Document:

Exhibit
10.1

 

SECURITIES
PURCHASE AGREEMENT

 

SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of November 23, 2016, by and among Ener-Core, Inc., a Delaware
corporation, with headquarters located at 9400 Toledo Way, Irvine, California 92618 (the “Company”), and the
investors listed on the Schedule of Buyers attached hereto (individually, an “Initial Buyer” and collectively,
the “Initial Buyers”).

 

WHEREAS:

 

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

 

B. The
Company has authorized a new series of senior secured notes of the Company, in substantially the form attached hereto as Exhibit
A (the “Notes”), which Notes shall be convertible into the Company’s common stock, par value $0.0001
per share (the ”Common Stock”), in accordance with the terms of the Notes.

 

C. Each
Buyer wishes to purchase, and the Company wishes to sell at the Initial Closing (as defined below), upon the terms and conditions
stated in this Agreement, (i) that aggregate principal amount of Notes set forth opposite such Buyer’s name in column (3)
on the Schedule of Buyers attached hereto (which aggregate principal amount of Notes for all Buyers shall be $3,555,555.56) (the
“Initial Notes”) (the shares of Common Stock issuable pursuant to the terms of the Initial Notes, including,
without limitation, upon conversion or otherwise, collectively, the “Initial Conversion Shares”), and (ii)
Warrants, in substantially the form attached hereto as Exhibit B (the “Initial Warrants”), representing
the right to acquire that number of shares of Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule
of Buyers (as exercised, collectively, the “Initial Warrant Shares”).

 

D.Subject
to the terms and conditions set forth in this Agreement, any Person (as defined below) that, upon approval of the Company and
the Required Holders (as defined below), becomes a Buyer hereunder by duly executing and delivering to the Company a Joinder Agreement
(each, a “Joinder Agreement”) in the form attached hereto as Exhibit C (individually, a “Subsequent
Buyer” and collectively, the “Subsequent Buyers” and together with the Initial Buyers, individually,
a “Buyer” and collectively, the “Buyers”) shall have the right, at the Subsequent Closing
to purchase, and require the Company to sell (i) up to $900,000 aggregate principal amount of Notes (the “Subsequent
Notes”, and together with the Initial Notes, the “Notes”) (the shares of Common Stock issuable pursuant
to the terms of the Subsequent Notes, including, without limitation, upon conversion or otherwise, collectively, the “Subsequent
Conversion Shares”, and together with the Initial Conversion Shares, the “Conversion Shares”) and
(ii) Warrants, in substantially the form attached hereto as Exhibit B (the “Subsequent Warrants”, and
together with the Initial Warrants, the “Warrants”), representing the right to acquire four hundred (400) shares
of Common Stock for each $1,000 of principal amount of Subsequent Notes purchased by such Subsequent Buyer on the Subsequent Closing
Date (without regard to any limitation on conversion set forth in the Subsequent Notes) (as exercised, collectively, the “Subsequent
Warrant Shares”, and together with the Initial Warrants, the “Warrant Shares”).

 

     

     

    

 

E. The
Notes will rank senior to all outstanding and future indebtedness of the Company, and its Subsidiaries (as defined below), will
be guaranteed by all direct and indirect Subsidiaries (as defined in Section 3(a)) of the Company, currently formed or formed
in the future, as evidenced by a Guaranty Agreement, in the form attached hereto as Exhibit D (as amended or modified from
time to time in accordance with its terms, the “Guaranty Agreement”), and will be secured by a first priority
perfected security interest (subject to Permitted Liens under and as defined in the Notes) in all of the current and future assets
of the Company and all direct and indirect Subsidiaries of the Company, except for the “Excluded Assets” (as such
term is defined in the Security Agreement), currently formed or formed in the future, as evidenced by that certain Second Amendment
to the Pledge and Security Agreement, substantially in the form attached hereto as Exhibit E (as amended or modified from
time to time in accordance with its terms, the “Security Amendment Agreement”), which amends that certain Pledge
and Security Agreement, dated as of April 23, 2015 by and among the Company and the Collateral Agent attached as Exhibit 10.2
to the Company’s Current Report on Form 8-K filed with the SEC on April 23, 2015 (as amended prior to the date hereof and
by the Second Amendment Agreement and as further amended or modified from time to time in accordance with its terms, the “Security
Agreement” and together with the Guaranty Agreement and any ancillary documents related thereto, collectively, the “Security
Documents”).

 

F. 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 F (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.

 

G. The
Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively are referred to herein as the “Securities”.

 

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

 

1.PURCHASE
AND SALE OF NOTES AND WARRANTS.

 

(a)Purchase
of Notes and Warrants.

 

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

 

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(ii) Subsequent
Closing. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b) below, the Company
shall issue and sell to each Subsequent Buyer, and each Subsequent Buyer severally, but not jointly, agrees to purchase from the
Company on the Subsequent Closing Date (as defined below), (x) a principal amount of Subsequent Notes as set forth on the signature
page of such Subsequent Buyer attached to such Subsequent Buyer’s Joinder Agreement or in the Subsequent Closing Notice
(as defined below), as applicable and (y) Subsequent Warrants to acquire four hundred (400) shares of Common Stock for each $1,000
of principal amount of Subsequent Notes purchased by such Subsequent Buyer on the Subsequent Closing Date (without regard to any
limitation on conversion set forth in the Subsequent Notes) (the “Subsequent Closing” and together with the
Initial Closing, each a “Closing”).

 

(b)Initial
Closing Date. The date and time of the Initial Closing (the “Initial Closing Date”) shall be 10:00 a.m.,
New York City time, on the date hereof (or such other date and time as is mutually agreed to by the Company and each Initial Buyer)
after notification of satisfaction (or waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and 7(b) below,
at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

 

(c)Subsequent
Closing Date.

 

(i) The
date and time of the Subsequent Closing (the “Subsequent Closing Date,” and together with the Initial Closing
Date, each a “Closing Date” and collectively, the “Closing Dates”) shall be 10:00 a.m.,
New York City time, on December 12, 2016 (or such earlier date as shall be mutually agreed to by the Company and the Required
Holders), subject to satisfaction (or waiver) of the conditions to the Subsequent Closing set forth in Sections 6(b) and 7(b)
and the conditions contained in this Section 1(c), at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York,
New York 10022. Any Person approved by the Company and the Required Holders may become a Subsequent Buyer and may purchase Subsequent
Notes and Subsequent Warrants by duly executing and delivering a Joinder Agreement to the Company. Any Initial Buyer may also
purchase, at such Initial Buyer’s option, Subsequent Notes and Subsequent Warrants by delivering written notice to the Company
(each, a “Subsequent Closing Notice”). Notwithstanding anything herein, in a Joinder Agreement or in a Subsequent
Closing Notice to the contrary, the number of Subsequent Notes to be purchased by the Subsequent Buyers at the Subsequent Closing
shall not exceed $900,000 aggregate principal amount of Subsequent Notes.

 

(ii)
The Initial Buyers hereby consent to the transactions contemplated by this Section 1(c).

 

(d)Purchase
Price. The aggregate purchase price for the Initial Notes and the Initial Warrants to be purchased by each Buyer at the Initial
Closing (the “Initial Purchase Price”) shall be the amount set forth opposite each Initial Buyer’s name
in column (5) of the Schedule of Buyers. The aggregate purchase price for the Subsequent Notes and the Subsequent Warrants to
be purchased by each Subsequent Buyer at the Subsequent Closing (the “Subsequent Purchase Price” and together
with the Initial Purchase Price, the “Purchase Price”) shall be the amount set forth on the signature page
of such Subsequent Buyer attached to such Subsequent Buyer’s Joinder Agreement or in the Subsequent Closing Notice (as defined
below), as applicable. Each Buyer shall pay $900 for each $1,000 of principal amount of Notes and related Warrants to be purchased
by such Buyer at the applicable Closing. The Buyers and the Company agree that the Notes and the Warrants constitute an “investment
unit” for purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”).
The Buyers and the Company mutually agree that the allocation of the issue price of such investment unit between the Notes and
the Warrants in accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be $145.91 per
$1,000 of Purchase Price to be allocated to the Warrants and the balance of each $1,000 of Purchase Price to be allocated to the
Notes, and neither the Buyers nor the Company shall take any position inconsistent with such allocation in any tax return or in
any judicial or administrative proceeding in respect of taxes.

 

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(e)Form
of Payment.

 

(i) Initial
Closing. On the Initial Closing Date, (i) each Initial Buyer shall pay its Initial Purchase Price to the Company for the Initial
Notes and the Initial Warrants to be issued and sold to such Initial Buyer at the Initial Closing (less, in the case of Empery
Asset Master Ltd. (“Empery”), the amounts withheld pursuant to Section 4(h)), by wire transfer of immediately
available funds in accordance with the Company’s written wire instructions and (ii) the Company shall deliver to each
Initial Buyer the Initial Notes (allocated in the principal amounts as such Initial Buyer shall request) which such Initial Buyer
is then purchasing hereunder along with the Initial Warrants (allocated in the amounts as such Initial Buyer shall request) which
such Initial Buyer is purchasing hereunder, in each case duly executed on behalf of the Company and registered in the name of
such Initial Buyer or its designee.

 

(ii) Subsequent
Closing. On the Subsequent Closing Date, (i) each Subsequent Buyer shall pay its Subsequent Purchase Price to the Company
for the Subsequent Notes and the Subsequent Warrants to be issued and sold to such Subsequent Buyer at the Subsequent 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 Subsequent Buyer the Subsequent Notes (allocated in the principal amounts as such Subsequent Buyer
shall request) which such Subsequent Buyer is then purchasing hereunder along with the Subsequent Warrants (allocated in the amounts
as such Subsequent Buyer shall request) which such Subsequent Buyer is purchasing hereunder, in each case duly executed on behalf
of the Company and registered in the name of such Subsequent 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 (i) is acquiring the Notes and the Warrants and (ii) upon issuance of the Conversion
Shares pursuant to the terms of the Notes and upon exercise of the Warrants will acquire the Conversion Shares issuable pursuant
to the terms of the Notes and 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 G, 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 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
investment risks and the merits of its decision to purchase the Securities, (ii) it has not relied on the advice of, or any representations
by, any other Person, other than the Company and its officers and directors, in making such decision, and (iii) no Person, other
than the Company and its officers and directors, 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, as amended (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 Notes and the Warrants and, until such time
as the resale of the Conversion Shares and the Warrant Shares have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Conversion Shares and the Warrant Shares, except as set forth below,
shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such stock certificates or other instruments):

 

[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES [MAY
BE CONVERTIBLE] [ARE EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN 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, (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.

 

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

 

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

 

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3.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

 

The
Company represents and warrants to each of the Buyers, as of the date hereof and as of each applicable Closing Date (unless otherwise
provided herein), 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 Notes, the Warrants, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined
in Section 5(b)), the Security Documents, any Joinder Agreements 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 Notes and the Warrants, and the reservation for issuance and the issuance of the Conversion Shares and the
reservation for issuance and issuance of Warrant Shares issuable upon exercise of the Warrants have been duly authorized by the
Company’s Board of Directors and (other than the filing with the SEC of one or more Registration Statements (as defined
in the Registration Rights Agreement) in accordance with the requirements of the Registration Rights Agreement, the filing with
the SEC of a Form D and any 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. Each of the Subsidiaries party to any of the Transaction
Documents has the requisite power and authority to enter into and perform its obligations under such Transaction Documents., as
applicable The execution and delivery by the Subsidiaries party to any of the Transaction Documents of such Transaction Documents
and the consummation by such Subsidiaries of the transactions contemplated thereby have been duly authorized by such Subsidiaries’
respective boards of directors (or other applicable governing body) and (other than filings as may be required by state securities
agencies) no further filing, consent, or authorization is required by such Subsidiaries, their respective boards of directors
(or other applicable governing body) or stockholders (or other applicable owners of equity of such Subsidiaries). The Transaction
Documents to which any of the Subsidiaries are parties have been duly executed and delivered by such Subsidiaries, and constitute
the legal, valid and binding obligations of such Subsidiaries, enforceable against them in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights
and remedies.

 

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(c)Issuance
of Securities. The issuance of the Notes and the Warrants are duly authorized and, upon issuance, shall be validly issued
and free from all taxes, liens and charges with respect to the issue thereof. As of the applicable Closing, a number of shares
of Common Stock shall have been duly authorized and reserved for issuance which equals or exceeds (the “Required Reserved
Amount) the sum of (i) the maximum number of Conversion Shares issued and issuable pursuant to the Notes to be issued in such
Closing based on the initial Conversion Price (as defined in the Notes) of $2.50 (as adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction occurring after the date hereof and without taking into account any
limitations on the issuance thereof pursuant to the terms of the Notes) (the “Initial Conversion Price”) plus
(ii) the maximum number of Warrant Shares issued and issuable pursuant to the Warrants to be issued in such Closing, each as of
the Trading Day (as defined in the Warrants) immediately preceding the applicable date of determination (without taking into account
any limitations on the exercise of the Warrants set forth in the Warrants). As of the date hereof, there are 194,428,192 shares
of Common Stock authorized and unissued, of which 1,786,592 are reserved for issuance upon full exercise of all outstanding options
and warrants. Upon conversion of the Notes in accordance with the Notes or exercise of the Warrants in accordance with the Warrants,
as the case may be, the Conversion Shares and the Warrant Shares, respectively, will be validly issued, fully paid and nonassessable
and free 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. Assuming the accuracy of each of the representations and warranties
set forth in Section 2 of this Agreement, the offer and issuance by the Company of the Securities is exempt from registration
under the 1933 Act.

 

(d)No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and any of its Subsidiaries
parties to any of the Transaction Documents and the consummation by the Company and any of its Subsidiaries of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the Warrants and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation (as defined in Section (3(q)) or Bylaws (as defined in Section (3(q)), 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.

 

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(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 (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements
of the Registration Rights Agreement, the filing with the SEC of a Form D and any other filings as may be required by any state
securities agencies), any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case
in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company
or any of its Subsidiaries is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior
to the Initial Closing Date, and the Company and its Subsidiaries are unaware of any facts or circumstances that might prevent
the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings pursuant to
the preceding sentence. The Company is not in violation of the listing requirements of the Principal Market and has no knowledge
of any facts that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. The issuance
by the Company of the Securities shall not have the effect of delisting or suspending the Common Stock from the Principal Market.

 

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

 

    	 	- 10 - 	 

     

    

 

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

 

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

 

(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.

 

    	 	- 11 - 	 

     

    

 

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

 

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

 

    	 	- 12 - 	 

     

    

 

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

 

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

 

(n)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.

 

    	 	- 13 - 	 

     

    

 

(o)Sarbanes-Oxley
Act. Except as disclosed in Schedule 3(o), the Company is in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof.

 

(p)Transactions
With Affiliates. Except as set forth on Schedule 3(p), 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.

 

(q) 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, 3,785,216 shares are issued and outstanding, 867,550 shares are reserved for issuance pursuant
to the Company’s stock option and purchase plans, 1,513,042 shares are reserved for issuance upon exercise of warrants outstanding
and 290,024 shares are reserved for issuance pursuant to securities (other than the aforementioned options, the Notes and the
Warrants) exercisable or exchangeable for, or convertible into, Common Stock, (ii) 50,000,000 shares of preferred stock, par value
$0.0001 per share, none of which are issued and outstanding as of the date hereof and (iii) there are 2,470,938 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 or as disclosed in Schedule 3(q), (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 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) other
than pursuant to the Registration Rights Agreement, 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; (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii) the Company does not have
any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) the
Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of the Company’s or any of its Subsidiary’s’
respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect. The Company
has furnished or made available to the Buyers true, correct and complete copies of the Company’s 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.

 

    	 	- 14 - 	 

     

    

 

(r)Indebtedness
and Other Contracts. Except as disclosed on Schedule 3(r), neither the Company nor any of its Subsidiaries (i) has
any outstanding Indebtedness (as defined below), (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(r) 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.

 

    	 	- 15 - 	 

     

    

 

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

 

(t)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.

 

(u)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.

 

    	 	- 16 - 	 

     

    

 

(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.

 

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

 

(w)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.

 

(x)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.

 

    	 	- 17 - 	 

     

    

 

(y)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.

 

(z)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.

 

(aa)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.

 

(bb)Internal
Accounting and Disclosure Controls. Except as set forth in Schedule 3(bb) 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(bb) 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.

 

    	 	- 18 - 	 

     

    

 

(cc)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.

 

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

 

(ee)Transfer
Taxes. On each 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.

 

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

 

(gg)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. The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any of the documents executed in connection herewith.

 

(hh)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 Code and the Company shall so certify
upon any Buyer’s request.

 

    	 	- 19 - 	 

     

    

 

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

 

(jj)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.

 

(kk)Disclosure.
Except for the transaction contemplated hereby, 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.

 

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

 

(mm)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.

 

    	 	- 20 - 	 

     

    

 

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

 

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

 

(pp)Other
Covered Persons. The Company is not aware of any Person (other than the Placement Agent) that has been or will be paid (directly
or indirectly) remuneration for solicitation of Buyers or potential purchasers in connection with the sale of any 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 each 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 such 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 applicable 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 applicable Closing Date.

 

    	 	- 21 - 	 

     

    

 

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

 

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

 

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

 

(f)Listing.
The Company shall commence trading of its Common Stock on either The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ
Capital Market, The NASDAQ Global Select Market or The Nasdaq Global Market (collectively,
the “Qualified Eligible Markets”) no later than December 31, 2017 (the “Listing Deadline”).
The Company shall promptly secure the listing of all of the Conversion Shares and the Warrant Shares 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 Conversion Shares and Warrant Shares 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 (as defined in the Warrants). From and after the Listing Deadline, the Company shall maintain the
authorization for quotation of the Common Stock on a Qualified Eligible Market and neither the Company nor any of its Subsidiaries
shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the applicable
Qualified Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this
Section 4(f).

 

    	 	- 22 - 	 

     

    

 

(g)Transfer
Agent. For so long any Securities are outstanding, the Company shall cause its transfer agent to participate in the Depository
Trust Company Fast Automated Securities Transfer Program.

 

(h)Fees.
The Company shall reimburse Empery (a Buyer) or its designee(s) (in addition to any other expense amounts paid to any Buyer or
its counsel prior to the date of this Agreement) for all costs and expenses incurred in connection with the transactions contemplated
by the Transaction Documents (including all legal fees and disbursements in connection therewith, documentation and implementation
of the transactions contemplated by the Transaction Documents and due diligence in connection therewith) (hereinafter, collectively,
the “Empery Expenses”), which amount may be withheld by such Buyer from its purchase price for any Notes purchased
at the Initial Closing to the extent not previously reimbursed by the Company. Notwithstanding the foregoing, in no event will
the Empery Expenses reimbursed by the Company pursuant to this Section 4(h) exceed $60,000 without the prior approval from the
Company. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby,
including, without limitation, any fees or commissions payable to the Placement Agent. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.

 

(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.

 

    	 	- 23 - 	 

     

    

 

(j)Disclosure
of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on the first (1st)
Business Day after the date hereof, (i) the Company shall issue a press release reasonably acceptable to the Buyers and (ii) file
a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required
by the 1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules
and exhibits to this Agreement), the form of the Warrants, the form of Notes, the Security Documents and the form of the Registration
Rights Agreement as exhibits to such filing (including all attachments, the “8-K Filing”). From and after the
filing of the 8-K Filing with the SEC, no Buyer shall be in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, that is not
disclosed in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that
any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its
Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the
Buyers or any of their affiliates, on the other hand, shall terminate. The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, affiliates, employees and agents, not to, provide any Buyer with any
material, nonpublic information regarding the Company or any of its Subsidiaries from and after the date hereof 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. 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 or any other obligation with respect to such information. Subject to the foregoing, neither the Company, its Subsidiaries
nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted
by the Company in connection with any such press release or other public disclosure prior to its release). Except for the Registration
Statement required to be filed pursuant to the Registration Rights Agreement, without the prior written consent of any applicable
Buyer, neither the Company nor any of its Subsidiaries or affiliates shall disclose the name of such Buyer in any filing, announcement,
release or otherwise.

 

(k) Additional
Notes; Variable Securities. So long as any Buyer beneficially owns any Notes, the Company will not issue any Notes (other
than to the Buyers as contemplated hereby and Additional Notes (as defined in the Notes)), and the Company shall not issue any
other securities that would cause a breach or default under the Notes; provided, however, the Company may amend
and restate those certain Senior Secured Notes issued by the Company pursuant to that certain Securities Purchase Agreement, dated
as of April 22, 2015 by and among the Company and the investors listed on the signature pages attached thereto (the “April
2015 SPA”) and that certain Securities Purchase Agreement, dated as of May 7, 2015 by and among the Company and the
investors listed on the signature pages attached thereto substantially in the form attached hereto as Exhibit A. For so
long as any Notes remain outstanding, the Company shall not, in any manner, issue or sell any rights, warrants or options to subscribe
for or purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price
which varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot be less than the then applicable Conversion Price
(as defined in the Notes) with respect to the Common Stock into which any Note is convertible or the then applicable Exercise
Price (as defined in the Warrants) with respect to the Common Stock into which any Warrant is exercisable.

 

    	 	- 24 - 	 

     

    

 

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

 

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

 

(n)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.

 

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

 

    	 	- 25 - 	 

     

    

 

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

 

(q)Collateral
Agent.

 

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

 

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

 

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

 

    	 	- 26 - 	 

     

    

 

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

 

(v) The
Company agrees to pay the Collateral Agent, by wire transfer of immediately available funds in accordance with the Collateral
Agent’s written wire instructions, a quarterly agency fee of $10,000 within three (3) Business Days following the end of
each calendar quarter that the Collateral Agent acted as collateral agent in accordance with this Section 4(q) and the Security
Documents during such calendar quarter.

 

(r)Additional
Issuances and Registrations of Securities. From the date hereof until the Trigger Date (as defined below), the Company will
not, directly or indirectly (A) file any registration statement with the SEC or file any amendment or supplement thereto, or grant
any registration rights to any Person that can be exercised prior to the earlier of such time as set forth above, other than pursuant
to the Registration Rights Agreement, (B) except for the issuance of Excluded Securities (as defined below), offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition
of) any of its or its Subsidiaries’ debt, equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible
into or exchangeable or exercisable for Common Stock or Common Stock Equivalents or (C) be party to any solicitations, negotiations
or discussions with regard to the foregoing. As used herein, (w) “Trigger Date” means the date that is ninety
(90) days after the earlier of (x) the date that one or more Registration Statement(s) covering the resale of all Registrable
Securities has been declared effective by the SEC and (y) the date all the Conversion Shares and Warrant Shares are eligible for
sale without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1)
(or any successor thereto) promulgated under the 1933 Act. For purposes of this Section 4(r), the following definitions shall
apply; (v) “Approved Stock Plan” means any employee benefit plan which has been approved by the Board of Directors
of the Company, pursuant to which the Company’s securities may be issued to any employee, officer or director for services
provided to the Company, (w)”Common Stock Equivalents” means, collectively, Options and Convertible Securities;
(x) “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable
or exchangeable for shares of Common Stock; (y) “Excluded Securities” means any shares of Common Stock or Options
(as defined below) issued or issuable: (i) in connection with any Approved Stock Plan, (ii) upon conversion of the Notes or exercise
of the Warrants; provided, that the terms of such Notes and Warrants are not amended, modified or changed on or after the
date hereof, (iii) upon exercise of any Options or Convertible Securities which are outstanding on the day immediately preceding
the date hereof; provided, that the terms of such Options or Convertible Securities are not amended, modified or changed
on or after the Subscription Date (other than pursuant to the amendment and restatement of certain notes of the Company issued
during April 2015 and May 2015 contemplated to occur contemporaneously with the issuance of the Notes and Warrants, and (iv) pursuant
to that certain purchase agreement dated September 1, 2016 or upon exercise of such additional Options, and (z) “Options”
means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. 

 

    	 	- 27 - 	 

     

    

 

(s)Pledges
of Intellectual Property Rights. The Company hereby agrees that it shall not pledge, mortgage, encumber or otherwise permit
the Intellectual Property Rights to be subject to any lien, security interest, encumbrances, or charge (such actions hereinafter
referred to collectively as “Pledge”) any of its Intellectual Property Rights except for Pledges related to
current commercial development agreements as listed on Schedule 4(s) or for future commercial development agreements entered
into in the ordinary course of business. The Company hereby further agrees: (a) to promptly notify the Collateral Agent of any
such future commercial development agreements (but only if the Collateral Agent executes a confidentiality agreement with respect
to any material, non-public information regarding or related to such commercial development agreements prior to its receipt of
any such material, non-public information), and (b) to amend Schedule 4(s) in connection with such additional Pledges,
with the approval of the Collateral Agent, which approval shall not be unreasonably withheld.

 

(t)Legal
Opinion. On or prior to ten (10) Business Days after the Initial Closing Date, the Company shall cause its outside legal counsel
to deliver to each Buyer legal opinions in form and substance reasonably acceptable to the Required Holders.

 

(u) Closing
Documents. On or prior to January 13, 2017, the Company agrees to deliver, or cause to be delivered, to each Buyer and Schulte
Roth & Zabel LLP a complete closing set of the executed Transaction Documents, Securities and any other documents required
to be delivered to any party pursuant to Section 7 hereof or otherwise.

 

5.REGISTER;
TRANSFER AGENT INSTRUCTIONS.

 

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

 

    	 	- 28 - 	 

     

    

 

(b)Transfer
Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent,
in the form of Exhibit H 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 Conversion Shares and the Warrant Shares issued at each Closing or pursuant to the terms of the Notes or exercise of the
Warrants in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or exercise
of the Warrants. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in
this Section 5(b), and stop transfer instructions to give effect to Section 2(f) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities
in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue
one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves
the Conversion Shares or the 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(b)
will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section
5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other
security being required.

 

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

 

(a) The
obligation of the Company hereunder to issue and sell the Initial Notes and the related Initial Warrants to each Initial Buyer
at the Initial Closing is subject to the satisfaction, at or before the Initial 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 Initial Buyer with prior written notice thereof:

 

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

 

    	 	- 29 - 	 

     

    

  

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

 

(iii) The
representations and warranties of such Initial 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 Initial 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 Initial 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 Initial Buyer at or prior to the Initial Closing Date.

 

(b) The
obligation of the Company hereunder to issue and sell the Subsequent Notes and the related Subsequent Warrants to each Subsequent
Buyer at the Subsequent Closing is subject to the satisfaction, at or before the Subsequent 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 Subsequent Buyer with prior written notice thereof:

 

(i) Such
Subsequent Buyer shall have executed the Investor Questionnaire and delivered the same to the Company.

 

(ii) Such
Subsequent Buyer shall have executed either (x) a Joinder Agreement or (y) a Subsequent Closing Notice and delivered the same
to the Company.

 

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

 

(iv)
The representations and warranties of such Subsequent 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 Subsequent 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 Subsequent
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 Subsequent Buyer at or prior to the Subsequent Closing Date.

 

    	 	- 30 - 	 

     

    

 

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

 

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

 

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

 

(ii) [Intentionally
Omitted]

 

(iii) The
Company shall have delivered to such Initial Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit
H 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 Initial Buyer a certificate evidencing the formation and good standing of the Company and
each of its Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office)
of such jurisdiction, as of a date within ten (10) days of the Initial Closing Date.

 

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

 

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

 

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

 

    	 	- 31 - 	 

     

    

 

(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 Initial 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 Initial Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

 

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

 

(xi)
The Collateral Agent shall have received (x) the First Amendment to the Subordination and Intercreditor Agreement, in the form
attached hereto as Exhibit K-1 (the “September Subordination Agreement”), which amends that certain
Subordination and Intercreditor Agreement dated as of September 1, 2016 by and among Longboard Capital Advisors LLC, the Company,
Ener-Core Power, Inc., Anthony Tang, as a Senior Lender (as defined therein) and Empery Tax Efficient, LP in its capacity as collateral
agent for the Senior Note Lenders (as defined therein) and (x) the First Amendment to the Subordination and Intercreditor Agreement,
in the form attached hereto as Exhibit K-2 (the “October Subordination Agreement”), which amends that
certain Subordination and Intercreditor Agreement dated as of November 2, 2015 by and among Anthony Tang, the Company and Empery
Tax Efficient, LP in its capacity as collateral agent for the Senior Lenders (as defined therein), in each case, duly executed
and delivered by all parties thereto.

 

(xii) The
Collateral Agent shall have received the Security Amendment Agreement, duly executed by the Company and each of its Subsidiaries,
together with the original stock certificates representing all of the equity interests and all promissory notes required to be
pledged thereunder, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer.

 

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

 

    	 	- 32 - 	 

     

    

 

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

 

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

 

(ii) If
applicable, the Company shall have duly executed and delivered to such Subsequent Buyer the Joinder Agreement of such Subsequent
Buyer.

 

(iii) The
Company shall have delivered to such Subsequent Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit
H 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 Subsequent Buyer a certificate evidencing the formation and good standing of the Company
and each of its Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction, as of a date within ten (10) days of the Initial Closing Date, and a bringdown of such certificate(s)
as of a date within ten (10) days of the Subsequent Closing Date.

 

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

 

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

 

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

 

    	 	- 33 - 	 

     

    

 

(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 Subsequent 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 Subsequent Closing Date, either (A) in writing by the SEC or
the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

 

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

 

(xi) The
Collateral Agent shall have received (x) the First Amendment to the Subordination and Intercreditor Agreement, in the form attached
hereto as Exhibit K-1 (the “September Subordination Agreement”), which amends that certain Subordination
and Intercreditor Agreement dated as of September 1, 2016 by and among Longboard Capital Advisors LLC, the Company, Ener-Core
Power, Inc., Anthony Tang, as a Senior Lender (as defined therein) and Empery Tax Efficient, LP in its capacity as collateral
agent for the Senior Note Lenders (as defined therein) and (x) the First Amendment to the Subordination and Intercreditor Agreement,
in the form attached hereto as Exhibit K-2 (the “October Subordination Agreement”), which amends that
certain Subordination and Intercreditor Agreement dated as of November 2, 2015 by and among Anthony Tang, the Company and Empery
Tax Efficient, LP in its capacity as collateral agent for the Senior Lenders (as defined therein), in each case, duly executed
and delivered by all parties thereto.

 

(xii) The
Collateral Agent shall have received the Security Amendment Agreement, duly executed by the Company and each of its Subsidiaries,
together with the original stock certificates representing all of the equity interests and all promissory notes required to be
pledged thereunder, accompanied by undated stock powers and allonges executed in blank and other proper instruments of transfer.

 

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

 

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

 

    	 	- 34 - 	 

     

    

 

9.MISCELLANEOUS.

 

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

 

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

 

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

 

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

 

    	 	- 35 - 	 

     

    

 

(e)Entire
Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein,
and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding
of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. Provisions
of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the aggregate
number of the Conversion Shares and the Warrant Shares issued or issuable under the Notes (calculated using the Initial Conversion
Price) and Warrants (without regard to any limitation on conversion or exercise set forth therein) and shall include Empery so
long as Empery or any of its affiliates holds any Securities (the “Required Holders”); provided that any such
amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely affects the rights
and obligations of any Buyer relative to the comparable rights and obligations of the other Buyers shall require the prior written
consent of such adversely affected Buyer; provided, further, that the provisions of Section 4(q) cannot be amended
without the additional prior written approval of the Collateral Agent or its successor. Any amendment or waiver effected in accordance
with this Section 9(e) shall be binding upon each Buyer and holder of Securities and the Company. No such amendment shall be effective
to the extent that it applies to less than all of the Buyers or holders of Securities. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the
same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to the Transaction Documents,
holders of Notes or holders of the Warrants, as the case may be. 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.

 

    	 	- 36 - 	 

     

    

 

(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) upon receipt, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise)
by the sending party and the sending party does not immediately receive an automatically generated message from the recipient’s
e-mail server that such e-mail could not be delivered to such recipient) or (iv) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail
addresses for such communications shall be:

 

If
to the Company:

 

Ener-Core,
Inc. 

9400
Toledo Way

Irvine, California 92618

Telephone:  (949)
616-3333

Facsimile:   (949)
616-3399

Attention:    Mr. Domonic J. Carney, CFO

Email:         DJ.Carney@ener-core.com

 

With
a copy (for informational purposes only) to:

 

K&L
Gates LLP

1
Park Plaza, 12th Floor

Irvine
CA 92614

Telephone:  (949)
623-3545

Facsimile:   (949)
623-4477

Attention:    Shoshannah
D. Katz, Esq.

Email:         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 the Placement Agent (for informational purposes only) to:

  

Sichenzia
Ross Ference Kesner LLP

61
Broadway, 32nd Floor

New
York, NY 10006

Telephone:  (212)
930-9700

Facsimile:
    (212) 930-9725

Attention:    Gregory
Sichenzia

E-mail:        gsichenzia@srfkllp.com

 

    	 	- 37 - 	 

     

    

 

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

 

with
a copy (for informational purposes only) to:

 

Schulte
Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone:  (212) 756-2000

Facsimile:     (212) 593-5955

Attention:    Eleazer N. Klein, Esq.

E-mail:        eleazer.klein@srz.com

 

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

 

(g)Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Notes 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, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes
and the Warrants). A Buyer may assign some or all of its rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

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

 

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

 

    	 	- 38 - 	 

     

    

 

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

 

(k)Indemnification.
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their 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, (iii) any disclosure made by such Buyer pursuant to Section 4(j), or (iv) the status of such Buyer or holder of the
Securities as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. Except as otherwise
set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall be the
same as those set forth in Section 6 of the Registration Rights Agreement.

 

    	 	- 39 - 	 

     

    

 

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

 

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

 

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

 

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

 

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

 

[Signature
Pages Follow]

 

    	 	- 40 - 	 

     

    

 

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

 

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

 

 

 

 

 

 

 

[Signature
Page to Securities Purchase Agreement]

 

     

     

    

 

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

 

	 	INITIAL
    BUYER:
	 	 
	 	By:	
	 	 	Name:
	 	 	Title:

 

 

     

     

    

 

SCHEDULE
OF BUYERS

 

	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)
	Buyer	 	Address
    and
 Facsimile Number	 	Aggregate

    Principal
 Amount of Notes	 	Number
    of 
 Warrant Shares	 	Purchase
    

Price	 	Legal
    Representative’s Address and Facsimile Number
	 	 	 	 	 	 	 	 	 	 	 

 

 

     

     

    

 

EXHIBITS

 

	Exhibit
    A	Form
    of Notes
	Exhibit
    B	Form
    of Warrants
	Exhibit
    C	Form
    of Joinder Agreement
	Exhibit
    D	Form
    of Guaranty Agreement
	Exhibit
    E	Form
    of Security Amendment Agreement
	Exhibit
    F	Form
    of Registration Rights Agreement
	Exhibit
    G	Form
    of Investor Questionnaire
	Exhibit
    H	Form
    of Irrevocable Transfer Agent Instructions
	Exhibit
    I	Form
    of Secretary’s Certificate
	Exhibit
    J	Form
    of Officer’s Certificate
	Exhibit
    K-1	Form
    of September Subordination Agreement
	Exhibit
    K-2	Form
    of October Subordination Agreement

 

SCHEDULES

 

	Schedule 3(a)	Subsidiaries
	Schedule
    3(j)	SEC
    Documents
	Schedule
    3(k)	Absence
    of Certain Changes
	Schedule 3(m)	Regulatory
    Permits
	Schedule
    3(o)	Sarbanes-Oxley
    Act
	Schedule
    3(p)	Transactions
    with Affiliates
	Schedule
    3(q)	Equity
    Capitalization
	Schedule
    3(r)	Indebtedness
    and Other Contracts
	Schedule
    3(s)	Absence
    of Litigation
	Schedule
    3(bb)	Internal
    Accounting and Disclosure Controls
	Schedule
    3(dd)	Ranking
    of Notes
	Schedule
    3(oo)	No
    Disqualification Events
	Schedule
    4(s)	Pledges
    of Intellectual Property Rights

 

     

     

    

 

EXHIBIT
A

 

Form
of Notes

  

[Omitted]

     

     

    

 

EXHIBIT
B

 

Form
of Warrants

 

[Omitted]

 

 

     

     

    

 

EXHIBIT
C

 

Form
of Joinder Agreement

 

 

     

     

    

 

JOINDER
AGREEMENT

 

Reference
is hereby made to: (i) that certain Securities Purchase Agreement by and among Ener-Core, Inc., a Delaware corporation, with headquarters
located at 9400 Toledo Way, Irvine, California 92618 (the “Company”), and the Initial Buyers (as defined therein),
dated as of November 23, 2016, attached hereto as Exhibit A (the “Securities Purchase Agreement”); and
(ii) that certain Registration Rights Agreement by and among the Company the Buyers (as defined therein), dated as of November
23, 2016, attached hereto as Exhibit B (the “Registration Rights Agreement”). Capitalized terms not
defined herein shall be as defined in the Securities Purchase Agreement.

 

(a) The
party signatory hereto as the “Subsequent Buyer” (the “Subsequent Buyer”) desires to purchase Subsequent
Notes for the Subsequent Purchase Price, as set forth under the signature line of the Subsequent Buyer attached hereto. The date
of the Subsequent Closing (the “Subsequent Closing Date”) shall occur on December 12, 2016 (or such earlier
date as shall be mutually agreed to by the Company and the Required Holders).

 

(b) The
Subsequent Buyer acknowledges, represents and warrants that it has reviewed the Securities Purchase Agreement, and subject to
the satisfaction (or waiver) of the conditions of Sections 1(c), 6(b), and 7(b), as of the Subsequent Closing Date, the Subsequent
Buyer shall be a “Buyer” and a “Subsequent Buyer”, in each case as defined in the Securities Purchase
Agreement, with all the rights and obligations of a “Buyer” and a “Subsequent Buyer” set forth therein,
including, without limitation, as set forth in Section 4(q) thereof.

 

(c) Having
read the representations in Section 2 of the Securities Purchase Agreement, the Subsequent Buyer hereby makes the representations
and warranties contained in Section 2 of the Securities Purchase Agreement, as set forth therein, to the Company as of the date
hereof and as of the Subsequent Closing Date.

 

(d) With
regards to the Company’s representations and warranties in Section 3 of the Securities Purchase Agreement, the Company hereby
makes the representations and warranties contained in Section 3 of the Securities Purchase Agreement, as set forth therein, to
the Subsequent Buyer as of the date hereof and as of the Subsequent Closing Date, as modified or affected by the schedules attached
hereto as Attachment 1.

 

(e) The
Subsequent Buyer acknowledges, represents and warrants that it has reviewed the Registration Rights Agreement, and subject to
the satisfaction (or waiver) of the conditions of Sections 1(c), 6(b), and 7(b), as of the Subsequent Closing Date, the Subsequent
Buyer shall be a “Buyer”, as defined in the Registration Rights Agreement, with all the rights and obligations of
a “Buyer” set forth therein.

 

(f) This
Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile
or “.pdf” electronic format signature shall be considered due execution and shall be binding upon the signatory thereto
with the same force and effect as if the signature were an original, not a facsimile or “.pdf” electronic format signature.

 

(g)
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.

 

[Signature
Page Follows]

 

     

     

    

 

IN
WITNESS WHEREOF, the Subsequent Buyer and the Company have caused their respective signature page to this Agreement to be
duly executed, in counterparts, as of the date set forth below.

 

	 	SUBSEQUENT
    BUYER:
	 	 	 
	 	By:	
	 	 	Name:
    
	 	 	Title:
    
	 	 	 
	 	Aggregate
    Principal Amount of Subsequent Notes Purchased:
	 	
	 	Number
    of Warrant Shares:
	 	
	 	Purchase
    Price:
	 	
	 	 
	 	Address:
	 	
	 	
	 	
	 	 
	 	Attention:
	 	
	 	 
	 	Facsimile:
	 	
	 	 
	 	Telephone:
	 	
	 	 
	 	Email:
	 	

 

Accepted
by:

 

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

 

     

     

    

 

EXHIBITS

 

	Exhibit A:	Securities Purchase
    Agreement
	Exhibit B:	Registration Rights Agreement
	Attachment 1:	Disclosure Schedules to Securities
    Purchase Agreement

 

     

     

    

 

EXHIBIT
D

  

Form
of Guaranty Agreement

 

     

     

    

 

GUARANTY

 

GUARANTY,
dated as of November 23, 2016, made by each of the undersigned (each a “Guarantor”, and collectively, the “Guarantors”),
in favor of the “Buyers” (as defined below) party to the Securities Purchase Agreement referenced below.

 

W
I T N E S S E T H :

 

WHEREAS,
Ener-Core, Inc., a Delaware corporation (the ”Company”), each party listed as a “Buyer” on
the Schedule of Buyers attached to the Securities Purchase Agreement and each “Subsequent Buyer”, if any, that is
party to a joinder agreement with respect to the Securities Purchase Agreement (each a “Buyer”, and collectively,
the “Buyers”) are parties to that certain Securities Purchase Agreement, dated as of November 23, 2016 (the
“Securities Purchase Agreement”), pursuant to which, among other things, the Buyers shall purchase from the
Company certain senior secured convertible “Notes” (as defined in the Securities Purchase Agreement) (collectively,
the “Notes”);

 

WHEREAS,
the Buyers have requested, and the Guarantors have agreed, that the Guarantors shall execute and deliver to the Buyers, a guaranty
guaranteeing all of the obligations of the Company under the Securities Purchase Agreement, the Notes and the other “Transaction
Documents” (as defined in the Securities Purchase Agreement, the “Transaction Documents”);

 

WHEREAS,
pursuant to a Pledge and Security Agreement, dated as of April 22, 2015 (as the same has been, and may be, amended from time to
time, the “Security Agreement”), the Company and the Guarantors have granted to Empery Tax Efficient, LP, as
collateral agent for the Buyers (in such capacity, the “Collateral Agent”), a security interest in and lien
on selected assets to secure their respective obligations under this Guaranty, the Securities Purchase Agreement, the Notes and
the other Transaction Documents; and

 

WHEREAS,
each Guarantor has determined that the execution, delivery and performance of this Guaranty directly benefits, and is in the best
interest of, such Guarantor.

 

NOW,
THEREFORE, in consideration of the premises and the agreements herein and for other consideration, the sufficiency of which is
hereby acknowledged, each Guarantor hereby agrees with each Buyer as follows:

 

1. Definitions.
Reference is hereby made to the Securities Purchase Agreement and the Notes for a statement of the terms thereof. All terms used
in this Guaranty, which are defined in the Securities Purchase Agreement or the Notes and not otherwise defined herein, shall
have the same meanings herein as set forth therein.

 

2. Guaranty.
The Guarantors, jointly and severally, hereby unconditionally and irrevocably, guaranty (a) the punctual payment, as and when
due and payable, by stated maturity or otherwise, of all obligations and any other amounts now or hereafter owing by the Company
in respect of the Securities Purchase Agreement, the Notes and the other Transaction Documents, including, without limitation,
all interest that accrues after the commencement of any proceeding commenced by or against any the Company or any Guarantor under
any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under any other bankruptcy or
insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other similar relief (an “Insolvency Proceeding”),
whether or not the payment of such interest is unenforceable or is not allowable due to the existence of such Insolvency Proceeding,
and all fees, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under any of the
Transaction Documents, and any and all expenses (including reasonable counsel fees and expenses) reasonably incurred by the Buyers
or the Collateral Agent in enforcing any rights under this Guaranty (such obligations, to the extent not paid by the Company,
being the “Guaranteed Obligations”) and (b) the punctual and faithful performance, keeping, observance and
fulfillment by the Company of all of the agreements, conditions, covenants and obligations of the Company contained in the Securities
Purchase Agreement, the Notes and the other Transaction Documents. Without limiting the generality of the foregoing, each Guarantor’s
liability hereunder shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Company
to the Buyers under the Securities Purchase Agreement and the Notes but for the fact that they are unenforceable or not allowable
due to the existence of an Insolvency Proceeding involving any Guarantor or the Company (each, a “Transaction Party”).

 

     

     

    

 

3. Guaranty
Absolute; Continuing Guaranty; Assignments.

 

(a) The
Guarantors, jointly and severally, guaranty that the Guaranteed Obligations will be paid strictly in accordance with the terms
of the Transaction Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Buyers with respect thereto. The obligations of each Guarantor under this Guaranty are
independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against any Guarantor
to enforce such obligations, irrespective of whether any action is brought against any Transaction Party or whether any Transaction
Party is joined in any such action or actions. The liability of any Guarantor under this Guaranty shall be irrevocable, absolute
and unconditional irrespective of, and each Guarantor hereby irrevocably waives, to the extent permitted by law, any defenses
it may now or hereafter have in any way relating to, any or all of the following:

 

(i)
any lack of validity or enforceability of any Transaction Document or any agreement or instrument relating thereto;

 

(ii) any
change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Transaction Document, including, without limitation, any increase
in the Guaranteed Obligations resulting from the extension of additional credit to any Transaction Party or otherwise;

 

(iii) any
taking, exchange, release or non-perfection of any collateral with respect to the Guaranteed Obligations, or any taking, release
or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; or

 

(iv) any
change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of any
Transaction Party.

 

    	 	- 2 -	 

     

    

 

This
Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed
Obligations is rescinded or must otherwise be returned by any Buyer or any other Person upon the insolvency, bankruptcy or reorganization
of any Transaction Party or otherwise, all as though such payment had not been made.

 

(b)
This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until the complete conversion of all of the
Company’s obligations under the Notes to equity securities of the Company and/or indefeasible payment in full in cash of
all obligations under the Notes (together with any matured indemnification obligations as of the date of such conversion and/or
payment, but excluding any inchoate or unmatured contingent indemnification obligations) and payment of all other amounts payable
under this Guaranty (excluding any inchoate or unmatured contingent indemnification obligations) and (ii) be binding upon each
Guarantor and its respective successors and assigns. This Guaranty shall inure to the benefit of and be enforceable by the Buyers
and their respective successors, and permitted pledgees, transferees and assigns. Without limiting the generality of the foregoing
sentence, any Buyer may pledge, assign or otherwise transfer all or any portion of its rights and obligations under and subject
to the terms of any Transaction Document to any other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Buyer herein or otherwise, in each case as provided in the Securities Purchase Agreement
or such Transaction Document. Notwithstanding the foregoing and for the avoidance of doubt, this Guaranty will expire and each
Guarantor will be released from its obligation hereunder upon the complete conversion of all of the Company’s obligations
under the Notes to equity securities of the Company and/or indefeasible payment in full in cash of all obligations under the Notes
(together with any matured indemnification obligations as of the date of such conversion and/or payment, but excluding any inchoate
or unmatured contingent indemnification obligations) and payment of all other amounts payable under this Guaranty (excluding any
inchoate or unmatured contingent indemnification obligations).

 

4. Waivers.
To the extent permitted by applicable law, each Guarantor hereby waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Buyers or the Collateral
Agent exhaust any right or take any action against any Transaction Party or any other Person or any Collateral (as defined in
the Security Agreement). Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 4 is knowingly made in contemplation of such benefits.
The Guarantors hereby waive any right to revoke this Guaranty, and acknowledge that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.

 

5. Subrogation.
No Guarantor may exercise any rights that it may now or hereafter acquire against any Transaction Party or any other guarantor
that arise from the existence, payment, performance or enforcement of any Guarantor’s obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate
in any claim or remedy of the Buyers or the Collateral Agent against any Transaction Party or any other guarantor or any Collateral
(as defined in the Security Agreement), whether or not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive from any Transaction Party or any other guarantor,
directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account
of such claim, remedy or right, unless and until the complete conversion of all of the Company’s obligations under the Notes
to equity securities of the Company and/or indefeasible payment in full in cash of all obligations under the Notes (together with
any matured indemnification obligations as of the date of such conversion and/or payment, but excluding any inchoate or unmatured
contingent indemnification obligations) and payment of all other amounts payable under this Guaranty (excluding any inchoate or
unmatured contingent indemnification obligations). If any amount shall be paid to a Guarantor in violation of the immediately
preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, such amount shall be held in trust for the benefit of the Buyers and shall forthwith be paid ratably
to the Buyers to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether
matured or unmatured, in accordance with the terms of the Transaction Documents, or to be held as collateral for any Guaranteed
Obligations or other amounts payable under this Guaranty thereafter arising. If (a) any Guarantor shall make payment to the
Buyers of all or any part of the Guaranteed Obligations, and (b) the Buyers receive the complete conversion of all of the
Company’s obligations under the Notes to equity securities of the Company and/or indefeasible payment in full in cash of
all obligations under the Notes (together with any matured indemnification obligations as of the date of such conversion and/or
payment, but excluding any inchoate or unmatured contingent indemnification obligations) and payment of all other amounts payable
under this Guaranty (excluding any inchoate or unmatured contingent indemnification obligations), the Buyers will, at such Guarantor’s
request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation
or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations
resulting from such payment by such Guarantor.

 

    	 	- 3 -	 

     

    

 

6. Representations,
Warranties and Covenants.

 

(a)
Each Guarantor hereby represents and warrants as of the date first written above as follows:

 

(i)
Each Guarantor (A) is a corporation, limited liability company or limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization as set forth on the signature pages hereto, (B) has all requisite
corporate, limited liability company or limited partnership power and authority to conduct its business as now conducted and as
presently contemplated and to execute and deliver this Guaranty and each other Transaction Document to which the Guarantor is
a party, and to consummate the transactions contemplated hereby and thereby and (C) is duly qualified to do business and is in
good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary except where the failure to be so qualified would not result in a Material
Adverse Effect.

 

(ii)
The execution, delivery and performance by each Guarantor of this Guaranty and each other Transaction Document to which such Guarantor
is a party (A) have been duly authorized by all necessary corporate, limited liability company or limited partnership action,
(B) do not and will not contravene its charter or by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, or any applicable law or any contractual restriction binding on the Guarantor
or its properties do not and will not result in or require the creation of any lien (other than pursuant to any Transaction Document)
upon or with respect to any of its properties, and (C) do not and will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to it or its operations
or any of its properties.

 

    	 	- 4 -	 

     

    

 

(iii)
No authorization or approval or other action by, and no notice to or filing with, any governmental authority is required in connection
with the due execution, delivery and performance by the Guarantor of this Guaranty or any of the other Transaction Documents to
which the Guarantor is a party (other than expressly provided for in any of the Transaction Documents).

 

(iv)
Each of this Guaranty and the other Transaction Documents to which the Guarantor is or will be a party, when delivered, will be,
a legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, suretyship or other
similar laws and equitable principles (regardless of whether enforcement is sought in equity or at law).

 

(v)
There is no pending or, to the best knowledge of the Guarantor, threatened action, suit or proceeding against the Guarantor or
to which any of the properties of the Guarantor is subject, before any court or other governmental authority or any arbitrator
that (A) if adversely determined, could reasonably be expected to have a Material Adverse Effect or (B) relates to this
Guaranty or any of the other Transaction Documents to which the Guarantor is a party or any transaction contemplated hereby or
thereby.

 

(vi)
The Guarantor (A) has read and understands the terms and conditions of the Securities Purchase Agreement, the Notes and the other
Transaction Documents, and (B) now has and will continue to have independent means of obtaining information concerning the
affairs, financial condition and business of the Company and the other Transaction Parties, and has no need of, or right to obtain
from the Collateral Agent or any Buyer, any credit or other information concerning the affairs, financial condition or business
of the Company or the other Transaction Parties that may come under the control of the Collateral Agent or any Buyer.

 

(b)
The Guarantor covenants and agrees that until the complete conversion of all of the Company’s obligations under the Notes
to equity securities of the Company and/or indefeasible payment in full in cash of all obligations under the Notes (together with
any matured indemnification obligations as of the date of such conversion and/or payment, but excluding any inchoate or unmatured
contingent indemnification obligations) and payment of all other amounts payable under this Guaranty (excluding any inchoate or
unmatured contingent indemnification obligations), it will comply with each of the covenants (except to the extent applicable
only to a public company) which are set forth in Section 4 of the Securities Purchase Agreement as if the Guarantor
were a party thereto.

 

    	 	- 5 -	 

     

    

 

7. Right
of Set-off. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent and any Buyer
may, and is hereby authorized to, at any time and from time to time, without notice to the Guarantors (any such notice being expressly
waived by each Guarantor) and to the fullest extent permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at any time owing by any Buyer to or for the credit
or the account of any Guarantor against any and all obligations of the Guarantors now or hereafter existing under this Guaranty
or any other Transaction Document, irrespective of whether or not Collateral Agent or any Buyer shall have made any demand under
this Guaranty or any other Transaction Document and although such obligations may be contingent or unmatured. Collateral Agent
and each Buyer agrees to notify the relevant Guarantor promptly after any such set-off and application made by such Buyer, provided
that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral
Agent or any Buyer under this Section 7 are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Collateral Agent or such Buyer may have under this Guaranty or any other Transaction Document
in law or otherwise.

 

8. Notices,
Etc. All notices and other communications provided for hereunder shall be in writing and shall be mailed (by overnight mail
or by certified mail, postage prepaid and return receipt requested), telecopied, sent via electronic mail, sent via overnight
courier or delivered, if to any Guarantor, to the address for such Guarantor set forth on the signature page hereto, or if to
any Buyer, to it at its respective address set forth in the Securities Purchase Agreement; or as to any Person at such other address
as shall be designated by such Person in a written notice to such other Person complying as to delivery with the terms of this
Section 8. All such notices and other communications shall be effective (i) if mailed (by certified mail, postage prepaid
and return receipt requested), when received or three Business Days after deposited in the mails, whichever occurs first; (ii)
if telecopied, when transmitted and confirmation is received, provided it is transmitted during regular business hours on a Business
Day and, if not, on the next Business Day; (iii) if sent via electronic mail, when transmitted (provided that such sent electronic
mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not immediately receive
an automatically generated message from the recipient’s electronic mail server that such electronic mail could not be delivered
to such recipient), (d) if sent via overnight courier service, one Business Day after deposit with an overnight courier service,
or (iii) if delivered by hand, upon delivery, provided it is delivered during regular business hours on a Business Day and, if
not, on the next Business Day.

 

9. CONSENT
TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER TRANSACTION
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE BUYERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST EACH GUARANTOR IN ANY OTHER JURISDICTION. ANY GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT ANY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY
AND THE OTHER TRANSACTION DOCUMENTS.

 

    	 	- 6 -	 

     

    

 

10.
WAIVER OF JURY TRIAL, ETC. EACH GUARANTOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
CONCERNING ANY RIGHTS UNDER THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT,
DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING
FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT
ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH GUARANTOR CERTIFIES THAT
NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BUYER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY BUYER WOULD NOT,
IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH GUARANTOR HEREBY ACKNOWLEDGES
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BUYERS ENTERING INTO THE OTHER TRANSACTION DOCUMENTS.

 

11.
Taxes.

 

(a)
All payments made by any Guarantor hereunder or under any other Transaction Document shall be made in accordance with the terms
of the respective Transaction Document and shall be made without set-off, counterclaim, deduction or other defense. All such payments
shall be made free and clear of and without deduction for any present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed on the net income of any Buyer by the jurisdiction
in which such Buyer is organized or where it has its principal lending office (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, “Taxes”). If any Guarantor shall be required
to deduct or to withhold any Taxes from or in respect of any amount payable hereunder or under any other Transaction Document:

 

(i)
the amount so payable shall be increased to the extent necessary so that after making all required deductions and withholdings
(including Taxes on amounts payable to any Buyer pursuant to this sentence) each Buyer receives an amount equal to the sum it
would have received had no such deduction or withholding been made,

 

    	 	- 7 -	 

     

    

 

(ii)
such Guarantor shall make such deduction or withholding,

 

(iii)
such Guarantor shall pay the full amount deducted or withheld to the relevant taxation authority in accordance with applicable
law, and

 

(iv) as
promptly as possible thereafter, such Guarantor shall send the Buyers an official receipt (or, if an official receipt is not available,
such other documentation as shall be satisfactory to the Buyers, as the case may be) showing payment.  In addition, each
Guarantor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise
with respect to, this Agreement or any other Transaction Document (collectively, “Other Taxes”).

 

(b)
Each Guarantor hereby indemnifies and agrees to hold the Collateral Agent and each Buyer (each an “Indemnified Party”)
harmless from and against Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 11) paid by any Indemnified Party  as a result of any payment made hereunder
or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Agreement or any other Transaction
Document, and any liability (including penalties, interest and expenses for nonpayment, late payment or otherwise) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted.  This indemnification
shall be paid within 30 days from the date on which such Buyer makes written demand therefor, which demand shall identify the
nature and amount of such Taxes or Other Taxes.

 

(c) If
any Guarantor fails to perform any of its obligations under this Section 11, such Guarantor shall indemnify the Collateral
Agent and each Buyer for any taxes, interest or penalties that may become payable as a result of any such failure. The obligations
of the Guarantors under this Section 11 shall survive the termination of this Guaranty and the payment of the Obligations
and all other amounts payable hereunder.

 

12.
Miscellaneous.

 

(a)
Each Guarantor will make each payment hereunder in lawful money of the United States of America and in immediately available funds
to each Buyer, at such address specified by such Buyer from time to time by notice to the Guarantors.

 

(b)
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 Required Holders (as defined
in the Securities Purchase Agreement). Any amendment or waiver effected in accordance with this Section 12 shall be binding upon
each Buyer and holder of Securities and the Company.

 

    	 	- 8 -	 

     

    

 

(c)
No failure on the part of the Collateral Agent or any Buyer to exercise, and no delay in exercising, any right hereunder or under
any other Transaction Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder
or under any Transaction Document preclude any other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Collateral Agent and the Buyers provided herein and in the other Transaction Documents are cumulative and
are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Collateral Agent and the Buyers
under any Transaction Document against any party thereto are not conditional or contingent on any attempt by the Collateral Agent
or any Buyer to exercise any of their respective rights under any other Transaction Document against such party or against any
other Person.

 

(d)
Any provision of this Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.

 

(e)
This Guaranty shall (i) be binding on each Guarantor and its respective successors and assigns, and (ii) inure, together with
all rights and remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the Collateral Agent and the Buyers
and their respective successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately preceding
sentence, the Collateral Agent and any Buyer may assign or otherwise transfer its rights and obligations under the Securities
Purchase Agreement or any other Transaction Document to any other Person in accordance with the terms thereof, and such other
Person shall thereupon become vested with all of the benefits in respect thereof granted to the Collateral Agent or such Buyer,
as the case may be, herein or otherwise. None of the rights or obligations of any Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of each Buyer.

 

(f)
This Guaranty reflects the entire understanding of the transaction contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, entered into before the date hereof.

 

(g)
Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any
other purpose.

 

(h)
This Guaranty may be executed by each party hereto on a separate counterpart, each of which when so executed and delivered shall
be an original, but all of which together shall constitute one agreement. Delivery of an executed counterpart by facsimile or
other method of electronic transmission shall be equally effective as delivery of an original executed counterpart.

 

(i)
This Guaranty shall be governed by and construed in accordance with the law of the State
of New York applicable to contracts made and to be performed therein without regard to conflict of law principles.

 

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

    	 	- 9 -	 

     

    

 

IN
WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by its respective duly authorized officer, as of the date
first above written.

 

	 	ENER-CORE
    POWER, INC., a Delaware corporation
	 	 	 
	 	By:	 
	 	Name:	Alain
    J. Castro
	 	Title:	Chief
    Executive Officer
	 	 	 
	 	Address
    for Notices:
	 	 
	 	9400
    Toledo Way
	 	Irvine,
    California 92618
	 	Attention:
    Mr. Domonic J. Carney
	 	Facsimile:
    (949) 616-3399
	 	Email:
    DJ.Carney@ener-core.com

 

     

     

    

 

EXHIBIT
E

 

Form
of Security Amendment Agreement

 

[Omitted]

 

     

     

    

 

EXHIBIT
F

 

Form
of Registration Rights Agreement

 

[Omitted]

 

     

     

    

 

EXHIBIT
G

 

Form
of Investor Questionnaire

 

     

     

    

 

Ener-Core,
Inc.

ACCREDITED
INVESTOR QUESTIONNAIRE 

PLEASE
READ CAREFULLY 

 

This
investor questionnaire is being submitted by the undersigned to Ener-Core, Inc., a Delaware corporation (“Issuer”)
in order to determine whether the undersigned qualifies as an “accredited investor” under Regulation D promulgated
under the Securities Act of 1933 (the “Securities Act”). The undersigned understands that Issuer will rely
upon the accuracy and completeness of the information provided in this questionnaire in determining whether certain issuances
of securities of Issuer may qualify for an exemption from the registration requirements of the Securities Act. Please return your
completed questionnaire and executed signature page hereto with your signature page to the Securities Purchase Agreement.

 

I. Accredited
Investor: The undersigned hereby represents and warrants that the undersigned is an “accredited investor” under
Regulation D promulgated under the Securities Act. o (please check box if you are an accredited investor)

 

The
undersigned is an “accredited investor” for one of the following reasons (check whichever applies):

 

Individuals.
If the undersigned is a natural person (ignoring any revocable grantor trust), then the undersigned hereby represents and
warrants as follows (check whichever applies):

 

		☐	The
                                         undersigned is a director, executive officer, or general partner of the Issuer, or a
                                         director, executive officer, or general partner of a general partner of the Issuer.

 

		☐	The
                                         undersigned has a net worth (either individually or jointly with the undersigned’s
                                         spouse) in excess of $1,000,000 (see calculation guidance below).

 

		☐	The
                                         undersigned (i) either (A) had an individual annual income (exclusive of spousal income)
                                         in excess of $200,000 or (B) had a joint income with the undersigned’s spouse in
                                         excess of $300,000 in each of the two preceding tax years, and (ii) reasonably expects
                                         to have the same income level (individually or jointly, as applicable) in the current
                                         tax year (see calculation guidance below).

 

The
term “net worth” means the excess of total assets over total liabilities. In calculating “net worth,”
the Investor must exclude the value of the Investor’s principal residence as an asset. The value of the principal residence
should be calculated as the fair market value of the residence, less any debt secured by such residence. To the extent that the
amount of debt secured by the primary residence exceeds the fair market value of such residence, this excess amount of debt should
be considered a liability for purposes of calculating net worth. The term “individual income” means adjusted
gross income, as reported for federal income tax purposes, less any income attributable to a spouse or property owned by a spouse,
increased by the amount (if not attributable to a spouse or property owned by a spouse) of any tax-exempt shares received, losses
claimed as a partner in an entity treated as a partnership for tax purposes, any deduction claimed for depletion, any deduction
for long term capital gains. The term “joint income” is defined in the same manner as “individual income,”
except that income attributable to a spouse or property owned by a spouse is included.

 

     

     

    

 

Trusts.
If the undersigned is a trust, then the undersigned hereby represents and warrants that the undersigned is (check whichever
applies):

 

		☐	A
                                         revocable trust (such as a living trust) or a trust formed for the purpose of acquiring
                                         the securities and for which, in either case, each grantor is an accredited investor.
                                         Indicate each grantor and the category that describes how each such grantor itself is
                                         qualified as an “accredited investor”:
	 	 	 
	 	 	 

 

		☐	A
                                         trust which has total assets in excess of $5,000,000, not formed for the specific purpose
                                         of acquiring securities, whose purchase is directed by a “sophisticated person”
                                         within the meaning of Regulation D who has such knowledge and experience in financial
                                         and business matters as to be capable of evaluating the merits and risks of an investment
                                         in the proposed investment.

 

Entities.
If the undersigned is a corporation, partnership, limited liability company or trust, then the undersigned hereby represents
and warrants that the undersigned is (check whichever applies):

 

		☐	an
                                         employee benefit plan within the meaning of the Employment Retirement Income Security
                                         Act of 1974, as amended (“ERISA”), if either:

 

		a.	the
                                         investment decision is made by a plan fiduciary, as defined in ERISA § 3(21), that
                                         is a bank, savings and loan association, insurance company or registered investment adviser,

 

		b.	an
                                         employee benefit plan with total assets in excess of $5,000,000, or

 

		c.	a
                                         self-directed plan with investment decisions made solely by persons who are accredited
                                         investors as defined in Rule 501(a) promulgated under the Securities Act.

 

		☐	one
                                         of the following entities, not formed for the specific purpose of acquiring securities
                                         and having total assets in excess of $5,000,000:

 

		a.	an
                                         organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as
                                         amended;

 

		b.	a
                                         corporation, partnership, or limited liability company; or

 

		c.	a
                                         Massachusetts or similar business trust.

 

		☐	a
                                         bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association
                                         or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether
                                         acting in its individual or a fiduciary capacity.

 

     

     

    

 

		☐	a
                                         broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of
                                         1934, as amended.

 

		☐	an
                                         insurance company as defined in Section 2(13) of the Securities Act.

 

		☐	an
                                         investment company registered under the Investment Company Act of 1940 (the “Investment
                                         Company Act”), or a business development company as defined in Section 2(a)(48)
                                         of the Investment Company Act.

 

		☐	a
                                         Small Business Investment Company licensed by the U.S. Small Business Administration
                                         under Section 301(c) or (d) of the Small Business Investment Act of 1958.

 

		☐	a
                                         plan established and maintained by a state, its political subdivisions, or any agency
                                         or instrumentality of a state or its political subdivisions for the benefit of its employees
                                         with total assets in excess of $5,000,000.

 

		☐	a
                                         private business development company as defined in Section 202(a)(22) of the Investment
                                         Advisers Act of 1940, as amended.

 

		☐	An
                                         entity in which all of the equity owners are “accredited investors”
                                         under any of the above categories (including the categories for individuals and trusts
                                         listed in the preceding Sections 1(a) and 1(b)). If the undersigned belongs
                                         to this investor category only, list the equity owners of the undersigned, and the “accredited
                                         investor” category which each such equity owner satisfies:
	 	 	 
	 	 	 

 

If
the Issuer needs to verify my status as an accredited investor or has any questions with respect to such status, I hereby consent
to request that the Issuer contact:

 

	Name:	 	 
	Firm
    name:	 	 
	Email:	 	 
	Telephone:	 	 
	Address:	 	 

	Relationship to accredited investor:	 	 

  

II.
Not an Accredited Investor: The undersigned hereby represents and warrants that the undersigned does NOT meet one of the
foregoing tests and does not qualify as an “accredited investor” under Regulation D promulgated under the Securities
Act.  o (please check box if you are not an accredited investor)

 

Signature
Page Follows

 

     

     

    

 

The
undersigned has/have executed this Accredited Investor Questionnaire effective as of the date set forth below.

 

	 	FOR
    INDIVIDUALS
	 	 	 
	 	By:	
	 	 	Signature
	 	 	 
	 	Name:	
	 	 	 
	 	Date:	 
	 	 	 
	 	 	 
	 	By:	
	 	 	Signature
	 	 	 
	 	Name:	
	 	 	 
	 	Date:	 

  

 

	NOTE:
    IF YOU ARE PURCHASING SHARES WITH YOUR SPOUSE, YOU MUST BOTH SIGN THIS SIGNATURE PAGE. 
	 
	IF
    YOU ARE PURCHASING SHARES WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE.

 

	 	FOR
    ENTITIES
	 	 	 
	 	 
	 	Name
    of Entity (i.e., corporation, partnership, trust, LLC etc.)
	 	 	 
	 	By:	 
	 	 	Signature
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 
	 	 	 
	 	Date:	 

 

     

     

    

 

EXHIBIT
H

 

Form
of Irrevocable Transfer Agent Instructions

 

     

     

    

 

TRANSFER
AGENT INSTRUCTIONS

 

ENER-CORE,
INC. 

 

November
23, 2016

 

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

 

Ladies
and Gentlemen:

 

Reference
is made to that certain Securities Purchase Agreement, dated as of November 23, 2016 (the “Agreement”), by
and among Ener-Core, Inc., a Delaware corporation (the “Company”), the investors named on each Buyer’s
signature page to the Agreement and the Schedule of Buyers attached thereto and the investors, if any, party to a joinder agreement
with respect to the Agreement (collectively, the “Holders”), pursuant to which the Company is issuing to the
Holders: (i) convertible senior secured promissory notes (the “Notes”), which Notes shall be convertible
into shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”) and (ii) warrants
(the “Warrants”), which are exercisable to purchase shares of Common Stock.

 

This
letter shall serve as our irrevocable authorization and direction to you (provided that you are the transfer agent of the Company
at such time):

 

		(i)	to
                                         issue shares of Common Stock upon conversion of the Notes (the “Conversion Shares”)
                                         to or upon the order of a Holder from time to time upon delivery to you of a properly
                                         completed and duly executed Conversion Notice, in the form attached hereto as Exhibit
                                         I, which has been acknowledged by the Company as indicated by the signature of a
                                         duly authorized officer of the Company thereon; and

 

		(ii)	to
                                         issue shares of Common Stock upon exercise of the Warrants (the “Warrant Shares”)
                                         to or upon the order of a Holder from time to time upon delivery to you of a properly
                                         completed and duly executed Exercise Notice, in the form attached hereto as Exhibit
                                         II, which has been acknowledged by the Company as indicated by the signature of a
                                         duly authorized officer of the Company thereon.

 

You
acknowledge and agree that so long as you have previously received (a) a written legal opinion from the Company’s legal
counsel that either (i) a registration statement covering resales of the Conversion Shares and/or Warrant Shares has been declared
effective by the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the
“Securities Act”), or (ii) sales of the Conversion Shares and/or the Warrant Shares may be made in conformity
with Rule 144 under the Securities Act (“Rule 144”) and (b) if applicable, a copy of such registration statement,
then within three (3) business days of your receipt of a notice of transfer, Conversion Notice or Exercise Notice, you shall issue
the certificates representing the Conversion Shares and/or the Warrant Shares, as applicable, registered in the names of such
transferees, and such certificates shall not bear any legend restricting transfer of the Conversion Shares and/or the Warrant
Shares thereby and should not be subject to any stop-transfer restriction; provided, however, that if such Conversion Shares
and Warrant Shares are not registered for resale under the Securities Act or able to be sold under Rule 144, then the certificates
for such Conversion Shares and/or Warrant Shares shall bear the following legend:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN 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.

 

[Remainder
of page left blank intentionally. Signatures follow.]

 

     

    

    

 

Please
execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should
you have any questions concerning this matter, please contact me at 949-616-3300.

 

	 	Very
    truly yours,
	 	 	 
	 	ENER-CORE,
    INC.
	 	 	 
	 	By:	 
	 	Name:	Domonic
    J. Carney
	 	Title:	Chief
    Financial Officer

 

	THE
                                         FOREGOING INSTRUCTIONS ARE 

                                         ACKNOWLEDGED AND AGREED TO

	 
	 	 	 
	this
    ___ day of November, 2016	 
	 	 	 
	VSTOCK
    TRANSFER, LLC	 
	 	 	 
	By:  	 	 
	Name:	Yoel
    Goldfeder	 
	Title:	Chief
    Executive Officer	 

 

Enclosures

 

 

 

 

 

Signature
Page to Transfer Agent Instructions

 

     

    

    

 

EXHIBIT
I

 

CONVERSION
NOTICE

 

ENER-CORE,
inc. 

 

Reference
is made to the convertible unsecured promissory note (the “Note”) issued to the undersigned by Ener-Core, Inc.,
a Delaware corporation (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby
elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock par value
$0.0001 per share (the “Common Stock”) of the Company, as of the date specified below.

 

	Date
    of Conversion:	 
	Aggregate
    Conversion Amount to be converted:	 

 

Please
confirm the following information:

 

	Conversion
    Price:	 
	Number
    of shares of Common Stock to be issued:	 

 

Please
issue the Common Stock into which the Note is being converted in the following name and to the following address:

 

	Issue
    to:	 
	 	 
	 	 
	 	 
	 

                                                                                     

        Facsimile
        Number and E-mail Address:
	 
	 	 
	 	 
	 	 
	Authorization:	 
	By:	 
	Title:	 
	Dated:	 

 

	Account
    Number (if book entry transfer):	 
	 	 
	

        Transaction
        Code Number (if book entry transfer):
	 
	Installment
    Amounts to be reduced and amount of reduction:	 

  

 

Exhibit
I

     

     

    

 

ACKNOWLEDGMENT

 

The
Company hereby acknowledges this Conversion Notice and hereby directs VStock Transfer, LLC to issue the above indicated number
of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 23, 2016 from the Company and acknowledged
and agreed to by VStock Transfer, LLC.

 

	 	ENER-CORE,
    INC.
	 	 	 
	 	By:	                 
	 	Name:	 
	 	Title:	 

 

     

     

    

 

EXHIBIT
II

 

EXERCISE
NOTICE

 

TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT
TO PURCHASE COMMON STOCK

 

ENER-CORE,
inc. 

  

The
undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”)
of Ener-Core, Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common
Stock (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

 

1.       Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:

 

____________
a “Cash Exercise” with respect to _________________ Warrant Shares; and/or

 

____________
a “Cashless Exercise” with respect to _______________ Warrant Shares.

 

2.       Payment
of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company
in accordance with the terms of the Warrant.

 

3.       Delivery
of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

 

Date:
_______________ __, ______

 

	 	 
	Name
    of Registered Holder    	 
	 	 	 	 
	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

 

     

     

    

 

 ACKNOWLEDGMENT

 

The
Company hereby acknowledges this Exercise Notice and hereby directs VStock Transfer, LLC to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated November 23, 2016 from the Company and acknowledged
and agreed to by VStock Transfer, LLC.

 

	 	ENER-CORE,
    INC.
	 	 	 
	 	By:	           
	 	Name:	 
	 	Title:	 

 

 

 

     

     

    

 

EXHIBIT
I

 

Form
of Secretary’s Certificate

 

 

 

     

     

    

 

SECRETARY’S
CERTIFICATE

 

Pursuant
to Section 7(vi) of the Securities Purchase Agreement, dated as of November 23, 2016 (the “Purchase Agreement”),
by and among Ener-Core, Inc., a Delaware corporation (the “Company”), the investors set forth on the Schedule
of Buyers attached to the Purchase Agreement and the investors, if any, party to a joinder agreement with respect to the Purchase
Agreement (each, a “Buyer” and collectively, the “Buyers”), Domonic J. Carney, the Secretary
of the Company, hereby certifies, in his capacity as an officer of the Company and as an officer of Ener-Core Power, Inc., a Delaware
corporation (the “Subsidiary”), and not individually, on behalf of the Company and the Subsidiary, respectively,
that:

 

1. Attached
hereto as Exhibit A are true, correct and complete copies of resolutions duly adopted by the Board of Directors (the “Board”)
of the Company and the Board of Directors (the “Subsidiary Board”) of the Subsidiary (collectively, the “Board
Resolutions”), approving the matters contemplated by Section 3(b) of the Purchase Agreement. Such resolutions have not
been amended, modified, supplemented, annulled or revoked and are in full force and effect in the form adopted, and are the only
resolutions adopted by the Board and the Subsidiary board or by any committee of or designated by the Board and Subsidiary Board
relating to (i) the transactions contemplated by the Board Resolutions, and (ii) the transaction agreements identified in
the Board Resolutions. All members of the Board and Subsidiary Board were, at the time of their approval of the resolutions attached
hereto as Exhibit A, respectively, and have been at all times thereafter, duly elected, qualified, and acting directors
of the Company and the Subsidiary, respectively.

 

2. Attached
hereto as Exhibit B are true, correct and complete copies of the Certificate of Incorporation of the Company, as currently
in effect (the “Certificate”), and the Certificate of Incorporation of the Subsidiary, as currently in effect
(the “Subsidiary Certificate”). The Certificate has not been amended subsequent to September 3, 2015, and no
action has been taken by the Company, its stockholders, directors, or officers to authorize or effect any further amendment or
modification to such Certificate, and the Subsidiary Certificate has not been amended subsequent to June 28, 2013, and no action
has been taken by the Subsidiary, its stockholders, directors, or officers to authorize or effect any further amendment or modification
to such Subsidiary Certificate.

 

3. Attached
hereto as Exhibit C are true, correct and complete copies of the Bylaws of the Company, as currently in effect (the “Bylaws”),
and the Bylaws of the Subsidiary, as currently in effect (the “Subsidiary Bylaws”). The Bylaws have not been
amended subsequent to September 3, 2015, and no action has been taken by the Company, its stockholders, directors, or officers
to authorize or effect any further amendment or modification to such Bylaws, and the Subsidiary Bylaws have not been amended subsequent
to August 1, 2012, and no action has been taken by the Subsidiary, its stockholders, directors, or officers to authorize or effect
any further amendment or modification to such Subsidiary Bylaws.

 

4. Each
person listed below has been duly elected or appointed to the position(s) indicated opposite his name and is duly authorized to
sign the Securities Purchase Agreement and each of the Transaction Documents on behalf of the Company, and the signature appearing
opposite such person’s name below is such person’s genuine signature.

 

	Name	 	Position	 	Signature

	 	 	 	 	 
	Alain
    J. Castro	 	Chief
    Executive Officer	 	

 

5.
Each person listed below has been duly elected or appointed to the position(s) indicated opposite his name and is duly authorized
to sign each of the Transaction Documents of which the Subsidiary is a party on behalf of the Subsidiary, and the signature appearing
opposite such person’s name below is such person’s genuine signature.

 

	Name	 	Position	 	Signature

	 	 	 	 	 
	Alain
    J. Castro	 	Chief
    Executive Officer	 	

 

Capitalized
terms contained herein and not otherwise defined shall be interpreted in accordance with their meaning in the Purchase Agreement.

 

 

[Signature
Page Follows]

 

     

     

    

 

IN
WITNESS WHEREOF, the undersigned has signed his name to this Secretary’s Certificate this November __, 2016.

 

	 	By:	 
	 	Name:	Domonic
    J. Carney
	 	Title:	Secretary

 

I,
Alain Castro, Chief Executive Officer, hereby certify that Domonic J. Carney is the duly elected, qualified and acting Secretary
of the Company and that the signature set forth above is his true signature.

 

	 	By:	 
	 	Name:	Alain
    Castro
	 	Title:	Chief
    Executive Officer

 

     

     

    

 

EXHIBIT
J

 

Form
of Officer’s Certificate

 

 

     

     

    

 

COMPLIANCE
CERTIFICATE

 

Pursuant
to Section 7(vii) of the Securities Purchase Agreement, dated as of November 23, 2016 (the “Purchase Agreement”),
by and among Ener-Core, Inc., a Delaware corporation (the “Company”), the investors set forth on the Schedule
of Buyers attached to the Purchase Agreement and the investors, if any, party to a joinder agreement with respect to the Purchase
Agreement (each, a “Buyer” and collectively, the “Buyers”), Alain J. Castro, the Chief Executive
Officer of the Company, hereby certifies, in his capacity as an officer of the Company and not individually, on behalf of the
Company and to the best of his knowledge after a reasonable investigation that:

 

1.
The representations and warranties of the Company contained in Section 3 of the Purchase Agreement are 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).

 

2. The
Company has performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

Capitalized
terms contained herein and not otherwise defined shall be interpreted in accordance with their meaning in the Purchase Agreement.

 

[Signature
Page Follows]

 

     

     

    

 

IN
WITNESS WHEREOF, the undersigned has signed his name to this Compliance Certificate this November __, 2016.

 

	 	By:	 
	 	Name:	Alain
    J. Castro
	 	Title:	Chief
    Executive Officer

 

     

     

    

 

EXHIBIT
K-1

 

Form
of September Subordination Agreement

 

[Omitted]

 

     

     

    

 

EXHIBIT
K-2

 

Form
of October Subordination Agreement

 

[Omitted]

 

     

     

    

 

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
2.1(d)

(Information)

 

From
May 18, 2015 until March 30, 2016, Erik Helenek, a Managing Director of the Placement Agent, served as a member of the Company’s
Board of Directors. Mr. Helenek was paid an annual fee of $40,000 and on May 18, 2015, the Company issued Mr. Helenek an option
to purchase 6,000 shares of Common Stock at an exercise price per share of $9.50, with 1/4 of the grant vesting on May 18, 2016
and 1/48 of the grant vesting ratably each month thereafter. No portion of the option granted was vested upon Mr. Helenek’s
resignation. For additional information regarding Mr. Helenek’s departure, see Current Report on Form 8-K filed April 5,
2016 (EDGAR Link), incorporated by reference herein. Subject to final approval of the Board of Directors, and in exchange
for his unpaid financial market advice and direction prior to his appointment as a director as well as his continued advice after
his resignation, the Company intends to issue Mr. Helenek a warrant to purchase 1,500 shares of common stock at an exercise price
of not less than $5.00, exercisable for three years from the date of Mr. Helenek’s resignation.

 

Schedule
3(a)

(Subsidiaries)

 

Ener-Core
Power, Inc., a Delaware corporation

 

Schedule
3(j)

(SEC
Documents; Financial Statements)

 

None.

 

Schedule
3(k)

(Absence
of Certain Changes)

 

Since
December 31, 2015, capital expenditures, individually or in the aggregate, in excess of $100,000:

 

		●	In
                                         2015, the Company had capitalized approximately $318,000 into fixed assets for payments
                                         made to Dresser-Rand in 2015 related to advance deposits and monthly lease payments for
                                         a leased turbine to be used in the Full Scale Acceptance Test (“FSAT”) unit.
                                         The Company had anticipated using that turbine after completion of testing and either
                                         selling or leasing the completed FSAT Powerstation. The turbine was returned to Dresser-Rand
                                         in August 2016 at which time it was determined that the leased turbine was not going
                                         to be incorporated into the finished Powerstation. We expect to recover some or all of
                                         the advance payments written off. However, due to uncertainty surrounding the amount
                                         and likelihood of the recovery of the advance payments, during the preparation of the
                                         Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September
                                         30, 2016, it was determined that the $318,000 capitalized in 2015 should be written off
                                         to expense. Any recovery will be accounted for prospectively as an expense reduction
                                         or an addition to fixed assets, or inventory, as appropriate, with a corresponding gain
                                         for the amount of the recovery. GAAP accounting precludes recording a contingent gain
                                         for this recovery based on information available as of November 10, 2016. The Company
                                         capitalized approximately $655,000 into fixed assets for additional expenditures and
                                         costs associated with the FSAT unit between January 1, 2015 and September 30, 2016.

 

     

     

    

 

Schedule
3(m)

(Regulatory
Permits)

 

None.

 

Schedule
3(o)

(Sarbanes-Oxley
Act)

 

None,
other than as disclosed in the Form 10-K for the year ended December 31, 2015, as updated on Forms 10-Q for the quarterly periods
ended March 31, 2016, June 30, 2016 and September 30, 2016, and as described in Schedule 3(aa) below.

 

Schedule
3(p)

(Transactions
with Affiliates)

 

None.

 

Schedule
3(q)

(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.

 

See
Schedule 2.1(d) disclosure.

 

Pursuant
to the terms of that certain Securities Purchase Agreement (the “September Purchase Agreement”), dated as of
September 1, 2016, by and among the Company, Longboard Capital Advisors LLC, in its capacity as agent for the investors in their
capacity as unsecured creditors, and the investors listed on the Schedule of Buyers attached thereto (each, a “September
Investor”), each September Investor is entitled to receive additional warrants (the “September Additional Warrants”)
to purchase 50 shares of Common Stock for each $1,000 of principal amount of the convertible unsecured notes issued pursuant to
such September Purchase Agreement at an exercise price of $4.00 per share on each of the 61st, 91st, 121st and 151st days after
the closing of the sales pursuant to the September Purchase Agreement (each such date, an “Additional Warrant Date”),
which occurred on September 1, 2016, but only in the event the Company has not consummated a further financing consisting of the
issuance of Common Stock and warrants for aggregate gross proceeds of at least $3,000,000 prior to such respective Additional
Warrant Date. On November 1, 2016, the Company issued September Additional Warrants to purchase an aggregate of 62,500 shares
of Common Stock at an exercise price of $4.00 per share.

 

    	 	- 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 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.

 

Subject
to final approval of the Board of Directors, the Company has engaged MZ Consulting to provide investor relations services to the
Company at a cost of $10,000 per month for the first three months, with a monthly rate review after three months of service, pursuant
to the terms of a consulting agreement that provides that the Company may choose to satisfy its payment obligations thereunder
by remitting to MZ a mix of cash and unregistered shares of Common Stock to satisfy the monthly payment.

 

		(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 2015 Notes and Backstop Security Support Agreement, dated November 2, 2015
(the “Backstop Security Agreement”), and may have been filed in conjunction with its capital lease obligations.

 

		(v)	Other
                                         than pursuant to the Registration Rights Agreement, 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.

 

Pursuant
to the terms of the September Purchase Agreement, each September Investor has the right to request that the Company register (i)
the shares issuable upon conversion of such September Investor’s convertible unsecured notes, (ii) the shares issuable upon
exercise of the warrants purchased by such September Investor pursuant to the September Purchase Agreement and (iii) the shares
issuable upon exercise of the Additional Warrants held by such September Investor on the earlier of (A) the conversion of at least
fifty percent of the then outstanding (x) principal, (y) accrued and unpaid interest with respect to such principal and (y) accrued
and unpaid late charges, if any, with respect to such principal and interest, under the then outstanding Senior Notes (as defined
below), or (B) the consummation of a private offering of its securities resulting in gross proceeds, inclusive of proceeds received
pursuant to the September Purchase Agreement, to the Company of at least $4,000,000.

 

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.

 

    	 	- 3 -	 

    

    

 

Schedule
3(r)

(Indebtedness
and Other Contracts)

 

Convertible
Unsecured Notes payable consisted of the following as of September 30, 2016 (unaudited):

 

	 	 	Notes	 	 	Debt

    Discount	 	 	Offering
    Costs	 	 	Net

    Total	 
	September 1, 2016	 	$	1,250,000	 	 	$	(553,000	)	 	$	(20,000	)	 	$	677,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amortization
    of debt discount and deferred financing costs	 	 	—	 	 	 	46,000	 	 	 	2,000	 	 	 	1,537,000	 
	Ending balance—September 30,
    2016	 	 	1,250,000	 	 	 	(507,000	)	 	 	(18,000	)	 	 	725,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Less: Current
    Portion	 	$	(1,250,000	)	 	$	507,000	 	 	$	18,000	 	 	$	(725,000	)
	Long Term Portion	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 

  

On
September 1, 2016, we entered into a securities purchase agreement and related note agreements and warrant agreements whereby
we issued unsecured convertible promissory notes (the “Junior Notes”) and detachable five-year warrants to
purchase an aggregate of 124,999 shares of the Company’s common stock at an exercise price of $4.00 per share (the “September
2016 Financing”). The Company received total gross proceeds of $1,250,000, less transaction expenses of $20,000 consisting
of legal costs for net proceeds of $1,230,000. The Junior Notes bear interest at a rate of 12% per annum and mature on September
1, 2017, however such maturity date shall be concurrently extended with the consummation of the transactions contemplated by the
current securities purchase agreement and the related amendments agreements for the Senior Notes (as defined below). In connection
with the September 2016 Financing, on September 1, 2016, the Company and its wholly-owned subsidiary, Ener-Core Power, Inc. also
entered into a Subordination and Intercreditor Agreement with the investors, an investor who has agreed to serve as subordinated
agent, a senior lender with respect to a letter of credit for the benefit of the Company, and the collateral agent for certain
senior noteholders.

 

The
terms of the Junior Notes and the related warrants, including the related agreements, are described in the Company’s Current
Report on Form 8-K, filed September 2, 2016 (EDGAR Link), incorporated by reference herein.

 

Leases
Payable 

 

Capital
leases payable consisted of the following:

 

	 	 	December 31,
 2015
	 	 	December 31,

    2014	 
	 	 	 	 	 	 	 
	Capital
    lease payable to De Lange Landon secured by forklift, 10.0% interest, due on October 1, 2018, monthly payment of $452.	 	$	13,000	 	 	$	17,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on November 16, 2016, monthly payment
    of $592.	 	 	6,000	 	 	 	12,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on December 15, 2016, monthly payment
    of $590.	 	 	6,000	 	 	 	12,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on January 3, 2017, monthly payment of
    $405.	 	 	5,000	 	 	 	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	 	 	401,000	 	 	 	49,000	 

 

    	 	- 4 -	 

    

    

 

	 	 	September 30,
    
 2016	 	 	December 31,

    2015	 
	 	 	(unaudited)	 	 	 	 
	Capital
    lease payable to De Lange Landon secured by forklift, 10.0% interest, due on October 1, 2018, monthly payment of $452.	 	$	10,000	 	 	$	13,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on November 16, 2016, monthly payment
    of $592.	 	 	1,000	 	 	 	6,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on December 15, 2016, monthly payment
    of $590.	 	 	2,000	 	 	 	6,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on January 3, 2017, monthly payment of
    $405.	 	 	2,000	 	 	 	5,000	 
	Capital
    lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on January 3, 2017, monthly payment of
    $394.	 	 	6,000	 	 	 	10,000	 
	Total
    capital leases	 	 	21,000	 	 	 	40,000	 

 

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 the Company’s
Current Report on Form 8-K filed November 3, 2015 (EDGAR Link), incorporated by reference herein.

 

The
Company leases certain assets, primarily computer equipment under agreements expiring in 2017. The total amount of the capital
leases is approximately $21,000.

 

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.

 

The
Company has entered into an operating lease to rent a Dresser-Rand turbine in order to build a prototype. The lease payments began
with the commissioning of the turbine with the prototype system in Q1 2016 and consist of $9,000 per month payments. As described
above in Schedule 3(k), in August 2016, the turbine was returned and the lease payments ended.

  

Senior
Secured Notes

 

Convertible
Secured Notes payable consisted of the following as of September 30, 2016 (unaudited):

 

	 	 	Notes	 	 	Debt

    Discount	 	 	Offering
    Costs	 	 	Net

    Total	 
	Ending balance—December
    31, 2015	 	$	5,000,000	 	 	$	(791,000	)	 	$	(99,000	)	 	$	4,110,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Amortization
    of debt discount and deferred financing costs	 	 	—	 	 	 	2,186,000	 	 	 	74,000	 	 	 	2,260,000	 
	Additional debt
    discount—March warrants	 	 	—	 	 	 	(1,497,000	)	 	 	—	 	 	 	(1,497,000	)
	Additional debt
    discount—February warrants	 	 	—	 	 	 	(148,000	)	 	 	—	 	 	 	(148,000	)
	Additional debt
    discount—warrant modification	 	 	—	 	 	 	(206,000	)	 	 	—	 	 	 	(206,000	)
	Ending balance—September 30,
    2016	 	 	5,000,000	 	 	 	(456,000	)	 	 	(25,000	)	 	 	4,519,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Less: Current
    Portion	 	$	(5,000,000	)	 	$	456,000	 	 	$	25,000	 	 	$	(4,519,000	)
	Long Term Portion	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 

 

    	 	- 5 -	 

    

    

 

The
Company has outstanding senior secured notes issued pursuant to (x) that certain Securities Purchase Agreement, dated as of April
22, 2015 by and among the Company and the investors listed on the signature pages thereto, as amended from time to time (the “April
2015 Notes”), and (y) that certain Securities Purchase Agreement, dated as of May 7, 2015 by and among the Company and
the investors listed on the signature pages thereto, as amended from time to time (the “May 2015 Notes” and,
together with the April 2015 Notes, the “Senior Notes”), which have been amended a number of times, and are
being amended and restated concurrent with the closing of the current notes transaction. The terms of the Senior Notes, as amended
to date (prior to the anticipated amendment and restatement), including the related securities purchase agreements, and the related
pledge, guaranty and intercreditor agreements, are described in the following Current Reports on Form 8-K, incorporated by reference
herein:

 

		●	Filed
                                         April 23, 2015 (EDGAR Link)
		●	Filed
                                         May 7, 2015 (EDGAR Link)
		●	Filed
                                         October 23, 2015 (EDGAR Link)
		●	Filed
                                         November 3, 2015 (EDGAR Link)
		●	Filed
                                         November 25, 2015 (EDGAR Link)
		●	Filed
                                         December 11, 2015 (EDGAR Link)
		●	Filed
                                         December 31, 2015 (EDGAR Link)
		●	Filed
                                         April 5, 2016 (EDGAR Link)
		●	Filed
                                         September 2, 2016 (EDGAR Link)
		●	Filed
                                         October 24, 2016 (EDGAR Link)

 

The
Company and the holders of the Senior Notes intend to amend and restated the terms of such Senior Notes in connection with the
execution of the Securities Purchase Agreement and the consummation of the transactions contemplated thereby.

 

The
Company has approximately $2,000,000 in trade accounts payable as of November 14, 2016.

 

Schedule
3(s)

(Litigation)

 

On
June 13, 2016, SAIL Venture Partners LLC, SAIL Capital Management LLC and all SAIL affiliates owning shares of the Company (collectively,
“SAIL”) filed a Schedule 13D in which it set forth various complaints and demands with respect to the Company
(EDGAR Link). The Company has disputed all such complaints and demands (EDGAR Link).

 

    	 	- 6 -	 

    

    

 

On
September 23, 2016 AMTRA ENGINEERING B.V. filed a civil lawsuit (Case number 30-2016-00877078-CU-BC-CJC) in the Superior Court,
County of Orange, California against Ener-Core Power, Inc. alleging breach of contract and breach of warranty. To date, the Company
has not been legally served on this matter. The lawsuit is due to a billing dispute surrounding a contractor for the Attero 250Kw
unit delivered in June 2014 to the Netherlands. The Company has accrued $50,000 for this disputed amount as of December 31, 2015
based solely on billings received. In the event of service, the Company believes it has a substantial defense including proper
jurisdiction, will dispute all demands, and has a counter-claim against the contractor for $30,000.

 

Schedule
3(bb)

(Internal
Accounting and Disclosure Controls)

 

As
of December 31, 2015, as updated on September 30, 2016 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, as amended).

 

Based
on such evaluation, the disclosure controls and procedures of the Company and the Subsidiary as of December 31, 2015 were ineffective
at the reasonable assurance level due to the following material weaknesses in internal control over financial reporting:

 

		1.	We
                                         do not have full and complete written documentation of our internal control policies
                                         and procedures, primarily for controls related to our inventory procurement and management.
                                         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, 2015, we did not have a sufficient, integrated purchasing
                                         and accounting system to allow for proper tracking, control and costing of our prototype
                                         KG2 Powerstation costs carried as a fixed asset and Powerstations currently under construction
                                         for sale and carried in inventory. Although we believe that our costing is accurate,
                                         based on additional review and procedures, to the extent we sell additional units, we
                                         will need to enhance our controls over our inventory systems. Management evaluated the
                                         impact of our failure to have adequate inventory accounting systems, coupled with the
                                         risk associated with costing our inventory, and the expected future activity for our
                                         inventory costing system 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 be not independent. Between December 1, 2014 and May 18, 2015
                                         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.

 

    	 	- 7 -	 

    

    

 

		5.	For
                                         the year ending December 31, 2014 and until July 2015, our Audit Committee consisted
                                         of the Chairman of the committee only. Until July 2015 we did not have a formal Compensation
                                         Committee or Nominating and Corporate Governance Committee. 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, 2015, 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 2015 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. Management
                                         evaluated the impact of our failure to have adequate information technology controls,
                                         on our assessment of our disclosure controls and procedures and has concluded that the
                                         control deficiency that resulted represented a material weakness.

 

Between
January 1, 2016 and September 30, 2016 the Company’s management updated portions of control deficiency points #1 and #3
above to partially remediate the control deficiency and fully remediated control deficiencies 4, and 5. However, as of September
30, 2016, based on the control deficiencies remaining, 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, as amended). Based on the
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2016,
the Company’s disclosure controls and procedures were ineffective at the reasonable assurance level. Such conclusion is
due to the presence of material weaknesses in internal control over financial reporting. The Company’s management anticipates
that its disclosure controls and procedures will remain ineffective until such material weaknesses are remediated.

 

Schedule
3(dd)

(Ranking
of Notes)

 

The
Senior Notes and the Notes issuable pursuant to this transaction shall rank pari passu. The rights granted pursuant to
the Backstop Agreement, are subject to a subordination and intercreditor agreement, and the Junior Notes are subordinated to all
such senior obligations pursuant to another subordination and intercreditor agreement.

 

    	 	- 8 -	 

    

    

 

Schedule
3(oo)

(No
Disqualification Events)

 

Oppenheimer
& Co. Inc. is serving as placement agent in connection with the current offering (the “Placement Agent”);
pursuant to Rule 506(e), the Company discloses that:

 

		1.	On
                                         February 26, 2010, the Placement Agent entered into a Consent Order with the Massachusetts
                                         Securities Division (the “Division”). The Order concerned alleged
                                         violations of the Massachusetts Uniform Securities Act with respect to Oppenheimer’s
                                         sale of auction rate securities. The order found that the Placement Agent violated Section
                                         204(a)(2)(G) of Chapter 110A of Massachusetts General Laws. The Placement Agent was required
                                         to buy back illiquid auction rate securities from investors and pay hearing costs in
                                         an amount totaling $250,000.

 

		2.	On
                                         July 9, 2007, the Placement Agent entered into a Consent Order with the Division. The
                                         Order alleged that the Placement Agent failed to supervise a registered representative
                                         who engaged in unlawful activities. The Division alleged that the Placement Agent made
                                         false and misleading filings to the Division during the course of its investigation of
                                         the matters addressed in the Order and accordingly violated Massachusetts General Laws,
                                         Chapter 110A, Section 404. The Placement Agent was required to pay a fine of $1,000,000,
                                         make restitution to the investor, cease and desist from further violations and retain
                                         an independent consultant.

 

		3.	On
                                         January 27, 2015, the Placement Agent entered into an order with the SEC pursuant to
                                         which the Placement Agent was censured and agreed to (i) pay $10 million, comprised of
                                         $4,168,400 in disgorgement, $753,471 in prejudgment interest and $5,078,129 in civil
                                         penalties; (ii) cease and desist from committing or causing any violations of Sections
                                         15(a) and 17(a) of the 1934 Act and Rules 17a-3 and 17a-8 adopted thereunder and of Section
                                         5 of the 1933 Act; and (iii) retain an independent consultant over a five-year period
                                         to conduct a review of the Placement Agent’s policies and procedures as they relate
                                         to compliance with Section 5 of the 1933 Act, the Bank Secrecy Act, the Patriot Act,
                                         the Placement Agent’s AML program and the proper recognition of liabilities and
                                         expenses associated with foreign entities trading on behalf of customers and U.S. customers
                                         trading through foreign financial institutions. This settlement was based on the Placement
                                         Agent’s conduct relating to two separate customer accounts. The first account involved
                                         aiding and abetting a customer’s violation of the broker-dealer registration requirements
                                         under the 1934 Act, failure to file Suspicious Activity Reports to report potential misconduct
                                         by this customer and failure to properly report, withhold and recognize backup withholding
                                         taxes. The second account involved failure to respond to red flags and conduct an inquiry
                                         into whether a customer’s unregistered sales of penny stocks were exempt from 1933
                                         Act registration requirements and failure to reasonably supervise with a view toward
                                         detecting and preventing violations of the registration provisions. The Placement Agent
                                         also agreed to pay an additional $10 million in civil penalties to settle a parallel
                                         action by the Treasury Department’s Financial Crimes Enforcement Network. The Placement
                                         Agent received an SEC order granting waiver of disqualification under Rule 506(d)(1)(ii)
                                         on January 27, 2015.

 

Schedule
4(s)

Pledges
of Intellectual Property Rights

 

None,
except as provided below:

 

		●	Commercial
                                         License Agreement, dated November 14, 2014, between Ener-Core Power, Inc. and Dresser-Rand

 

		●	Commercial
                                         and Manufacturing License Agreement, dated June 29, 2016, between Ener-Core Power, Inc.
                                         and Dresser-Rand Company

 

 

 

 -
9 -Exhibit 10.2

 

REGISTRATION
RIGHTS AGREEMENT

 

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of November 23, 2016, by and among Ener-Core, Inc., a Delaware
corporation, with headquarters located at 9400 Toledo Way, Irvine, California 92618 (the “Company”), the investors
listed on the Schedule of Buyers attached hereto and the investors, if any, party to a joinder agreement with respect hereto (each,
a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A. In
connection with the Securities Purchase Agreement by and among the parties hereto of even date herewith (as may be joined from
time to time, the “Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer (i) senior secured convertible notes of the Company
(the “Notes”), which will, among other things, be convertible into the Company’s common stock, par value
$0.0001 per share (the “Common Stock”) (the shares of Common Stock issuable pursuant to the terms of the Notes,
collectively, the “Conversion Shares”) and (ii) warrants (the “Warrants”) which will be
exercisable to purchase shares of Common Stock (as exercised, collectively, the “Warrant Shares”) in accordance
with the terms of the Warrants.

 

B. In
accordance with the terms of the Securities Purchase Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the “1933 Act”), and applicable state securities laws.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

 

1. Definitions.

 

Capitalized
terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement.
As used in this Agreement, the following terms shall have the following meanings:

 

(a) “Additional
Effective Date” means the date the Additional Registration Statement is declared effective by the SEC.

 

(b) “Additional
Effectiveness Deadline” means the date which is the earlier of (x) (i) in the event that the Additional Registration
Statement is not subject to a full review by the SEC, forty-five (45) calendar days after the earlier of the Additional Filing
Date and the Additional Filing Deadline or (ii) in the event that the Additional Registration Statement is subject to a full review
by the SEC, seventy-five (75) calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline
and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier)
by the SEC that such Additional Registration Statement will not be reviewed or will not be subject to further review; provided,
however, that if the Additional Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed
for business, the Additional Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

 

     

     

    

 

(c) “Additional
Filing Date” means the date on which the Additional Registration Statement is filed with the SEC.

 

(d) “Additional
Filing Deadline” means if Cutback Shares are required to be included in any Additional Registration Statement, the later
of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately
preceding Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or the most recent
Additional Effective Date, as applicable.

 

(e) “Additional
Registrable Securities” means, (i) any Cutback Shares not previously included on a Registration Statement and (ii) any
capital stock of the Company issued or issuable with respect to the Notes, the Conversion Shares, the Warrants, the Warrant Shares,
or the Cutback Shares, as applicable, as a result of any stock split, stock dividend, recapitalization, exchange or similar event
or otherwise, without regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants.

 

(f) “Additional
Registration Statement” means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of any Additional Registrable Securities.

 

(g) “Additional
Required Registration Amount” means (I) any Cutback Shares not previously included on a Registration Statement, all
subject to adjustment as provided in Section 2(f) or (II) such other amount as may be permitted by the staff of the SEC pursuant
to Rule 415, in each case without regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants.

 

(h) “Business
Day” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.

 

(i) “Cutback
Shares” means any of the Initial Required Registration Amount or the Additional Required Registration Amount (without
regard to clause (II) in the definition thereof) of Registrable Securities not included in all Registration Statements previously
declared effective hereunder as a result of a limitation on the maximum number of shares of Common Stock of the Company permitted
to be registered by the staff of the SEC pursuant to Rule 415. For the purpose of determining the Cutback Shares, (i) the
Prior Shares shall be considered Cutback Shares before any Registrable Securities are to be considered Cutback Shares and
(ii) in order to determine any applicable Required Registration Amount, subject to the immediately preceding clause (i), unless
an Investor gives written notice to the Company to the contrary with respect to the allocation of its Cutback Shares, first the
Warrant Shares shall be excluded on a pro rata basis among the Investors until all of the Warrant Shares have been excluded, and
second the Conversion Shares shall be excluded on a pro rata basis among the Investors until all of the Conversion Shares have
been excluded.

 

(j) “Effective
Date” means the Initial Effective Date and the Additional Effective Date, as applicable.

 

(k) “Effectiveness
Deadline” means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.

 

    	 	2	 

     

    

 

(l) “Eligible
Market” means The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ Capital Market, The NASDAQ Global Select
Market or The Nasdaq Global Market or, on or prior to December 31, 2017, the Principal
Market.

 

(m) “Filing
Deadline” means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.

 

(n) “Initial
Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.

 

(o) “Initial
Effective Date” means the date that the Initial Registration Statement has been declared effective by the SEC.

 

(p) “Initial
Effectiveness Deadline” means the date which is the earlier of (x) (i) in the event that the Initial Registration Statement
is not subject to a full review by the SEC, seventy-five (75) calendar days after the Initial Closing Date or (ii) in the event
that the Initial Registration Statement is subject to a full review by the SEC, one-hundred five (105) calendar days after the
Initial Closing Date and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing,
whichever is earlier) by the SEC that such Initial Registration Statement will not be reviewed or will not be subject to further
review; provided, however, that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that
the SEC is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC
is open for business.

 

(q) “Initial
Filing Date” means the date on which the Initial Registration Statement is filed with the SEC.

 

(r) “Initial
Filing Deadline” means the date which is forty-five (45) calendar days after the Initial Closing Date.

 

(s) “Initial
Registrable Securities” means (i) the Conversion Shares issued or issuable pursuant to the terms of the Notes, (ii)
the Warrant Shares issued or issuable upon exercise of the Warrants and (iii) any capital stock of the Company issued or issuable
with respect to the Notes, the Conversion Shares, the Warrant Shares or the Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, in each case without regard to any limitations on conversion and/or
redemption of the Notes or exercise of the Warrants.

 

(t) “Initial
Registration Statement” means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of the Initial Registrable Securities.

 

(u) “Initial
Required Registration Amount” means (I) the sum of (i) the maximum number of Conversion Shares issued and issuable pursuant
to the Notes and (ii) the maximum number of Warrant Shares issued and issuable pursuant to the Warrants, each as of the Trading
Day immediately preceding the applicable date of determination and all subject to adjustment as provided in Section 2(f), without
regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants or (II) such other amount as
may be permitted by the staff of the SEC pursuant to Rule 415.

 

(v) “Investor”
means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement
in accordance with Section 9.

 

    	 	3	 

     

    

 

(w) “Lead
Investor” means Empery Asset Master, Ltd.

 

(x) “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.

 

(y)
“Principal Market”
means The OTCQB.

 

(z) “register,”
“registered,” and “registration” refer to a registration effected by preparing and filing
one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration
or ordering of effectiveness of such Registration Statement(s) by the SEC.

 

(aa) “Registrable
Securities” means the Initial Registrable Securities and the Additional Registrable Securities.

 

(bb) “Registration
Statement” means the Initial Registration Statement and the Additional Registration Statement, as applicable.

 

(cc) “Required
Holders” means the holders of at least a majority of the Registrable Securities and shall include the Lead Investor
so long as the Lead Investor or any of its Affiliates holds any Registrable Securities.

 

(dd) “Required
Registration Amount” means either the Initial Required Registration Amount or the Additional
Required Registration Amount, as applicable.

 

(ee) “Rule
415” means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous
or delayed basis.

 

(ff) “SEC”
means the United States Securities and Exchange Commission.

 

(gg) “Subsequent
Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.

 

(hh) “Trading
Day” means any day on which the Common Stock is traded on the Principal Market, 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.

 

    	 	4	 

     

    

 

2. Registration.

 

(a) Initial
Mandatory Registration. Promptly following the Subsequent Closing Date, the Company shall prepare, and, as soon as practicable
but in no event later than the Initial Filing Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering
the resale of all of the Initial Registrable Securities. In the event that Form S-3 is unavailable for such a registration, the
Company shall use Form S-1 or such other form as is available for such a registration on another appropriate form reasonably acceptable
to the Required Holders, subject to the provisions of Section 2(e). The Initial Registration Statement prepared pursuant hereto
shall register for resale at least the number of shares of Common Stock equal to the Initial Required Registration Amount determined
as of the date the Initial Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section
2(f). The Initial Registration Statement shall contain (except if otherwise directed by the Required Holders) the “Plan
of Distribution” and “Selling Stockholders” sections in substantially the form attached hereto as
Exhibit B. The Company shall use its best efforts to have the Initial Registration Statement declared effective by the
SEC as soon as practicable, but in no event later than the Initial Effectiveness Deadline. By 9:30 a.m. New York time on the second
Business Day following the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales pursuant to such Initial Registration Statement.

 

(b) Additional
Mandatory Registrations. The Company shall prepare, and, as soon as practicable but in no event later than the Additional
Filing Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional
Registrable Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of
the SEC does not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement,
the Company shall file Additional Registration Statements successively trying to register on each such Additional Registration
Statement the maximum number of remaining Additional Registrable Securities until the Additional Required Registration Amount
has been registered with the SEC. In the event that Form S-3 is unavailable for such a registration, the Company shall use Form
S-1 or such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required
Holders, subject to the provisions of Section 2(e). Each Additional Registration Statement prepared pursuant hereto shall register
for resale at least that number of shares of Common Stock equal to the Additional Required Registration Amount determined as of
the date such Additional Registration Statement is initially filed with the SEC, subject to adjustment as provided
in Section 2(f). Each Additional Registration Statement shall contain (except if otherwise directed by the Required Holders) the
“Plan of Distribution” and “Selling Stockholders” sections in substantially the form attached
hereto as Exhibit B. The Company shall use its best efforts to have each Additional Registration Statement declared effective
by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New York time
on the second Business Day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule
424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement.

 

(c) Allocation
of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on
the number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number
of Registrable Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells
or otherwise transfers any of such Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares
of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number
of Registrable Securities then held by such Investors which are covered by such Registration Statement. In no event shall the
Company include any securities other than Registrable Securities on any Registration Statement without the prior written consent
of the Required Holders; provided, that the Company may register for resale the shares of Common Stock underlying those
certain convertible unsecured notes and warrants to purchase Common Stock of the Company and the shares of Common Stock underlying
the additional warrants to purchase Common Stock issued pursuant to that certain securities purchase agreement dated September
1, 2016 (the “Prior Shares”).

 

    	 	5	 

     

    

 

(d) Legal
Counsel. Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel to review and
oversee any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Schulte Roth & Zabel
LLP or such other counsel as thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate
with each other in performing the Company’s obligations under this Agreement.

 

(e) Ineligibility
for Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder,
the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable
to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

 

(f) Sufficient
Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to
Section 2(a) or Section 2(b) is insufficient to cover the Required Registration Amount of Registrable Securities required to be
covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section
2(c), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately
preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in
any event not later than fifteen (15) days after the necessity therefor arises. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient
to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under
the Registration Statement is less than the Required Registration Amount. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the conversion and/or redemption of the Notes or exercise of the Warrants and
such calculation shall assume (i) that the Notes are then convertible in full into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Notes) (ii) the initial outstanding principal amount of the Notes remains outstanding through
the scheduled Maturity Date (as defined in the Notes) and no redemptions of the Notes occur prior to the scheduled Maturity Date
and (iii) the Warrants are then exercisable in full into shares of Common Stock at the then prevailing Exercise Price (as defined
in the Warrants).

 

    	 	6	 

     

    

 

(g) Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration Statement. If (i) the Initial Registration Statement
when declared effective fails to register the Initial Required Registration Amount of Initial Registrable Securities (a “Registration
Failure”), (ii) a Registration Statement covering all of the Registrable Securities required
to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before
the applicable Filing Deadline (a “Filing Failure”) or (B) not declared effective
by the SEC on or before the applicable Effectiveness Deadline, (an “Effectiveness Failure”)
or (iii) on any day after the applicable Effective Date, sales of all of the Registrable Securities required to be included on
such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(r))) pursuant
to such Registration Statement or otherwise (including, without limitation, because of the suspension of trading or any other
limitation imposed by an Eligible Market, a failure to keep such Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such Registration Statement, a failure to register a sufficient number
of shares of Common Stock or a failure to maintain the listing of the Common Stock) (a “Maintenance Failure”)
then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without
limitation, specific performance or the additional obligation of the Company to register any Cutback Shares), the Company shall
pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to two percent (2.0%)
of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) of such Investor’s Registrable
Securities, whether or not included in such Registration Statement, on each of the following dates: (i) the day of a Registration
Failure, (ii) the day of a Filing Failure; (iii) the day of an Effectiveness Failure; (iv) the initial day of a Maintenance Failure;
(v) on the thirtieth day after the date of a Registration Failure and every thirtieth day thereafter (pro rated for periods totaling
less than thirty days) until such Registration Failure is cured; (vi) on the thirtieth day after the date of a Filing Failure
and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such Filing Failure is cured;
(vii) on the thirtieth day after the date of an Effectiveness Failure and every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until such Effectiveness Failure is cured; and (viii) on the thirtieth day after the initial date
of a Maintenance Failure and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such
Maintenance Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 2(g) are referred to herein
as “Registration Delay Payments.” Registration Delay Payments shall be paid
on the earlier of (I) the dates set forth above and (II) the third Business Day after the event or failure giving rise to the
Registration Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of one and one-half percent (1.5%) per month (prorated for partial
months) until paid in full. Notwithstanding anything to the contrary contained herein, Registration Delay Payments shall (i) not,
in the aggregate, exceed fourteen percent (14.0%) of the aggregate Purchase Price and (ii) cease to accrue after the Registration
Period (as defined below).

 

3. Related
Obligations.

 

At
such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f),
the Company will use its best efforts to effect the registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

 

(a) The
Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use
its best efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable
after such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earliest of (i) the date as of which the Investors may sell all of the Registrable
Securities covered by such Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement
to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act, (ii) the two year anniversary
of the Initial Closing Date and (iii) the date on which the Investors shall have sold all of the Registrable Securities covered
by such Registration Statement (the “Registration Period”). The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein
(in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. The term “best
efforts” shall mean, among other things, that the Company shall submit to the SEC, within three (3) Business Days after
the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the staff
of the SEC or that the staff has no further comments on a particular Registration Statement, as the case may be, and (ii) the
approval of Legal Counsel pursuant to Section 3(c) (which approval is immediately sought), a request for acceleration of effectiveness
of such Registration Statement to a time and date not later than two (2) Business Days after the submission of such request. The
Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but
in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an amendment is required
in order for a Registration Statement to be declared effective.

 

    	 	7	 

     

    

 

(b) The
Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth
in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K,
Form 10-Q, Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”),
the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

 

(c) The
Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least five (5) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto
in a form to which Legal Counsel reasonably objects. The Company shall not submit a request for acceleration of the effectiveness
of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) promptly
after the same is prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits
and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement
and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel in performing the Company’s
obligations pursuant to this Section 3.

 

(d) The
Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge,
(i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor,
all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies
as such Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus,
as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities
owned by such Investor.

 

    	 	8	 

     

    

 

(e) The
Company shall use its best efforts to (i) register and qualify, unless an exemption from registration and qualification applies,
the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue
sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel
and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding
for such purpose.

 

(f) The
Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after
becoming aware of such event, but in any event on the same Trading Day as the Company becomes aware of such event, as a result
of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material,
nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and
each Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification
of such effectiveness shall be delivered to Legal Counsel and each Investor by facsimile or email on the same day of such effectiveness
and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate. By 9:30 a.m. New York City time on the date following the date any post-effective amendment has
become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be
used in connection with sales pursuant to such Registration Statement.

 

(g) The
Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such
an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

 

    	 	9	 

     

    

 

(h) If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an
Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, at the reasonable request
of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given
in an underwritten public offering, addressed to the Investors.

 

(i) If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an
Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, the Company shall make available
for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably
request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except
to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction,
or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of
this Agreement. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with applicable
laws and regulations.

 

(j) The
Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction,
or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.

 

    	 	10	 

     

    

 

(k) The
Company shall use its best efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to
be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) secure the inclusion
for quotation of all of the Registrable Securities on The Principal Market or (iii) if, despite the Company’s best efforts,
the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on another
Eligible Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its best efforts
to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. (“FINRA”)
as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying
its obligation under this Section 3(k).

 

(l) The
Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the
case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

 

(m) If
requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being
offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified
of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments
to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

 

(n) The
Company shall use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

 

(o) The
Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after
the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal
quarter next following the applicable Effective Date of a Registration Statement.

 

(p) The
Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.

 

(q) Within
two (2) Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

 

    	 	11	 

     

    

 

(r) Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors
of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required
(a “Grace Period”); provided, that the Company shall promptly (i) notify the Investors in writing of the existence
of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose
the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and
(ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall
exceed ten (10) consecutive Trading Days and during any three hundred sixty five (365) day period such Grace Periods shall not
exceed an aggregate of twenty (20) Trading Days and the first day of any Grace Period must be at least five (5) Trading Days after
the last day of any prior Grace Period (each, an “Allowable Grace Period”). For purposes of determining the
length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred
to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii)
and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section
3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable.
Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock
to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a contract for sale, prior to the Investor’s receipt
of the notice of a Grace Period and for which the Investor has not yet settled.

 

(s) Neither
the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or
filing with the SEC, the Principal Market or any Eligible Market and any Buyer being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Securities
Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company from including the disclosure
found in the “Plan of Distribution” section attached hereto as Exhibit B in the Registration Statement.

 

(t) Neither
the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries,
on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.

 

4. Obligations
of the Investors.

 

(a) At
least five (5) Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of
such Investor’s Registrable Securities included in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities
of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to
effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.

 

(b) Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor
has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities
from such Registration Statement.

 

    	 	12	 

     

    

 

(c) Each
Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of Section 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant
to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of copies of the supplemented
or amended prospectus as contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement
or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s
receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence
of Section 3(f) and for which the Investor has not yet settled.

 

(d) Each
Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it
or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

 

5. Expenses
of Registration.

 

All
reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees,
printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The Company
shall also reimburse the Investors for the fees and disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $10,000 for each such registration,
filing or qualification.

 

6. Indemnification.

 

In
the event any Registrable Securities are included in a Registration Statement under this Agreement:

 

(a) To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement
or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party
is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto
or in any filing made in connection with the qualification of the offering under the securities or other “blue sky”
laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior
to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein
were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of
the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing
clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse
the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in
writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available
by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

 

    	 	13	 

     

    

 

(b) In
connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and, subject to Section 6(c), such Investor shall reimburse the Indemnified Party
for any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

 

    	 	14	 

     

    

 

(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel
with the fees and expenses of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable,
the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented
by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in
the Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall reasonably cooperate
with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised
at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however,
that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to such Claim or litigation and such settlement shall not
include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying
party is prejudiced in its ability to defend such action.

 

(d) The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

 

(e) The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.

 

7. Contribution.

 

To
the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that: (i) no Person involved in the sale of Registrable Securities which Person is guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled
to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation;
and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received
by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

 

    	 	15	 

     

    

 

8. Reports
Under the 1934 Act.

 

With
a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration
(“Rule 144”), the Company agrees to:

 

(a) make
and keep public information available, as those terms are understood and defined in Rule 144;

 

(b) file
with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and

 

(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company,
if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without
registration.

 

9. Assignment
of Registration Rights.

 

The
rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such
Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company
is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee
is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound
by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements
of the Securities Purchase Agreement.

 

10. Amendment
of Registration Rights.

 

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 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 Investor relative to the comparable rights and obligations of the other Investors shall require the prior
written consent of such adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall
be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent
to a waiver or modification of any provision of this Agreement unless the same consideration (other than the reimbursement of
legal fees) also is offered to all of the parties to this Agreement.

 

    	 	16	 

     

    

 

11. Miscellaneous.

 

(a) A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.

 

(b) 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 a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and email
addresses for such communications shall be:

 

If
to the Company:

 

Ener-Core,
Inc.

9400
Toledo Way

Irvine,
California 92618

Telephone:
(949) 616-3322

Facsimile: (949)
616-3399

Attention:
Alain Castro

Email: Alain.Castro@fpgen.com

 

With
a copy (for informational purposes only) to:

 

K&L Gates LLP

1
Park Plaza, 12th Floor

Irvine
CA 92614

Telephone: (949)
623-3545

Facsimile:
(949) 623-4477

Attention:
Shoshannah D. Katz, Esq.

Email: shoshannah.katz@klgates.com

 

If
to the Transfer Agent:

 

VStock
Transfer, LLC

77
Spruce Street, Suite 201

Cedarhurst,
New York 11516

Telephone:
(212) 828-8436

Facsimile:
(646) 536-3179

Attention:
Yoel Goldfeder

E-mail:
 yoel@vstocktransfer.com

 

    	 	17	 

     

    

 

If
to Legal Counsel:

 

Schulte
Roth & Zabel LLP

919
Third Avenue

New
York, New York 10022

Telephone:
(212) 756-2000

Facsimile:
(212) 593-5955

Attention:
Eleazer Klein, Esq.

Email: eleazer.klein@srz.com

 

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

 

(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

(d) 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 HEREWITH OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	 	18	 

     

    

 

(e) 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).

 

(f) This
Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreement) and the instruments referenced herein
and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This
Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter hereof and thereof.

 

(g) Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

 

(h) The
headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(i) This
Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

(j) 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.

 

(k) All
consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders, determined as if all of the outstanding Notes then held by the Investors
have been converted for Registrable Securities without regard to any limitations on redemption and/or conversion of the Notes
and the outstanding Warrants then held by Investors have been exercised for Registrable Securities without regard to any limitations
on exercise of the Warrants.

 

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

 

(m) 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.

 

(n) The
obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision
of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained
herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions contemplated herein.

 

*
* * * * *

 

[Signature
Page Follows]

 

    	 	19	 

     

    

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights 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

 

     

     

    

 

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

 

	 	BUYER:	 
	 	 	 
	 	By:	 
	 	 	Name:
    
	 	 	Title:
    

 

     

     

    

 

SCHEDULE
OF BUYERS

 

	Buyer
	 	Buyer
    Address

    and Facsimile Number	 	Buyer’s
    Representative’s Address 

    and Facsimile Number

 

     

     

    

 

EXHIBIT
A

 

FORM
OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

VStock
Transfer, LLC

77
Spruce Street, Suite 201

Cedarhurst,
New York 11516

Attention:             Yoel Goldfeder

 

	 	Re:	Ener-Core, Inc.

 

Ladies
and Gentlemen:

 

[We
are][I am] counsel to Ener-Core, Inc., a Delaware corporation (the “Company”), and have represented the Company
in connection with that certain Securities Purchase Agreement, dated as of November 23, 2016 (the “Securities Purchase
Agreement”), entered into by and among the Company and the buyers named therein (collectively, the “Holders”)
pursuant to which the Company issued to the Holders senior secured convertible notes (the “Notes”) pursuant
to which shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) are issuable
thereunder and warrants exercisable for shares of Common Stock (the “Warrants”). Pursuant to the Securities
Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to register the resale of the Registrable
Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of
the Notes and upon exercise of the Warrants under the Securities Act of 1933, as amended (the “1933 Act”).
In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ___, 2016, the Company
filed a Registration Statement on Form S-3 (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders as a selling stockholder thereunder.

 

In
connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that
the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS]
on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the
SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

 

This
letter shall serve as our standing instruction to you that the shares of Common Stock are freely transferable by the Holders pursuant
to the Registration Statement. You need not require further letters from us to effect any future legend-free issuance or reissuance
of shares of Common Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
November 23, 2016.

 

	 	Very truly yours,
	 	 	 
	 	[ISSUER’S COUNSEL]
	 	 	 
	 	By:	 

 

CC:      [LIST
NAMES OF HOLDERS]

 

    	 	A-1	 

     

    

 

EXHIBIT
B

 

SELLING
STOCKHOLDERS

 

The
shares of common stock being offered by the selling stockholders are those issuable to the selling stockholders pursuant to the
terms of the convertible notes and upon exercise of the warrants. For additional information regarding the issuance of those convertible
notes and warrants, see “Private Placement of Convertible Notes and Warrants” above. We are registering the shares
of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the ownership
of the convertible notes and the warrants issued pursuant to the Securities Purchase Agreement, the selling stockholders have
not had any material relationship with us within the past three years.

 

The
table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock
by each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by each selling
stockholder, based on its ownership of the convertible notes and warrants, as of ________, 2016, assuming conversion of all convertible
notes and exercise of all warrants held by the selling stockholders on that date, without regard to any limitations on conversion,
redemption or exercise.

 

The
third column lists the shares of common stock being offered by this prospectus by the selling stockholders, which includes the
shares of common stock issuable upon conversion of the convertible notes and upon exercise of the warrants held by such selling
stockholder. The fourth column lists the percentage of shares of common stock beneficially owned by such selling stockholder after
the completion of the offering, based on its ownership as of ________, based on ________ shares of common stock outstanding as
of ________ and assuming the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

 

In
accordance with the terms of a registration rights agreement with the selling stockholders, this prospectus generally covers the
resale of at least the sum of (i) the maximum number of shares of common stock issued and issuable pursuant to the convertible
notes as of the trading day immediately preceding the date the registration statement is initially filed with the SEC, and (ii)
the maximum number of shares of common stock issued and issuable upon exercise of the related warrants as of the trading day immediately
preceding the date the registration statement is initially filed with the SEC. Because the conversion price of the convertible
notes and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more or
less than the number of shares being offered by this prospectus.

 

Under
the terms of the convertible notes and the warrants, a selling stockholder may not convert the convertible notes or exercise the
warrants to the extent such conversion or exercise would cause such selling stockholder, together with its affiliates, to beneficially
own a number of shares of common stock which would exceed 9.99% of our then outstanding shares of common stock following such
conversion or exercise, excluding for purposes of such determination shares of common stock issuable upon conversion of the convertible
notes which have not been converted and upon exercise of the warrants which have not been exercised. The number of shares in the
second column does not reflect this limitation. The selling stockholders may sell all, some or none of their shares in this offering.
See “Plan of Distribution.”

 

    	 	Annex I-1	 

     

    

 

	Name of Selling Stockholder	 	Number of Shares of Common Stock Beneficially Owned Prior to Offering(1)	 	 	Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus(2)	 	 	Number of Shares of Common Stock Beneficially Owned After Offering(3)	 	 	Percentage of Shares Beneficially Owned After Offering(3)	 
	Empery Asset Master, Ltd.(4)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Empery Tax Efficient, LP(5)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Empery Tax Efficient II, LP(6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 
	[Other Buyers]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

(1)
The number of shares of common stock owned are those “beneficially owned” as determined under the rules of the SEC,
including any shares of common stock as to which the selling stockholder has sole or shared voting or investment power and any
shares of common stock that the selling stockholder has the right to acquire within 60 days of ________ through the exercise of
any option, warrant, or right.

 

(2)
 Includes both the convertible notes purchased by each selling stockholder in ________
and the shares of common stock issuable upon exercise of the warrants held by such selling stockholder.

 

(3)
Assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

 

(4)
Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd (“EAM”), has discretionary authority to
vote and dispose of the shares held by EAM and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane,
in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting
power over the shares held by EAM. EAM, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. The business
address for each of EAM, Empery Asset Management LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1 Rockefeller
Plaza, Suite 1205, New York, NY 10020.

 

(5)
Empery Asset Management LP, the authorized agent of Empery Tax Efficient, LP (“ETE”), has discretionary authority
to vote and dispose of the shares held by ETE and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan
Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion
and voting power over the shares held by ETE. ETE, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares.
The business address for each of ETE, Empery Asset Management LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP,
1 Rockefeller Plaza, Suite 1205, New York, NY 10020.

 

(6)
Empery Asset Management LP, the authorized agent of Empery Tax Efficient II, LP (“ETE II”), has discretionary authority
to vote and dispose of the shares held by ETE II and may be deemed to be the beneficial owner of these shares. Martin Hoe and
Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion
and voting power over the shares held by ETE II. ETE II, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these
shares. The business address for each of ETE II, Empery Asset Management LP and Messrs. Hoe and Lane is c/o Empery Asset Management,
LP, 1 Rockefeller Plaza, Suite 1205, New York, NY 10020.

 

    	 	Annex I-2	 

     

    

 

PLAN
OF DISTRIBUTION

 

We
are registering the shares of common stock issuable pursuant to the terms of the convertible notes and upon exercise of the warrants
to permit the resale of these shares of common stock by the holders of the convertible notes and warrants from time to time after
the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of
common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

The
selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through
underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s
commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,

 

		●	on
                                         any national securities exchange or quotation service on which the securities may be
                                         listed or quoted at the time of sale;

 

		●	in
                                         the over-the-counter market;

 

		●	in
                                         transactions otherwise than on these exchanges or systems or in the over-the-counter
                                         market;

 

		●	through
                                         the writing of options, whether such options are listed on an options exchange or otherwise;

 

		●	ordinary
                                         brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

		●	block
                                         trades in which the broker-dealer will attempt to sell the shares as agent but may position
                                         and resell a portion of the block as principal to facilitate the transaction;

 

		●	purchases
                                         by a broker-dealer as principal and resale by the broker-dealer for its account;

 

		●	an
                                         exchange distribution in accordance with the rules of the applicable exchange;

 

		●	privately
                                         negotiated transactions;

 

		●	short
                                         sales;

 

		●	sales
                                         pursuant to Rule 144;

 

		●	broker-dealers
                                         may agree with the selling securityholders to sell a specified number of such shares
                                         at a stipulated price per share;

 

		●	a
                                         combination of any such methods of sale; and

 

		●	any
                                         other method permitted pursuant to applicable law.

 

    	 	Annex I-3	 

     

    

 

If
the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers
or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions
from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or
agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common
stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage
in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also
sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and
to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.

 

The
selling stockholders may pledge or grant a security interest in some or all of the convertible notes, warrants or shares of common
stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The
selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be
“underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the
time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name
or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under
the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There
can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a part.

 

The
selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders
and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the
shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing
may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

 

We
will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated
to be $[ ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance
with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities
under the Securities Act, in accordance with the registration rights agreements, or the selling stockholders will be entitled
to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the
Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in
this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

 

Once
sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable
in the hands of persons other than our affiliates.

 

 

Annex
I-4

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