SECURITIES
PURCHASE AGREEMENT


 


SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of July 27, 2016, by and among Enerpulse Technologies, Inc.,
a Nevada corporation, with headquarters located at 2451 Alamo Ave. NE, Albuquerque, New Mexico 87106 (the “Company”),
and the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively,
the “Buyers”).


 


WHEREAS:


 


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


 


B.The
Company has authorized a new series of senior subordinated secured convertible notes of the Company, in substantially the form
attached hereto as Exhibit A (the “Notes”), which Notes shall be convertible into the Company’s
common stock, par value $0.001 per share (the “Common Stock”) (the shares of Common Stock issuable pursuant
to the terms of the Notes, including, without limitation, upon conversion as payment of interest or otherwise, collectively, the
“Conversion Shares”), in accordance with the terms of the Notes.


 


C.Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, that aggregate
principal amount of Notes set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers attached hereto (which
aggregate principal amount of Notes for all Buyers shall be $425,000).


 


D.Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant
to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined
in the Registration Rights Agreement) under the 1933 Act and the rules and regulations promulgated thereunder, and applicable
state securities laws.


 


E.The
Notes will rank senior to all outstanding and future indebtedness of the Company (other than Permitted Senior Indebtedness (as
defined in the Notes) secured by Permitted Liens (as defined in the Notes)), and its Subsidiaries (as defined below), will be
guaranteed by all direct and indirect U.S. Subsidiaries (as defined in Section 3(a)) of the Company, currently formed or formed
in the future, as evidenced by a guaranty agreement, in the form attached hereto as Exhibit D (as amended or modified from
time to time in accordance with its terms, the “Guaranty Agreement”), and assuming the Collateral Agent (as
defined below) takes the proper and necessary steps to perfect the security interest immediately following the Closing Date, will
be secured by a first priority perfected security interest, subject to Permitted Liens which may have priority over such security
interest to the extent such Permitted Liens are expressly subordinated to such security interest or are subordinated as a matter
of law to such security interest, in all of the current and future assets of the Company and all direct and indirect U.S. Subsidiaries
of the Company, currently formed or formed in the future, and a pledge of 65% of the capital stock of any direct foreign subsidiary
of the Company, currently formed or formed in the future, as evidenced by a pledge and security agreement, substantially in the
form attached hereto as Exhibit E, (as amended or modified from time to time in accordance with its terms, the “Security
Agreement”).


 




    	 	 	 



    	 



    


 


F.The
Notes and the Conversion Shares collectively are referred to herein as the “Securities”.


 


G.Contemporaneously
with this execution and delivery of this Agreement, the Company will execute and deliver a Securities Purchase Agreement (the
“Other Securities Purchase Agreement”) with Passaic River Capital LLC to purchase the Company’s (i) 10%
Senior Secured Convertible Notes due 2019 in the aggregate principal amount of $150,000 (the “Other Notes”),
(ii) shares of Common Stock and (iii) shares of preferred stock, par value $0.001 per share.


 


H.Following
the Closing, the Company may execute and deliver one or more additional subscription agreements, each in a form substantially
similar to this Agreement, with one or more current or new investors (the “Additional Buyers”), in connection
with the offering and sale of additional Notes (the (the “Additional Notes”) of the Company (which aggregate
principal amount of Notes for all Additional Buyers shall not exceed $300,000).


 


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


 


1.PURCHASE
AND SALE OF NOTES.


 


(a)Purchase
of Notes. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the Company on the Closing Date
(as defined below), a principal amount of Notes as is set forth opposite such Buyer’s name in column (3) on the Schedule
of Buyers (the “Closing”).


 


(b)Closing.
The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York City time, on the date
hereof (or such other date and time as is mutually agreed to by the Company and each Buyer) after notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below, at the offices of Troutman Sanders LLP, 875
Third Aveneue, New York, New York 10022. 


 


(c)Purchase
Price. The aggregate purchase price for the Notes to be purchased by each Buyer at the Closing (the “Purchase Price”)
shall be the amount set forth opposite each Buyer’s name in column (5) of the Schedule of Buyers. Each Buyer shall pay $1,000
for each $1,000 of principal amount of Notes to be purchased by such Buyer at the Closing. 


 


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


 




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(e)Additional
Closings. Following the Closing, the Additional Buyers may purchase from the Company, and Company may issue and sell to the
Additional Buyers, the Additional Notes at one or more additional closings (each an “Additional Closing”).
Each Additional Closing shall take place at 10:00 a.m., New York City time, on such date as is mutually agreed to by the Company
and the Additional Buyers, but in no event after December 31, 2016, after notification of satisfaction (or waiver) of the conditions
to the Additional Closing at the offices of Troutman Sanders LLP, 875 Third Aveneue, New York, New York 10022. Each Additional
Buyer shall pay $1,000 for each $1,000 of principal amount of Additional Notes to be purchased by such Additional Buyer at the
Additional Closing. 


 


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


 


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


 


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


 


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


 


(d)Information.
Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other
due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect
such Buyer’s right to rely on the Company’s representations and warranties contained herein. Such Buyer understands
that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.


 




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


 


(f)Transfer
or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned
or transferred unless (A) sold pursuant to a registration statement declared effective by the Securities and Exchange Commission,
(B) such Buyer shall have delivered to the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
“Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the
seller (or the Person) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption thereunder. Notwithstanding the foregoing, the Securities
may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities
and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer
effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery
to the Company pursuant to this Agreement or any other Transaction Document (as defined in Section 3(b)), including, without limitation,
this Section 2(f).


 


(g)Legends.
Such Buyer understands that the certificates or other instruments representing the Notes and the stock certificates representing
the Conversion Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any
state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of
such stock certificates):


 




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


 


The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities
upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust
Company (“DTC”), if (i) such Securities have been sold pursuant to a registration statement that has been declared
effective by the Securities and Exchange Commission, (ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer
of the Securities may be made without registration under the applicable requirements of the 1933 Act, (iii) the Securities are
then eligible to be sold, assigned or transferred pursuant to Rule 144 without restriction or limitation pursuant to Rule 144
and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto), or (iv) the Securities have been
sold, assigned or transferred pursuant to Rule 144 or Rule 144A. The Company shall be responsible for the fees of its transfer
agent and all DTC fees associated with such issuance.


 


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


 


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


 




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(j)Residency.
Such Buyer is a resident of that jurisdiction specified below its address on the Schedule of Buyers.


 


(k)Independent
Evaluation. Such Buyer confirms and agrees that it has independently evaluated the merits of its decision to purchase the
Securities.


 


(l)Acknowledgement
of Risk. Such Buyer acknowledges and understands that its investment in the Securities involves a significant degree of risk,
including, without limitation, (i) the Company remains an early stage business with limited operating history and requires substantial
funds in addition to the proceeds from the sale of the Securities; (ii) an investment in the Company is speculative, and only
purchasers who can afford the loss of their entire investment should consider investing in the Company and the Securities; (iii)
such Buyer may not be able to liquidate its investment; (iv) transferability of the Securities is limited; (v) in the event of
a disposition of the Securities, such Buyer could sustain the loss of its entire investment; and (vi) the Company has not paid
any dividends on its Common Stock since inception and does not anticipate the payment of dividends in the foreseeable future.



 


(m)Certain
Trading Activities. Such Buyer has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding
with such Buyer, engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales
(as defined below) involving the Company’s securities) during the period commencing as of the time that such Buyer was first
contacted regarding the specific investment in the Company contemplated by this Agreement and ending immediately prior to the
execution of this Agreement by such Buyer (it being understood and agreed that for all purposes of this Agreement, and, without
implication that the contrary would otherwise be true, that neither transactions nor purchases nor sales shall include the location
and/or reservation of borrowable shares of Common Stock). Notwithstanding the foregoing, in the case that any of the Buyers is
a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Buyer’s assets and
the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions
of such Buyer’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. “Short
Sales” means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Securities
Exchange Act of 1934, as amended (the “1934 Act”).


 


(n)Experience
of Such Buyer. Such Buyer, 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 Buyer 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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3.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. 


 


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


 


(a)Organization
and Qualification. Each of the Company and each of its “Subsidiaries” (which for purposes of this Agreement
means any entity in which the Company, directly or indirectly, owns any of the capital stock or holds an equity or similar interest)
are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed,
and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and
as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity
to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing
would not reasonably be expected to have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets, liabilities, operations, results of operations, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries, individually or taken as a whole, or on the transactions
contemplated hereby or on the other Transaction Documents or by the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the Company to perform any of its obligations under any of the Transaction
Documents (as defined below). The Company has no Subsidiaries except as set forth on Schedule 3(a).


 


(b)Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)),
the Security Documents (as defined below) and each of the other agreements entered into by the parties hereto in connection with
the transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof. The execution and delivery of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Notes, and the reservation for issuance and the issuance of the Conversion Shares have been duly
authorized by the Company’s Board of Directors and (other than the filing with the SEC of one or more Registration Statements
(as defined in the Registration Rights Agreement) in accordance with the requirements of the Registration Rights Agreement, the
8-K Filing (as defined below), the Form D with the SEC and other filings as may be required by state securities agencies, the
filing of any necessary Financing Statements and appropriate Assignments for Security in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, in each case in accordance with the Security Agreement (collectively,
the “Required Filings”)) no further filing, consent, or authorization is required by the Company, its Board
of Directors or its stockholders. This Agreement and the other Transaction Documents have been duly executed and delivered by
the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or
state securities law and public policy, and the remedy of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Each
of the Subsidiaries party to any of the Transaction Documents has the requisite power and authority to enter into and perform
its obligations under such Transaction Documents. The execution and delivery by the Subsidiaries party to any of the Transaction
Documents of such Transaction Documents and the consummation by such Subsidiaries of the transactions contemplated thereby have
been duly authorized by such Subsidiaries’ respective boards of directors (or other applicable governing body) and (other
than filings as may be required by state securities agencies) no further filing, consent, or authorization is required by such
Subsidiaries, their respective boards of directors (or other applicable governing body) or stockholders (or other applicable owners
of equity of such Subsidiaries). The Transaction Documents to which any of the Subsidiaries are parties have been duly executed
and delivered by such Subsidiaries, and constitute the legal, valid and binding obligations of such Subsidiaries, enforceable
against them in accordance with their respective terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution
may be limited by federal or state securities law and public policy, and the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding
therefor may be brought. For purposes of this Agreement, the term “Security Documents” means the Guaranty Agreement,
the Security Agreement and any other related collateral documents to be executed or filed by any of the parties hereto or thereto
in connection with the Closing hereunder and in connection with the foregoing agreements and documents.


 




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(c)Issuance
of Securities. The issuance of the Notes are duly authorized and, upon issuance in accordance with the Transaction Documents,
shall be validly issued and free from all preemptive or similar rights, taxes, liens and charges and other encumbrances with respect
to the issue thereof. As of the date of the Stockholder Approval, a number of shares of Common Stock shall have been duly authorized
and reserved for issuance which equals or exceeds (the “Required Reserved Amount”) 120% of the maximum number of Conversion
Shares issued and issuable pursuant to the Notes based on the Conversion Price (as defined in the Notes) (without taking into
account any limitations on the issuance thereof pursuant to the terms of the Notes) as of the Trading Day (as defined in the Notes)
immediately preceding the applicable date of determination. As of the date hereof, there are 84,487,619 shares of Common Stock
authorized and unissued. Upon conversion of the Notes in accordance with the Notes, the Conversion Shares will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens and charges and other encumbrances with
respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of this Agreement, the offer and issuance by the
Company of the Securities is exempt from registration under the 1933 Act.


 


(d)No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and any of its Subsidiaries
parties to any of the Transaction Documents and the consummation by the Company and any of its Subsidiaries of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of the Notes and reservation for issuance and issuance
of the Conversion Shares will not (i) result in a violation of the Articles of Incorporation (as defined in Section 3(r)) or Bylaws
(as defined in Section 3(r)), any memorandum of association, certificate of incorporation, certificate of formation, bylaws, any
certificate of designations or other constituent documents of the Company or any of its Subsidiaries, any capital stock of the
Company or any of its Subsidiaries or the articles of association or bylaws of the Company or any of its Subsidiaries or (ii)
except as set forth on Schedule 3(d), conflict with, or constitute a default (or an event which with notice or lapse of
time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities
laws and regulations and the rules and regulations of the OTCQB (the “Principal Market”) and including all
applicable foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii)
or (iii) above, to the extent such violations that would not reasonably be expected to have a Material Adverse Effect.


 


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


 







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


 


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


 


(h)No
Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, nor any Person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances
that would require registration of any of the Securities under the 1933 Act, whether through integration with prior offerings
or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company for purposes of the
1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the Company are designated for quotation. None of
the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the Securities under the 1933 Act or cause the offering of
any of the Securities to be integrated with other offerings for purposes of any such applicable stockholder approval provisions.



 


(i)Dilutive
Effect. The Company understands and acknowledges that the number of Conversion Shares issuable pursuant to terms of the Notes
will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares pursuant
to the terms of the Notes in accordance with this Agreement and the Notes is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other stockholders of the Company.


 




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(j)Application
of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including,
without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of
Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Buyer’s ownership of the Securities. The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company
or any of its Subsidiaries.


 


(k)SEC
Documents; Financial Statements. Except as disclosed in Schedule 3(k), since January 1, 2015, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date hereof, and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC
Documents”). The Company has delivered to the Buyers or their respective representatives true, correct and complete
copies of the SEC Documents not available on the EDGAR system. As of their respective filing dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective filing
dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the
periods involved (“GAAP”) (except (i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). No other
information provided by or on behalf of the Company to any of the Buyers which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(d) of this Agreement or in the disclosure schedules to this Agreement,
contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not misleading.


 




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(l)Absence
of Certain Changes. Since December 31, 2015, there has been no material adverse change and no material adverse development
in the business, assets, liabilities, properties, operations, condition (financial or otherwise), results of operations or prospects
of the Company or its Subsidiaries. Since December 31, 2013, neither the Company nor any of its Subsidiaries has (i) declared
or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary course
of business or (iii) had capital expenditures, individually or in the aggregate, in excess of $100,000. Neither the Company nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that
any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that
would reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, will not
be, after giving effect to the transactions contemplated hereby to occur at the Closing, Insolvent (as defined below). For purposes
of this Section 3(l), “Insolvent” means, with respect to any Person, (i) the present fair saleable value of
such Person’s assets is less than the amount required to pay such Person’s total Indebtedness (as defined in Section
3(s)), (ii) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities
become absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which
it is engaged as such business is now conducted and is proposed to be conducted. 


 


(m)No
Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth on Schedule 3(m), no event, liability,
development or circumstance has occurred or exists, or is contemplated to occur with respect to the Company, its Subsidiaries
or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed
by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been publicly announced.


 


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


 




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


 


(p)Sarbanes-Oxley
Act. Except as set forth on Schedule 3(p), the Company is in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof. The matter set forth in Schedule 3(p) would
not reasonably be expected to have a Material Adverse Effect.


 


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


 


(r)Equity
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 100,000,000 shares of Common
Stock, of which as of the date hereof, 15,512,381 shares are issued and outstanding, 5,095,765 shares are reserved for issuance
pursuant to the Company’s stock option and purchase plans and 33,776,096 shares are reserved for issuance pursuant to securities
(other than the aforementioned options and the Notes) exercisable or exchangeable for, or convertible into, Common Stock, and
(ii) 10,000,000 shares of preferred stock, par value $0.001 per share, none of which are issued and outstanding as of the date
hereof. No shares of Common Stock are held in treasury and all of such outstanding shares are duly authorized and have been, or
upon issuance will be, validly issued and are fully paid and nonassessable. (i) None of the Company’s or any Subsidiary’s
capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary; (ii) except as disclosed in Schedule 3(r)(ii), there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional
shares or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
for, any shares of capital stock of the Company or any of its Subsidiaries; (iii) except as disclosed in Schedule 3(r)(iii),
there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may
become bound; (iv) there are no financing statements securing obligations in any material amounts filed in connection with the
Company or any of its Subsidiaries; (v) except as disclosed in Schedule 3(r)(v), there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933
Act (except pursuant to the Registration Rights Agreement); (vi) there are no outstanding securities or instruments of the Company
or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or
any of its Subsidiaries; (vii) except as disclosed in Schedule 3(r)(vii), there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii) neither the Company nor any
Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement;
and (ix) neither the Company nor any Subsidiary has any liabilities or obligations required to be disclosed in the SEC Documents
but not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or any of its
Subsidiary’s’ respective businesses and which, individually or in the aggregate, do not or would not have a Material
Adverse Effect. The Company has furnished or made available to the Buyers true, correct and complete copies of the Company’s
Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms
of all securities convertible into, or exercisable or exchangeable for shares of Common Stock and the material rights of the holders
thereof in respect thereto.


 




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(s)Indebtedness
and Other Contracts. (i) Except as disclosed in Schedule 3(s)(i), neither the Company nor any of its Subsidiaries has
any outstanding Indebtedness (as defined below), (ii) except as disclosed in Schedule 3(s)(ii), neither the Company nor
any of its Subsidiaries is a party to any contract, agreement or instrument, the violation of which, or default under which, by
the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect,
(iii) neither the Company nor any of its Subsidiaries is in violation of any term of or in default under any contract, agreement
or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) neither the Company nor any of its Subsidiaries is a party to any contract, agreement
or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or
is expected to have a Material Adverse Effect. Schedule 3(s)(i) provides a detailed description of the material terms of
any such outstanding Indebtedness. For purposes of this Agreement: (x) “Indebtedness” of any Person means,
without duplication (A) all indebtedness for borrowed money in excess of $50,000, (B) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services, including, without limitation, “capital leases” in accordance
with GAAP (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced
by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited
to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection
with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred
to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any mortgage, claim, tax, right of first refusal, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person
which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise,
of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose
or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that
the holders of such liability will be protected (in whole or in part) against loss with respect thereto.


 


(t)Absence
of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any
of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise, in
their capacities as such.


 


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


 




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(v)Employee
Relations. 


 


(i)Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The
Company and its Subsidiaries believe that their relations with their employees are good. No executive officer or other key employee
of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary
that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with
the Company or any such Subsidiary. No executive officer or other key employee of the Company or any of its Subsidiaries is, or
is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.


 


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


 


(w)Title.
The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title
to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects except for Permitted Liens (as defined in the Notes), which do not materially
affect the value of such property and do not interfere with the use made or proposed to be made of such property by the Company
and any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries.


 


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


 




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(y)Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with any and all Environmental Laws (as hereinafter defined),
(ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where,
in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local
or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans
or regulations issued, entered, promulgated or approved thereunder.


 


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


 


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


 


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


  




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



 


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


 


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


 


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


 


(gg)Manipulation
of Price. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) other than the Placement
Agent, sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) other than
the Placement Agent, paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities
of the Company.


 




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(hh)Acknowledgement
Regarding Buyers’ Trading Activity. The Company acknowledges and agrees that (i) none of the Buyers has been asked to
agree, nor has any Buyer agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) any Buyer, and counter-parties
in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (a) one
or more Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Conversion Shares are being determined and (b) such hedging
and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the Company both
at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned
hedging and/or trading activities do not constitute a breach of this Agreement, the Notes, or any of the documents executed in
connection herewith.


 


(ii)U.S.
Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is or has ever been, and so long as any
Securities remain outstanding, shall not become, a U.S. real property holding corporation within the meaning of Section 897 of
the Code and the Company shall so certify upon any Buyer’s request.


 


(jj)Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%)
or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


 


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


 




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(ll)Disclosure.
After the time of the filing of the Form 8-K (as defined below), the Company confirms that neither it nor any other Person acting
on its behalf has provided any of the Buyers or their agents or counsel with any information that constitutes or could reasonably
be expected to constitute material, nonpublic information concerning the Company or any of its Subsidiaries. The Company understands
and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Buyers regarding the Company, or any of its Subsidiaries, their business and the transactions
contemplated hereby, including the disclosure schedules to this Agreement, furnished by or on behalf of the Company or any of
its Subsidiaries is true and correct and does not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not
misleading. All of the written information furnished after the date hereof by or on behalf of the Company or any of its Subsidiaries
to you pursuant to or in connection with this Agreement and the other Transaction Documents, taken as a whole, will be true and
correct in all material respects as of the date on which such information is so provided and will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading. The Company acknowledges and agrees that no Buyer makes or has made
any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth
in Section 2.


 


(mm)Shell
Company Status. The Company is not, and has not been since September 4, 2013, an issuer identified in Rule 144(i)(1) of the
1933 Act. As of September 4, 2013, the Company filed current “Form 10 information” (as defined in Rule 144 (i)(3))
with the SEC reflecting its status as an entity that was no longer an issuer described in Rule 144(i)(1)(i).


 


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


 


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


 


(pp)No
Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the
1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer,
any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter
(as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each,
an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of
the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided
thereunder. 


 




    	 	- 18 -	 



    	 



    


 


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


 


(rr)Money
Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act
of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to,
the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including,
but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations
contained in 31 CFR, Subtitle B, Chapter V.


 


4.COVENANTS.


 


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


 


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


 


(c)Reporting
Status. Until the date on which the Investors (as defined in the Registration Rights Agreement) shall have sold all of the
Conversion Shares and none of the Notes are outstanding (the “Reporting Period”), the Company shall use its
commercially reasonable efforts to file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would no longer require or otherwise permit such termination.


 


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


 




    	 	- 19 -	 



    	 



    


 


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


 


(f)Listing.
The Company shall maintain the authorization for quotation of the Common Stock on the Principal Market or any other Eligible Market
(as defined in the Notes). Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected
to result in the removal from quotation of the Common Stock on the Principal Market unless the Common Stock has been or is being
listed or quoted on another Eligible Market prior to, or contemporaneously with, such removal. If after the date hereof the Common
Stock becomes listed on an Eligible Market that is a national securities exchange, the Company shall promptly secure the listing
of all of the Registrable Securities (as defined in the Registration Rights Agreement) and shall maintain such listing of all
Registrable Securities from time to time issuable under the terms of the Transaction Documents for so long as the Common Stock
remains listed on such Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(f).


 


(g)Fees.
The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable
attorney’s fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as
otherwise set forth in the Transaction Documents and the Engagement Letter, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.


 


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


 




    	 	- 20 -	 



    	 



    


 


(i)Disclosure
of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on the fourth Business Day after
this Agreement has been executed, the Company shall file a Current Report on Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act and attaching the material Transaction Documents
(including, without limitation, this Agreement, the form of Note, the Registration Rights Agreement, the Security Agreement and
the form of Guaranty, the “8-K Filing”). From and after the filing of the 8-K Filing with the SEC, no Buyer
shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their
respective officers, directors, affiliates, employees or agents, that is not publicly disclosed prior to the date of the 8-K Filing
or in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and
all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries
or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Buyers or any
of their affiliates, on the other hand, shall terminate. The Company shall not, and shall cause each of its Subsidiaries and its
and each of their respective officers, directors, affiliates, employees and agents, not to, provide any Buyer with any material,
nonpublic information regarding the Company or any of its Subsidiaries (other than any material, nonpublic information relating
to the Company with respect to the transactions contemplated herein which shall be disclosed in the 8-K Filing) from and after
the date hereof without the express prior written consent of such Buyer. To the extent that the Company delivers any material,
non-public information to a Buyer without such Buyer’s consent, the Company hereby covenants and agrees that such Buyer
shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents with respect to, or a duty to the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates, employees or agents not to trade on the basis of, such material, non-public information. Subject
to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and (ii) as is required by applicable law and regulations. Except for the Registration Statement
required to be filed pursuant to the Registration Rights Agreement, the Form 8-K Filing and as otherwise required by applicable
law and regulations, without the prior written consent of any applicable Buyer, neither the Company nor any of its Subsidiaries
or affiliates shall disclose the name of such Buyer in any filing, announcement, release or otherwise.


 


(j)Additional
Notes; Variable Securities. So long as any Buyer beneficially owns any Notes, the Company will not issue any Notes or Additional
Notes other than to the Buyers and the Additional Buyers as contemplated hereby, and other than the Other Notes to be issued pursuant
to the Other Subscription Agreements, and the Company shall not issue any other securities that would cause a breach or default
under the Notes. For so long as any Notes remain outstanding, other than the issuance of the Additional Notes and the Other Notes,
the Company shall not, in any manner, issue or sell any rights, warrants or options to subscribe for or purchase Common Stock
or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which varies or may vary
with the market price of the Common Stock (other than with respect to customary weighted-average anti-dilution and full-ratchet
anti-dilution adjustments), including by way of one or more reset(s) to any fixed price, unless the conversion, exchange or exercise
price of any such security cannot be less than the then applicable Conversion Price with respect to the Common Stock into which
any Note is convertible.


  




    	 	- 21 -	 



    	 



    


 


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


 


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


 


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


 


(n)Additional
Issuances of Securities. 


 


(i)From
the date hereof until the earlier of (x) the time of the registration of all of the Registrable Securities (as defined in the
Registration Rights Agreement) pursuant to and in accordance with the Registration Rights Agreement, which registration remains
in effect and (y) such time as all of the Registrable Securities, if a registration statement is not available for the resale
of all of the Registrable Securities may be sold pursuant to Rule 144, the Company shall not, directly or indirectly, file any
registration statement with the SEC, or file any amendment or supplement thereto, or grant any registration rights to any Person
that can be exercised prior to the earlier of such time as set forth above, other than pursuant to the Registration Rights Agreement
and any registration statement registered on Form S-8 or S-4.


 


(ii)From
the date hereof until the date that ninety (90) days immediately following the Closing Date, other than with respect to Excluded
Securities (as defined in the Notes), the Company will not: (i) directly or indirectly, offer, sell, grant any option to purchase,
or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its
Subsidiaries’ equity or equity equivalent securities, including without limitation any convertible debt, preferred stock
or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable
or exercisable for Common Stock or Common Stock Equivalents or (ii) be party to any solicitations, negotiations or discussions
with regard to the foregoing.


 












    	 	- 22 -	 



    	 



    

 


(o)Reserved.


 


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


 


(q)Collateral
Agent. 


 


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


 


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


 


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


 




    	 	- 23 -	 



    	 



    


 


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


 


(v)The
Collateral Agent shall terminate the Security Documents promptly following the date that the Investors may sell all of the Registrable
Securities without restriction or limitation pursuant to Rule 144 (or any successor thereto) promulgated under the 1933 Act continuously
for forty-five (45) consecutive days.


 


(r) No
Net Short Sales. So long as the Notes remain outstanding, no Buyer nor any of its affiliates nor any entity managed
or controlled by a Buyer (collectively, the “Restricted Persons” and each of the foregoing is referred to
herein as a “Restricted Person”) shall maintain, in the aggregate, a Net Short Position. For purposes
hereof, a “Net Short Position” by a Restricted Person means a position whereby such Restricted Person has
executed one or more sales of Common Stock that is marked as a short sale (but not including any sale marked “short
exempt”) and that is executed at a time when such Restricted Person has no equivalent offsetting long position in the
Common Stock (or is deemed to have a long position hereunder or otherwise in accordance with Regulation SHO under the 1934
Act); provided, further that no “Short Sale” shall be deemed to exist as a result of any failure by the Company
(or its agents) to deliver Conversion Shares, respectively, upon conversion of the Notes to any Restricted Person exercising
such Notes. For purposes of determining whether a Restricted Person has an equivalent offsetting long position in the Common
Stock, such Restricted Person shall be deemed to hold “long” all Common Stock that is either (i) then owned by
such Restricted Person, if any, (ii) then issuable to such Restricted Person as Conversion Shares pursuant to the terms of
the Notes then held by such Restricted Person, if any, (without regard to any limitations on conversion set forth in the
Notes and giving effect to any conversion price adjustments that would take effect given only the passage of time), or (iii)
that may be issued as Interest Shares pursuant to the terms of the Notes to such Restricted Person. Notwithstanding the
foregoing, nothing contained herein (i) shall (without implication that the contrary would otherwise be true) prohibit any
Restricted Person from selling “long” (as defined under Rule 200 promulgated under Regulation SHO under the 1934
Act) the Securities or any other Common Stock then owned by such Restricted Person or (ii) shall constitute a covenant, 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.


 




    	 	- 24 -	 



    	 



    


 


(t)Options.
As of the Closing Date, the Company shall reserve for issuance under the Enerpulse Technologies, Inc. 2013 Equity Incentive
Plan, shares of Common Stock in an amount equal to fifteen percent (15%) of the aggregate
amount of shares of Common Stock outstanding as of the Closing Date, on a fully diluted basis. 


 


(u)Stockholder
Approval. The Company shall use commercially reasonable efforts to provide each stockholder entitled to vote at a special
meeting of stockholders of the Company (the “Stockholder Meeting”) a proxy statement soliciting each such stockholder’s
affirmative vote at the Stockholder Meeting for approval of resolutions (“Stockholder Resolutions”) providing
for (i) an amendment to the Company’s articles of incorporation that would increase the number of authorized shares of Common
Stock to at least 200,000,000 within one year of the date of the shareholder authorization; and (ii) an amendment to the Company’s
articles of incorporation to that would authorize the Company to effect a reverse split of its outstanding shares of Common Stock
within one year of the date of the shareholder authorization within a range of one share of Common Stock for every two shares
of Common Stock to one share of Common Stock for every 40 shares of Common Stock, with the exact reverse split ratio to be decided
by the Board of Directors of the Company prior to the effective time of the reverse stock split amendment (such affirmative approval
being referred to herein as the “Stockholder Approval”, and the date such Stockholder Approval is obtained,
the “Stockholder Approval Date”), and the Company shall use its commercially reasonable efforts to solicit
its stockholders’ approval of such Stockholder Resolutions and shall cause the Board of Directors of the Company to recommend
to the stockholders that they approve such Stockholder Resolutions. The Company shall use its commercially reasonable efforts
to cause the Stockholder Meeting to be promptly called and held not later than the ninetieth (90th) day following the
Closing Date. Each Buyer agrees to vote all shares of Common Stock it beneficially owns on the record date applicable to the Stockholder
Meeting that are eligible to vote in connection with the Stockholder Resolutions in favor of adopting the Stockholder Resolutions.
Notwithstanding the foregoing, the Company may obtain the Stockholder Approval through the
written consent of holders of a majority of the shares of Common Stock of the Company; provided that in such case the Company
will use its commercially reasonable efforts to prepare and file with the SEC the preliminary Information Statement in
accordance with Rule 14C to be sent to the Shareholders of the Company in connection with such written consent no later than the
thirtieth (30th) day following the Closing Date and cause the Stockholder Approval to be effective no later than the
ninetieth (90th) day following the Closing Date.


 


(v)So
long as the Notes, the Additional Notes and the Other Notes remain outstanding, the Company and its subsidiaries shall not, without
the prior written consent of Passaic River Capital LLC, (i) disburse or pay any amounts equal to or exceeding $2,500; (ii) make
any loan or advance to any person or entity or cause the Company or any of its Subsidiaries to make any loan or advance to any
person or entity; (iii) incur, or cause the Company or any of its subsidiaries to incur, any contractual obligation that requires
the Company, or any of its subsidiaries, as the case may be, to make one-time or annual payments in excess of $2,500, or (iv)
authorize or agree to take any of the actions described in this Section 4(v).


 







    	 	- 25 -	 



    	 



    


 


(w)The
Company shall use its commercially reasonable efforts to have its shares of Common Stock quoted on the Principal Market no later
than the ninetieth (90th) days following the Closing Date. 


 


5.REGISTER;
TRANSFER AGENT INSTRUCTIONS.


 


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


 


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


 




    	 	- 26 -	 



    	 



    


 


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


 


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


 


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


 


(ii)Such
Buyer shall have delivered the Purchase Price contemplated by Section 1(c) hereof for the Notes and Shares being purchased by
such Buyer at the Closing pursuant to Section 1(d) hereof by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.


 


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


 


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


 


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


 


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


 


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


 


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


 




    	 	- 27 -	 



    	 



    


 


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


 


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


 


(vi)The
representations and warranties of the Company shall be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect, which are accurate in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a
specific date which shall be true and correct as of such specified date) and the Company shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect in the form attached hereto
as Exhibit H.


 


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


 


(viii)Each
of the Company’s U.S. Subsidiaries shall have executed and delivered to such Buyer the Guaranty Agreement.


 


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


 




    	 	- 28 -	 



    	 



    


 


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


 


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


 


8.TERMINATION.
In the event that the Closing shall not have occurred with respect to the Buyer on or before ten (10) Trading Days from the date
hereof due to the Company’s or the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and
the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of business on such date by delivering a written notice
to that effect to each other party to this Agreement and without liability of any party to any other party.


 


9.MISCELLANEOUS.


 


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


 


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


 




    	 	- 29 -	 



    	 



    


 


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


 


(d)Severability.
If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity
or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).


 


(e)Entire
Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein,
and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding
of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. Provisions
of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the aggregate
number of Registrable Securities issued or issuable under the Notes (the “Required Holders”); provided that
any such amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely affects the
rights and obligations of any Buyer relative to the comparable rights and obligations of the other Buyers shall require the prior
written consent of such adversely affected Buyer; provided, further, that (i) the provisions of Section 4(q) cannot
be amended without the additional prior written approval of the Collateral Agent or its successor and (ii) any such amendment
or waiver that materially and adversely affects the rights of the Placement Agent shall require the prior written consent of the
Placement Agent. No provisions hereto may be waived other than by an instrument in writing signed by the party against whom enforcement
is sought. Any amendment or waiver effected in accordance with this Section 9(e) shall be binding upon each Buyer and holder of
Securities and the Company. No such amendment shall be effective to the extent that it applies to less than all of the Buyers
or holders of Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents unless the same consideration (other than the reimbursement of legal fees)
also is offered to all of the parties to the Transaction Documents, holders of Notes. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company
or otherwise.


 




    	 	- 30 -	 



    	 



    


 


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


 


If
to the Company:


 


Enerpulse
Technologies, Inc.


2451
Alamo Ave. NE,

Albuquerque, New Mexico 87106









	 	Telephone:	(505) 842-5201
	 	Facsimile:	(505) 213-0013
	 	Attention:	Bryan Templeton,
	 	 	Chief Financial Officer
	 	Email:	btempleton@enerpulse.com




 


With
a copy to:


 


Troutman
Sanders LLP


875
Third Avenue

New York, NY 10022





	 	Telephone:	(212) 704-6249
	 	Facsimile:	(212) 704-5900
	 	Attention:	Aurora Cassirer, Esq.
	 	E-mail:	acasirer@troutmansanders.com




 


If
to the Transfer Agent:


 


Securities
Transfer Corporation


2591
Dallas Parkway, Suite 102


Frisco,
Texas 75034

Telephone: (469) 633-0101


Facsimile:
(469) 633-0088


Attention:
Christina Shelton, Original Issuance Department


E-mail:
shelton@stctransfer.com


 





    	 	- 31 -	 



    	 



    


 


If
to the Buyer, to its address, facsimile number and e-mail address set forth on the Schedule of Buyers, with copies to the Buyer’s
representatives as set forth on the Schedule of Buyers, or to such other address, facsimile number and/or e-mail address and/or
to the attention of such other Person as the recipient party has specified by written notice given to each other party at least
one (1) Business day prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine or e-mail containing the time, date, recipient facsimile number and an image of the first page of such transmission or
(C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.


 


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


 


(h)No
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that
(i) each Indemnitee shall have the right to enforce the obligations of the Company with respect to Section 9(m) and (ii) the Placement
Agent shall be a third party beneficiary of this Section 9(h) and Sections 1(e), 2(e), 2(k), 2(l), 2(m), 3(g), 4(g), 7(ii), 9(i)
and 9(j).


 


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


 


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


 




    	 	- 32 -	 



    	 



    


 


(k)Indemnification.
In consideration of the Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless the Buyer and each other holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including reasonable and documented attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating
to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities or (iii) the status of the Buyer or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities that is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures
with respect to the rights and obligations under this Section 9(m) shall be the same as those set forth in Section 6 of the Registration
Rights Agreement.


 


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


 


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


 




    	 	- 33 -	 



    	 



    


 


(n)Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever the Buyer exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then the Buyer may rescind or withdraw,
in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.


 


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


 


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


 


[Signature
Page Follows]


 




    	 	- 34
                                                                                                                                                                                                                                                                 -	 



    	 



    


 


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


 


	 	COMPANY:
	 	 	 
	 	ENERPULSE TECHNOLOGIES, INC.
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:


 


[Signature
Page to Securities Purchase Agreement]


 




    	 	 	 



    	 



    


 


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


 


	 	BUYERS:
	 	 	 
	 	[___________] 
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
    


 




    	 	 	 



    	 



    


 


SCHEDULE
OF BUYERS


 


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

 Facsimile Number	 	Aggregate
    

Principal

 Amount of Notes	 	Purchase
    Price	 	Legal
    Representative’s

 Address 

and Facsimile Number
	 	 	 	 	 	 	 	 	 
	 	 	 	 	$[  ]	 	$[  ]	 	 
	[Buyers]	 	[Address]
    	 	 	 	 	 	 
	 	 	Attention:
    [  ]	 	 	 	 	 	 
	 	 	Facsimile:
    [  ]	 	 	 	 	 	 
	 	 	Telephone:
    [  ]	 	 	 	 	 	 
	 	 	Residence:
    [  ]	 	 	 	 	 	 
	 	 	E-mail:
    [  ]	 	 	 	 	 	 


 




    	 	 	 



    	 



    


 


EXHIBITS


 


	Exhibit
    A	Form
    of Notes
	Exhibit
    C	Form
    of Registration Rights Agreement
	Exhibit
    D	Form
    of Guaranty Agreement
	Exhibit
    E	Form
    of Security Agreement
	Exhibit
    F	Form
    of Irrevocable Transfer Agent Instructions
	Exhibit
    G	Form
    of Secretary’s Certificate
	Exhibit
    H	Form
    of Officer’s Certificate


 


SCHEDULES


 


	Schedule
    3(a)	Subsidiaries
	Schedule
    3(d)	Conflicts
	Schedule
    3(k)	SEC
    Documents
	Schedule
    3(m)	Undisclosed
    Events, Liabilities, Developments or Circumstances
	Schedule
    3(p)	Sarbanes-Oxley
    Act
	Schedule
    3(q)	Transactions
    with Affiliates
	Schedule
    3(r)	Equity
    Capitalization
	Schedule
    3(s)	Indebtedness
    and Other Contracts
	Schedule
    3(x) 	Intellectual
    Property Rights
	Schedule
    3(cc)	Internal
    Accounting and Disclosure Controls
	Schedule
    3(ee)	Ranking
    of Notes