Exhibit 10.1





 





Execution
Version


 


SECURITIES
PURCHASE AGREEMENT


 


SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of December 30, 2015, by and among Ener-Core, Inc., a
Delaware corporation, with headquarters located at 9400 Toledo Way, Irvine, California 92618 (the
“Company”), and the investors identified in their respective “Buyer Signature Page” attached
hereto (individually, a “Buyer” and collectively, the “Buyers”).


 


WHEREAS:


 


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


 


B.        Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate
number of shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), as
set forth opposite such Buyer’s name in column (3) on the schedule of Buyers attached hereto as Exhibit A (the “Schedule
of Buyers”) (which aggregate amount for all Buyers together shall be 625,000 shares of Common Stock and shall collectively
be referred to herein as the “Common Shares”) and (ii) a warrant to acquire up to that number of additional
shares of Common Stock as set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (the “Warrants”),
in substantially the form attached hereto as Exhibit B (as exercised, collectively, the “Warrant Shares”).


 


C.        The
Common Shares, the Warrants and the Warrant Shares collectively are referred to as the “Securities”.


 


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


 


E.        In
connection with the offer and sale of the Securities, the Company has entered into an engagement letter dated December 26, 2015
(the “Engagement Letter”) with Northland Securities, Inc. (“Northland”) and Lake Street
Capital Markets, LLC (“Lake Street”, and together with Northland, the “Agents”).


 






     


     


    

 


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


 


1.       PURCHASE
AND SALE OF COMMON SHARES AND WARRANTS.


 


(a)       Purchase
of Common Shares and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7 below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), the number of Common Shares set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers and the Warrants to acquire up to that number of Warrant Shares set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers (the “Closing”).


 


(b)      Closing.
The date and time of the Closing (the “Closing Date”) shall be the Trading Day on which all of the Transaction
Documents have been executed and delivered by the applicable parties thereto in connection with the Closing, and all conditions
precedent to the Closing set forth in Sections 6 and 7 below have been satisfied or waived, or at such other time
or on such other date as the Company and each Buyer may mutually agree upon, at the offices of K&L Gates LLP, 1 Park Plaza,
12th Floor, Irvine, California 92614.


 


(c)      Purchase
Price. The aggregate purchase price for the Common Shares and the Warrants to be purchased by each Buyer at the Closing (the
“Purchase Price”) shall be the amount set forth opposite each Buyer’s name in column (5) on the Schedule
of Buyers.


 


(d)       Form
of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for the Common Shares and the
Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with
the Company’s written wire instructions and (ii) the Company shall deliver to each Buyer one or more stock certificates,
evidencing the number of Common Shares such Buyer is purchasing, and one or more warrant certificates, evidencing the Warrants
such Buyer is purchasing, which certificates shall be duly executed on behalf of the Company and registered in the name of such
Buyer or its designee.


 


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


 


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


 






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(b)        Accredited
Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
Such Buyer has executed and delivered to the Company a questionnaire (the “Investor Questionnaire”), substantially
in the form attached hereto as Exhibit D, which such Buyer represents and warrants is true, correct and complete.


 


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


 


(d)       Information.
Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations
of the Company, including but not limited to the Company’s filings under the Securities Exchange Act of 1934, as amended
(the “1934 Act”), and materials relating to the offer and sale of the Securities that have been requested by
such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained herein.
Such Buyer understands that its investment in the Securities involves a high degree of risk and is able to afford a complete loss
of such investment. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities. Such Buyer confirms and agrees that (i) it has independently
evaluated the merits of its decision to purchase the Securities, (ii) it has not relied on the advice of, or any representations
by, the Agents or any affiliate thereof or any representative of the Agents or their affiliates in making such decision, and (iii)
neither the Agents nor any of their representatives has any responsibility with respect to the completeness or accuracy of any
information or materials furnished to such Buyer in connection with the transactions contemplated hereby.


 


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


 






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


 


(g)       Legends.
Such Buyer understands that the certificates or other instruments representing the Common Shares, the Warrants and the Warrant
Shares and, until such time as the resale of the Common Shares and the Warrant Shares have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, shall bear any legend as required by the “blue sky” laws of
any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer
of such stock certificates or other instruments):


 


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


 






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


 






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


 


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


 


(j)         Short
Sales. Between the time such Buyer learned about the offering contemplated by this Agreement and the public announcement of
the offering, such Buyer has not engaged in any short sales or similar transactions with respect to the Common Stock, nor has
such Buyer, directly or indirectly, caused any Person to engage in any short sales or similar transactions with respect to the
Common Stock. Such Buyer shall not engage in any short sales involving the Securities in violation of the 1933 Act. Notwithstanding
the foregoing, in the case of a Buyer that is a multi-managed investment vehicle whereby separate portfolio managers manage separate
portions of such Buyer’s assets and the portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Buyer’s assets, the representation set forth above shall apply only
with respect to the portion of assets managed by the portfolio managers that have knowledge about the financing transaction contemplated
by this Agreement.


 


(k)       No
General Solicitation and Advertising; Prior Relationship. Such Buyer represents and acknowledges, to its knowledge, that it
has not been solicited to offer to purchase or to purchase any Securities by means of any general solicitation or advertising
within the meaning of Regulation D. The Buyer represents that its interest in the purchase of the Securities is the result of
its substantive, pre-existing relationship with the Company.


 






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(l)         Rule
506(d) Representation. Such Buyer represents that it is not a person of the type described in Section 506(d) of Regulation
D that would disqualify the Company from engaging in a transaction pursuant to Section 506 of Regulation D.


 


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


 


3.        REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


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


 


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


 


(b)      Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5) and
each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement
(collectively, the “Transaction Documents”) and to issue the Securities in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the issuance of the Common Shares, the issuance of
the Warrants and the reservation for issuance and the issuance of the Warrant Shares have been duly authorized by the Company’s
Board of Directors and (other than the filing with the SEC of one or more Registration Statements (as defined in the Registration
Rights Agreement) in accordance with the requirements of the Registration Rights Agreement and (other filings as may be required
by state securities agencies) no further filing, consent, or authorization is required by the Company, its Board of Directors
or its stockholders. This Agreement and the other Transaction Documents have been duly executed and delivered by the Company,
and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.


 






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(c)      Issuance
of Securities. The Common Shares and the Warrants are duly authorized and, upon issuance, shall be validly issued and free
from all from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock. As of the date hereof, there are 197,535,840 shares of Common Stock
authorized and unissued. Assuming the accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.


 


(d)      No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares,
the issuance of the Warrants and the reservation for issuance and issuance of the Warrant Shares) will not (i) result in a violation
of the Certificate of Incorporation (as defined in Section 3(p)) or Bylaws (as defined in Section 3(p)), any memorandum
of association, certificate of incorporation, certificate of formation, bylaws, any certificate of designations or other constituent
documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or the articles
of association or bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including other
foreign, federal and state securities laws and regulations and the rules and regulations of the OTCQB (the “Principal
Market”) and including all applicable laws of the State of Delaware and any foreign, federal and state laws, rules and
regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected.


 


(e)      Consents.
Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case
in accordance with the terms hereof or thereof, other than the filings or registration required by Sections 4(b) and 4(j)
of this Agreement, the Registration Rights Agreement and as may be required under the rules and regulations of the Financial
Industry Regulatory Authority, Inc. The Company is not in violation of the requirements of the Principal Market and has no knowledge
of any facts that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. The issuance
by the Company of the Securities shall not have the effect of delisting or suspending the Common Stock from the Principal Market.


 






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


 


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


 


(h)      No
Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances
that would require registration of any of the Securities under the 1933 Act, whether through integration with prior offerings
or otherwise. None of the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action
or steps referred to in the preceding sentence that would require registration of any of the Securities under the 1933 Act.


 


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


 






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(j)       SEC
Documents; Financial Statements. During the one (1) year prior to the date hereof, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof, and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC
Documents”). The Company has delivered to the Buyers or their respective representatives true, correct and complete
copies of the SEC Documents not available on the EDGAR system. As of their respective filing dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective filing
dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved
(“GAAP”) (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).


 


(k)      Absence
of Certain Changes. Except as disclosed in Schedule 3(k) or as set forth in the SEC Documents, since December 31, 2014,
there has been no event that would, to the Company’s knowledge, reasonably be expected to result in a Material Adverse Effect.
Except as disclosed in Schedule 3(k), since December 31, 2014, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the aggregate, in excess of $100,000.


 


(l)       Conduct
of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default
under any certificate of designations of any outstanding series of preferred stock of the Company (if any), its Certificate of
Incorporation or Bylaws or their organizational charter or memorandum of association or certificate of incorporation or articles
of association or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree
or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations which
could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and
has no knowledge of any facts or circumstances that would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Except as set forth in Schedule 3(l), during the one (1) year prior to the
date hereof, the Common Stock has been designated for quotation on the Principal Market. Except as set forth in Schedule 3(l),
during the one (1) year prior to the date hereof, (i) trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (ii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the
suspension or delisting of the Common Stock from the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.


 






    	 	- 10 -	 



     


    

 


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


 


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


 


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


 






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(p)      Equity
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 200,000,000 shares of Common
Stock, of which as of the date hereof, 2,464,160 shares are issued and outstanding, 608,464 shares are reserved for issuance pursuant
to the Company’s stock option and purchase plans and 413,043 shares are reserved for issuance pursuant to securities (other
than the aforementioned options) exercisable or exchangeable for, or convertible into, Common Stock, (ii) 50,000,000 shares of
preferred stock, par value $0.0001 per share, none of which are issued and outstanding as of the date hereof and (iii) 1,814,688
shares of Common Stock held by non-affiliates of the Company. All of such outstanding shares have been, or upon issuance will
be, validly issued and are fully paid and nonassessable. Except as set forth in the SEC Documents: (i) none of the Company’s
capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any
of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries;
(iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents
or instruments evidencing Indebtedness (as defined below) of the Company or any of its Subsidiaries or by which the Company or
any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any material amounts,
either singly or in the aggregate, filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except pursuant to the Registration Rights Agreement); (vi) there are no outstanding securities or instruments
of the Company or any of its Subsidiaries that contain any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of
the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; and (viii) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement. The Company and its Subsidiaries have no liabilities
or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than those incurred
in the ordinary course of the Company’s or any of its Subsidiaries’ respective businesses and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect. The Company has furnished or made available to the Buyers
true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date
hereof (the “Certificate of Incorporation”), and the Company’s Bylaws, as amended and as in effect on
the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable
for shares of Common Stock and the material rights of the holders thereof in respect thereto.


 






    	 	- 12 -	 



     


    

 


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


 


(r)       Absence
of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any
of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise, in
their capacities as such, except as set forth in Schedule 3(r). The matters set forth in Schedule 3(r) would not
reasonably be expected to have a Material Adverse Effect.


 


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


 






    	 	- 13 -	 



     


    

 


(t)       Employee
Relations.


 


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


 


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


 


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


 


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


 






    	 	- 14 -	 



     


    

 


(w)     Environmental
Laws. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i)
neither the Company nor its Subsidiaries is in violation of any Environmental Laws (as hereinafter defined), (ii) the Company
and its Subsidiaries have received all permits, licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) the Company and its Subsidiaries are in compliance with all terms and conditions
of any such permit, license or approval. The term “Environmental Laws” means all federal, state, local or foreign
laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.


 


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


 


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


 


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


 






    	 	- 15 -	 



     


    

 


(aa)   Internal
Accounting and Disclosure Controls. Except as set forth in Schedule 3(aa) or as set forth in the SEC Documents, the
Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles
and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared
with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.
Except as set forth in Schedule 3(aa) or as set forth in the SEC Documents, the Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that are effective in ensuring that information required
to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.


 


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


 


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


 


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


 


(ee)    Acknowledgement
Regarding Buyers’ Trading Activity. The Company acknowledges and agrees that (i) none of the Buyers has been asked to
agree, nor has any Buyer agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) any Buyer, and counter-parties
in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The Company further understands and acknowledges that one or
more Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding,
and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest
in the Company both at and after the time the hedging and/or trading activities are being conducted. Subject to the provisions
of Section 2(j), the Company acknowledges that such aforementioned hedging and/or trading activities do not constitute
a breach of this Agreement or any of the documents executed in connection herewith.


 






    	 	- 16 -	 



     


    

 







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


 


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


 


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


 


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


 






    	 	- 17 -	 



     


    

 


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


 


(kk)    No
“Bad Actor” Disqualification Events. No “bad actor” disqualifying event described in Rule 506(d)(1)(i)–(viii)
of the 1933 Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge,
any Company Covered Person (as defined below), except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or
(d)(3), is applicable. “Company Covered Person” means, with respect to the Company as an “issuer”
for purposes of Rule 506 promulgated under the 1933 Act, any Person listed in the first paragraph of Rule 506(d)(1).


 


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


 


4.        COVENANTS.


 


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


 


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


 


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


 


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


 






    	 	- 18 -	 



     


    

 


(e)       Purchase
Price Reset. From the date of this Agreement until the earlier of (i) thirty (30) days from the date of effectiveness of the
Registration Statement required to be filed by the Company pursuant to the Registration Rights Agreement and (ii) six months after
the Closing Date (the “Adjustment Period”), if the Company issues or sells any shares of Common Stock at a
price less than $4.00 per share (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification
or similar transaction after the date hereof) (such issuances, a “Dilutive Issuance”), then the Company shall
issue as soon as reasonably practicable additional shares of Common Stock to each Buyer for no additional consideration, in an
amount equal to (x) the Purchase Price paid by such Buyer hereunder divided by the price per share of Common Stock for the Dilutive
Issuance, minus (y) the total number of Common Shares purchased by such Buyer (such adjustment, a “Dilution Adjustment”).
In evaluating whether a registered or unregistered offering constitutes a Dilutive Issuance, (i) derivative securities, including
warrants, that are issued or sold with shares of Common Stock, whether as part of units or otherwise, shall not be attributed
any value in determining the price per share of Common Stock in the offering, and (ii) the price per share of Common Stock shall
be the price per share paid by investors in the offering, excluding any underwriting discounts, commissions, placement agent fees
and other similar fees and expenses. A Dilution Adjustment shall be made successively whenever a Dilutive Issuance is made within
the Adjustment Period. Notwithstanding the foregoing, this Section 4(e) shall not apply (i) if a Buyer no longer holds any Common
Shares or (ii) with respect to an Exempt Issuance (as defined in the following sentence). “Exempt Issuance”
means the issuance of (i) shares of Common Stock issued in a stock dividend, stock split, stock combination, reclassification
or similar transaction, (ii) shares of Common Stock, options and other derivative securities issued to employees, officers, directors,
consultants or other service providers of the Company pursuant to any equity incentive plan of the Company, (iii) shares of Common
Stock issuable pursuant to the conversion or exercise of derivative securities, including options, warrants, notes or other similar
rights, that are issued and outstanding on the date of this Agreement, (iv) shares of Common Stock issued in connection with a
business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise
and (v) shares of Common Stock issued in connection with bona fide real estate transactions, equipment lease financing,
bank or similar credit or debt arrangements, license agreements or other partnering agreements so long as such issuances are not
for the principal purpose of raising capital.


 


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


 






    	 	- 19 -	 



     


    

 


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


 


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


 


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


 






    	 	- 20 -	 



     


    

 


(j)       Disclosure
of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on the first Business Day after
the date hereof, the Company shall issue a press release reasonably acceptable to the Buyers (the “Press Release”)
and file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the
form required by the 1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement
and the form of Registration Rights Agreement, as exhibits to such filing (including all attachments)). From and after the issuance
of the Press Release, no Buyer shall be in possession of any material, nonpublic information received from the Company, any of
its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, that is not disclosed in the
Press Release. In addition, effective upon the issuance of the Press Release, the Company acknowledges and agrees that any and
all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries
or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Buyers or any
of their affiliates, on the other hand, shall terminate. The Company shall not, and shall cause each of its Subsidiaries and its
and each of their respective officers, directors, affiliates, employees and agents, not to, provide any Buyer with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and after the date hereof with the SEC without the
express prior written consent of such Buyer. If a Buyer has, or believes it has, received any such material, nonpublic information
regarding the Company or any of its Subsidiaries from the Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates, employees or agents, it may provide the Company with written notice thereof. The Company shall, within
two (2) Trading Days of receipt of such notice, make public disclosure of such material, nonpublic information. No Buyer shall
have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, affiliates, employees,
shareholders or agents for any such disclosure. To the extent that the Company delivers any material, non-public information to
a Buyer without such Buyer’s consent, the Company hereby covenants and agrees that such Buyer shall not have any duty of
confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates
or agents with respect to, or a duty not to trade on the basis of, such material, non-public information. Subject to the foregoing,
neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial
conformity with the Press Release and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Except for the Registration Statement required to be filed pursuant to the Registration
Rights Agreement or as required by applicable law, without the prior written consent of any applicable Buyer, neither the Company
nor any of its Subsidiaries or affiliates shall disclose the name of such Buyer in any filing, announcement, release or otherwise.


 


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


 


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


 






    	 	- 21 -	 



     


    

 


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


 


(n)       Short
Sales. Starting on the date hereof and ending on the 45th day following the Closing Date, no Buyer shall engage in any short
sales or similar transactions with respect to the Common Stock, nor cause any Person to engage in any short sales or similar transactions
with respect to the Common Stock.


 


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


 


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


 






    	 	- 22 -	 



     


    

 


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


 


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


 


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


 


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


 


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


 


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


 






    	 	- 23 -	 



     


    

 


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


 


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


 


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


 


(ii)     Such
Buyer shall have received the opinion of K&L Gates LLP, the Company’s outside counsel, dated as of the Closing Date,
in substantially the form of Exhibit F attached hereto.


 


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


 


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


 


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


 


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


 


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


 






    	 	- 24 -	 



     


    

 


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


  


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


 


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


 


8.         TERMINATION.
In the event that the Closing shall not have occurred with respect to a Buyer on or before five (5) Business Days from the date
hereof due to the Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have
the option to terminate this Agreement with respect to such breaching party at the close of business on such date by delivering
a written notice to that effect to each other party to this Agreement and without liability of any party to any other party.


 


9.        MISCELLANEOUS.


 


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


 






    	 	- 25 -	 



     


    

 


(b)       Counterparts.
This Agreement and any amendments hereto may be executed and delivered in two or more counterparts, and by the different parties
hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when counterparts have been signed by each party hereto
and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.  In the
event that any signature to this Agreement or any amendment hereto 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.  No party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf”
format data file to deliver a signature to this Agreement or any amendment hereto or the fact that such signature was transmitted
or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense
to the formation or enforceability of a contract and each party hereto forever waives any such defense.


 


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


 


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


 


(e)       Entire
Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein,
and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding
of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. Provisions
of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the amount
of Common Shares issued hereunder (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar
transaction occurring after the date thereof) (the “Required Holders”); provided that any such amendment or
waiver that complies with the foregoing but that disproportionately, materially and adversely affects the rights and obligations
of any Buyer relative to the comparable rights and obligations of the other Buyers shall require the prior written consent of
such adversely affected Buyer. Any amendment or waiver effected in accordance with this Section 9(e) shall be binding upon
each Buyer and holder of Securities and the Company. No such amendment shall be effective to the extent that it applies to less
than all of the Buyers or holders of Securities. No consideration shall be offered or paid to any Person to amend or consent to
a waiver or modification of any provision of any of the Transaction Documents unless the same consideration (other than the reimbursement
of legal fees) also is offered to all of the parties to the Transaction Documents, holders of Common Shares. The Company has not,
directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company or otherwise.


 






    	 	- 26 -	 



     


    

 


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


 


If
to the Company:


 


Ener-Core,
Inc. 


9400
Toledo Way


Irvine,
California 92618


	 	Telephone:	(949) 616-3300
	 	Facsimile:	(949) 616-3399
	 	Attention:	Domonic J.
    Carney
	 	Email:	DJ.Carney@ener-core.com




 


With
a copy to:


 


K&L
Gates LLP 


1
Park Plaza, 12th Floor 


	 	Irvine,	California 92614
	 	Telephone:	(949) 253-0900
	 	Facsimile:    	(949) 253-0902
	 	Attention:	David  C.
    Lee 
	 	 	Shoshannah
D. Katz 
	 	E-mail:	david.lee@klgates.com 
	 	 	shoshannah.katz@klgates.com




 


If
to the Transfer Agent:


 


VStock
Transfer, LLC. 


18
Lafayette Place 


Woodmere,
New York 11598


	 	Telephone:	(212) 828-8436 
	 	Facsimile:	(646) 536-3179 
	 	Attention:	Yoel Goldfeder 
	 	E-mail:	yoel@vstocktransfer.com




 


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


 


(g)       Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Common Shares or the Warrants. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the Required Holders. A Buyer may assign some or all of its
rights hereunder without the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with
respect to such assigned rights.


 


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


 


(i)        [Intentionally
omitted]


 


(j)        [Intentionally
omitted]


 


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


 


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


 






    	 	- 27 -	 



     


    

 


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


 


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


 


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


 






    	 	- 28 -	 



     


    

 


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


 


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


 


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


 


[Signature
Pages Follow]


 






    	 	- 29 -	 



     


    

 










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


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


 


[Company
Signature Page to Securities Purchase Agreement] 


 






    	 	- 30 -	 



     


    

 





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


BUYER:


 


____________________________________________________________________________ 


Please
print above the exact name(s) in which the Common Shares and Warrants are to be held


 


Date:
________________________


 


Number
of Common Shares Purchased: ________________________


Number
of Shares of Common Stock underlying Warrants Purchased: ________________________


Purchase
Price:$ ________________________


 


	INDIVIDUAL
                                         INVESTOR:
	 	PARTNERSHIP,
                                         CORPORATION, TRUST, LIMITED LIABILITY COMPANY, CUSTODIAL ACCOUNT, OR OTHER INVESTOR:

        

	 	 	 
	 	 	 
	(print
    name)	 	(print
    name of entity)
	 	 	 
	 	  	By:	 
	(signature)		(signature
    of person signing on behalf of entity)
	 	 	 
	 	  	Name:	 
	 	 	 
	  	  	Title:	 



 


	 	 	 	 	 
	SSN/Tax
    I.D. No.:	 	 	Tax
    I.D. No.:	 
	 	 	 	 	 
	Address for Notice:	 	Address
    for Notice:



 


	 	 	 
	 	 	 
	 	 	 
	Tel:	 	 	Tel:	 
	Fax:	 	 	Fax:	 
	Email:	 	 	Email:	 



 


[Buyer
Signature Page to Securities Purchase Agreement]


 



     


     


    

 


EXHIBITS


 


	Exhibit
    A	Schedule
    of Buyers
	Exhibit
    B	Form
    of Warrant
	Exhibit
    C	Form
    of Registration Rights Agreement
	Exhibit
    D	Investor
    Questionnaire
	Exhibit
    E	Form
    of Irrevocable Transfer Agent Instructions
	Exhibit
    F	Form
    of Opinion of Company Counsel
	Exhibit
    G	Form
    of Secretary’s Certificate
	Exhibit
    H	Form
    of Compliance Certificate




 


SCHEDULES


	Schedule
    3(a)	Subsidiaries
	Schedule
    3(h)	No
    Integrated Offering
	Schedule
    3(j)	SEC
    Documents
	Schedule
    3(k)	Absence
    of Certain Changes
	Schedule
    3(l)	Regulatory
    Permits
	Schedule
    3(n)	Sarbanes-Oxley
    Act
	Schedule
    3(p)	Equity
    Capitalization
	Schedule
    3(q) 	Indebtedness
    and Other Contracts
	Schedule
    3(r)	Absence
    of Litigation
	Schedule
    3(aa)	Internal
    Accounting and Disclosure Controls







 






     


     


    

 


EXHIBIT
A


 


Schedule
of Buyers


 


	(1)
                                         

        Investor
        Name
	(2)
                                         

        Contact
        Information
	(3)
                                         

        Number
        of Shares of Common Stock
	(4)
                                         

        Number
        of Warrant Shares
	(5)
                                         

        Aggregate
        Purchase Price
	(6)
                                         

        Closing
        Date

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 





 


Exhibit
A


 






     


     


    

 


EXHIBIT
B


 


Form
of Warrant


 


Exhibit
B




 






     


     


    

 


EXHIBIT
C


 


Form
of Registration Rights Agreement


 


Exhibit
C





 



     


     


    

 


EXHIBIT
D


 


Investor
Questionnaire








 


Exhibit
D


 



     


     


    

 


EXHIBIT
E


 


Form
of Irrevocable Transfer Agent Instructions


 





Exhibit
E





 






     


     


    

 


EXHIBIT
F


 


Form
of Opinion of Company Counsel





 


Exhibit
F




 



     


     


    




 


EXHIBIT
G


 


Form
of Secretary’s Certificate


 





Exhibit
G





 



     


     


    

 


EXHIBIT
H


 


Form
of Compliance Certificate


 


Exhibit
H


 






    

     

    

 


 




DISCLOSURE
SCHEDULES TO SECURITIES PURCHASE AGREEMENT


 


(Note:
Capitalized terms used herein and not otherwise defined shall have the definitions ascribed to such terms in the Securities Purchase
Agreement.)


 


Schedule
3(a)


(Subsidiaries)


 


Ener-Core
Power, Inc., a Delaware corporation


 


Schedule
3(h)


 


No
Integrated Offering. 


 


None


 


Schedule
3(j)


(SEC
Documents)


 


None


 


Schedule
3(k)


(Material
Adverse Change/Development since December 31, 2014)


 


None,
except as noted below:


 


Effective
as of December 30, 2015, the Company executed a Fourth Amendment to Securities Purchase Agreement dated April 22, 2015, and a
Third Amendment to Securities Purchase Agreement dated May 7, 2015 (collectively, the “December Amendments”), each
with certain investors holding the requisite number of conversion shares and warrant shares underlying the notes and warrants
issued in April 2015 and May 2015 pursuant to the referenced purchase agreements. The December Amendments (i) extend the deadline
to March 31, 2016 for the Company’s consummation of a firm commitment underwritten public offering registered under the
Securities Act and related listing of its Common Stock on a national securities exchange, (ii) provide for the issuance of additional
five-year warrants (the “Additional Warrants”), exercisable for ten shares of Common Stock per $1,000 of outstanding
principal of the 2015 Notes (defined below) held by each buyer pursuant to the April 2015 and May 2015 purchase agreements, each
with an exercise price of $12.50 per share, subject to adjustment as set forth within the warrants, issuable in tranches triggered
by certain Company actions as set forth in the December Amendments and (iii) authorize the Company, prior to January 31, 2016,
to issue to one or more investors up to an aggregate of $1,000,000 principal amount of senior secured notes, on the terms and
subject to the restrictions set forth in the December Amendments. An initial tranche of 50,000 Additional Warrants became issuable
and were issued in conjunction with the execution of the December Amendments. A second tranche of 50,000 Additional Warrants will
become issuable if the Company consummates further debt issuances as approved in the December Amendments, and a third tranche
of 50,000 Additional Warrants will become issuable if the Company does not complete an uplisting of its common stock to a national
securities exchange prior to February 2, 2016.


 



    	 	DS-1	 



     


    

 


Effective
as of December 30, 2015, the Company and certain investors holding senior secured notes issued by the Company in April and May
2015 (the “2015 Notes”) executed third amendments (the “Notes Amendments”) to such 2015 Notes to remove
the minimum raise requirement from the definition of a Qualified Public Offering set forth in the Notes, to allow full conversion
of the Notes and to integrate any additional debt issued pursuant to the SPA Amendments. The revised definition of a Qualified
Public Offering is incorporated by reference into each of the Securities Purchase Agreement, dated April 22, 2015 and the Securities
Purchase Agreement, dated May 7, 2015, each as amended to date. The Notes Amendments are binding upon all of the issued 2015 Notes
pursuant to the terms thereof.


 


The
Company has received a notice from Dresser-Rand in relation to the pending satisfaction of the requirement in Article 3.4.1 of
the Commercial License Agreement (“CLA”), entered into effective as of November 14, 2014 with Dresser-Rand Company
(“D-R”), to raise additional capital, within 120 days following the Core Binding Date (as defined in the CLA), which
was August 3, 2015. The Company has negotiated with D-R and received an extension to February 29, 2016, to complete the required
capital raise, contingent on the successful raise of at least $1 million within the 45 day extension period, which the current
transaction should satisfy. Pursuant to Article 3.4.1 of the CLA, if the Company fails to satisfy the capital raise requirement
by February 29, 2016, which represents the end of the extended cure period, D-R shall be entitled, by delivering written notice
to the Company, to terminate the CLA.


 


Schedule
3(l)


(Regulatory
Permits)


 


None


 


Schedule
3(n)


(Sarbanes-Oxley
Act)


 


None,
other than as disclosed in the Form 10-K for the year ended December 31, 2014, as updated on Forms 10-Q for the quarterly period
ended September 30, 2015 and as described in Schedule 3(aa) below.


 


Schedule
3(p)


(Equity
Capitalization)


 


		(ii)	Outstanding
                                         options, warrants, scrip, rights to subscribe to, calls or commitments of any character
                                         whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
                                         for, any shares of capital stock of the Company or any of its Subsidiaries, or contracts,
                                         commitments, understandings or arrangements by which the Company or any of its Subsidiaries
                                         is or may become bound to issue additional shares of capital stock of the Company or
                                         any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
                                         commitments of any character whatsoever relating to, or securities or rights convertible
                                         into, or exercisable or exchangeable for, any shares of capital stock of the Company
                                         or any of its Subsidiaries



 


The
Company is concurrently issuing 50,000 Additional Warrants as described in Schedule 3(k) with the consummation of this transaction,
and has reserved the shares of common stock underlying such Additional Warrants.


 


As
described in Schedule 3(k), the Company has also committed to the further issuance of potentially 100,000 Additional Warrants,
and has reserved the shares of common stock underlying such Additional Warrants.


 



    	 	DS-2	 



     


    

 


		(iii)	Outstanding
                                         debt securities, notes, credit agreements, credit facilities or other agreements, documents
                                         or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by
                                         which the Company or any of its Subsidiaries is or may become bound



 


The
Company leases certain assets, primarily computer equipment under agreements expiring in 2017. The total amount of the Capital
leases is approximately $45,000.


 


The
Company leases office and research locations under operating leases which expires December 31, 2016 for the office location and
is month-to-month for our research location. Combined monthly rent is $27,500.


 


Concurrent
with this transaction, as described in Schedule 3(k), the Company has amended the terms of its Senior Notes outstanding, including
to enable the issuance of up to $1,000,000 of additional debt in the same form.


 


The
Company expects to enter into up to $1 million of Capital Lease financing over the next 6 months to finance R&D related equipment
and prototypes


 


The
Company expects to enter into a material operating lease to rent a Dresser-Rand turbine in order to build a prototype.


 


		(iv)	Financing
                                         statements securing obligations in any material amounts, either singly or in the aggregate,
                                         filed in connection with the Company or any of its Subsidiaries



 


UCC
Statements have been filed for the Company’s Senior Notes and Backstop Security Agreement, and may have been filed in conjunction
with its capital lease obligations.


 


Liabilities
or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than those incurred
in the ordinary course of the Company's or any of its Subsidiary's' respective businesses and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect


 


See
Schedule 3(k) disclosure.


 


Schedule
3(q)


(Indebtedness
and Other Contracts)


 


Outstanding
indebtedness, including (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services, including, without limitation, "capital leases" in accordance with GAAP (other
than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property,
assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession
or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses
(A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above 


 






    	 	DS-3	 



     


    

 


Capital
Leases Payable 


 


Capital
leases payable consisted of the following:


 


	 	 	September 30,
 2015
	 	 	December 31, 2014	 
	 	 	(unaudited)	 	 	 	 
	Capital lease payable to De Lange Landon secured by forklift, 10.0% interest, due on October 1, 2018, monthly payment of $452.	 	$	14,000	 	 	$	17,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on November 16, 2016, monthly payment of $592.	 	 	8,000	 	 	 	12,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on December 15, 2016, monthly payment of $590.	 	 	8,000	 	 	 	12,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on January 3, 2017, monthly payment of $405.	 	 	6,000	 	 	 	8,000	 
	Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on January 3, 2017, monthly payment of $394.	 	 	10,000	 	 	 	—	 
	Total capital leases	 	 	46,000	 	 	 	49,000	 



   


The
Company is obligated to enter into a performance bond of $2,100,000 (the “Bond”) payable for the benefit of
Dresser-Rand in order to secure performance on delivery of two Power Oxidizer units. The Bond is required within 45 days of the
placement of an order for the Power Oxidizer units. On November 2, 2015, the Company satisfied this obligation by the creation
of the Backstop Security Agreement. For detailed terms of the Backstop Security and related documents, see Current Report on Form
8-K filed November 3, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015008150/f8k110215_enercoreinc.htm),
incorporated by reference herein.


 


Pursuant
to certain Exchange Agreements, the Company granted investors a right of first refusal to participate in any future sale of the
Company’s equity or equity equivalent securities on a pro rata basis, which has been waived in conjunction with the Company’s
pending registered offering and this transaction. Such participation rights are also more fully described in our Current Report
on Form 8-K filed April 7, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015002493/f8k040215_enercore.htm)
, incorporated by reference herein.


 



    	 	DS-4	 



     


    

 


The
terms of the Company’s Senior Notes as amended to date, including the related securities purchase agreements as amended
to date and the related pledge, guaranty and intercreditor agreements, are described in the following Current Reports on Form
8-K, incorporated by reference herein, and in Schedule 3(k) above:


 


		●	Filed
                                         April 23, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015002938/f8k042215_enercore.htm)
	 	 	 
		●	Filed
                                         May 7, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015003364/0001213900-15-003364-index.htm)
	 	 	 
		●	Filed
                                         October 23, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015007903/f8k102215_enercore.htm)
                                         
	 	 	 
		●	Filed
                                         November 3, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015008150/0001213900-15-008150-index.htm)
	 	 	 
		●	Filed
                                         November 25, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015009088/f8k112415_enercoreinc.htm)
	 	 	 
		●	Filed
                                         December 11, 2015 (http://www.sec.gov/Archives/edgar/data/1495536/000121390015009442/f8k120715_enercoreinc.htm)



 


The
Company expects to enter into up to $1 million of additional secured financings within the next 12 months consisting of approximately
$500,000 of capital lease financing for the Company’s multi-fuel test facility under construction and approximately $500,000
of secured financing for the 1.75MW power station prototype under development with Dresser-Rand.


 


Violation
of any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract,
agreement or instrument could reasonably be expected to result in a Material Adverse Effect


 


See
Dresser-Rand waiver discussion in Schedule 3(k).


 


Schedule
3(r)


(Litigation)


 


None


 


Schedule
3(aa)


(Internal
Accounting and Disclosure Controls)


 


As
of December 31, 2014, the Company’s management, under the supervision and with the participation of its Chief Executive
Officer and Chief Financial Officer, performed an evaluation of the effectiveness of its disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).


 



    	 	DS-5	 



     


    

 


Based
on such evaluation, the disclosure controls and procedures of the Company and the Subsidiary as of December 31, 2014 were ineffective
at the reasonable assurance level due to the following material weaknesses in internal control over financial reporting:


 


		1.	We
                                         do not have written documentation of our internal control policies and procedures.  Management
                                         evaluated the impact of our failure to have written documentation of our internal controls
                                         and procedures on our assessment of our disclosure controls and procedures and has concluded
                                         that the control deficiency that resulted, represented a material weakness.
	 	 	 
		2.	We
                                         do not have sufficient segregation of duties within accounting functions, which is a
                                         basic internal control.  Due to our size and nature, segregation of all conflicting
                                         duties may not always be possible and may not be economically feasible. However, to the
                                         extent possible, the initiation of transactions, the custody of assets and the recording
                                         of transactions should be performed by separate individuals.  Management evaluated
                                         the impact of our failure to have segregation of duties on our assessment of our disclosure
                                         controls and procedures and has concluded that the control deficiency that resulted,
                                         represented a material weakness.
	 	 	 
		3.	For
                                         the year ending December 31, 2014 we did not have accounting and finance staff with sufficient
                                         technical accounting training and experience capable to manage and process the Company’s
                                         derivative equity accounting including stock options and warrants.  In addition,
                                         the Company had 100% turnover during the year of accounting and finance management and
                                         staff.  This turnover resulted in periods of time where there was insufficient
                                         review of internal and external reports and proof of key internal controls. Management
                                         evaluated the impact of our failure to have inadequate technical accounting experience,
                                         coupled with the turnover, on our assessment of our disclosure controls and procedures
                                         and has concluded that the control deficiency that resulted, represented a material weakness.
	 	 	 
		4.	For
                                         the year ending December 31, 2014 we did not have a majority of our Directors considered
                                         to be independent Directors.  Until December 1, 2014, we had a majority of
                                         our Board of Directors considered to the not independent.  Between December
                                         1, 2014 and December 31, 2014 our Board was split evenly between independent Directors
                                         and non-independent Directors.  Management evaluated the impact of our failure
                                         to have a fully independent Board of Directors, on our assessment of our disclosure controls
                                         and procedures and has concluded that the control deficiency that resulted, represented
                                         a material weakness.
	 	 	 
		5.	For
                                         the year ending December 31, 2014, our audit committee consisted of the Chairman of the
                                         committee only.  Management evaluated the impact of our failure to have an
                                         adequate audit committee and an internal audit function on our assessment of our disclosure
                                         controls and procedures and has concluded that the control deficiency that resulted,
                                         represented a material weakness.
	 	 	 
		6.	For
                                         the year ending December 31, 2014, management concluded that the Company’s management
                                         information systems and information technology internal control design was deficient
                                         because the potential for unauthorized access to certain information systems and software
                                         applications existed during 2014 in several departments, including corporate accounting.
                                         Additionally, certain key controls for maintaining the overall integrity of systems and
                                         data processing were not properly designed and operating effectively. These deficiencies
                                         increased the likelihood of potential material errors in our financial reporting






 


 





DS-6