Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of December 30, 2015,
by and among Ener-Core, Inc., a Delaware corporation, with headquarters located
at 9400 Toledo Way, Irvine, California 92618 (the “Company”), and the investors
identified in their respective “Buyer Signature Page” attached hereto (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 (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) shares
(“Common Shares”) of the Company’s common stock, par value $0.0001 per share
(the “Common Stock”), and (ii) a warrant, which will be exercisable to purchase
shares of Common Stock (as exercised, collectively, the “Warrant Shares”).

 

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

 

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

 

(c)          “Effective Date” means the date on which a Registration Statement,
through which Registrable Securities shall be registered, has been declared
effective by the SEC.

 

  

 

 

(d)          “Effectiveness Deadline” means (i) in the event that the
Registration Statement is not subject to review by the Staff, the earlier of (x)
130 days after the Closing Date, and (y) five Trading Days following the date on
which the Staff notifies the Company that the Registration Statement is not
subject to review, and (ii) in the event that the Registration Statement is
subject to review by the Staff, the earlier of (x) 170 days after the Closing
Date, and (y) five Trading Days following the date on which the Staff notifies
the Company that it has no further comments on the Registration Statement.

 

(e)          “Eligible Market” means the Principal Market, The New York Stock
Exchange, Inc., the NYSE MKT LLC, The NASDAQ Capital Market, The NASDAQ Global
Select Market or The Nasdaq Global Market.

 

(f)          “Filing Deadline” means the later of the date that is 60 days after
the Closing Date and 30 days after the closing of the proposed offering
registered on the Company’s Form S-1 registration statement (File No.
333-205916), or if such registration statement is withdrawn, any registration
statement subsequently filed with respect to such proposed offering, provided,
however, that the Filing Deadline shall be no later than March 31, 2016. If the
Filing Deadline falls on a Saturday, Sunday or other day that the SEC is closed
for business, the Filing Deadline shall be extended to the next business day on
which the SEC is open for business.

 

(g)          “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 for so long as any of the foregoing
continues to hold Registrable Shares.

 

(h)          “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.

 

(i)          “Principal Market” means The OTCQB.

 

(j)          “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.

 

(k)          “Registrable Securities” means (i) the Common Shares, (ii) the
Warrant Shares issued or issuable upon exercise of the Warrants and (iii) any
shares of capital stock of the Company issued or issuable with respect to the
Common Shares as a result of any stock split, stock dividend, recapitalization,
exchange or similar event, without regard to any limitations on exercise of the
Warrants.

 

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

 

(m)          “Required Holders” means holders of at least a majority of the
Registrable Securities.

 

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(n)          “Required Registration Amount” for the Registration Statement means
100% of the sum of (i) the number of Common Shares issued pursuant to the
Securities Purchase Agreement and (ii) the number of Warrant Shares issued and
issuable pursuant to the Warrants as of the trading day immediately preceding
the applicable date of determination, all, subject to adjustment as provided in
Section 2(b) (without regard to any limitations on exercise of the Warrants).

 

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

 

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

 

(q)          “Staff” means the staff of the Division of Corporation Finance at
the SEC.

 

(r)          “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; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

 

2.            Registration.

 

(a)          Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than the Filing Deadline, file with the SEC
the Registration Statement on Form S-1 covering the resale of at least the
number of shares of Common Stock equal to the Required Registration Amount
determined as of the date the Registration Statement is initially filed with the
SEC. The Registration Statement shall contain (except if otherwise directed by
the Required Holders or required in order to address comments to the
Registration Statement received from the Staff) the “Selling Stockholders” and
“Plan of Distribution” sections in substantially the form attached hereto as
Exhibit B. The Company shall use its commercially reasonable efforts to have the
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the Effectiveness Deadline. By 5:30 p.m. (Eastern time)
on the second Business Day following the 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 Registration
Statement.

 

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(b)          Rule 415; Cutback. If at any time the Staff takes the position that
the offering of some or all of the Registrable Securities in a Registration
Statement is not eligible to be made on a delayed or continuous basis under the
provisions of Rule 415 under the 1933 Act or requires any Investor to be named
as an “underwriter”, the Company shall use commercially reasonable efforts to
persuade the Staff that the offering contemplated by the Registration Statement
is a valid secondary offering and not an offering “by or on behalf of the
issuer” as defined in Rule 415 and that none of the Investors is an
“underwriter.” In the event that, despite the Company’s commercially reasonable
efforts and compliance with the terms of this Section 2(b), the Staff refuses to
alter its position, the Company shall (i) remove from the Registration Statement
such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii)
agree to such restrictions and limitations on the registration and resale of the
Registrable Securities as the Staff may require to assure the Company’s
compliance with the requirements of Rule 415 (collectively, the “SEC
Restrictions”); provided, however, that the Company shall not agree to name any
Investor as an “underwriter” in such Registration Statement without the prior
written consent of such Investor. Any cut-back imposed pursuant to this
Section 2(b) shall be allocated among the Investors on a pro rata basis, unless
the SEC Restrictions otherwise require or provide or the Required Holders
otherwise agree. No liquidated damages shall accrue as to any Cut Back Shares
until such date as the Company is able to effect the registration of such Cut
Back Shares in accordance with any SEC Restrictions (such date, the “Restriction
Termination Date” of such Cut Back Shares). In furtherance of the foregoing,
each Investor shall provide the Company with prompt written notice of its sale
of substantially all of the Registrable Securities under the Registration
Statement such that the Company will be able to file one or more additional
registration statements covering the Cut Back Shares. From and after the
Restriction Termination Date applicable to any Cut Back Shares, all of the
provisions of this Section 2 (including the liquidated damages provisions) shall
again be applicable to such Cut Back Shares; provided, however, that (i) the
Filing Deadline for the Registration Statement including such Cut Back Shares
shall be ten (10) Business Days after such Restriction Termination Date and (ii)
the Effectiveness Deadline with respect to such Cut Back Shares shall be the
earlier of (A) 120 days after the Restriction Termination Date and (B) five
Trading Days following the date on which the Staff notifies the Company that
either (x) such Registration Statement is not subject to review or (y) the Staff
has no further comments to such Registration Statement.

 

(c)          Form S-3. The Company undertakes to register the Registrable
Securities on Form S-3 as soon as such form is available for use by the Company,
provided that if the Registration Statement is on Form S-1, 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.

 

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(d)          Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. Subject to Section 2(b), if (i) 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 Filing Deadline (a “Filing Failure”) or (B) not
declared effective by the SEC on or before the Effectiveness Deadline (an
“Effectiveness Failure”); or (ii) on any day after the Effective Date sales of
all of the Registrable Securities required to be included on such Registration
Statement cannot be made (other than (x) during an Allowable Grace Period (as
defined in Section 3(n)) or (y) if the Registration Statement is on Form S-1,
for a period of 15 days following the date on which the Company files a
post-effective amendment to incorporate the Company’s Annual Report on Form
10-K) pursuant to such Registration Statement (including, without limitation,
because of a failure to keep such Registration Statement effective, failure to
disclose such information as is necessary for sales to be made pursuant to such
Registration Statement or failure to register a sufficient number of shares of
Common Stock) (a “Maintenance Failure”) then, in satisfaction of the damages to
any holder of Registrable Securities 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), the
Company shall pay to each such holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to one percent (1.0%) of the
aggregate Purchase Price (as such term is defined in the Securities Purchase
Agreement) of such Investor’s Registrable Securities included in such
Registration Statement on each of the following dates: (i) the day of a Filing
Failure and on every thirtieth day (pro rated for shorter periods) thereafter
until such Filing Failure is cured; (ii) the day of an Effectiveness Failure and
on every thirtieth day (pro rated for shorter periods) thereafter until such
Effectiveness Failure is cured; and (iii) the initial day of a Maintenance
Failure and on every thirtieth day (pro rated for shorter periods) thereafter
until such Maintenance Failure is cured. The payments to which a holder shall be
entitled pursuant to this Section 2(d) are referred to herein as “Registration
Delay Payments.” Registration Delay Payments shall be paid on the earlier of (i)
the last day of the calendar month during which such Registration Delay Payments
are incurred 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 percent (1.0%) of such unpaid
Registration Delay Payment per month (pro rated for shorter periods) until paid
in full. Notwithstanding anything to the contrary herein or in the Securities
Purchase Agreement, in no event shall the aggregate amount of Registration Delay
Payments exceed, in the aggregate, ten percent 10% of the aggregate Purchase
Price of the Common Shares.

 

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) or 2(c), the Company will use its
commercially reasonable 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 submit to the SEC, within two (2) Business Days
after the Company learns that no review of a particular Registration Statement
will be made by the Staff or that the Staff has no further comments on a
particular Registration Statement, as the case may be, a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request. The Company shall
keep each Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144 (or any successor thereto) promulgated under
the 1933 Act, or (ii) 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 necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading.

 

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(b)          The Company shall (i) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the Rule 424 prospectus used in connection with such Registration
Statement as may be necessary to keep such Registration Statement effective at
all times during the Registration Period, and (ii) during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities 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 as set forth
in such Registration Statement.

 

(c)          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.

 

(d)          The Company shall notify each Investor in writing of the happening
of any event, as promptly as practicable after becoming 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 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(n), 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 each Investor (or such other
number of copies as such Investor may reasonably request).

 

(e)          The Company shall use its commercially reasonable 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. If such an order or
suspension is issued, the Company shall use its commercially reasonable efforts
to obtain the withdrawal of such order or suspension at the earliest possible
moment, and to notify each Investor who holds Registrable Securities being sold
of the issuance of such order and the resolution thereof, or its receipt of
notice of the initiation or threat of any proceeding for such purpose.

 

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(f)          If any Investor is required under applicable securities law to be
described in the Registration Statement as an “underwriter,” upon the written
request of such Investor in connection with such Investor’s due diligence
requirements, if any, the Company shall make available for inspection by (i)
such Investor and its legal counsel and (ii) one firm of accountants or other
agents retained 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 solely for the purpose of establishing a due
diligence defense under underwriter liability under the 1933 Act, and cause the
Company’s officers, directors and employees to supply all information that 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
such 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, nonappealable 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 or any other Transaction Document. 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.

 

(g)          The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) the
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 by the Company of this Agreement or
any other agreement to which the Company is a party. 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.

 

(h)          The Company shall use its commercially reasonable efforts either to
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. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(h).

 

(i)          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.

 

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(j)          If requested by an Investor, the Company shall (i) as soon as
practicable, incorporate in a prospectus supplement or posteffective 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) as soon as practicable, 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) as soon as practicable, supplement or make amendments to
any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

 

(k)         The Company shall use its commercially reasonable 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.

 

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

 

(m)        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.

 

(n)         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 commercially reasonable 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, nonpublic 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; provided further, such Grace Periods shall not
exceed an aggregate of thirty (30) days during any three hundred sixty five
(365) day period 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) or the date
referred to in such notice. The provisions of Section 3(d) 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 Section 3(d) 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, and deliver a copy of the prospectus
included as part of the applicable Registration Statement (unless an exemption
from such prospectus delivery requirement exists).

 

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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, including the number of Registrable
Securities such Investor wishes to include in such Registration Statement. It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that (i) such Investor furnish to the
Company such information regarding itself, the Registrable Securities held by it
(including the number of Registrable Securities to be included in the
Registration Statement) and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities, and (ii) the
Investor 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.

 

(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(d) or
Section 3(e), 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 the copies of the
supplemented or amended prospectus contemplated by Section 3(b) 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(d) or Section
3(e), and for which the Investor has not yet settled.

 

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(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 or
other charges of any broker-dealer acting on behalf of the Investors, 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.

 

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 agree to indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees and agents of, and each Person, if any,
who controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (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, 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, or
(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 (the matters in the
foregoing clauses (i) through (iii) 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 reasonable 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 contained in this Section 6(a)
shall not apply to: (w) a Claim sought by an Indemnified Person arising out of
or based upon a Violation that 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;
(x) a Claim by an Indemnified Person arising out of or based on the use by an
Investor of an outdated or defective prospectus after the Company has notified
such Investor in writing that the prospectus is outdated or defective; (y) a
Claim by an Indemnified Person arising out of or based on an Investor’s (or any
other Indemnified Person’s) failure to send or give a copy of the prospectus or
supplement (as then amended or supplemented), if required (and not exempted) to
the Persons asserting an untrue statement or omission or alleged untrue
statement or omission at or prior to the written confirmation of the sale of
Registrable Securities; or (z) 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.

 

 10 

 

 

(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, officers
and employees, each of the other holders of the Company’s securities covered by
such Registration Statement and each Person, if any, who controls the Company or
any other such Person within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified Party”), against any Claims to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claims
arise out of or are based upon any Violation that 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 (or any
amendment thereof or supplement thereto); 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 indemnification 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 as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.

 

(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 proceeding or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person that relates to such action or proceeding or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably 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 that 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 or proceeding 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 or proceeding as a result of
such failure.

 

 11 

 

 

(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.

 

(e)          The indemnity agreements contained herein shall be in addition to
any liabilities the indemnifying party may be subject to pursuant to the law.

 

7.            Contribution.

 

To the extent any indemnification contemplated hereby by an indemnifying party
is prohibited or limited by applicable law, the indemnifying party shall to the
extent permitted by applicable law contribute to the amount paid or payable by
such Indemnified Person or Indemnified Party as a result of such Claim in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and of the Indemnified Person or Indemnified Party, on
the other, in connection with such Violation. The relative fault of the
indemnifying party, on the one hand and of the Indemnified Person or Indemnified
Party, on the other hand, shall be determined by a court of law by reference to,
among other things, whether the Violation relates to information supplied or
actions undertaken by the indemnifying party, on the one hand, or by the
Indemnified Person or Indemnified Party, on the other hand, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such Violation; provided, that in no event shall any contribution by an
Investor hereunder exceed the amount of net proceeds to such Investor of the
Registrable Securities sold in any such Registration Statement. The amount paid
or payable by a party as a result of any Claim shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
Section 6 was available to such party in accordance with its terms. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The Investors’ obligations to
contribute pursuant to this Section 7 are several and not joint.

 

 12 

 

 

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, during the Registration Period;

 

(b)          file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act so long as the Company
remains subject to such requirements, during the Registration Period; and

 

(c)          furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request during the Registration Period, (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144 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.

 

 13 

 

 

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 is also offered to all
of the parties to this Agreement.

 

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

 

 14 

 

 

With a copy (for informational purposes only) to:

 

K&L Gates LLP

1 Park Plaza, 12th Floor

Irvine, California 92614

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

 

If to the Transfer Agent:

 

VStock Transfer, LLC

18 Lafayette Place

Woodmere, New York 11598

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

 

If to an Investor, to its address, facsimile number and/or email address set
forth on such Investor’s “Buyer Signature Page,” 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
or recipient electronic email address, as applicable, and an image of the first
page of such transmission, if applicable, or (C) provided by a courier or
overnight courier service, shall be rebuttable evidence of personal service,
receipt by facsimile, receipt by email or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii), (iii) or (iv)
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.

 

 15 

 

 

(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.

 

(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 of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

 

 16 

 

 

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

 

(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.

 

(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 Investor shall be responsible
in any way for the performance of the obligations of any other Investor
hereunder. 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]

 17 

 

 

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

 

[Company Signature Page To Registration Rights Agreement]

 

 

 

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:

 

INDIVIDUAL INVESTOR:   PARTNERSHIP, CORPORATION, TRUST, LIMITED LIABILITY
COMPANY, CUSTODIAL ACCOUNT, OR OTHER INVESTOR:                     (print name)
    (print name of entity)               By:     (signature)     (signature of
person signing on behalf of entity)                 Name:                  
Title:              Address for Notice:    Address for Notice:                  
                                                    Tel:     Tel:            
Fax:     Fax:             Email:     Email:  

 

[Buyer Signature Page To Registration Rights Agreement]

 

 

 

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

 

VStock Transfer, LLC

18 Lafayette Place

Woodmere, New York 11598

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 December 30, 2015 (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 shares of 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 Securities Purchase Agreement, collectively, the “Common Shares”).
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 Common Shares issuable pursuant to
the Securities Purchase Agreement under the Securities Act of 1933, as amended
(the “1933 Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on ____________ ___, 201__, the Company filed a
Registration Statement on Form S-__ (File No. 333-_____________) (the
“Registration Statement”) with the Securities and Exchange Commission (the
“SEC”) relating to the Registrable Securities that names each of the Holders as
a selling shareholder 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 Common
Shares 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 Common Shares to the Holders as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
______, 201_.

 

  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
previously issued to the selling stockholders and those issuable to the selling
stockholders upon exercise of the warrants. For additional information regarding
the issuances of common stock and the warrants, see “Private Placement of Common
Shares 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 shares of common stock and the
warrants, 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 shareholder, based on its ownership of the
shares of common stock and the warrants, as of , 20[ ], assuming exercise of the
warrants held by the selling stockholders on that date, without regard to any
limitation on exercise.

 

The third column lists the shares of common stock being offered by this
prospectus by the selling stockholders.

 

In accordance with the terms of registration rights agreements with the holders
of the shares of common stock and the warrants, this prospectus generally covers
the resale of that number of shares of common stock equal to the number of
shares of common stock issued and the shares of common stock issuable upon
exercise of the related warrants, determined as if the outstanding warrants were
exercised, as applicable, in full, in each case as of the trading day
immediately preceding the date this registration statement was initially filed
with the SEC. The fourth column assumes the sale of all of the shares offered by
the selling stockholders pursuant to this prospectus.

 

Name of Selling
Stockholder Number of Shares Owned
Prior to Offering Maximum Number of Shares to be Sold Pursuant to this
Prospectus Number of Shares Owned
After Offering                        

 

 B-1 

 

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock previously issued and the shares
of common stock issuable upon exercise of the warrants to permit the resale of
these shares of common stock by the holders of the common stock 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;

 

 B-2 

 

 

●a combination of any such methods of sale; and

 

●any other method permitted pursuant to applicable law.

 

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.

 

 B-3 

 

 

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.

 

 

B-4