Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


SECURITIES PURCHASE
AGREEMENT (the "Agreement"), dated as of September 18, 2014, by and among Ener-Core, Inc., a Nevada corporation,
with headquarters located at 9400 Toledo Way, Irvine, California 92618 (the "Company"), and the investors listed
on the Schedule of Buyers attached hereto (individually, a "Buyer" and collectively, the "Buyers").


 


WHEREAS:


 


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


 


B.Each Buyer wishes
to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, that aggregate number of shares
of the Common Stock, par value $0.0001 per share, of the Company (the "Common Stock"), set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers (which aggregate amount for all Buyers together shall be 26,666,667 shares
of Common Stock and shall collectively be referred to herein as the "Common Shares" or the "Securities").


 


C.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 A (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.


 


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


 


1.PURCHASE AND SALE OF COMMON SHARES.


 


(a)Purchase
of Common Shares. 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), the number of Common Shares 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 Schulte Roth & Zabel LLP, 919 Third
Avenue, New York, New York 10022.


 






    	 



    	 



    

 


(c)Purchase
Price. The aggregate purchase price for the Common Shares 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 (4) of the Schedule of Buyers.


 


(d)Form
of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for the Common Shares to be issued
and sold to such Buyer at the Closing (less, in the case of Empery Asset Master Ltd. ("Empery"), the amounts withheld
pursuant to Section 4(g)), 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 one or more stock certificates, evidencing the number of Common Shares such Buyer
is purchasing as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyers duly executed on behalf
of the Company and registered in the name of such Buyer or its designee.


 


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


 


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


 


(g)Legends.
Such Buyer understands that the certificates or other instruments representing the Common Shares and, until such time as the resale
of the Common Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Common 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):


 


THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.


 






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The legend set forth above
shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust Company ("DTC"),
if, unless otherwise required by state securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii)
in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act, or (iii) the Securities can be sold, assigned or transferred pursuant to Rule 144
or Rule 144A. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with such issuance.
If the Company shall fail for any reason or for no reason to issue to the holder of the Securities within three (3) Trading Days
after the occurrence of any of (i) through (iii) above, a certificate without such legend to the holder or to issue such Securities
to such holder by electronic delivery at the applicable balance account at DTC, and if on or after such Trading Day the holder
purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder
of such Securities that the holder anticipated receiving without legend from the Company (a "Buy-In"), then the
Company shall, within three (3) Business Days after the holder's request and in the holder's discretion, either (i) pay cash to
the holder in an amount equal to the holder's total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver such unlegended
Securities shall terminate, or (ii) promptly honor its obligation to deliver to the holder such unlegended Securities as provided
above and pay cash to the holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number
of shares of Common Stock, times (B) the Closing Bid Price on the date of the occurrence of any of clauses (i) through (iii), as
applicable. As used herein, (i) "Trading Day" means any day on which the Common Stock is traded on the Principal
Market (as defined in Section 3(d)), or, if the Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading
Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or
if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York time); (ii) "Closing Bid Price" means, for any security as of any date,
the last closing bid price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing bid price, then the last bid price of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg,
or, if no closing bid price is reported for such security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.).
If the Closing Bid Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as mutually determined by the Company and such holder of Securities.
All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period; and (iii) "Bloomberg" means Bloomberg Financial Markets..


 






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(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.


 


3.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


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


 


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


 






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(b)Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Lock-Up Agreements (as defined in Section 7(x)), a Waiver and Amendment Agreement,
in the form attached hereto as Exhibit B, with each of the investors listed on the signature pages attached to that certain
Securities Purchase Agreement (the "April 2014 SPA") by and among the Company and such investors (the "April
2014 Investors") dated as of April 15, 2014 (the "Waiver and Amendment Agreement"), the Irrevocable Transfer
Agent Instructions (as defined in Section 5) and each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the "Transaction Documents") and to issue
the Securities in accordance with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation,
the reservation for issuance and the issuance of the Common 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 and (other filings as may be required by state securities
agencies) no further filing, consent, or authorization is required by the Company, its Board of Directors or its shareholders.
This Agreement and the other Transaction Documents have been duly executed and delivered by the Company, and constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except
as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.


 


(c)Issuance
of Securities. The issuance of the Common Shares are duly authorized and, upon issuance, shall be validly issued and free from
all from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. As of the date hereof, there are 113,890,972 shares of Common Stock authorized
and unissued. 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.


 






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(d)No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance
of the Common 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) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under,
or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including other foreign, federal and state securities laws and regulations and the rules and regulations of
the OTC QB (the "Principal Market") and including all applicable laws of the State of Nevada and any foreign,
federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.


 


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


 


(f)Acknowledgment
Regarding Buyer's Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and
that, except as disclosed in Schedule 3(f), 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.


 






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


 


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


 


(i)[Intentionally
omitted]


 


(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, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws of the jurisdiction
of its formation which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and any Buyer's ownership of the Securities. The Company
has not adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock
or a change in control of the Company.


 






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


 


(l)Absence
of Certain Changes. Except as disclosed in Schedule 3(l) or as set forth in the SEC Documents, since December 31, 2013,
there has been no material adverse change and no material adverse development in the business, assets, properties, operations,
condition (financial or otherwise), results of operations or prospects of the Company or its Subsidiaries. Except as disclosed
in Schedule 3(l), 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 bankruptcy law nor does the Company have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would
reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of
the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(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.


 






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


 


(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 delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Except as set forth in Schedule 3(n), during the two (2) years prior to the date hereof,
the Common Stock has been designated for quotation on the Principal Market. Except as set forth in Schedule 3(n), during
the two (2) years prior to the date hereof, (i) trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (ii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the
suspension or delisting of the Common Stock from the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.


 


(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.


 






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


 


(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) 200,000,000 shares of Common
Stock, of which as of the date hereof, 86,109,028 shares are issued and outstanding, 14,000,000 shares are reserved for issuance
pursuant to the Company's stock option and purchase plans and 5,410,939 shares are reserved for issuance pursuant to securities
(other than the aforementioned options) exercisable or exchangeable for, or convertible into, Common Stock, (ii) 50,000,000 shares
of preferred stock, par value $0.0001 per share, none of which are issued and outstanding as of the date hereof and (iii) there
are 47,942,748 shares of Common Stock held by non-affiliates of the Company. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable. Except as disclosed in (i) Schedule 3(r)(i), none
of the Company's capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered
or permitted by the Company; (ii) Schedule 3(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 of capital stock of the Company
or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company
or any of its Subsidiaries; (iii) Schedule 3(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) Schedule 3(r)(iv), there are no financing
statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company
or any of its Subsidiaries; (v) Schedule 3(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) Schedule 3(r)(vi), there are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements
by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries;
(vii) Schedule 3(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) Schedule 3(r)(viii), the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement; and (ix) Schedule 3(r)(ix), the
Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of the Company's or any of its Subsidiary's' respective
businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect. The Company has furnished
or made available to the Buyers true, correct and complete copies of the Company's Articles of Incorporation, as amended and as
in effect on the date hereof (the "Articles of Incorporation"), and the Company's Bylaws, as amended and as in
effect on the date hereof (the "Bylaws"), and the terms of all securities convertible into, or exercisable or
exchangeable for shares of Common Stock and the material rights of the holders thereof in respect thereto.


 






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


 






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(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, except
as set forth in Schedule 3(t). The matters set forth in Schedule 3(t) would not reasonably be expected to have a
Material Adverse Effect.


 


(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.


 


(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 of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such officer's employment with the Company or any such Subsidiary.
No executive officer of the Company or any of its Subsidiaries, to the knowledge of the Company or any of its Subsidiaries, is,
or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters.






    	- 13 -



    	 



    

 


(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 which do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any
real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.


 


(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. None of the Company's Intellectual Property Rights have expired or terminated or have been abandoned or are expected
to expire or terminate or are expected to be abandoned, within three years from the date of this Agreement. The Company does not
have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There is no
claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened,
against the Company or any of its Subsidiaries regarding its Intellectual Property Rights. Neither the Company nor any of its Subsidiaries
is aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings.
The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all
of their Intellectual Property Rights.


 


(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.


 






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(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 Subsidiary is, and upon consummation of the sale of the Securities, and for so
long any Buyer holds any Securities, will be, an "investment company," a company controlled by an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended.


 


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


 


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




 






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


 


(ee)[Intentionally
omitted]


 


(ff)[Intentionally
omitted]


 


(gg)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.


 


(hh)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.


 


(ii)Acknowledgement
Regarding Buyers' Trading Activity. The Company acknowledges and agrees that (i) none of the Buyers has been asked to agree,
nor has any Buyer agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or "derivative"
securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) any Buyer, and counter-parties
in "derivative" transactions to which any such Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Stock, and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm's length
counter-party in any "derivative" transaction. The Company further understands and acknowledges that one or more Buyers
may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding, and (b)
such hedging and/or trading activities, if any, can reduce the value of the existing shareholders' equity interest in the Company
both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned
hedging and/or trading activities do not constitute a breach of this Agreement or any of the documents executed in connection herewith.


 


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


 






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(kk)Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or affiliates is subject to the Bank Holding Company Act
of 1956, as amended (the "BHCA") and to regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (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.


 


(ll)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.


 


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


 


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


 






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(oo)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.


 


(pp)No Disagreements
with Accountants and Lawyers. There are no material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company's ability to
perform any of its obligations under any of the Transaction Documents. In addition, on or prior to the date hereof, the Company
had discussions with its accountants about its financial statements previously filed with the SEC. Based on those discussions,
the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.


 


(qq)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.


 


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


 


4.COVENANTS.


 


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


 


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


 






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(c)Reporting
Status. Until the date on which the Investors (as defined in the Registration Rights Agreement) shall have sold all of the
Common Shares (the "Reporting Period"), the Company shall timely file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under
the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination.


 


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


 


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


 


(f)Listing.
The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any, upon which the Common Stock then listed (subject
to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time issuable under
the terms of the Transaction Documents. The Company shall maintain the authorization for quotation of the Common Stock on the Principal
Market or any other Eligible Market. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably
expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f). As used herein, "Eligible Market"
means the Principal Market, the NYSE MKT LLC, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market
or The New York Stock Exchange, Inc.


 






    	- 19 -



    	 



    

 


(g)Fees.
The Company shall reimburse Empery (a Buyer) or its designee(s) (in addition to any other expense amounts paid to any Buyer or
its counsel prior to the date of this Agreement) for all costs and expenses incurred in connection with the transactions contemplated
by the Transaction Documents (including all legal fees and disbursements in connection therewith, documentation and implementation
of the transactions contemplated by the Transaction Documents and due diligence in connection therewith), which amount may be withheld
by such Buyer from its purchase price for any Common Shares purchased at the Closing to the extent not previously reimbursed by
the Company. Notwithstanding the foregoing, in no event will the fees of counsel of Empery reimbursed by the Company pursuant to
this Section 4(g) exceed $25,000 without the prior approval from the Company. The Company shall be responsible for the payment
of any placement agent's fees, financial advisory fees, or broker's commissions (other than for Persons engaged by any Buyer) relating
to or arising out of the transactions contemplated hereby, including, without limitation, any fees or commissions payable to the
Placement Agent. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney's fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment.
Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection
with the sale of the Securities to the Buyers.


 


(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 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 first Business Day after
this Agreement has been executed, the Company shall issue a press release reasonably acceptable to the Buyers and file a Current
Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the
1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules and
exhibits to this Agreement), the form of Lock-Up Agreement, the form of the Waiver and Amendment Agreement and the Registration
Rights Agreement, as exhibits to such filing (including all attachments), the "8-K Filing"). From and after the
filing of the 8-K Filing with the SEC, no Buyer shall be in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, that is not disclosed
in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries
or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Buyers or any
of their affiliates, on the other hand, shall terminate. The Company shall not, and shall cause each of its Subsidiaries and its
and each of their respective officers, directors, affiliates, employees and agents, not to, provide any Buyer with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and after the date hereof with the SEC without the
express prior written consent of such Buyer. If a Buyer has, or believes it has, received any such material, nonpublic information
regarding the Company or any of its Subsidiaries from the Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates, employees or agents, it may provide the Company with written notice thereof. The Company shall, within two
(2) Trading Days of receipt of such notice, make public disclosure of such material, nonpublic information. In the event of a breach
of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, affiliates,
employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Buyer shall have the right
to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information
without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, affiliates,
employees or agents. No Buyer shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers,
directors, affiliates, employees, shareholders or agents for any such disclosure. To the extent that the Company delivers any material,
non-public information to a Buyer without such Buyer's consent, the Company hereby covenants and agrees that such Buyer shall not
have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees,
affiliates or agents with respect to, or a duty not to trade on the basis of, such material, non-public information. Subject to
the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Except for the Registration Statement required to be filed pursuant to the Registration
Rights Agreement, 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)Variable
Securities. Without the prior written approval of the Required Holders, from the date hereof until the one (1) year anniversary
of the Closing Date, the Company shall not, in any manner, issue or sell any rights, warrants or options to subscribe for or purchase
Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which varies
or may vary with the market price of the Common Stock, including by way of one or more reset(s) to any fixed price, in each case
unless the conversion, exchange or exercise price of such security cannot be less than the Exercise Price (as defined in the warrants
issued pursuant to the April 2014 SPA) in effect at the time the Company issues the applicable security (as adjusted for any stock
dividend, stock split, stock combination, reclassification or similar transaction occurring after the date thereof).


 


(k)Corporate
Existence. So long as any Buyer beneficially owns any Securities, the Company shall maintain its corporate existence.


 






    	- 21 -



    	 



    

 


(l)[Intentionally
omitted]


 


(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
Registration Statements. Without the prior written approval of the Required Holders, from the date hereof until the time that
all of the Registrable Securities may be re-sold pursuant to an effective Registration Statement, the Company shall not, directly
or indirectly (i) cause any resale registration statement or any amendment or supplement thereto to be declared effective by the
SEC, or (ii) grant any registration rights to any Person that requires the Company to cause any resale registration statement to
be declared effective by the SEC prior to the time that all of the Registrable Securities may be re-sold pursuant to an effective
Registration Statement, other than pursuant to the Registration Rights Agreement.


 


(o)Public
Information. At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities, if a registration statement is not available for the resale of all of the Securities, may
be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1),
if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the
failure to satisfy the current public information requirement under Rule 144(c) or (ii) if the Company has ever been an issuer
described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set
forth in Rule 144(i)(2) (a "Public Information Failure") then, as partial relief for the damages to any holder
of Securities by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to each such holder an amount in cash equal to two
percent (2.0%) of the aggregate Purchase Price of such holder's Securities on the day of a Public Information Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such Public Information
Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144. The payments to which
a holder shall be entitled pursuant to this Section 4(o) are referred to herein as "Public Information Failure Payments."
Public Information Failure Payments shall be paid on the earlier of (I) the last day of the calendar month during which
such Public Information Failure Payments are incurred and (II) the third Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full.


 


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


 






    	- 22 -



    	 



    

 


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


 


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


 


5.TRANSFER AGENT
INSTRUCTIONS. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, in
the form of Exhibit C attached hereto (the "Irrevocable Transfer Agent Instructions") to issue certificates
or credit shares to the applicable balance accounts at DTC, registered in the name of each Buyer or its respective nominee(s),
for the Common Shares issued at the Closing. The Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof, will be given
by the Company to its transfer agent, and that the Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment
or transfer of the Securities in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and
in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves the Common 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 will be
inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5, 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.


 


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


 


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


 


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


 



    	- 23 -



    	 



    

 





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


 


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


 


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


 


The obligation of each Buyer
hereunder to purchase the Common 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 each Buyer's sole benefit and may be waived by such Buyer at any
time in its sole discretion by providing the Company with prior written notice thereof:


 


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


 


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


 


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


 


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


 


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


 


(vi)[Intentionally
omitted]


 






    	- 24 -



    	 



    

 


(vii)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 Board of Directors in a form reasonably
acceptable to such Buyer, (ii) the Articles of Incorporation of the Company and (iii) the Bylaws of the Company, as in effect at
the Closing, in the form attached hereto as Exhibit E.


 


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


 


(ix)The
Company shall have delivered to each Buyer a Waiver and Amendment Agreement executed and delivered by the Company and each of the
April 2014 Investors.


 


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


 


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


 


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


 


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


 


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


 






    	- 25 -



    	 



    

 


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
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.


 


(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).


 






    	- 26 -



    	 



    

 


(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 Common
Shares issued hereunder and shall include Empery so long as Empery and/or any of its affiliates hold, in the aggregate, at least
1,000,000 shares of Common Stock (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar
transaction occurring after the date thereof) (the "Required Holders"); provided that any such amendment or waiver
that complies with the foregoing but that disproportionately, materially and adversely affects the rights and obligations of any
Buyer relative to the comparable rights and obligations of the other Buyers shall require the prior written consent of such adversely
affected Buyer; provided, further, that the provisions of Sections 4(r) and 4(s) cannot be amended without the additional
prior written approval of the Collateral Agent or its successor. Any amendment or waiver effected in accordance with this Section
9(e) shall be binding upon each Buyer and holder of Securities and the Company. No such amendment shall be effective to the extent
that it applies to less than all of the Buyers or holders of Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration
(other than the reimbursement of legal fees) also is offered to all of the parties to the Transaction Documents, holders of Common
Shares. 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.


 






    	- 27 -



    	 



    

 


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


 


If to the Company:


 


Ener-Core, Inc.


9400 Toledo Way

Irvine, California 92618


Telephone:    (949)
616-3333


Facsimile:      (949)
616-3399
 Attention:     Domonic J. Carney


  


With a copy to:


 


LKP Global Law, LLP


1901 Avenue of the Stars, Suite 480


Los Angeles, California 90067


Telephone:   (424) 239-1890

Facsimile:      (424) 239-1882


Attention:     Kevin K. Leung,
Esq.


E-mail:
          kleung@lkpgl.com


 


If to the Transfer Agent:


 


VStock Transfer, LLC.


77 Spruce Street, Suite 201


Cedarhurst, New York 11516

Telephone:    (212) 828-8436


Facsimile:      (646)
536-3179


Attention:     Yoel
Goldfeder


E-mail:
          yoel@vstocktransfer.com



 


 


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


 


with a copy (for informational purposes only) to:


 


Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone:   (212) 756-2000

Facsimile:     (212) 593-5955

Attention:    Eleazer N. Klein, Esq.

E-mail:          eleazer.klein@srz.com


 


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


 






    	- 28 -



    	 



    

 


(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 Common Shares. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Required Holders. A Buyer may assign some or all of its rights hereunder without
the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights.


 


(h)No
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that
each Indemnitee shall have the right to enforce the obligations of the Company with respect to Section 9(k).


 


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


 


(j)Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby, including without limitation taking such reasonable action as is necessary or desirable to perfect a security interest
in the Company's or one or more of its Subsidiaries' Intellectual Property. Also, without limiting the generality of the requirements
of the Company set forth in the Transaction Documents, the Company hereby covenants and agrees to provide prompt notice to the
Collateral Agent upon the issuance of any patents in the name of the Company or any of their Subsidiaries anywhere in the world.


 






    	- 29 -



    	 



    

 


(k)Indemnification.In
consideration of each Buyer's execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify
and hold harmless each Buyer and each other holder of the Securities and all of their shareholders,
partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons' agents or
other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby
or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes
a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance
or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii)
any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the
Securities, (iii) any disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the
Securities as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. Except as otherwise
set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) 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.
Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law
may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or
other security.


 


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


 






    	- 30 -



    	 



    

 


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


 


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


 


[Signature Page Follows] 


 




    	- 31 -



    	 



    

 


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


 


	 	COMPANY:
	 	 
	 	ENER - CORE, INC.
	 	 	 
	 	By:	

	 	 	Name: Alain J. Castro
	 	 	Title:   Chief Executive Officer


 





[Signature Page to Securities Purchase Agreement]







 









    	 



    	 



    

 


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


 


	 	BUYERS:
	 	 	 
	 	By:	

	 	 	Name:  
	 	 	Title:  


  





[Signature Page to Securities Purchase Agreement]







 






    	 



    	 



    

 





SCHEDULE OF BUYERS 


 


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

        Facsimile Number
	
        Number of
        Common Shares
	
        Purchase
        Price
	
        Legal Representative's
        Address and Facsimile Number

	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 



 






    	 



    	 



    

 


EXHIBITS


 


	Exhibit A	Form of Registration Rights Agreement
	Exhibit B	Form of Waiver and Amendment Agreement
	Exhibit C	Form of Irrevocable Transfer Agent Instructions
	Exhibit D	Form of Opinion of Company Counsel
	Exhibit E	Form of Secretary's Certificate
	Exhibit F	Form of Officer's Certificate
	Exhibit G	Form of Lock-Up Agreement


 


SCHEDULES


 


	Schedule 3(a)	Subsidiaries
	Schedule 3(f)	Acknowledgment Regarding Buyer's Purchase of Securities
	Schedule 3(k)	SEC Documents
	Schedule 3(l)	Absence of Certain Changes
	Schedule 3(n)	Regulatory Permits
	Schedule 3(q)	Transactions with Affiliates
	Schedule 3(r)	Equity Capitalization
	Schedule 3(s)	Indebtedness and Other Contracts
	Schedule 3(t)	Absence of Litigation
	Schedule 3(aa)	Internal Accounting and Disclosure Controls
	Schedule 7(x)	Lock-Up Parties