Exhibit 10.1


 





SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of March 11, 2015, between EnerJex Resources, Inc., a Nevada corporation
(the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors
and assigns, a “Purchaser” and collectively, the “Purchasers”).


 


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


 


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


 


ARTICLE I.


DEFINITIONS


 


1.1           Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Certificate of Designation (as defined herein), and (b) the following terms have the meanings
set forth in this Section 1.1:


 


"8-K
Filing" means the Company's filing with the United States Securities and Exchange Commission, in accordance with Section
4.6 hereof, of a Form 8-K, announcing the closing of the transactions contemplated by this Agreement and filing therewith, inter
alia, a copy of this Agreement and the Disclosure Schedules hereto.


 


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.7.


 


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


 


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


 


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


 


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


 




    	 



    	 



    

 


“Certificate
of Designation” means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary
of State of Nevada, in the form of Exhibit A attached hereto.


 


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


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than
the third Trading Day following the date hereof.


 


“Closing
Statement” means the Closing Statement in the form on Annex A attached hereto.


 


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


 


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


 


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.


 


“Company
Counsel” means Reicker, Pfau, Pyle & McRoy LLP, 1421 State Street, Suite B, Santa Barbara, California 93101.


 


“Conversion
Price” shall have the meaning ascribed to such term in the Certificate of Designation.


 


“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in
accordance with the terms hereof.


 


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.


 


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


 


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


 


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


 




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“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors or a majority
of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b)
securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable
or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations)
or to extend the term of such securities, and (c) securities issued pursuant to mergers, acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person
(or to the equityholders of a Person) which is, itself or through its subsidiaries, either an operating company or an owner of
an asset or assets that such disinterested directors of the Company determine to be synergistic with the business of the Company,
but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.17.


 


“Participation
Maximum” shall have the meaning ascribed to such term in Section 4.12(a).


 


“Per
Share Purchase Price” equals $1.75, subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.


 




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


 


“Placement
Agent” means Northland Capital Markets.


 


“Preferred
Stock” means the up to 1,764 shares of the Company’s Series B Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.


 


“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.12(b).


 


“Pro
Rata Portion” shall have the meaning ascribed to such term in Section 4.12(e).


 


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


 


“Prospectus”
means the final prospectus filed for the Registration Statement.


 


“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with
the Commission and delivered by the Company to each Purchaser at the Closing.


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10.


 


“Registration
Statement” means the effective registration statement with the Commission file No. 333-199030 which registers the sale
of the Shares, Preferred Stock, Warrants and Underlying Shares set forth on Schedule 1.1 attached hereto.


 


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


 


“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants
or conversion in full of all shares of Preferred Stock, ignoring any conversion or exercise limits set forth therein, and that
any previously unconverted shares of Preferred Stock are held until the third anniversary of the Closing Date.


 


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


 




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


 


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


 


“Securities”
means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.


 


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


 


“Shareholder
Approval” means such approval as may be required by the applicable rules and regulations of the Trading Market (or any
successor entity) from the shareholders of the Company with respect to the transactions contemplated by the Transaction Documents,
including the issuance of all of the Underlying Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing
Date.


 


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


 


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


 


“Stated
Value” means $1,000 per share of Preferred Stock.


 


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


 


“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.12(a).


 


“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b).


 


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


 


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


 


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


 




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“Transaction
Documents” means this Agreement, the Certificate of Designation, the Warrants, all exhibits and schedules thereto and
hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.


 


“Transfer
Agent” means Standard Registrar & Transfer Company Inc., the current transfer agent of the Company, with a mailing
address of 12528 South 1840 East, Draper, UT 84020 and a facsimile number of (801) 571-2551, and any successor transfer agent of
the Company.


 


“Underlying
Shares” means the Shares, the shares of Common Stock issued and issuable upon conversion or redemption of the Preferred
Stock and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of dividends on the Preferred Stock
in accordance with the terms of the Certificate of Designation.


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).


 


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


 


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


 


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


 




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ARTICLE II.


PURCHASE AND SALE


 


2.1           Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $3,100,000 of Shares, Preferred Stock and Warrants, all as determined by pursuant to Section
2.2(a). Notwithstanding anything herein to the contrary, in no event shall the Company issue to a Purchaser a number of Shares
such that such Purchaser’s beneficial ownership of the Common Stock at the Closing exceed 9.9% of the issued and then outstanding
shares of Common Stock at such time (including the Shares issuable hereunder but not including the Conversion Shares or Warrant
Shares)(for purposes of this provision) (“Share Closing Maximum”), beneficial ownership shall be calculated
in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each Purchaser shall
deliver to the Company, via wire transfer or a certified check, immediately available funds equal to its Subscription Amount, and
the Company shall deliver to each Purchaser its respective Shares, shares of Preferred Stock and Warrants, as determined pursuant
to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the
Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices
of EGS or such other location as the parties shall mutually agree. Notwithstanding anything herein to the contrary, the Company
covenants that, if the Purchaser delivers a Notice of Conversion (as defined in the Certificate of Designation) to convert any
shares of Preferred Stock between the date hereof and the Closing Date, the Company shall deliver Conversion Shares to the Purchaser
on the Closing Date in connection with such Notice of Conversion (rather than the converted Preferred Stock.


 


2.2           Deliveries.


 


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


 


(i)          this
Agreement duly executed by the Company;


 


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


 


(iii)        a
number of Shares equal to the Share Closing Maximum delivered to such Purchaser account electronically via The Depository Trust
Company Deposit or Withdrawal at Custodian system (“DWAC”);


 


(iv)        a
certificate evidencing a number of shares of Preferred Stock equal to (A) such Purchaser’s Subscription Amount minus the
product of (1) the Share Closing Maximum and (2) the Per Share Purchase Price, divided by (B) the Stated Value, registered in the
name of such Purchaser and evidence of the filing and acceptance of the Certificate of Designation from the Secretary of State
of Nevada;


 




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(v)         a
Warrant in the form attached hereto at Exhibit C registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 100% of such Purchaser’s Shares and Conversion Shares, with an exercise price equal to $2.75,
subject to adjustment therein (such Warrant certificate may be delivered within three Trading Days of the Closing Date); and


 


(vi)        the
Prospectus and Prospectus Supplement (which have been delivered in accordance with Rule 172 under the Securities Act).


 


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


 


(i)          this
Agreement duly executed by such Purchaser; and


 


(ii)         such
Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.


 


2.3           Closing
Conditions.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 




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


 


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


 


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


 


ARTICLE III.


REPRESENTATIONS AND WARRANTIES


 


3.1           Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules are attached hereto
as Annex B and shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent
of the disclosure contained in the corresponding section of the Disclosure Schedule (under which an exception to one section of
such Disclosure Schedules shall be deemed to be an exception to each other Section of this Article III as to which a reasonable
reader would infer, from the language of the disclosure, that such exception applies), the Company hereby makes the following representations
and warranties to each Purchaser:


 


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


 




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


 


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


 


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


 




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(e)          Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.6 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement,
(iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Shares and Warrant Shares
and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, (iv) the filing of Form D
with the Commission and such filings as are required to be made under applicable state securities laws (v) Shareholder Approval,
and (vi) the filing of the Certificate of Designation with the office of the Secretary of State of the State of Nevada (collectively,
the “Required Approvals”).


 


(f)          Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on
the date hereof. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities
Act, which became effective on February 25, 2015 (the “Effective Date”), including the Prospectus, and
such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is
effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or
suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been
instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations
of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b). At the time the Registration Statement
and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement
and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did
not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at time
the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material
respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were
made, not misleading.


 




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


 




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(h)          SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on
a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.


 


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


 




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(j)          Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Except
as set forth in Schedule 3.1(j), neither the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.


 


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


 


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


 




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


 


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


 


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


 




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


 


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


 


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


 




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(s)          Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange
Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its Subsidiaries.


 


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


 


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


 


(v)         Registration
Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act
of any securities of the Company or any Subsidiary.


 




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


 


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


 


(y)          Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents and other
certain information that shall be publicly disclosed and disseminated upon the filing of the Current Report on Form 8-k required
to be filed pursuant to Section 4.6, the Company confirms that neither it nor any other Person acting on its behalf has provided
any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in the Prospectus Supplement. The Company understands and confirms that
the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure
furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses
and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof. Investor acknowledges and agrees that the Investor has not requested from the Company, and the
Company has not delivered to the Investor, a private placement or similar memorandum or any “Risk Factors” or “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of the type typically contained therein.


 




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


 


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


 




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


 


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


 


(dd)         Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(dd) of the Disclosure Schedules. To the knowledge and belief
of the Company, such accounting firm: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall
express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal
year ending December 31, 2015.


 


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


 




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(ff)         Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(e) and 4.15 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers
has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities
for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently
have a “short” position in the Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are outstanding, including, without limitation, during the periods that the value
of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any)
could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities
are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of
any of the Transaction Documents.


 


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


 


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


 


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


 


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


 




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


 


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


 


(mm)         Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Warrants by the Company to the Purchasers as contemplated hereby.


 


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


 


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


 


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


 




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(b)          Understandings
or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business.


 


(c)          Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants or converts any shares of Preferred Stock it will be either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act.


 


(d)          Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser has been granted the opportunity
to conduct a full and complete examination of the records, documents and files of the Company, to ask questions of and receive
answers from representatives of the Company, its officers, directors, employees and agents concerning the Company and its business
and prospects, the terms and conditions of this Agreement, and the purchase of the Securities, and to obtain any additional information
which Investor deems necessary to verify the accuracy of any information received. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.


 




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


 


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


 


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


 


ARTICLE IV.


OTHER AGREEMENTS OF THE PARTIES


 


4.1           Removal
of Legends.


 


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


 


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


 




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NEITHER THIS
SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


The Company
acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Warrants to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged
or secured Warrants to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further,
no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of Warrants may reasonably request in connection with a pledge or transfer
of the Warrants.


 


(c)          Certificates
evidencing the Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while
a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities
Act, (ii) following any sale of such Warrant Shares pursuant to Rule 144, (iii) if such Warrant Shares are eligible for sale under
Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144
as to such Warrant Shares and without volume or manner-of-sale restrictions or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).
The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required
by the Transfer Agent to effect the removal of the legend hereunder. If all or any shares of Preferred Stock are converted or any
portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant
Shares, or if such Warrant Shares may be sold under Rule 144 and the Company is then in compliance with the current public information
required under Rule 144, or if the Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to such Warrant Shares and without volume or manner-of-sale restrictions
or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission) then such Warrant Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will,
no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing
Warrant Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and
other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4. Certificates for Warrant Shares subject to legend removal hereunder shall
be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository
Trust Company System as directed by such Purchaser.


 




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


 


(e)          The
Shares and Conversion Shares shall be issued free of legends.


 


(f)          Each
Purchaser acknowledges and agrees that the Company is an issuer subject to Rule 144(i) and that Company's obligations under this
Agreement are subject to satisfaction of the conditions imposed thereby.


 




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


 


4.3           Furnishing
of Information; Public Information.


 


(a)          Until
the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to maintain
the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.


 


(b)          At
any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of
the Warrant Shares (assuming cashless exercise) may be sold without the requirement for the Company to be in compliance with Rule
144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to
satisfy the current public information requirement under Rule 144(c) for a period of more than 30 consecutive days or (ii) has
ever been an issuer described in Rule 144(i)(1)(i) or becomes an issuer in the future, and the Company shall fail to satisfy any
condition set forth in Rule 144(i)(2) for a period of more than 30 consecutive days (a “Public Information Failure”)
then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial
liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Warrant Shares,
an amount in cash equal to one percent (1.0%) of the aggregate Exercise Price of such Purchaser’s Warrants on the day of
a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days)
thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information
is no longer required  for the Purchasers to transfer the Underlying Shares pursuant to Rule 144.  The payments to which
a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” 
Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which
such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or
failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at
the rate of 1.0% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s
right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.


 




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


 


4.5           Conversion
and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion
included in the Certificate of Designation set forth the totality of the procedures required of the Purchasers in order to exercise
the Warrants or convert the Preferred Stock. Without limiting the preceding sentences, no ink-original Notice of Exercise or Notice
of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Exercise or Notice of Conversion form be required in order to exercise the Warrants or convert the Preferred Stock. No additional
legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their
Preferred Stock. The Company shall honor exercises of the Warrants and conversions of the Preferred Stock and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.


 


4.6           Securities
Laws Disclosure; Publicity. The Company shall, by 9:00 a.m. (New York City time) on the Trading Day immediately following the
date hereof, file a Current Report on Form 8-K and press release disclosing the material terms of the transactions contemplated
hereby, including the Transaction Documents as exhibits thereto. From and after the 8-K Filing, the Company represents to the Purchasers
that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or
any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective upon the 8-K Filing, the Company acknowledges and agrees that
any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its
Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers
or any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser shall consult with each other in
issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing
with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except: (a)
as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b)
to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers
with prior notice of such disclosure permitted under this clause (b).


 




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


 


4.8           Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents
(including, but not limited to, the disclosure schedules set forth in the Disclosure Schedules), the Company covenants and agrees
that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into
a written agreement with the Company regarding the confidentiality and use of such information. To the extent that the Company
delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants
and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their
respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries, or any of their
respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information.
The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.


 


4.9           Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for general corporate purposes,
including but not limited to paying debt service on the Company's indebtedness, paying operating expenses in the ordinary course,
and investigating and pursuing the acquisition of assets and other strategic transactions.


 




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4.10         Indemnification
of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against Purchaser
Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate
of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents
or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser
Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability
is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by
such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10
shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right
of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.


 


4.11         Reservation
and Listing of Securities.


 


(a)          The
Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.


 


(b)          If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate
or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required
Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.


 




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(c)          The
Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum
on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing
or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on
such date on such Trading Market or another Trading Market. The Company agrees to maintain the eligibility of the Common Stock
for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation,
by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such
electronic transfer. In addition, on or before the earlier of the next annual meeting of the Company’s shareholders or May
31, 2015, the Company shall hold a meeting of shareholders (which may also be at the annual meeting of shareholders) for the purpose
of obtaining Shareholder Approval, with the recommendation of the Company’s Board of Directors that such proposal be approved,
and the Company shall solicit proxies from its shareholders in connection therewith in the same manner as all other management
proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal.
The Company shall use its reasonable best efforts to obtain such Shareholder Approval. If the Company does not obtain Shareholder
Approval at the first meeting, the Company shall call a meeting every four months thereafter to seek Shareholder Approval until
the earlier of the date Shareholder Approval is obtained or the Preferred Stock is no longer outstanding.


 


4.12         Participation
in Future Financing.


 


(a)          From
the date hereof until the date that is the 12-month anniversary of the Closing Date, upon any issuance by the Company or any of
its Subsidiaries of Common Stock, Common Stock Equivalents for cash consideration or a combination of units hereof (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to an amount of the Subsequent Financing equal
to 50% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided
for in the Subsequent Financing.


 


(b)          At
least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).
Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The
Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed
to be effected and shall include a term sheet or similar document relating thereto as an attachment.


 




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(c)          Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice that
the Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing
and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent
Financing Notice. If the Company receives no such notice from a Purchaser as of such fifth (5th) Trading Day, such Purchaser
shall be deemed to have notified the Company that it does not elect to participate.


 


(d)          If
by 5:30 p.m. (New York City time) on the fifth (5th ) Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Participation Maximum, then the Company may effect the remaining
portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.


 


(e)          If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice,
the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the
Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities
purchased on the Closing Date by a Purchaser participating under this Section 4.12 and (y) the sum of the aggregate Subscription
Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.12.


 


(f)          The
Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after
the date of the initial Subsequent Financing Notice.


 


(g)          The
Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree
to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written
consent of such Purchaser.


 


(h)          Notwithstanding
anything to the contrary in this Section 4.12 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the
Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to
the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such
Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession
of any material, non-public information with respect to the Company or any of its Subsidiaries.  


 




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(i)          Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance.


 


4.13         Subsequent
Equity Sales.


 


(a)          [RESERVED].


 


(b)          From
the date hereof until such time as no Purchaser holds any of the Warrants, the Company shall be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents
(or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means
a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market
for the Common Stock (but not including customary anti-dilution provisions for future offerings granted within a security) or (ii)
enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at
a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect damages.


 


(c)          Additionally,
prior to the date that Shareholder Approval has been obtained and deemed effective (by the Company’s Trading Market), neither
the Company nor any Subsidiary shall make any issuance whatsoever of Common Stock or Common Stock Equivalents. Any Purchaser shall
be entitled to obtain injunctive relief against the Company to preclude any such issuance or registration, which remedy shall be
in addition to any right to collect damages.


 


(d)          Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall
be an Exempt Issuance.


 




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


 


4.15         Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.6.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release
as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding
anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press
release as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any
securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated
by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser
shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company or its Subsidiaries
after the issuance of the initial press release as described in Section 4.6.  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing
other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.


 


4.16         Capital
Changes. Prior to the 180 days after the Closing Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest of the
shares of Preferred Stock.


 




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4.17         Piggyback
Registration Rights. If, at any time prior to the earlier of (x) the 12-month anniversary of the Closing Date and (y) the first
day as of which all Securities issued and sold hereunder may be sold under Rule 144 and the Company is then in compliance with
the current public information required under Rule 144, the Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its account or the account of others under the Securities Act of the Common Stock, other
than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with
the stock option or other employee benefit plans, the Company shall deliver to each Purchaser a written notice of such determination
and if, within 15 Business Days after the date of delivery of such notice, the Purchaser (or any permitted successor or assign)
shall so request in writing, the Company shall include in such registration statement all or any part of the Warrant Shares that
such Purchaser requests to be registered. In the case of inclusion in a firm-commitment underwritten offering, the Purchasers must
sell their Warrant Shares on the same terms set by the underwriters for shares of Common Stock to be sold for the account of the
Company.


 


4.18         Per
Share Price Protection for Common Stock.


 


(a)          From
the date hereof until the date immediately following the 10 consecutive Trading Days (the “Measurement Period,”
which such Measurement Period shall have commenced only after the 12-month anniversary of the date hereof) wherein (i) the VWAP
for each Trading Day during such Measurement Period exceeds $4.30 (subject to adjustment for forward and reverse stock splits and
the like) and (ii) for each Trading Day during such Measurement Period the daily trading volume for the Common Stock on the principal
Trading Market exceeds 200,000 shares per Trading Day (subject to adjustment for forward and reverse stock splits and the like),
the Company or any Subsidiary issues and sells Common Stock or Common Stock Equivalents (including the issuance or sale of shares
of Common Stock or Common Stock Equivalents owned or held by or for the account of the Company) for a consideration per share that
is less than the Per Share Purchase Price (adjusted for stock splits, combinations, dividends and the like occurring after the
Closing Date) (such lesser price is referred to herein as the “Discounted Per Share Purchase Price”) (the foregoing
a “Dilutive Issuance”), then within three (3) Trading Days after such Dilutive Issuance and subject to Purchaser's
compliance with Section 4.18(c), below) the Company shall issue to each Purchaser, without the payment of additional consideration,
in connection with such Dilutive Issuance, a number of shares of Common Stock equal to the product of (i) the fraction obtained
by dividing (A) the sum of the number of Initial Shares and Additional Shares then held by such Purchaser on the date of the Dilutive
Issuance by (B) the sum of the number of Initial Shares (as defined below) issued to such Purchaser hereunder on the Closing Date
and all Additional Shares previously reserved for issuance to such Purchaser after the Closing Date, multiplied by (ii)
the difference between (A) the aggregate number of shares of Common Stock that would have been issued to such Purchaser at the
Closing if the Subscription Amount were divided by the Discounted Per Share Purchase Price, minus (B) the aggregate number of shares
of Common Stock equal to the sum of the Initial Shares, plus, to the extent there has been a previous reservation of Additional
Shares (as defined below) to such Purchaser, the number of Additional Shares previously reserved for issuance to such Purchaser. 
For purposes of this Section 4.18, the term (I) “Additional Shares” means, with respect to the applicable Purchaser,
shares of Common Stock issued to such Purchaser pursuant to this Section 4.18 (adjusted for stock splits, combinations, dividends
and the like occurring after the Closing Date); and (II) “Initial Shares” means, with respect to the applicable
Purchaser, the number of shares of Common Stock issued to such Purchaser on the Closing Date (adjusted for stock splits, combinations,
dividends and the like occurring after the Closing Date).


 




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(b)          Notwithstanding
the foregoing:


 


(i)          To
the extent that an issuance of Additional Shares would result in a Purchaser or any of its affiliates beneficially owning in excess
of 9.9% (the “Maximum Percentage”) of the Common Stock, then the Company shall initially issue only such number
of Additional Shares that would result in such Purchaser (together with such Purchaser’s affiliates) beneficially owning
the Maximum Percentage of the Common Stock, and, except as otherwise provided below, no other Additional Shares shall be issuable
under this Section 4.18. After such initial issuance, and until all Additional Shares which otherwise would have been issued under
this Section 4.18 have been issued, from time to time the Company will issue such number of such unissued Additional Shares so
that such Purchaser (together such Purchaser’s affiliates) will beneficially own only the Maximum Percentage of the Common
Stock. Such Purchaser shall make written representations and warranties to the Company regarding its (together with its affiliates’)
beneficial ownership to effectuate the foregoing.  The provisions of this paragraph shall be implemented in a manner otherwise
than in strict conformity with the terms this paragraph to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph
shall apply to assignees of such Purchaser hereunder. The holders of Common Stock of the Company shall be third party beneficiaries
of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock.
For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation,
with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. To the extent that the Purchaser is unable to receive shares as a result
of this Section 4.18(b)(i), such shares shall be held in abeyance for the Purchaser until such time, if ever, as its right thereto
would not result in the Holder exceeding the Maximum Percentage.


 




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(ii)         If
the Company has not obtained Shareholder Approval, then the Company may not issue, under this Section 4.18, a number of shares
of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Closing Date and prior to such issuance
date under this Section 4.18 (A) in connection with the issuance of the Shares pursuant to this Agreement, (B) in connection with
any conversion of Preferred Stock issued pursuant to this Agreement and (C) in connection with the exercise of any Warrants issued
pursuant to this Agreement, would exceed 1,528,622 shares of Common Stock (subject to adjustment for forward and reverse stock
splits, recapitalizations and the like) (such number of shares, the “Issuable Maximum”). Each Purchaser shall
be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the Purchaser’s original
Subscription Amount pursuant to this Agreement by (y) the aggregate original Subscription Amounts of all holders pursuant to this
Agreement. In addition, each Purchaser may allocate its pro-rata portion of the Issuable Maximum among Shares, Preferred Stock
and Warrants held by it in its sole discretion. For avoidance of doubt, unless and until any required Shareholder Approval is obtained
and effective, warrants issued to any registered broker-dealer as a fee in connection with the Securities issued pursuant to this
Agreement and pursuant to such Purchaser’s Preferred Stock and Warrants was less than such Purchaser’s pro-rata share
of the Issuable Maximum as described in clause (iii) above shall provide that such warrants shall not be allocated any portion
of the Issuable Maximum and shall be unexercisable unless and until such Shareholder Approval is obtained and effective. To the
extent that the Purchaser is unable to receive shares as a result of this Section 4.18(b)(ii), such shares shall be held in abeyance
for the Purchaser until the date that Shareholder Approval is obtained.


 


(c)          On
the first Trading Day following the closing of any Dilutive Issuance, the Company shall execute and deliver to Purchaser a certificate
duly executed by the Chief Executive Officer of the Company, describing the terms of such Dilutive Issuance (including a description
of the securities issued thereat, the price per share at which such Common Stock or Common Stock Equivalents were issued in such
Dilutive Issuance).


 


(d)          Within
two (2) Trading Days following the delivery of such officer's certificate, each Purchaser shall execute and deliver to the Company
a certificate executed by such Purchaser, in which Purchaser shall represent and warrant to the Company the number of the Initial
Shares owned by Purchaser as of the date of the closing of the Dilutive Issuance described in such officer's certificate. For the
avoidance of doubt, each Purchaser shall be eligible to receive Additional Shares under this Section 4.18 with respect to any Dilutive
Issuance if and only if, as of the date of the closing of such Dilutive Issuance (as described in the officer's certificate delivered
with respect thereto under Section 4.18(c), above), such Purchaser continued to own some or all of the Initial Shares.


 


(e)          If
shares of Common Stock or Common Stock Equivalents are issued for a consideration other than cash, the per share price shall be
the fair value of such consideration as determined in good faith by the Board of Directors of the Company. For the purposes of
this Section 4.18, the “price per share for which one share of Common Stock is issuable upon the conversion, exercise or
exchange of any Common Stock Equivalents” shall be equal to the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of such Common Stock Equivalents
and upon conversion, exercise or exchange of such Common Stock Equivalents.  The Company may not refuse to issue to a Purchaser
Additional Shares hereunder based on any claim that such Purchaser or anyone associated or affiliated with such Purchaser has been
engaged in any violation of law, agreement or for any other reason, unless, an injunction from a court, on notice, restraining
and or enjoining an issuance hereunder shall have been sought and obtained.  Nothing herein shall limit a Purchaser’s
right to pursue actual damages for the Company’s failure to deliver Additional Shares hereunder, and such Purchaser shall
have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief.  On the date of closing of any transaction pursuant to which securities are issued for a Discounted
Per Share Purchase Price, the Company shall give each of the Purchasers written notice thereof. 


 




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(f)          Notwithstanding
anything to the contrary herein in this Section 4.18, this Section 4.18 shall not apply to an Exempt Issuance.


 


(g)          The
Company acknowledges and agrees that the right set forth in this Section 4.18 is a right granted by the Company, separately, to
each Purchaser.


 


ARTICLE V.


MISCELLANEOUS


 


5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before March 31, 2015; provided, however, that such termination will not affect the
right of any party to sue for any breach by any other party (or parties).


 


5.2           Fees
and Expenses. At the Closing, the Company has agreed to reimburse Alpha Capital Anstalt (“Alpha”) the non-accountable
sum of $40,000 for its legal fees and expenses, $10,000 of which has been paid prior to the Closing. Accordingly, in lieu of the
foregoing payments, the aggregate amount that Alpha is to pay for the Securities at the Closing shall be reduced by $30,000 in
lieu thereof. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and
any conversion or exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.


 


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


 




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


 


5.5           Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers who purchased at least 67% in interest of the Securities then outstanding
or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought; provided, that
if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent
of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver
that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable
rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser, Any
amendment effected in accordance with accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities
and the Company.


 


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


 


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


 


5.8           No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.10 and this Section 5.8.


 




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5.9           Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action
or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding
is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action
or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under
Section 4.10, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action
or Proceeding.


 


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


 


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


 


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


 




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


 


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


 


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


 


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


 




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5.17         Usury.
To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any
time hereafter in force, in connection with any claim, Action or Proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated
with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract
rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing Date thereof
forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such
excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company,
the manner of handling such excess to be at such Purchaser’s election.


 


5.18         Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent all of the
Purchasers and only represents Alpha. The Company has elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company
and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.


 


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


 




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


 


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


 


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


 


(Signature Pages Follow)


 




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


 


 


	ENERJEX RESOURCES, INC.	 	Address for Notice:
	 	 	EnerJex Resources, Inc.
	 	 	ATTN: Robert G. Watson, Jr.
	 	 	4040 Broadway, Suite 508
	 	 	San Antonio, TX 78209
	By:	 	 	Facsimile No.: (210) 829-1224
	 	Robert G. Watson, Jr., Chief Executive Officer	 	Email: rwatson@enerjexresources.com
	 	 	 
	With a copy to (which shall not constitute notice):	 	Reicker, Pfau, Pyle & McRoy LLP
	 	 	ATTN: Michael E. Pfau, Esq.
	 	 	1421 State Street, Suite B
	 	 	Santa Barbara, CA 93101
	 	 	 
	 	 	Facsimile No.: (805) 966-3320
	 	 	Email: mpfau@rppmh.com


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 




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[PURCHASER
SIGNATURE PAGES TO ENRJ SECURITIES PURCHASE AGREEMENT]


 


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


 


Name of Purchaser: ________________________________________________________


 


Signature of Authorized Signatory of
Purchaser: __________________________________


 


Name of Authorized Signatory: ____________________________________________________


 


Title of Authorized Signatory: _____________________________________________________


 


Email Address of Authorized Signatory:
_____________________________________________


 


Facsimile Number of Authorized Signatory: __________________________________________


 


Address for Notice to Purchaser:


 


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


 


Subscription Amount: _____________


 


Shares of Preferred Stock: ____________


 


Warrant Shares: _________________


 


EIN Number: _______________________


 


o
Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed
to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations
of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded,
(ii) the Closing shall occur on the third (3rd) Trading Day following the date of this Agreement and (iii) any condition
to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company
or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be
a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such
agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.


 


[SIGNATURE PAGES CONTINUE]


 




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Schedule 1.1


 


Summary of Registered Shares and Private
Placement Shares


 




    	 



    	 



    

 


Annex A


 


Closing Statement


 


Pursuant to the attached Securities Purchase
Agreement, dated as of March 11, 2015, the purchasers shall purchase up to $[______ of Preferred Stock and Warrants from EnerJex
Resources, Inc., a Nevada corporation (the “Company”).  All funds will be wired into an account maintained
by the Company.  All funds will be disbursed in accordance with this Closing Statement. 


 


Disbursement
Date:  [_____ ___, 20__


                                                                                            


 


	I.   PURCHASE PRICE	 
	 	 
	 	Gross Proceeds to be Received	$
	 	 
	
        II.  DISBURSEMENTS 
	 
	 	 
	 	 	$
	 	 	$
	 	 	$
	 	 	$
	 	 	$
	 	 
	Total Amount Disbursed:	$
	 	 
	 	 
	 	 
	WIRE INSTRUCTIONS:	 
	 	 
	To: _____________________________________	 
	 	 
	 	 
	To: _____________________________________	 


 




    	 



    	 



    

 


Annex B


 


Company Disclosure Schedules


 




    	 



    	 



    

 





Schedule 1.1


 


Summary of Registered Shares and Private
Placement Shares


 


	 	 	No. Shares	 	 	As-

Converted	 	 	Price/Share	 	 	Aggregate
 Purchase
 Price/Exercise
 Price	 
	Registered Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  Common Stock	 	 	763,547	 	 	 	763,547	 	 	$	1.75	 	 	$	1,336,207.25	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  Preferred Stock	 	 	1,242.17099	 	 	 	709,812	 	 	$	1.75	 	 	$	1,242,170.99	 
	  TOTAL PUBLIC SHARES	 	 	764,789.17099	 	 	 	1,473,359	 	 	 	N/A	 	 	$	2,578,378.24	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Private Offering Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  Series B Preferred Stock	 	 	521.62076	 	 	 	298,069	 	 	$	1.75	 	 	$	521,620.76	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  Investor Warrant	 	 	1,771,428	 	 	 	1,771,428	 	 	$	2.75	 	 	$	4,871,427.00	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL	 	 	1,771,949.62076	 	 	 	5,016,215	 	 	 	N/A	 	 	$	5,393,047.76	 



 




    	 



    	 



    

 





EnerJex
Resources, Inc.


 


Disclosure
Schedule


 


This
Disclosure Schedule (the "Disclosure Schedule") contains exceptions to the representations and warranties
of EnerJex Resources, Inc., a Nevada corporation (the "Company"),
set forth in Section 3.1 of that certain "Securities Purchase Agreement" dated as of March 11, 2015 (the "Purchase
Agreement"), by and between the Company and the "Purchasers" named therein, and is an integral part of the Purchase
Agreement. Any capitalized term that is used in this Disclosure Schedule and not otherwise defined herein shall have the meaning
ascribed to such term in the Purchase Agreement. The section numbers of each exception noted in this Disclosure Schedule correspond
to the paragraph numbers appearing in the Purchase Agreement. Where the term "None" appears below, the Company intend
this to be a statement that, except for information disclosed elsewhere in this Company Disclosure Schedule and expressly cross-referenced
to such Section where the term "None" appears, there are no additional disclosures to be made. Any matter disclosed herein
pursuant to one Section of the Purchase Agreement is deemed disclosed for all other subsections of Section 3, if such matter relates
to more than one subsection of Section 3 and the level of particularity and manner of disclosure of the matter expressly disclosed
in one subsection of this Disclosure Schedule would make a reasonable Person aware that such disclosure is relevant to such other
subsections.


 


3.1           Representations
and Warranties of the Company


 


All references to any SEC Report in this
Disclosure Schedule speaks as of the date referenced in such SEC Report. Any reference to an SEC Report does not imply that the
information described therein is current as of the Effective Date of the Purchase Agreement unless otherwise noted herein. The
Company undertakes no obligation to update these disclosures except as and when required by law.


 


(a)          Subsidiaries


 


See list of Company
Subsidiaries at Exhibit 21.1 to Quarterly Statement on Form 10-Q filed November 14, 2014, incorporated by reference. The assets
of and title to the shares of and other ownership interests in those subsidiaries are pledged as security for the Company's obligations
to its secured lender, Texas Commerce Bank, N.A.


 


(g) Capitalization


 


See "Description
of Capital Stock" in Registration Statement on Form S-1, filed September 25, 2014, incorporated by reference, for the Company's
authorized and outstanding shares of Company Common Stock and Preferred Stock as of the referenced date.


 


See cover page to Quarterly
Statement on Form 10-Q filed November 14, 2014, incorporated by reference, for the outstanding shares of Common Stock as of such
date.


 


See Note 2 –
"Stock Options" to Condensed Consolidated Financial Statements in Quarterly Statement on Form 10-Q, filed November 14,
2014, incorporated by reference, for the number of shares covered under issued and outstanding options as of such date.


 


The Reporting Persons
identified in the Schedule 13D of West Coast Opportunity Fund, LLC, as amended by Amendment No. 13 to Schedule 13D filed May 13,
2014 have entered into a voting agreement as disclosed by Item 4 of such amendment.


 




    	 



    	 



    

 


Pursuant to an engagement
letter dated February 19, 2015, by and among the Company, Northland Capital Markets ("NCM"), and Euro Pacific
Capital Inc. ("EPC"), the Company has engaged NCM and EPC in connection with the transactions contemplated by
the Purchase Agreement and has agreed to issue to NCM and EPC at the Closing a Warrant for the purchase of a number of the Company's
shares of Common Stock equal to the quotient determined by dividing (x) 6.0% of the gross proceeds received by the Company from
Purchasers at Closing, by (y) the Per Share Purchase Price.


 


(i)          Material
Changes, Undisclosed Events, Liabilities or Developments


 


The Company borrowed
$1 million in the fourth quarter of 2014, and $500,000 in January 2015, under the Company's Senior Secured Credit Facility described
in Note 6 – "Long-Term Debt" to Condensed Consolidated Financial Statements in Quarterly Statement on Form 10-Q,
filed November 14, 2014, incorporated by reference.


 


On December 31, 2014,
the Company paid a dividend of approximately $156,000 on the Company's 10% Series A Cumulative Perpetual Preferred Stock to shareholders
of record at the close of business on December 15, 2014. The dividend was for the month of December 2014.


 


On January 30, 2015,
the Company paid a dividend of approximately $156,000 on the Company's 10% Series A Cumulative Perpetual Preferred Stock to shareholders
of record at the close of business on January 15, 2015. The dividend was for the month of January 2015.


 


On February 3, 2015,
the Company declared a dividend of approximately $156,000 on the Company's 10% Series A Cumulative Perpetual Preferred Stock to
be paid on February 28, 2015 to shareholders of record at the close of business on February 16, 2015. The dividend is for the month
of February 2015.


 


Reference is made to
the "Risk Factors" described in the Company's SEC Reports, including but not limited to the Registration Statement on
Form S-3 filed November 17, 2014, as amended. The oil and gas markets have been extremely volatile and uncertain, and the Company's
trading price for its equities has been volatile and declining as a result of this volatility and uncertainty, among other things.
Because of the material decline in market prices for oil and the continued volatility and uncertainty in the oil and natural gas
markets, and the risks inherent thereto including the Risk Factors, it can reasonably be expected that in the future a fact, circumstance,
occurrence or development with respect to the Company's or its Subsidiaries' or their respective businesses, properties, prospects,
operations, assets or financial condition will occur that would be required to be disclosed by the Company under applicable securities
laws.


 


The market price of
oil has fallen precipitously over the past seven (7) months, and that decline has materially adversely affected not only the Company's
cash flow but also the value of the Company's assets and its prospects for future cash flows absent either a significant recovery
in oil prices or a further asset acquisition or financing transaction (in addition to the financing transaction contemplated by
the Purchase Agreement).


 


The Company is presently
working with its auditors to prepare the Company's financial statements for the fiscal year ended December 31, 2014. It is possible
that the Company's auditors may qualify their annual audit opinion by reference to whether the Company is a going concern.


 




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The Company's reserve
engineer consultant has confirmed that the oil and gas reserve report for the calendar year ended December 31, 2014, will show
a decline in the Company's proved developed producing reserves below the figure shown in the reserve report that such
reserve engineer consultant rendered for the calendar year ended December 31, 2013. The total present value of the Company's proved
reserves as of December 31, 2013 was approximately $102 million. We believe the value of the Company's proved reserves is likely
to be approximately $64.0 million.


 


While under applicable
SEC guidelines the Company will report the present value of the Company's reserves based upon the average month-end price of oil
for each of the 12 months in the calendar year ended December 31, 2014, actual market values dropped precipitously in the last
calendar quarter of 2014, so the value of the Company's reserves as calculated by with the terms of the Company's credit facility
will be lower.


 


Under the terms of
the Company's secured credit facility, the value of the Company's available reserves is the primary factor that defines the Company's
"borrowing base," which is the maximum amount that the Company is entitled to borrow under that secured credit facility.
Because of the pending reduction in the reported amount of the Company's available reserves, the borrowing base under the Company's
credit agreement is likely to be reduced to between $18.0 million and $20.0 million, which is less than the currently outstanding
unpaid principal balance of the Company's loan in the amount of $23.5 million. That shortfall will result in a material default
by us under the terms of the credit agreement, and the Company's secured lender will require that the Company develop an acceptable
plan to bring the principal balance below the borrowing base. Even after completing this financing, the Company believes it
is likely that the outstanding principal balance of the Company's secured credit facility will exceed by approximately $1.0 million
the sum of the Company's borrowing base and the amount of the Company's liquid assets.


 


The Company's secured
lender may require that the Company address this shortfall with a plan that includes amortizing monthly debt service payments,
which, in turn, is likely to require that the Company suspend payment of cash dividends on the Company's series A preferred stock.
If the Company's secured lender does not approve the Company's plan for addressing that issue, then the lender may exercise its
default remedies under the documents evidencing and securing the Company's credit facility, including foreclosure of the lien securing
the Company's loan. By reason of that shortfall, it is likely that the Company's auditors will issue a going concern qualification
to their audit opinion letter for the period ended December 31, 2014. The issuance of such a qualified audit opinion letter is
likely to be a material default under the Company's credit agreement.


 


There is a risk
of a decline in the value of the Company's common stock after the Company discloses in its filings with the United States
Securities and Exchange Commission the material reduction in the amount and the value of the Company's available oil and gas
reserves, the fact that the outstanding principal balance of the Company's secured credit facility will exceed the borrowing
base under that credit facility, the potential issuance by the auditors of a going concern qualification to their audit
opinion letter, and a possible suspension in the payment of cash dividends on the Company's series A preferred stock.


 


In addition to having pursued this offering, the Company currently is evaluating a number of strategic
initiatives, including but not limited to potential acquisitions, mergers, sales of non-core assets, and monetizing its hedges.
The Company holds a minority interest in a corporation that is expected to close on a sale of its principal assets in approximately
30 days which is expected to generate approximately $1.5 million to us during 2015.


 


Because the
Company expects its final reserve report for the year ended December 31, 2014, to reflect a material reduction in the
Company's available reserves, the Company expects that it will be required to write-down the carrying value of its oil and
gas properties. That write-down adversely affect the Company's earnings for the period in which the write-down occurs. The
Company reviews the carrying value of its oil and gas properties under the full-cost accounting rules of the SEC on a
quarterly basis. That quarterly review is referred to as a "ceiling test." Under the ceiling test, capitalized
costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the
present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be
incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net
revenues, current prices and costs used are those as of the end of the appropriate quarterly period. Such prices are utilized
except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts,
including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve
levels and current prices, and their associated impact on the present value of estimated future net revenues. By reason of a
reduction in both the Company’s reserve levels and market prices, the Company expects that this
"ceiling test" will occasion a write-down in its assets.


 




    	3



    	 



    

 


Under the terms of
the Company's 2013 Stock Incentive Plan (the "Plan"), an additional 382,155 shares of Common Stock were reserved under
that Plan as of January 1, 2015, thereby increasing to 715,488 the cumulative aggregate number of shares reserved under the Plan.
The Company presently has outstanding under the Plan options for the purchase of 236,000 shares of Common Stock, and there are
484,156 shares of Common Stock reserved and available for grant or issuance under the Plan.


 


The Company has agreed
with Kent Roach, an employee, that immediately following the one-year anniversary of his employment with the Company, and provided
that he remains continuously employed with the Company during that time, the Company will issue to him 50,000 shares of the Company's
common stock.


 


Pursuant to that certain
Investor Relations Consulting Agreement dated as of November 6, 2014, the Company engaged MZHCI, LLC ("Consultant"),
to provide investor relations consulting services, and agreed to issue to Consultant 17,500 shares of Company common stock for
each 6 months of services, with the first tranche issuable within 10 days following the execution of such Agreement and each remaining
tranche issuable at each 6-month anniversary of the date of such Agreement. No such shares have actually been issued, although
the Company is presently obligated to issue 17,500 shares of Common Stock to Consultant.


 


Pursuant to an engagement
letter dated February 19, 2015, by and among the Company, Northland Capital Markets ("NCM"), and Euro Pacific
Capital Inc. ("EPC"), the Company has engaged NCM and EPC in connection with the transactions contemplated by
the Purchase Agreement and has agreed to issue to NCM and EPC at the Closing a Warrant for the purchase of a number of the Company's
shares of Common Stock equal to the quotient determined by dividing (x) 6.0% of the gross proceeds received by the Company from
Purchasers at Closing, by (y) the Per Share Purchase Price.


 


(j)          Litigation


 


See "Involvement
in Certain Legal Proceedings" in Proxy Statement on Schedule 14A filed on July 23, 2014, incorporated by reference.


 


(x)          Application
of Takeover Protection


 


The Nevada Corporations
Code imposes certain limits on business combinations with interested stockholders that are applicable to issuing corporations that
have 200 or more stockholders of record and more than 100 stockholders of record with addresses in Nevada on the issuing corporation's
stock ledger. See NRS 78.3788. The Company has only seven (7) stockholders of record with Nevada addresses on the Company's
stock ledger.


 


(dd)         Accountants


 


The Company's current
independent registered certified public accountants are RBSM LLP.


 




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