completed questionnaire
and executed signature page hereto with your signature page to the Securities Purchase Agreement.


 


I.  Accredited
Investor: The undersigned hereby represents and warrants that the undersigned is an “accredited investor” under
Regulation D promulgated under the Securities Act. o (please check box if you
are an accredited investor)


 


The undersigned is an “accredited
investor” for one of the following reasons (check whichever applies):


 


Individuals.
If the undersigned is a natural person (ignoring any revocable grantor trust), then the undersigned hereby represents and warrants
as follows (check whichever applies):


 


		o	The undersigned is a director, executive officer, or general partner of
the Issuer, or a director, executive officer, or general partner of a general partner of the Issuer.



 


		o	The undersigned has a net worth (either individually or jointly with the
undersigned’s spouse) in excess of $1,000,000 (see calculation guidance below).



 


		o	The undersigned (i) either (A) had an individual annual income (exclusive
of spousal income) in excess of $200,000 or (B) had a joint income with the undersigned’s spouse in excess of $300,000 in
each of the two preceding tax years, and (ii) reasonably expects to have the same income level (individually or jointly, as applicable)
in the current tax year (see calculation guidance below).



 


The term “net
worth” means the excess of total assets over total liabilities. In calculating “net worth,” the Investor
must exclude the value of the Investor’s principal residence as an asset. The value of the principal residence should be
calculated as the fair market value of the residence, less any debt secured by such residence. To the extent that the amount of
debt secured by the primary residence exceeds the fair market value of such residence, this excess amount of debt should be considered
a liability for purposes of calculating net worth. The term “individual income” means adjusted gross income,
as reported for federal income tax purposes, less any income attributable to a spouse or property owned by a spouse, increased
by the amount (if not attributable to a spouse or property owned by a spouse) of any tax-exempt shares received, losses claimed
as a partner in an entity treated as a partnership for tax purposes, any deduction claimed for depletion, any deduction for long
term capital gains. The term “joint income” is defined in the same manner as “individual income,”
except that income attributable to a spouse or property owned by a spouse is included.


 






    


     


    

 


Trusts. If
the undersigned is a trust, then the undersigned hereby represents and warrants that the undersigned is (check whichever
applies):


 


		o	A revocable trust (such as a living trust) or a trust formed for the purpose
of acquiring the securities and for which, in either case, each grantor is an accredited investor. Indicate each grantor and the
category that describes how each such grantor itself is qualified as an “accredited investor”:



 


____________________________________________________________


 


____________________________________________________________


 


		o	A trust which has total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring securities, whose purchase is directed by a “sophisticated person” within the meaning
of Regulation D who has such knowledge and experience in financial and business matters as to be capable of evaluating the merits
and risks of an investment in the proposed investment.



 


Entities.
If the undersigned is a corporation, partnership, limited liability company or trust, then the undersigned hereby represents and
warrants that the undersigned is (check whichever applies):


 


		o	an employee benefit plan within the meaning of the Employment Retirement
Income Security Act of 1974, as amended (“ERISA”), if either:



 


		a.	the investment decision is made by a plan fiduciary, as defined in ERISA
§ 3(21), that is a bank, savings and loan association, insurance company or registered investment adviser,



 


		b.	an employee benefit plan with total assets in excess of $5,000,000, or



 


		c.	a self-directed plan with investment decisions made solely by persons who
are accredited investors as defined in Rule 501(a) promulgated under the Securities Act.



 


		o	one of the following entities, not formed for the specific purpose of acquiring
securities and having total assets in excess of $5,000,000:



 


		a.	an organization described in Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended;



 


		b.	a corporation, partnership, or limited liability company; or



 


		c.	a Massachusetts or similar business trust.



 


		o	a bank as defined in Section 3(a)(2) of the Securities Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual
or a fiduciary capacity.



 






    


     


    

 


		o	a broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended.



 


		o	an insurance company as defined in Section 2(13) of the Securities Act.



 


		o	an investment company registered under the Investment Company Act of 1940
(the “Investment Company Act”), or a business development company as defined in Section 2(a)(48) of the Investment
Company Act.



 


		o	a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.



 


		o	a plan established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees with total assets in
excess of $5,000,000.



 


		o	a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940, as amended.



 


		o	An entity in which all of the equity owners are “accredited
investors” under any of the above categories (including the categories for individuals and trusts listed in the preceding
Sections 1(a) and 1(b)). If the undersigned belongs to this investor category only, list the equity owners of the
undersigned, and the “accredited investor” category which each such equity owner satisfies:



 


____________________________________________________________


 


____________________________________________________________


 


If the Issuer needs to verify
my status as an accredited investor or has any questions with respect to such status, I hereby consent to request that the Issuer
contact:


 


	Name:	_____________________________________
	 	 
	Firm name:	_____________________________________
	 	 
	Email:	_____________________________________
	 	 
	Telephone:	_____________________________________
	 	 
	Address:	_____________________________________
	 	 
	Relationship to accredited investor:	_____________________________________




 


II.  Not
an Accredited Investor: The undersigned hereby represents and warrants that the undersigned does NOT meet one of the foregoing
tests and does not qualify as an “accredited investor” under Regulation D promulgated under the Securities Act. 
o (please check box if you are not an accredited investor)


 


Signature Page Follows


 






    


     


    

 





The undersigned has/have executed this
Accredited Investor Questionnaire effective as of the date set forth below.


 





	 	FOR INDIVIDUALS 
	 	 
	 	By: 	
	 	 	Signature
	 	 	 
	 	Name: 	
	 	 	 
	 	Date: 	
	 	 	 
	 	By: 	 
	 	 	Signature
	 	 	 
	 	Name: 	 
	 	 	 
	 	Date:	 


  




NOTE: IF YOU ARE PURCHASING SHARES WITH YOUR SPOUSE, YOU MUST
BOTH SIGN THIS SIGNATURE PAGE.


 


IF YOU ARE PURCHASING SHARES WITH ANOTHER PERSON NOT YOUR SPOUSE,
YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE.





 


	 	FOR ENTITIES 
	 	 
	 	
	 	Name of Entity (i.e., corporation, partnership, trust, LLC etc.)
	 	 
	 	By: 	
	 	 	Signature
	 	 	 
	 	Name: 	
	 	 	 
	 	Title: 	
	 	 	 
	 	Date: 	







 






    


     


    

 


EXHIBIT E


 


Form of Irrevocable Transfer Agent Instructions


 






    


     


    

 


TRANSFER AGENT INSTRUCTIONS


 


ENER-CORE, INC. 


 


March 26, 2018


 


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


 


Ladies and Gentlemen:


 


Reference is made to
that certain Fourth Amended and Restated Securities Purchase Agreement, dated as of March 26, 2018 (as amended, restated, modified
or joined from time to time, the “Agreement”), by and among Ener-Core, Inc., a Delaware corporation (the “Company”),
and the investors named on each Buyer’s signature page to a Joinder Agreement with respect to the Agreement and the Schedule
of Buyers attached hereto (collectively, the “Holders”), pursuant to which the Company is issuing to the Holders:
(i) convertible senior secured promissory notes (the “Notes”), which Notes shall be convertible into shares
of common stock of the Company, par value $0.0001 per share (the “Common Stock”) and (ii) warrants (the
“Warrants”), which are exercisable to purchase shares of Common Stock.


 


This letter shall serve
as our irrevocable authorization and direction to you (provided that you are the transfer agent of the Company at such time):


 


		(i)	to issue shares of Common Stock upon conversion of the Notes (the “Conversion Shares”)
to or upon the order of a Holder from time to time upon delivery to you of a properly completed and duly executed Conversion Notice,
in the form attached hereto as Exhibit I, which has been acknowledged by the Company as indicated by the signature of a
duly authorized officer of the Company thereon; and



 


		(ii)	to issue shares of Common Stock upon exercise of the Warrants (the “Warrant Shares”)
to or upon the order of a Holder from time to time upon delivery to you of a properly completed and duly executed Exercise Notice,
in the form attached hereto as Exhibit II, which has been acknowledged by the Company as indicated by the signature of a
duly authorized officer of the Company thereon.



 


You acknowledge and
agree that so long as you have previously received (a) a written legal opinion from the Company’s legal counsel that either
(i) a registration statement covering resales of the Conversion Shares and/or Warrant Shares has been declared effective by the
Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities
Act”), or (ii) sales of the Conversion Shares and/or the Warrant Shares may be made in conformity with Rule 144 under
the Securities Act (“Rule 144”) and (b) if applicable, a copy of such registration statement, then within three
(3) business days of your receipt of a notice of transfer, Conversion Notice or Exercise Notice, you shall issue the certificates
representing the Conversion Shares and/or the Warrant Shares, as applicable, registered in the names of such transferees, and such
certificates shall not bear any legend restricting transfer of the Conversion Shares and/or the Warrant Shares thereby and should
not be subject to any stop-transfer restriction; provided, however, that if such Conversion Shares and Warrant Shares are
not registered for resale under the Securities Act or able to be sold under Rule 144, then the certificates for such Conversion
Shares and/or Warrant Shares shall bear the following legend:


 


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 FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE COMPANY, 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.


 


[Remainder of page left blank intentionally.
Signatures follow.]


 






    


     


    

 





Please execute this
letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at 949-616-3300.


 





	 	Very truly yours,
	 	 	 
	 	ENER-CORE, INC.
	 	 	 
	 	By:	
	 	Name:  	Domonic J. Carney
	 	Title:	Chief Financial Officer



  


THE FOREGOING INSTRUCTIONS ARE


ACKNOWLEDGED AND AGREED TO


 


this ___ day of ______, 2018


 


VSTOCK TRANSFER,
LLC


 





	By:		 



Name:  Yoel Goldfeder

Title:  Chief Executive Officer




Enclosures


 


Signature
Page to Transfer Agent Instructions




 






    


     


    

 


EXHIBIT I


 


CONVERSION NOTICE


 


ENER-CORE,
inc.  


 


Reference is made to
the convertible unsecured promissory note (the “Note”) issued to the undersigned by Ener-Core, Inc., a Delaware
corporation (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert
the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock par value $0.0001 per share
(the “Common Stock”) of the Company, as of the date specified below.


 


 


	Date of Conversion:	 
	
         

         

        Aggregate Conversion Amount
        to be converted:
	 


 


 


Please confirm the following information:


 


 


	Conversion Price:	 
	
         

         

        Number of shares of Common Stock
        to be issued:
	 


 


 


Please issue the Common Stock into which
the Note is being converted in the following name and to the following address:


 


 


	Issue to:	 
	 	 
	 	 
	 	 
	
         

         

        Facsimile Number and E-mail
        Address:
	 
	 	 
	 	 
	 	 
	Authorization:	 
	  By:	 
	  Title:	 
	Dated:	 


 


	Account Number (if book entry transfer):	 
	
         

         

        Transaction Code Number (if
        book entry transfer):
	 
	Installment Amounts to be reduced and amount of reduction:	 





 


Exhibit
I




 






    


     


    

 


ACKNOWLEDGMENT


 


The Company hereby
acknowledges this Conversion Notice and hereby directs VStock Transfer, LLC to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated March 26, 2018 from the Company and acknowledged and agreed to by
VStock Transfer, LLC.


 


	 	ENER-CORE, INC.
	 	 	 
	 	By:	     
	 	Name:	 
	 	Title:	 





 






    


     


    

 


EXHIBIT II


 


EXERCISE NOTICE


 


TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS


WARRANT TO PURCHASE COMMON STOCK


 


ENER-CORE,
inc. 


 


The undersigned holder
hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of
Ener-Core, Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common
Stock (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.


 


1.  Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:


 


____________ a “Cash
Exercise” with respect to _________________ Warrant Shares; and/or


 


 ____________ a
“Cashless Exercise” with respect to _______________ Warrant Shares.


  


2.  Payment
of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company
in accordance with the terms of the Warrant.


  


3.  Delivery
of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.


 


Date: _______________ __, ______


 


	 	 	 	 
	Name of Registered Holder
	 	 	 	 
	By:	 	 	 
	 	Name:	 	 
	 	Title:	 	 


 






    


     


    

 


 ACKNOWLEDGMENT


 


The Company hereby
acknowledges this Exercise Notice and hereby directs VStock Transfer, LLC to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated March 26, 2018 from the Company and acknowledged and agreed to by
VStock Transfer, LLC.


 


	 	ENER-CORE, INC.
	 	 	 
	 	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	 
	
TOTAL
	 	 	-	 	 	$	333,334.45	 	 	 	133,332	 	 	$	300,001	 	 	 	  -	 





 


 


 






    


     


    

 


EXHIBIT F


 


Form of Secretary’s Certificate


 






    


     


    

 





SECRETARY’S CERTIFICATE


 


Pursuant to Section
7(b)(vi) of the Fourth Amended and Restated Securities Purchase Agreement, dated as of March 26, 2018 (the “Purchase Agreement”),
by and among Ener-Core, Inc., a Delaware corporation (the “Company”), and the investors set forth on the Schedule
of Buyers attached to the Purchase Agreement and the investors, if any, party to a joinder agreement with respect to the Purchase
Agreement (each, a “Buyer” and collectively, the “Buyers”), Domonic J. Carney, the Secretary
of the Company, hereby certifies, in his capacity as an officer of the Company and as an officer of Ener-Core Power, Inc., a Delaware
corporation (the “Subsidiary”), and not individually, on behalf of the Company and the Subsidiary, respectively,
that:


 


		1.	Attached hereto as Exhibit A are true, correct and complete copies of resolutions duly adopted
by the Board of Directors (the “Board”) of the Company and the Board of Directors (the “Subsidiary
Board”) of the Subsidiary (collectively, the “Board Resolutions”), approving the matters contemplated
by Section 3(b) of the Purchase Agreement. Such resolutions have not been amended, modified, supplemented, annulled or revoked
and are in full force and effect in the form adopted, and are the only resolutions adopted by the Board and the Subsidiary Board
or by any committee of or designated by the Board and Subsidiary Board relating to (i) the transactions contemplated by the Board
Resolutions, and (ii) the transaction agreements identified in the Board Resolutions. All members of the Board and Subsidiary
Board were, at the time of their approval of the resolutions attached hereto as Exhibit A, respectively, and have been at
all times thereafter, duly elected, qualified, and acting directors of the Company and the Subsidiary, respectively.



 


		2.	Attached hereto as Exhibit B are true, correct and complete copies of the Certificate of
Incorporation of the Company, as currently in effect (the “Certificate”), and the Certificate of Incorporation
of the Subsidiary, as currently in effect (the “Subsidiary Certificate”). The Certificate has not been amended
subsequent to September 3, 2015, and no action has been taken by the Company, its stockholders, directors, or officers to authorize
or effect any further amendment or modification to such Certificate, and the Subsidiary Certificate has not been amended subsequent
to June 28, 2013, and no action has been taken by the Subsidiary, its stockholders, directors, or officers to authorize or effect
any further amendment or modification to such Subsidiary Certificate.



 


		3.	Attached hereto as Exhibit C are true, correct and complete copies of the Bylaws of the
Company, as currently in effect (the “Bylaws”), and the Bylaws of the Subsidiary, as currently in effect (the
“Subsidiary Bylaws”). The Bylaws have not been amended subsequent to September 3, 2015, and no action has been
taken by the Company, its stockholders, directors, or officers to authorize or effect any further amendment or modification to
such Bylaws, and the Subsidiary Bylaws have not been amended subsequent to August 1, 2012, and no action has been taken by the
Subsidiary, its stockholders, directors, or officers to authorize or effect any further amendment or modification to such Subsidiary
Bylaws.



  


		4.	Each person listed below has been duly elected or appointed to the position(s) indicated opposite
his name and is duly authorized to sign the Purchase Agreement and each of the Transaction Documents on behalf of the Company,
and the signature appearing opposite such person’s name below is such person’s genuine signature.



 


	 	Name	 	Position	 	Signature
	 
	 	Alain J. Castro	 	Chief Executive Officer	 	 	    	 



 


		5.	Each person listed below has been duly elected or appointed to the position(s) indicated opposite
his name and is duly authorized to sign each of the Transaction Documents of which the Subsidiary is a party on behalf of the Subsidiary,
and the signature appearing opposite such person’s name below is such person’s genuine signature.



 


	 	Name	 	Position	 	Signature
	 
	 	Alain J. Castro	 	Chief Executive Officer	 	 	   	 



 


 


Capitalized terms contained
herein and not otherwise defined shall be interpreted in accordance with their meaning in the Purchase Agreement.


 


[Signature
Page Follows]


 






    


     


    

 








IN WITNESS WHEREOF,
the undersigned has signed his name to this Secretary’s Certificate this March 26, 2018.


 


	 	By:	
	 	Name:  	Domonic J. Carney
	 	Title:  	Secretary


 


I, Alain Castro, Chief
Executive Officer, hereby certify that Domonic J. Carney is the duly elected, qualified and acting Secretary of the Company and
that the signature set forth above is his true signature.


 





	 	By:	
	 	Name:  	Alain Castro
	 	Title:  	Chief Executive Officer


 


Signature
Page to Secretary’s Certificate


 






    


     


    

 


EXHIBIT A


 


Board Resolutions


 






    


     


    

 





Subsidiary Board Resolutions


 






    


     


    

 





EXHIBIT B


  


Certificates of Incorporation





 






    


     


    

 


EXHIBIT C


 


Bylaws


 






    


     


    

 





EXHIBIT G


 


Form of Officer’s Certificate


 






    


     


    

 


COMPLIANCE CERTIFICATE


 


Pursuant to Section
7(b)(vii) of the Fourth Amended and Restated Securities Purchase Agreement, dated as of March 26, 2018 (the “Purchase
Agreement”), by and among Ener-Core, Inc., a Delaware corporation (the “Company”), and the investors
set forth on the Schedule of Buyers attached to the Purchase Agreement and the investors, if any, party to a joinder agreement
with respect to the Purchase Agreement (each, a “Buyer” and collectively, the “Buyers”),
Alain J. Castro, the Chief Executive Officer of the Company, hereby certifies, in his capacity as an officer of the Company and
not individually, on behalf of the Company and to the best of his knowledge after a reasonable investigation that:


 


1.  The
representations and warranties of the Company contained in Section 3 of the Purchase Agreement are true and correct in all material
respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall
be true and correct in all respects) 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).


 


2.  The
Company has 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.


 


Capitalized terms contained
herein and not otherwise defined shall be interpreted in accordance with their meaning in the Purchase Agreement.


 


[Signature Page Follows]





 






    


     


    

 


IN WITNESS WHEREOF,
the undersigned has signed his name to this Compliance Certificate this March 26, 2018.


 


	 	By:	
	 	 	Name:  Alain J. Castro
	 	 	Title:   Chief Executive Officer


 






    


     


    

 





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 Agreement.)


 


Schedule 3(a)





(Subsidiaries)





 


Ener-Core Power, Inc., a Delaware corporation


 


Schedule 3(j)





(SEC Documents; Financial Statements)


 


None.


 


Schedule 3(m)





(Regulatory Permits)


 


None.


  


Schedule 3(o)





(Sarbanes-Oxley Act)





 


None, other than as disclosed in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2016, as updated by the Company’s Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 2017, June 30, 2017 and September 30, 2017, and as described in Schedule 3(bb)
below.


 


Schedule 3(p)





(Transactions with Affiliates)


 


None, except as described in Schedule 3(u) below.


 


Schedule 3(q)





(Equity Capitalization)


 


		(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.



 


None.


  






    


     


    

 


		(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.



 


None.


 


		(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.



 


UCC financing statements have been
filed in connection with (i) the issuance by the Company of the 2015 Senior Notes (as defined below), (ii) the CLA (as defined
below) (iii) certain of its capital lease obligations.


  


		(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.



  


In connection with the issuance
and sale of the 2016 Senior Notes (as defined hereinafter), the Company entered into a Registration Rights Agreement with the investors
(the “Registration Rights Agreement”), pursuant to which the Company is required to file one or more registration
statements with the Securities and Exchange Commission (the “SEC”) to register for resale by the investors the
shares issuable upon conversion of the 2016 Senior Notes (the “Conversion Shares”) and shares underlying certain
warrants issued to the holders of the 2016 Senior Notes (the “Warrant Shares”), and use its best efforts to
maintain the effectiveness of such registration statement(s). The Company was required to file the first such registration statement
promptly following the initial closing date under the securities purchase agreement for the 2016 Senior Notes, which occurred on
December 2, 2016, but in no event later than the date that is forty-five (45) days after such initial closing date. The Registration
Rights Agreement required the Company to obtain effectiveness of the required registration statement by specified deadlines contained
in the Registration Rights Agreement. The Company complied with its obligation to file such registration statement on January 17,
2017 and the SEC declared such registration statement effective on February 21, 2017. In connection with the execution of the Transaction
Documents, the required number of investors waived the Company’s ongoing maintenance obligations pursuant to the Registration
Rights Agreement with respect to such Conversion Shares and Warrant Shares.


  


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)


 






    


     


    

 


Convertible Unsecured Notes (as defined below) payable consisted
of the following as of September 30, 2017:


 


	 	 	Notes	 	 	Debt
 Discount
	 	 	Offering Costs	 	 	Net 
 Total
	 
	December 31, 2016 Balance	 	$	1,250,000	 	 	$	(666,000	)	 	$	(30,000	)	 	$	554,000	 
	Amortization of debt discount and deferred financing costs	 	 	—	 	 	 	739,000	 	 	 	30,000	 	 	 	769,000	 
	Issuance of additional warrants	 	 	—	 	 	 	(73,000	)	 	 	—	 	 	 	(73,000	)
	Ending balance—September 30, 2017	 	 	1,250,000	 	 	 	—	 	 	 	—	 	 	 	1,250,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Less: Current Portion	 	$	(1,250,000	)	 	$	—	 	 	$	—	 	 	$	(1,250,000	)
	Long Term Portion	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 



 


On September 1, 2016, the Company entered
into a securities purchase agreement and related notes and warrants pursuant to which it issued certain convertible unsecured promissory
notes (the “Convertible Unsecured Notes”) and detachable five-year warrants to purchase an aggregate of 124,999
shares of the Company’s common stock at an exercise price of $4.00 per share (the “September 2016 Financing”).
The Company received total gross proceeds of $1,250,000, less transaction expenses of $45,000 consisting of legal costs for net
proceeds of $1,205,000. The Company recorded a discount of $553,000 on the date of issuance representing the fair value of the
warrants issued and the value of the beneficial conversion feature on the date of issuance. In the fourth quarter of 2016, the
Company increased its debt discount recorded by $335,000, consisting of $305,000 recorded for the issuance of additional warrants
at fair value of $305,000 and $30,000 for the difference in fair value for warrants repriced from $4.00 per share to $3.00 per
share.


 


The Convertible Unsecured Notes bear interest
at a rate of 12% per annum and mature on September 1, 2017; provided, however, that the Company may not prepay any portion of the
outstanding principal and accrued and unpaid interest under the Convertible Unsecured Notes so long as any of the Senior Notes
(as defined hereinafter) remain outstanding and in no event will the maturity date of such Convertible Unsecured Notes be earlier
than at least ninety-one (91) days after the maturity date under the Senior Notes. The Convertible Unsecured Notes are subordinate
to the Senior Notes. The Convertible Unsecured Notes were initially convertible at the option of the holder into common stock at
a conversion price of $4.31 per share and will automatically convert into shares of common stock in the event of a conversion of
at least 50% of the then outstanding (i) principal, (ii) accrued and unpaid interest with respect to such principal and (iii) accrued
and unpaid late charges, if any, with respect to such principal and interest, under the Senior Notes. In connection with the issuance
of the 2016 Senior Notes (as defined hereinafter) and amendment and restatement of the 2015 Senior Notes (as defined hereinafter),
the conversion price was reduced to $2.50 per share. The Convertible Unsecured Notes also contain a blocker provision that prevents
the Company from effecting a conversion in the event that the holder, together with certain affiliated parties, would beneficially
own in excess of 9.99% of the shares of common stock outstanding immediately after giving effect to such conversion. At any time
after the issuance date of the Convertible Unsecured Notes, the Company may, at its option, redeem all or any portion of the then
outstanding principal and accrued and unpaid interest with respect to such principal (the “Company Optional Redemption
Amount”), at 100% of such aggregate amount; provided, however, that the Company may not redeem all or any portion of
the Company Optional Redemption Amount so long as any of the Senior Notes remain outstanding without the prior written consent
of the collateral agent with respect to such Senior Notes and certain investors holding the requisite number of conversion shares
and warrant shares underlying the Senior Notes and certain related warrants.


 






    


     


    

 


The securities purchase agreement for the
Convertible Unsecured Notes called for the issuance of additional five-year warrants to purchase an aggregate of 62,500 shares
at an exercise price of $4.00 per share on each of the 61st, 91st, 121st and 151st days after the closing of the September 2016
Financing (in each case, an “Additional Warrant Date”), but only in the event the Company had not consummated
a further financing consisting of the issuance of common stock and warrants for aggregate gross proceeds of at least $3,000,000
prior to such respective Additional Warrant Date. As of January 30, 2017, the Company had not consummated a further financing and,
as a result, issued warrants to purchase an aggregate of 250,000 shares of the Company’s common stock, consisting of the
issuance of an aggregate of 62,500 shares of the Company’s common stock on each of November 1, 2016, December 1, 2016, December
31, 2016 and January 30, 2017. The Company valued the warrants to purchase an aggregate of 62,500 shares of common stock issued
in the first quarter of 2017 using the Black-Scholes option pricing model at $73,000 and recorded an additional discount on the
date of issuance. The Company evaluated the accounting of the additional detachable warrants and determined that the warrants should
not be accounted for as derivative liabilities.


  


The terms of the Convertible Unsecured
Notes and the related warrants, including the related agreements, are also described in the Company’s Current Report on Form
8-K, filed September 2, 2016 (EDGAR Link), incorporated by reference herein.


 


Leases Payable 


 


Capital leases payable consisted of the
following:


 


	 	 	September 30,

2017
 (unaudited)
	 	 	December 31,
 2016	 
	 	 	 	 	 	 	 
	Capital lease payable to De Lange Landon secured by forklift, 10.0% interest, due on October 1, 2018, monthly payment of $452.	 	$	6,000	 	 	$	10,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on November 22, 2017, monthly payment of $394.	 	 	1,000	 	 	 	4,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 4.99% interest, due on May 1, 2020, monthly payment of $716.	 	 	23,000	 	 	 	—	 
	Total capital leases	 	$	30,000	 	 	$	14,000	 
	Less: current portion	 	 	(15,000	)	 	 	(10,000	)
	Long-term portion of capital leases	 	$	15,000	 	 	$	4,000	 



 


Standby Letter of Credit 


  


Pursuant to the terms of the Commercial
License Agreement (“CLA”), dated as of November 14, 2014, by and between the Company and Dresser-Rand, the Company
is required to provide a backstop security of $2.1 million to secure performance of certain obligations under the CLA (the “Backstop
Security”). Effective November 2, 2015, the Company executed that certain Backstop Security Support Agreement (the “Support
Agreement”), pursuant to which an investor agreed to provide the Company with financial and other assistance (including
the provision of sufficient and adequate collateral) as necessary in order for the Company to obtain a $2.1 million letter of credit
acceptable to Dresser-Rand as the Backstop Security and with an expiration date of June 30, 2017 (“Letter of Credit”).
If the investor is required to make any payments on the Letter of Credit, subject to the terms of the Intercreditor Agreement (as
defined hereinafter), the Company must reimburse the investor the full amount of any such payment. Such payment obligation is secured
by a pledge of certain collateral of the Company pursuant to a Security Agreement dated November 2, 2015 (“Security Agreement”),
and the security interest in favor of and the payment obligations to the investor are subject to the terms of that certain Subordination
and Intercreditor Agreement executed concurrently with the Support Agreement and Security Agreement (the “Intercreditor
Agreement”) by and among the investor, the Company and the collateral agent pursuant to the Senior Notes.


 






    


     


    

 


The term of the Company’s obligations
under the Support Agreement (the “Term”) commenced on November 2, 2015, the issuance date of the Letter of Credit,
and will terminate on the earliest of: (a) replacement of the Letter of Credit with an alternative Backstop Security in favor
of Dresser-Rand, (b) Dresser-Rand eliminating the Backstop Security requirement under the CLA, or (c) the last day of the
twenty-fourth calendar month following the commencement of the Term. In consideration of the investor’s support commitment,
the Company paid the investor a one-time fee equal to 4% of the amount of the Letter of Credit and is obligated to pay a monthly
fee equal to 1% of the amount of the Letter of Credit for the first twelve months. If the Support Agreement has not terminated
after the initial twelve months, the Company will pay another one-time fee equal to 4% of the amount of the Letter of Credit, and
a monthly fee equal to 2% of the amount of the Letter of Credit for up to another twelve months.


 


Amendments to Backstop Security and
Senior Notes


 


In June 2016, the Company executed a contract
manufacturing and commercial licensing agreement (the “CMLA”) with Dresser-Rand, which both companies intended
would supersede and replace the CLA. In April 2017, the Company amended the terms of the CMLA to make the CMLA effective as of
January 1, 2017, at which time it superseded and replaced the CLA. Further, effective as of April 27, 2017, the Company executed
a First Amendment to the Support Agreement (the “BSSA Amendment”), with the individual investor. The BSSA Amendment
is intended to conform the terms of the Support Agreement and related Letter of Credit to the terms of the CMLA. The BSSA Amendment
(i) reduces the security obligation underlying the Letter of Credit from $2.1 million to $500,000, consistent with the current
terms of the CMLA, (ii) extends the term of the backstop security to March 31, 2018, (iii) reduces the related fee payable under
the Support Agreement to 1% per month for the remainder of the term, (iv) provided for the amendment and restatement of the warrant
issued to the investor in connection with the execution of the Support Agreement in order to reduce the exercise price per share
of common stock of to $3.00 and insert a beneficial ownership blocker provision at 4.99% and (v) provided that the Company would
issue the investor an additional warrant to purchase 41,000 shares of Common Stock at an exercise price of $3.00 per share, subject
to a 4.99% beneficial ownership blocker.


 


In connection with the execution of the
BSSA Amendment, on April 27, 2017, the Company and certain investors holding Senior Notes executed first amendments to such Senior
Notes to revise the definition of “Backstop Agreement” to include any amendments, restatements, supplements
or other modifications thereof, as may be permitted thereunder.


  


For detailed terms of the Backstop Security
and related documents, see the Company’s Current Reports on Form 8-K filed November 3, 2015 (EDGAR Link) and May 1,
2017 (EDGAR Link), each incorporated by reference herein.


  


Capital Leases


 


The Company leases certain assets, primarily
computer equipment under agreements expiring in 2020. The total amount of the capital leases is approximately $35,000.


 


Operating Leases


  


The Company leases its office facility,
research and development facility and equipment under operating leases, which for the most part, are renewable. The leases also
provide that the Company will pay insurance and taxes. The Company’s primary operating lease expired on December 31, 2016
and it extended the lease for a three-month period ending March 31, 2017 at a reduced interim rate. The Company signed a new lease
in February 2017 for a separate facility and moved into the new headquarters facilities in April 2017.


 






    


     


    

 


Through March 31, 2017, the Company’s
headquarters was located at 9400 Toledo Way, Irvine, California 92618.  The property consisted of a mixed use commercial
office, production, and warehouse facility of 32,649 square feet and expired December 31, 2016. The Company extended the lease
at a reduced rate until March 31, 2017.  The monthly rent was $15,000 per month for the three months ended March 31,
2017. As of April 1, 2017, the Company’s headquarters is located at 8965 Research Drive, Suite 100, Irvine, California 92618
and consists of a mixed use commercial office of 4,960 square feet. From January through March 2017, the Company’s monthly
rent was $15,000 for the Toledo Way property holdover and, from April 1, 2017, its monthly rent is $10,168 per month, with annual
escalations on April 1, 2018 to $10,473 per month and on April 1, 2019 to $10,787 per month for the Research Drive property. The
Toledo Way lease terminated on April 1, 2017 and the Research Drive property lease expires on March 31, 2020.


 


Senior Secured Notes


  


Convertible Senior Notes payable consisted of the following
as of September 30, 2017:


 


	 	 	Principal	 	 	Debt
 
 Discount
	 	 	Offering Costs	 	 	Net
 
 Total
	 
	Balance, December 31, 2016	 	$	9,191,000	 	 	$	(8,152,000	)	 	$	(409,000	)	 	$	630,000	 
	Amortization of Debt Discount and Offering Costs	 	 	—	 	 	 	3,048,000	 	 	 	152,000	 	 	 	3,200,000	 
	Conversion into common shares	 	 	(60,000	)	 	 	50,000	 	 	 	3,000	 	 	 	(7,000	)
	2017 Senior Notes issued	 	 	556,000	 	 	 	(158,000	)	 	 	(35,000	)	 	 	363,000	 
	Balance, September 30, 2017	 	 	9,687,000	 	 	 	(5,212,000	)	 	 	(289,000	)	 	 	4,186,000	 
	Less: Current Portion	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Long Term Portion	 	$	9,687,000	 	 	$	(5,212,000	)	 	$	(289,000	)	 	$	4,186,000	 



 


In the fourth quarter of 2016, the Company
entered into a securities purchase agreement pursuant to which it issued a new series of convertible senior secured notes (collectively,
the “2016 Senior Notes”) and related warrants, and entered into amendment agreements related to the convertible
senior secured notes originally issued in April and May 2015 (the “2015 Senior Notes”) and the Convertible Unsecured
Notes. The Company issued and sold new 2016 Senior Notes with a face value of $3,747,000 and an original issue discount of $375,000
for gross cash proceeds of $3,372,000. Additionally, the Company amended and restated the 2015 Senior Notes, the aggregate principal
amount of which was $5,000,000 prior to such amendment and restatement. Upon the amendment and restatement of the 2015 Senior Notes,
the face value of such 2015 Senior Notes was $5,556,000 with an original issue discount of $556,000.


 


In September 2017, the Company entered
into a securities purchase agreement pursuant to which it issued a new series of convertible senior secured notes (collectively
the “2017 Senior Notes”) and related warrants at identical terms as the 2016 Senior Notes, except for the initial
exercise price of the detachable warrants. The Company issued and sold 2017 Senior Notes with a face value of $556,000 and an original
issue discount of $56,000 for gross cash proceeds of $500,000. In conjunction with the issuance of the 2017 Senior Notes, the Company
issued five-year warrants to purchase up to 222,222 shares of the Company’s common stock at $1.50 per share, which were valued
using Black-Scholes option pricing model at $128,000. The Company allocated the fair value of these warrants and the conversion
feature of the 2017 Senior Notes to debt discount as follows: $102,000 allocated to detachable warrants and $0 allocated to the
conversion feature. The Company recorded an additional debt discount of $56,000 for the original issue discount, resulting in a
debt discount recorded at issuance of $158,000. The Company will amortize this discount to interest expense over the expected remaining
life of the 2017 Senior Notes, which mature on December 31, 2018.


 






    


     


    

 


The Company incurred $35,000 of offering
costs in conjunction with the issuance and sale of the 2017 Senior Notes, consisting of legal and professional fees. The Company
will amortize the offering costs to interest expense over the expected remaining life of the 2017 Senior Notes.


 


In conjunction with the issuance and/or
amendment and restatement, as applicable, of the aggregate face value of $9,302,000 of the 2016 Senior Notes and 2015 Senior Notes,
the Company issued five-year warrants to purchase up to 3,720,839 shares of the Company’s common stock at $3.00 per share,
which were valued using Black-Scholes option pricing model at $6,003,000. The Company allocated the fair value of these warrants
and the conversion feature of the 2016 Senior Notes and 2015 Senior Notes to debt discount as follows: $3,495,000 allocated to
detachable warrants and $4,133,000 allocated to the conversion feature. It recorded an additional debt discount of $930,000 for
the original issue discount, resulting in a debt discount recorded at issuance of $8,558,000. The Company will amortize this discount
to interest expense over the expected remaining life of the 2016 Senior Notes and 2015 Senior Notes, which mature on December 31,
2018.


 


The Company incurred $479,000 of offering
costs in conjunction with the issuance and sale of the 2016 Senior Notes and amendment and restatement of the 2015 Senior Notes,
consisting of $298,000 of placement agent fees and costs and $181,000 of legal and professional fees. It will amortize the offering
costs to interest expense over the expected remaining life of the 2016 Senior Notes and 2015 Senior Notes.


 


The Company refers to the 2017 Senior Notes,
the 2016 Senior Notes and the amended and restated 2015 Senior Notes, collectively, as the “Senior Notes”. The
Senior Notes are fully secured by all assets of the Company and the Company’s subsidiaries. The Senior Notes are convertible
at a price per share of $2.50, which is adjustable upon a Company stock split, reverse split, or common share dividend.


 


Upon an Event of Default, the Senior Notes
will bear interest at a rate of 10% per annum. The Senior Notes will mature on December 31, 2018 and rank senior to the Convertible
Unsecured Notes. The Senior Notes are convertible at the option of the holder into the Company’s common stock at an exercise
price of $2.50 (as subject to adjustment therein) and will automatically convert into shares of the Company’s common stock
on the fifth trading day immediately following the issuance date of the Senior Notes on which (i) the Weighted Average Price (as
defined in the Senior Notes) of the Company’s common stock for each trading day during a twenty trading day period equals
or exceeds $5.00 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction)
and no Equity Conditions Failure (as defined in the Senior Notes) has occurred. The Senior Notes also contain a blocker provision
that prevents the Company from effecting a conversion in the event that the holder, together with certain affiliated parties, would
beneficially own in excess of either 4.99% or 9.99%, with such threshold determined by the holder prior to issuance, of the shares
of the Company’s common stock outstanding immediately after giving effect to such conversion.


  


Upon an Event of Default and delivery to
the holder of the Senior Note of notice thereof, such holder may require the Company to redeem all or any portion of its Senior
Note at a price equal to 115% of the Conversion Amount (as defined in the Senior Notes) being redeemed. Additionally, upon a Change
of Control and delivery to the holder of the Senior Note of notice thereof, such holder may also require the Company to redeem
all or any portion of its Senior Note at a price equal to 115% of the Conversion Amount being redeemed. Further, at any time from
and after January 1, 2018 and provided that the Company has not received either (i) initial deposits for at least eight 2 MW Power
Oxidizer units or (ii) firm purchase orders totaling not less than $3,500,000 and initial payment collections of at least $1,600,000,
in each case during the period commencing on the issuance date of the 2016 Senior Notes and ending on December 31, 2017, the holder
of the Senior Note may require the Company to redeem all or any portion of its Senior Note at a price equal to 100% of the Conversion
Amount being redeemed.


  






    


     


    

 


At any time after the issuance date of
the Senior Notes, the Company may redeem all or any portion of the then outstanding principal and accrued and unpaid interest with
respect to such principal, at 100% of such aggregate amount; provided, however, that the aggregate Conversion Amount to be redeemed
pursuant to all Senior Notes must be at least $500,000, or such lesser amount as is then outstanding. The portion of the Senior
Note(s) to be redeemed shall be redeemed at a price equal to the greater of (i) 110% of the Conversion Amount of the Senior Note
being redeemed and (ii) the product of (A) the Conversion Amount being redeemed and (B) the quotient determined by dividing (I)
the greatest Weighted Average Price (as defined in the Senior Notes) of the shares of the Company’s common stock during the
period beginning on the date immediately preceding the date of the notice of such redemption by the Company and ending on the date
on which the redemption by the Company occurs by (II) the lowest Conversion Price (as defined in the Senior Notes) in effect during
such period.


 


The Senior Notes contain a provision that
prevents the Company from entering into or becoming party to a Fundamental Transaction (as defined in the Senior Notes) unless
the Company’s successor entity assumes all of the Company’s obligations under the Senior Notes and the related transaction
documents pursuant to written agreements in form and substance satisfactory to at least a certain number of holders of the Senior
Notes.


  


In connection with foregoing, Ener-Core
Power, Inc., the Company’s wholly-owned subsidiary, entered into a Guaranty, pursuant to which it agreed to guarantee all
of the obligations of the Company under the securities purchase agreement for the 2016 Senior Notes, the Senior Notes and the related
transaction documents.


 


During the nine months ended September
30, 2017, two holders of Senior Notes converted $60,000 of principal into 24,000 shares of the Company’s common stock. As
a result of these conversions, the Company incurred a loss of $53,000, representing the unamortized debt discount and deferred
financing fees.


  


Additionally, on November 1, 2017, pursuant
to the Agreement, the Company issued certain Notes and Warrants, and entered into waivers related to the 2015 Senior Notes and
2016 Senior Notes. The Company issued and sold Notes with an aggregate face value of approximately $444,445 and an original issue
discount of approximately $44,445 for gross cash proceeds of $400,000. The Notes rank pari passu with the 2017 Senior Notes, 2015
Senior Notes and 2016 Senior Notes; provided that the Notes include a provision that provides for conversion upon a next
equity financing.


 


Additionally, on December 20, 2017, pursuant
to the Agreement, the Company issued certain Notes and Warrants, and entered into waivers related to the 2015 Senior Notes and
2016 Senior Notes. The Company issued and sold Notes with an aggregate face value of approximately $555,556 and an original issue
discount of approximately $55,556 for gross cash proceeds of $500,000. The Notes rank pari passu with the 2017 Senior Notes, 2015
Senior Notes and 2016 Senior Notes; provided that the Notes include a provision that provides for conversion upon a next
equity financing.


 


Additionally, on January 25, 2018, pursuant
to the Agreement, the Company issued certain Notes and Warrants, pursuant to prior waivers related to the 2015 Senior Notes and
2016 Senior Notes. The Company issued and sold Notes with an aggregate face value of approximately $555,556 and an original issue
discount of approximately $55,556 for gross cash proceeds of $500,000. The Notes rank pari passu with the 2017 Senior Notes, 2015
Senior Notes and 2016 Senior Notes; provided that the Notes include a provision that provides for conversion upon a next
equity financing.


  






    


     


    

 


The terms of the Senior Notes, as amended
and/or restated to date, including the related securities purchase agreements, and the related pledge, guaranty and intercreditor
agreements, are described in the following Current Reports on Form 8-K, incorporated by reference herein:


  


		●	Filed
                                         April 23, 2015 (EDGAR Link)
		●	Filed
                                         May 7, 2015 (EDGAR Link)
		●	Filed
                                         October 23, 2015 (EDGAR Link)
		●	Filed
                                         November 3, 2015 (EDGAR Link)
		●	Filed
                                         November 25, 2015 (EDGAR Link)
		●	Filed
                                         December 11, 2015 (EDGAR Link)
		●	Filed
                                         December 31, 2015 (EDGAR Link)
		●	Filed
                                         April 5, 2016 (EDGAR Link)
		●	Filed
                                         September 2, 2016 (EDGAR Link)
		●	Filed
                                         October 24, 2016 (EDGAR Link)
		●	Filed
                                         November 25, 2016 (EDGAR Link)
		●	Filed
                                         December 2, 2016 (EDGAR Link)
		●	Filed
                                         December 14, 2016 (EDGAR Link)
		●	Filed
                                         May 1, 2017 (EDGAR Link)
		●	Filed
                                         September 20, 2017 (EDGAR Link)
		●	Filed
                                         November 2, 2017 (EDGAR Link)
		●	Filed
                                         December 21, 2017 (EDGAR Link)
		●	Filed
                                         January 26, 2018 (EDGAR Link)



 


The Company has approximately $1,800,000
in trade accounts payable as of September 30, 2017.


 


Schedule 3(s)


 


(Litigation)


 


On September 23, 2016 AMTRA ENGINEERING
B.V. filed a civil lawsuit (Case number 30-2016-00877078-CU-BC-CJC) in the Superior Court, County of Orange, State of California
against Ener-Core Power, Inc. alleging breach of contract and breach of warranty. The lawsuit is due to a billing dispute surrounding
a contractor for the Attero 250Kw unit delivered in June 2014 to the Netherlands. The Company has settled the lawsuit for $42,500
in cash, of which $27,500 remains payable and is expected to be paid after the close of a larger financing. The Company intends
to file a counter-claim against the contractor’s related company to recover $78,000 in unpaid billings.


  


On March 22, 2017, Dian Griesel filed a
civil lawsuit (Case number 30-2017-009001490CU-BC-CJC) in the Superior Court, County of Orange, State of California against Ener-Core
Power, Inc. for 42,657.40 of past due payables for investor relations services performed for the Company during the 2016 fiscal
year. The Company settled the case on November 17, 2017 for $30,000 and has received a full legal release.


  


On November 13, 2017, Praxair Distribution,
Inc. filed a civil lawsuit (Case number 00955447-CU-CL-CJC) in the Superior Court, County of Orange, State of California against
Ener-Core Power, Inc. for $41,595.45 of past due payables for industrial gases and materials purchased by the Company during theyear
ended December 31, 2016. The Company was served notice on November 28, 2017 and expects to dispute a portion of the amount claimed.
The Company expects to seek a potential settlement during 2018.


 






    


     


    

 


A commercial partner of the Company has
notified the Company that such partner may make a claim with respect to an incident involving the Company’s technology; as
of the date of the Agreement, no claim has been received and the Company is unable to quantify the scope of any potential claim.


 


Schedule 3(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 (as defined in Rule 501(f) under the 1933 Act) of the Company or any of its Subsidiaries 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.



  


On December 17, 2017, the Company
and Alain J. Castro entered into a Separation Agreement and General Release of All Claims (the “Separation Agreement”),
pursuant to which the Company and Mr. Castro mutually agreed to terminate Mr. Castro’s employment with the Company, as well
as his position as Chief Executive Officer of the Company, along with any officer, director or employee positions with the Company’s
subsidiaries and affiliates, effective as of a date no later than May 31, 2018 (the “Termination Date”). Mr.
Castro will remain employed and will continue to serve as both Chief Executive Officer and a member of the Company’s board
of directors (the “Board”) during the six-month notice period, beginning on December 1, 2017 and ending on the
Termination Date (the “Notice Period”), subject to the following conditions: (i) if the Company hires a new
chief executive officer during the Notice Period, Mr. Castro will continue to remain employed by the Company as a special advisor
for the remainder of the Notice Period and will perform duties under the direction of the Board; (ii) Mr. Castro will resign as
a member of the Board at the request of the Board at any time during the Notice Period; (iii) during the Notice Period, the Company
will pay Mr. Castro a base salary of $20,000 per month, the Company will continue to reimburse Mr. Castro for certain out-of-pocket
expenses and Mr. Castro may continue to participate in the Company’s health and insurance plans; and (iv) the options awarded
to Mr. Castro on or about April 6, 2017 and November 28, 2014 and the restricted stock awarded to Mr. Castro on or about April
6, 2017 will accelerate and be fully vested on the effective date of the Severance Agreement and General Release of All Claims
(the “Severance Agreement”) that Mr. Castro has agreed to execute upon effectiveness of his termination. In
addition, the November 28, 2014 option will remain exercisable through November 28, 2020, and the April 6, 2017 option will be
exercisable for a period of five years following his departure from the Company pursuant to the terms of the Separation Agreement.
During the Notice Period, Mr. Castro may spend a reasonable amount of time searching for alternate employment, and in the event
he leaves to begin full time employment elsewhere during the Notice Period, he will forfeit any additional compensation due under
the Separation Agreement.


  






    


     


    

 


The terms of the Separation Agreement
and Severance Agreement are described in the Company’s Current Report on Form 8-K, as filed on December 19, 2017, and are
incorporated by reference herein.


 


Schedule 3(bb)


(Internal Accounting and Disclosure
Controls)


  


As of December 31, 2016, as updated on
September 30, 2017 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, as amended).


 


Based on such evaluation, the disclosure
controls and procedures of the Company and the Subsidiary as of December 31, 2016 were ineffective at the reasonable assurance
level due to the following material weaknesses in internal control over financial reporting:


 


		1.	The Company does not have full and complete written documentation of its internal control policies
and procedures, primarily for controls related to its inventory procurement and management. Management evaluated the impact of
the Company’s failure to have written documentation of its internal controls and procedures on its assessment of the Company’s
disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.



  


		2.	The Company does not have sufficient segregation of duties within accounting functions, which is
a basic internal control. Due to its 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 the Company’s failure to
have segregation of duties on its assessment of its disclosure controls and procedures and has concluded that the control deficiency
that resulted represented a material weakness.



  


		3.	For the year ending December 31, 2016, 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 2015 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 the Company’s financial
reporting. Management evaluated the impact of the Company’s failure to have adequate information technology controls, on
the Company’s assessment of its disclosure controls and procedures and has concluded that the control deficiency that resulted
represented a material weakness.



  






    


     


    

 


The Company is attempting to remediate
the material weaknesses in its disclosure controls and procedures and internal controls over financial reporting identified in
its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 by refining its internal procedures (see below).  During
the nine months ended September 30, 2017, the Company initiated the following corrective actions, which management believes are
reasonably likely to materially affect the Company’s financial reporting, as they are designed to remediate the material
weaknesses as described above:


 


	 	●	The Company has begun the process of further documenting its internal control structure.


 


	 	●	The Company is in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.  The Company has implemented additional anti-fraud measures over its cash disbursements systems.


  


	 	●	It is developing and implementing inventory control procedures.


 


The Company does not expect to have fully
remediated these material weaknesses until management has tested those internal controls and found them to have been remediated.  The
Company expects to complete this process during its annual testing for the fiscal year ending December 31, 2017.


 


Schedule 3(dd)


(Ranking of Notes)


 


The Senior Notes and the Notes issued and
issuable pursuant to the Agreement will rank pari passu. The rights granted pursuant to the Backstop Agreement are subject
to a subordination and intercreditor agreement, and the Convertible Unsecured Notes are subordinated to all such senior obligations
pursuant to another subordination and intercreditor agreement. See also Schedule 3(r).


  


Schedule 3(nn)


(No Disagreements with Accountants and
Lawyers)


  


The Company owes certain outstanding balances
with respect to fees incurred by its accountants and lawyers; however, the Company does not anticipate that such outstanding fees
owed will affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.


  


Schedule 3(oo)


(No Disqualification Events)


  


None.


  


Schedule 4(s)


(Pledges of Intellectual Property Rights)


 


None, except as provided in the CMLA, as
amended to date.