Exhibit 10.1


 





SECURITIES PURCHASE AGREEMENT


 


This SECURITIES
PURCHASE AGREEMENT (this “Agreement”) is dated as of September 23, 2014, between LabStyle Innovations Corp.,
a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).


 


WHEREAS, subject
to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506(b) promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.


 


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


 


ARTICLE I.


DEFINITIONS


 


1.1          Definitions.
In addition to the terms defined elsewhere in this Agreement, the following capitalized terms have the meanings set forth in this
Section 1.1:


 


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


 


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


 


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


 


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


 


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


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.


 


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


 


“Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 




    	 



    	 



    

  


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


 


“Edery”
means David Edery, or his controlled Affiliates, including Dicilyon Consulting and Investments Ltd.


 


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


 


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


 


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


 


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


 


“Preferred
Stock” means the up to 60,000 shares of the Company’s Series A Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.


 


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


 


“Registration
Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit B attached hereto.


 


“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.


 


“Reverse
Split” means a five-for-one reverse stock split of the Common Stock which has been previously authorized by the Company’s
stockholders. All share number and similar references in this Agreement are made without taking into account the Reverse Split.
It is expressly acknowledged and agreed that all representations and warranties of the Company contained herein regarding (a) the
due authorization and reservation of the Securities and (b) the due authorization by the Company and the Board of Directors of,
and the power and authority of the Company to enter into, this Agreement, the Transaction Documents and the transactions contemplated
hereby and thereby are subject to and qualified in their entirety by the requirement of the Company to implement the Reverse Split.


 


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


 




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


 


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


 


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.


 


“Stated
Value” means $100 per share of Preferred Stock.


 


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


 


“Subsidiary”
means (i) LabStyle Innovation Ltd., an Israeli company and (ii) LabStyle Innovations US LLC, a Delaware limited liability company,
and “Subsidiaries” means each Subsidiary collectively.


 


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


 


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


 


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


 


“Transfer
Agent” means VStock Transfer, LLC, the current transfer agent of the Company, and any successor transfer agent of the
Company.


 


“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock or upon exercise
of the Warrants.


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to four (4) years, in the form of Exhibit
C attached hereto.


 


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


 




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ARTICLE II.


PURCHASE AND SALE


 


2.1          Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $6,000,000 of shares of Preferred Stock with an aggregate value for each Purchaser equal
to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and Warrants
as determined by pursuant to Section 2.2(a). The aggregate number of shares of Preferred Stock sold hereunder shall be up to 60,000.
Prior to Closing, each Purchaser shall deliver to the Company, via wire transfer of immediately available funds, cash equal to
its Subscription Amount, and as of the Closing (i) the Company shall deliver to each Purchaser its respective shares of Preferred
Stock and Warrants as determined pursuant to Section 2.2(a), and (ii) the Company and each Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at the Closing, provided that it shall not be a condition for the Closing as to any Purchaser
that any other Purchaser shall have delivered the items set forth in Section 2.2 to be delivered by such other Purchaser. Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of legal
counsel to the Company or such other location as the parties shall mutually agree (and such Closing may be undertaken remotely
by electronic exchange of documentation).


 


2.2          Deliveries.


 


(a)          In
connection with the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following:


 


(i)          on
or prior to the Closing Date, this Agreement duly executed by the Company;


 


(ii)         within
five (5) Business Days of the Closing Date, a stock certificate evidencing a number of shares of Preferred Stock equal to such
Purchaser’s Subscription Amount divided by the Stated Value, registered in the name of such Purchaser (it being agreed, however,
that each Purchaser shall, upon consummation of the Closing, be the record holder of such shares of Preferred Stock);


 


(iii)        within
five (5) Business Days of the Closing Date, a Warrant registered in the name of such Purchaser to purchase up to a number of shares
of Common Stock equal to 50% of the shares of Common Stock underlying the Preferred Stock purchased by such Purchaser hereunder,
with an exercise price per share equal to $0.914, subject to adjustment as provided for therein; and


 


(iv)         on
or prior to the Closing Date, the Registration Rights Agreement duly executed by the Company.


 


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


 


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


 


(ii)         the
Registration Rights Agreement duly executed by such Purchaser.


 




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2.3          Closing
Conditions.


 


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


 


(i)          the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);


 


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


 


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


 


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


 


(i)          the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein, which shall be true and correct as of such specified date), and the Purchasers 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 the Purchasers in the form attached hereto as Exhibit
D;


 


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


 


(iii)        the
Company shall have received all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities;


 


(iv)         the
Purchasers shall have received the opinion of Ellenoff Grossman & Schole LLP, the Company's outside counsel, dated as of the
Closing Date, in a customary form agreed to by counsel to Edery;


 


(v)          the
Purchasers shall have received a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to
(i) the resolutions consistent with Sections 3.1(c) and (tt), Section 4.7 and Section 4.9 below as adopted by the Company's Board
of Directors in a form reasonably acceptable to Edery, (ii) the undertakings provided for in Section 4.9(d), (iii) the Certificate
of Incorporation and (iv) the Bylaws, each as in effect at the Closing, in the form attached hereto as Exhibit E;


 


(vi)         the
Purchasers shall have received from the Company a certified copy of the Certificate of Designation from the Secretary of State
of the State of Delaware; and


 


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


 




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ARTICLE III.


REPRESENTATIONS AND WARRANTIES


 


3.1          Representations
and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:


 


(a)          Subsidiaries.
The Subsidiaries are the only direct or indirect subsidiaries of the Company. The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.


 


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


 


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


 




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


 


(e)          Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
notices to existing investors in connection with affording such investors any existing pre-emptive or participation rights held
by such existing investors (the “Participation Rights”), (ii) the filings required pursuant to Section 4.6 of
this Agreement, (iii) the filing with the Commission required under the Registration Rights Agreement, (iv) the notice and/or application(s)
to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Shares and Warrant Shares
for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).


 


(f)          Issuance
of the Securities. Subject to the requirement to implement the Reverse Split: (i) the Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents
and (ii) the Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for
in the Transaction Documents and (iii) the Company has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares.


 




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(g)          Capitalization.
As of the date hereof the authorized capital stock of the Company consists of (i) 80,000,000 shares of Common Stock, of which,
79,529,254 are issued and outstanding and 22,312,647 shares are reserved for issuance pursuant to securities (other than
the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 5,000,000 shares of preferred
stock, none of which are issued and outstanding. No shares of Common Stock are held in treasury. All of such outstanding shares
are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. 862,500 shares
of the Company's issued and outstanding Common Stock are as of the date hereof owned by Persons who are "affiliates"
(as defined in Rule 405 of the 1933 Act) of the Company or any of its Subsidiaries. Except as set forth on Schedule 3(g)
hereto or as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.


 


(h)          SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects
the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.


 


(i)          Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property
to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v)
the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock
option or incentive plans.


 




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(j)          Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. There
has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act
or the Securities Act.


 


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


 


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


 


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


 




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


 


(o)          Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses(collectively, the “Intellectual
Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that
any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be
abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the
date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any
knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.


 


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


 


(q)          Transactions
With Affiliates and Employees. Except as set forth in Schedule 3(q) hereto, none of the officers or directors of the
Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently
a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money too or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.


 




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


 


(s)          Certain
Fees. Except as disclosed on Schedule 3(s), no brokerage or finder’s fees or commissions are or will be payable
by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank
or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation
with respect to, and the Company shall hold the Purchasers harmless from, any fees, liabilities or losses or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.


 


(t)          Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby.


 


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


 




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(v)          Registration
Rights. Other than each of the Purchasers and except as disclosed in the SEC Reports, no Person has any right to cause the
Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.


 


(w)          Listing
and Maintenance Requirements. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible
for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current
in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such
electronic transfer.


 


(x)          Disclosure.
All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby is true and correct in all material respects and does not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.


 


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


 


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


 


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


 


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


 




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(cc)         Accountants.
The Company’s independent registered public accounting firm is Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global. To the knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required
by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s
Annual Report for the fiscal year ending December 31, 2014.


 


(dd)         No
Disagreements with Accountants and Lawyers. There are no 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.


 


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


 


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


 


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


 


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


 




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


 


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


 


(rr)         No
Disqualification Events.  With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under
the Securities Act, 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 Securities 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 Securities 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.


 


(ss)         Other
Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid
(directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.


 


(tt)         Application
of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including,
without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of
Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its formation which is or could become
applicable to any Purchaser as a result of the transactions contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and any Purchaser's ownership of the Securities. The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating
to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.


 


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


 




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(vv)          Shell
Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).


 


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


 


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


 


(b)          Own
Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.


 


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


 


(d)          Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. Such Purchaser
acknowledges that as of the date hereof, the Company has very limited financial resources, and thus an investment in the Securities
is subject to significant risk.


 




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


 


(f)          Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including
all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering
of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial
condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with respect to the investment.  Such Purchaser
acknowledges and agrees that neither the Company nor any Affiliate of the Company has provided such Purchaser with any information
or advice with respect to the Securities nor is such information or advice necessary or desired. 


 


(g)          Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases
or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered
by this Agreement. Other than to other Persons party to this Agreement or its legal counsel or other advisors, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms
of this transaction).


 


(h)          Other
Company Holdings. As of the Closing Date, and prior to the consummation of the transactions contemplated by this Agreement,
such Purchaser is not, collectively with its Affiliates or any Person with whom such Purchaser is acting in concert, a holder of
Common Stock or Common Stock Equivalents in an amount equal to more than one percent (1%) of the outstanding shares of Common Stock
(assuming full exercise or conversion of any such Common Stock Equivalents).


 




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ARTICLE IV.


OTHER AGREEMENTS OF THE PARTIES


 


4.1          Transfer
Restrictions.


 


(a)          The
Securities may only be disposed of in compliance with U.S. state and U.S. federal securities laws. In connection with any transfer
of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser
or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of
such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights and obligations of a Purchaser
under this Agreement and the Registration Rights Agreement.


 


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


 


[NEITHER] THIS SECURITY [NOR
THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE COMPANY TO SUCH EFFECT.


 


(c)          Certificates
evidencing the Underlying Shares shall not be required to contain any legend (including the legend set forth in Section 4.1(b)
hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective
under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares
are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information
required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions or (iv) if such legend is
not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission).


 


(d)          Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance
with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.


 


(e)          Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will not sell, transfer,
assign, hypothecate or otherwise dispose of any Securities or any direct or indirect interest therein for a period of sixty (60)
days following the Closing Date.


 


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


 




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4.3          Furnishing
of Information. For so long as any Purchaser is an “affiliate” (as defined in Rule 144) of the Company, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required
to be filed by the Company after the date hereof pursuant to the Exchange Act, and the Company shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would
no longer require or otherwise permit such termination, and the Company shall take all reasonable actions to maintain its eligibility
to register the Common Stock and Warrant Shares for resale by the Purchasers on Form S-3.


 


4.4          Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities.


 


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


 


4.6          Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceed: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.


 


4.7          Reverse
Stock Split. The Company covenants that it shall, within fifteen (15) calendar days of the Closing, implement the Reverse Split.


 


4.8          Preemptive
Rights of Edery.


 


(a)          For
a period of two (2) years from the Closing, Edery shall have the right of first refusal to
purchase his Pro Rata Share (as defined below) of all (or any part) of any New Securities (as defined below) that the Company may
from time to time issue during such period. 


 




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(b)          Edery’s
“Pro Rata Share” for purposes of this Section 4.8 shall be equal to the ratio of (a) the number of shares of
Common Stock on a Fully Diluted Basis which the Edery is deemed to hold immediately prior to the issuance of such New Securities
to (b) the total number of shares of outstanding Common Stock on a Fully Diluted Basis immediately prior to the issuance of the
New Securities. For purposes of this Section 4.8, the term “Fully Diluted Basis” shall mean at the time of determination,
the total number of shares of Common Stock then issued and outstanding, plus the number of shares underlying Common Stock Equivalents
then issued and outstanding; provided, however, that for purposes of this Section 4.8 only, the term Common Stock Equivalents shall
only include those whose exercise or conversion prices are greater than the then market value of the Common Stock (i.e., “in
the money”).


 


(c)          For
purposes of this Section 4.8, the term “New Securities” means any Common Stock or Common Stock Equivalents,
whether now authorized or not, but only those issued pursuant to a private placement offering; provided, however, that the
term “New Securities” does not include: (i) any securities issued or issuable pursuant to current or future stock option,
stock incentive or similar plans or agreements approved by the Board of Directors; (ii) any shares of Common Stock issuable upon
conversion or exercise of the Securities issued hereunder; (iii) any shares of Common Stock issuable upon conversion or exercise
of any Common Stock Equivalents issued and outstanding as of the date hereof; (iv) any shares of the Common Stock Common Stock
Equivalents issued in connection with any forward or reverse stock split or stock dividend or similar event; or (v) any securities
issued by the Company (A) in connection with the establishment of credit facilities approved by the Board of Directors, (B) pursuant
to the acquisition approved by the Board of Directors of another Person by the Company or its Affiliates by way of consolidation,
merger, purchase of all or substantially all of the assets, or other reorganization in which the Company or such Affiliate acquires,
in a single transaction or series of related transactions, all or substantially all of the assets of such other Person or at least
fifty-one percent (51%) or more of the voting power of such other Person or at least fifty-one percent (51%) or more of the equity
ownership of such other Person or (C) pursuant to acquisitions or strategic transactions approved by the Board of Directors with
the affirmative vote of the Edery Nominees (as defined below) then serving, provided that
any such issuance shall only be to a Person (or to the equity holders of such Person) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company or its Subsidiaries and
shall provide to the Company or its Subsidiaries significant additional benefits in addition to the investment of funds, but shall
not include (except as set forth above) a transaction in which the Company is issuing securities for the purpose of raising capital
or to a Person whose primary business is investing in securities.


 


4.9          Edery
Board Nomination Rights.


 


(a)          For
so long as Edery or his Affiliates beneficially own 10.0% or more of the total number of shares of Common Stock outstanding, Edery
shall have the right (but not the obligation) pursuant to this Agreement to nominate one (1) individual to serve as a director
on the Board of Directors, and the Company shall include, and shall use its best efforts to cause the Company’s directors,
whether acting through the Nominating and Corporate Governance Committee of the Board of Directors or otherwise, to include, in
the slate of nominees recommended to stockholders of the Company for election as a director at any annual or special meeting of
such stockholders (or, if permitted, by any action by written consent of such stockholders) at or by which directors of the Company
are to be elected, the one (1) individual identified in writing and in advance by Edery.


 


(b)          For
so long as Edery or his Affiliates beneficially own 15.0% or more of the total number of shares of Common Stock outstanding, the
Edery shall have the right (but not the obligation) pursuant to this Agreement to nominate two (2) individuals to serve as directors
on the Board of Directors, and the Company shall include, and shall use its best efforts to cause the Company’s directors,
whether acting through the Nominating and Corporate Governance Committee of the Board of Directors or otherwise, to include, in
the slate of nominees recommended to stockholders of the Company for election as directors at any annual or special meeting of
such stockholders (or, if permitted, by any action by written consent of such stockholders) at or by which directors of the Company
are to be elected, the two (2) individuals identified in writing and in advance by Edery.


 




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(c)          For
so long as Edery or his Affiliates beneficially own 25.0% or more of the total number of shares of Common Stock outstanding, Edery
shall have the right (but not the obligation) pursuant to this Agreement to nominate three (3) individuals to serve as directors
on the Board of Directors, and the Company shall include, and shall use its best efforts to cause the Company’s directors,
whether acting through the Nominating and Corporate Governance Committee of the Board of Directors or otherwise, to include, in
the slate of nominees recommended to stockholders of the Company for election as a director at any annual or special meeting of
such stockholders (or, if permitted, by any action by written consent of such stockholders) at or by which directors of the Company
are to be elected, the three (3) individuals identified in writing and in advance by Edery. The individuals nominated to the Board
of Directors by Edery pursuant to this Section 4.9 are referred to as the “Edery Nominees.”


 


(d)          Simultaneously
with the Closing (and, in the case of subclauses (d)(iii) and (iv) below, at all applicable times following the Closing), the Company
shall ensure that:


 


(i)          the
Board of Directors shall set the number of members of the Board of Directors of the Company at seven (7);


 


(ii)         each
of the members of the Board of Directors immediately prior the Closing shall provide an undertaking to Edery to resign from the
Board and the committees thereof at such time as indicated by Edery in his sole discretion such that following Edery's acceptance
of one or more such undertakings, there shall be (A) up to three (3) vacancies on the Board of Directors (as requested by Edery)
if Section 4.9(c) shall be applicable, (B) up to two (2) vacancies on the Board of Directors (as requested by Edery) if Section
4.9(b) shall be applicable, and (C) one vacancy on the Board of Directors (as requested by Edery) if Section 4.9(a) shall be applicable;


 


(iii)        the
applicable Edery nominees shall be appointed by the Board of Directors to fill the applicable vacancies on the Board of Directors
occurring as a result of the application of subclause (d)(ii) above;


 


(iv)         two
Edery Nominees (or, if there is only one Edery Nominees, one Edery nominee until such time as there are two Edery Nominees) shall
be appointed to serve on the Compensation Committee of the Board of Directors and the Nominating and Corporate Governance Committee.
Each such committee shall be comprised of no more than three members. It is agreed that the applicability of this subclause (d)(iv)
shall be subject to the independence and other listing requirements of the Commission or any Trading Market on which the Common
Stock is traded or quoted from time to time, and if the application of this subclause (d)(iv) shall be contrary to such requirements,
the Company shall afford Edery the maximum possible representation on such committees without violating such requirements or subjecting
the Company to potential delisting from a Trading Market.


 


(e)          Vacancies
arising through the death, resignation or removal of any Edery Nominee who was nominated to the Board of Directors pursuant to
this Section 4.9, may be filled by the Board of Directors only with an Edery Nominee, and the director so chosen shall hold
office until the next election and until his or her successor is duly elected and qualified, or until his or her earlier death,
resignation or removal.


 




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(f)          Notwithstanding
the provisions of this Section 4.9, Edery shall not be entitled to designate an individual as a nominee to the Board of Directors
upon a written determination by the Nominating and Corporate Governance Committee of the Company or the Board of Directors (which
determination shall set forth in writing reasonable grounds for such determination) that such individual would not be qualified
under any applicable law, rule or regulation to serve as a director of the Company. In such an event, Edery shall be entitled to
select an individual as a replacement nominee and the Company shall use its best efforts to cause such individual to be nominated
as the Edery Nominee at the same meeting (or, if permitted, pursuant to the same action by written consent of the Company’s
stockholders) as such initial individual was to be nominated. Other than with respect to the issue set forth in the preceding sentence,
neither the Company nor any other party to this Agreement shall have the right to object to any Edery Nominee.


 


(g)          In
the event that Edery cease to have the right to designate an individual to serve as a director pursuant to this Section 4.9,
Edery shall use its best efforts to cause the applicable Edery Nominee to immediately resign from the Board of Directors, any committee
thereof, or any other position with the Company, any Subsidiary or any Affiliate of the Company.


 


4.10        Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced.  Each Purchaser, severally
and not jointly with the other Purchasers, and the Company covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company, it will maintain the confidentiality of the existence and terms of this transaction
and the information included in the Transaction Documents.


 


4.11        Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall 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 Purchasers
at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide
evidence of such actions promptly upon request of any Purchaser.


 


4.12        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 is 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 Trading
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 Trading Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4.12.


 




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ARTICLE V.


MISCELLANEOUS


 


5.1          Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before 5:00 p.m., New York time, on September 24, 2014; provided, however, that such
termination will not affect the right of any party to sue for any breach by any other party (or parties).


 


5.2          Fees
and Expenses. At the Closing, the Company agrees to reimburse Edery for its actual, accountable legal fees and expenses, up
to a maximum of $50,000. Following the Closing, the Company shall promptly reimburse Edery, from time to time, for its actual,
accountable legal fees and expenses reasonably incurred in connection with Edery’s investment in the Company, up to a maximum
of $40,000 in any twelve (12) month period (which amount shall include the cost of any Rule 144 legal opinions requested by Edery).
Except as expressly set forth in this Section 5.2, each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery
and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required
for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by a
Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.


 


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


 


5.4          Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment as set forth on the signature pages attached hereto (or, with respect
to an assignee or transferee of Securities as contemplated by Section 5.7, at the contact information of such Person provided to
the Company in connection with such assignment or transfer) at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number or email attachment as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.


 


5.5          Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and Edery or, in the case of a waiver, by the party against whom enforcement of any
such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair
the exercise of any such right.


 




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


 


5.7          Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in writing as a pre-condition to such assignment or transfer to
be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”


 


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


 


5.9          Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.


 


5.10        Arbitration
of Claims. Any dispute, controversy or claim arising in relation to this this Agreement or any Transaction Document, including
with regard to their validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall
be appointed by the Head of the Israel Bar Association. The arbitrator will not be bound by rules of evidence or procedure and
will give the reasons for his or her judgment in writing. Any such arbitration shall be conducted in Tel Aviv, Israel. The arbitrator's
decision shall be final and enforceable in any court. This Section 5.10 shall constitute an arbitration agreement between the parties.


 


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


 


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


 


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


 




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


 


5.15        Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents.


 


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


 


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


  


(Signature Pages Follow)


 




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


 


	LABSTYLE INNOVATIONS CORP.	 
	 	 	 
	By:	 	 
	 	Name:	 
	 	Title:	 
	 	 
	Address for Notice:	 
	 	 
	9 Halamish Street	 
	Caesarea Industrial Park	 
	38900, Israel	 
	Fax Number: +(972)-(4) 770 4059	 
	 	 
	With a copy to (which shall not constitute notice):	 
	 	 
	Ellenoff Grossman & Schole LLP	 
	1345 Avenue of the Americas, 11th Floor	 
	New York, NY 10105	 
	Fax Number: (646) 895-7204	 
	Attention: Lawrence A. Rosenbloom, Esq.	 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 




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[PURCHASER SIGNATURE PAGES TO LABSTYLE
INNOVATIONS CORP.


SECURITIES PURCHASE AGREEMENT]


 


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


 


Name of Purchaser: ___________________________________________________________________


 


Signature of Authorized Signatory of Purchaser: ____________________________________________


 


Name of Authorized Signatory: _________________________________________________________


 


Title of Authorized Signatory: _____________________________________


 


Email Address of Authorized Signatory: ___________________________________________


 


Facsimile Number of Authorized Signatory: _________________________________________


 


Address for Notice to Purchaser:


 


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


 


Subscription Amount: ____________


 


Shares of Preferred Stock: ____________


 


Warrant Shares: ________________


 


EIN Number (if applicable): _______________________


 


[SIGNATURE PAGES CONTINUE]


 




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