Exhibit 10.1

 

FORM OF EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (the "Agreement"), dated as of April [  ], 2015, is made
by and among Ener-Core, Inc., a Nevada corporation, with headquarters located at
9400 Toledo Way, Irvine, California 92618 (the "Company"), and the investor
listed on the signature page attached hereto (the "Holder"). Capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
set forth in the Securities Purchase Agreement (as defined below).

 

A.            Pursuant to that certain Securities Purchase Agreement dated as of
April 15, 2014 by and among the Company, the Holder and certain other investors
party thereto ("Securities Purchase Agreement"), the Company sold to the Holders
(i) senior secured convertible notes of the Company (the “Notes”) in
substantially the form attached to the Securities Purchase Agreement as Exhibit
A, which Notes were all cancelled following their conversion and redemption
pursuant to that certain Conversion and Redemption Agreement dated August 14,
2014 that was entered into by and among the Company, the Holder and the Other
Holders (as defined below) and (ii) Warrants, in substantially the form attached
to the Securities Purchase Agreement as Exhibit B (the "Warrants"), representing
the right to acquire shares of the Company’s Common Stock (as defined below)
(this financing transaction, hereinafter referred as the “April 2014
Financing”).

 

B.            The Company and the Holder desire to exchange all of the Warrants
held by the Holders for shares of Common Stock (the "Exchange Shares") pursuant
to the terms hereof in a transaction undertaken in reliance upon the exemption
from registration provided by Section 3(a)(9) of the Securities Act of 1933, as
amended (the "1933 Act").

 

C.            In connection with the above-described warrant exchange, the
Company and the Holder also desire to terminate and cancel in full the
Securities Purchase Agreement and the related Registration Rights Agreement (the
“Registration Rights Agreement”), Pledge and Security Agreement and each of the
other agreements entered into in connection with the April 2014 Financing
(collectively the “Transaction Documents”), all dated as of April 15, 2014 by
and among the Company, the Holder and certain other investors party thereto
(each of such other investors or such investors' transferees holding any
Warrants, the "Other Holders") pursuant to the terms of this Agreement.

 

D.            The Company is negotiating, and intends to implement, the exchange
of other Warrants issued pursuant to the Securities Purchase Agreement that are
currently outstanding by entering into agreements (the "Other Agreements") in
the same form as this Agreement.

 

 

 

 

NOW THEREFORE, in consideration of the foregoing mutual premises and the
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt, and legal adequacy of which is hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.INCORPORATION OF PREMISES; CAPITALIZED TERMS.

 

(a)   The Company and the Holder agree that the premises of this Agreement set
forth above are incorporated into and form an integral part of this Agreement.

 

(b)   Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Securities Purchase Agreement.

 

2.ISSUANCE OF EXCHANGE SHARES.

 

Subject to the satisfaction (or waiver) of the conditions set forth in Section 5
and 6 below, the Company and the Holder hereby agree that, all the Warrants held
by the Holder shall be exchanged into the number of Exchange Shares, as set
forth on the Holder's signature page attached hereto,1 (the "Exchange"). After
such Exchange, including, without limitation, the delivery of the Exchange
Shares pursuant to the provisions of Section 3(a) below: (i) all of the
Company's and the Holder's obligations and covenants under the Securities
Purchase Agreement (other than as contemplated in Section 4(a)(iv) below) and
the Transaction Documents will automatically be terminated and cancelled in full
without any further action required and (ii) this Section 2 shall constitute an
instrument of termination and cancellation in full of such Holder’s Warrants,
the Securities Purchase Agreement, and the Transaction Documents.

 

3.EXCHANGE; CLOSING.

 

(a)   Procedure. At the Closing (as defined in Section 3(b) hereof), the Company
shall credit to the balance account of the Holder with The Depository Trust
Company through its Deposit / Withdrawal at Custodian system (with such DWAC
Instructions as specified on the Holder's signature page attached hereto or as
otherwise specified in writing by the Holder to the Company prior to the
Closing), the number of Exchange Shares as set forth on the Holder's signature
page attached hereto, and effective upon receipt of such Exchange Shares, the
Warrants held by the Holder will be deemed cancelled and all rights of the
Holder thereunder will terminate. No later than three (3) Business Days
following the Closing Date (as defined in Section 3(b)), the Holder shall return
the original Warrant to the Company.

 

(b)   Closing. The date and time of the closing (the "Closing") of the
transactions specified in Sections 2 and 3(a) above (the "Closing Date") shall
be 10:00 a.m., New York City Time, on the date hereof (or such other date and
time as is mutually agreed to by the Company and the Holder), subject to the
notification of satisfaction (or waiver) of the conditions to Closing set forth
in Sections 5 and 6 hereof. The Closing shall occur at the offices of Schulte
Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022 and may be
undertaken remotely by electronic exchange of documentation.

 

 

1 Insert the number of shares of Common Stock equal to 90% of the number of
shares of Common Stock issuable upon exercise in full of the Holder's Warrants
(without regard to any limitations on exercise), rounded up to the nearest whole
number.

 

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(c)   Buy-In. If the Company shall fail for any reason or for no reason to issue
to the Holder on the Closing Date the Exchange Shares by electronic delivery at
the applicable balance account at DTC, and if on or after the Closing Date the
Holder effects a Buy-In (as defined in the Warrants), then the Company shall,
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay the Buy-In Price (as defined in the Warrants) in
cash, at which point the Company's obligation to deliver such Exchange Shares
shall terminate, or (ii) promptly honor its obligation to electronically deliver
to the Holder such unlegended Exchange Shares as provided above and pay cash to
the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) any trading
price of the Common Stock selected by the Holder in writing as in effect at any
time during the period beginning on the date hereof and ending on the date the
Company satisfies its obligations in full pursuant to this Section 3(c).

 

4.REPRESENTATIONS, AGREEMENTS, WARRANTIES AND COVENANTS.

 

(a)   Holder Representations, Warranties and Covenants. The Holder hereby
represents and warrants to the Company that:

 

(i)    Authorization; Enforcement; Validity. The Holder has the power and
authority to execute and deliver this Agreement and perform its obligations
hereunder; and this Agreement and the transactions contemplated hereby have been
duly authorized by the Holder. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Holder and shall constitute
the legal, valid and binding obligations of the Holder enforceable against the
Holder in accordance with its 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.

 

(ii)    No Conflicts. The execution, delivery and performance by the Holder of
this Agreement and the consummation by the Holder of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of the Holder 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 the Holder 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
the Holder, 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 the Holder to perform its obligations hereunder.

 

(iii)    Title to Warrant. The Holder is the beneficial owner and sole legal
owner of, and has good and valid title to, the Warrant, free and clear of any
mortgage, lien, pledge, charge, security interest, encumbrance, title retention
agreement, option, equity or other adverse claim thereto other than encumbrances
by one or more brokers of the Holder, which shall terminate upon the Closing,
and encumbrances under federal or state securities laws ("Claims"). The Holder
has not, in whole or in part, (i) assigned, transferred, hypothecated, pledged
or otherwise disposed of the Warrant or its rights in the Warrant, or (ii) given
any person or entity any transfer order, power of attorney or other authority of
any nature whatsoever with respect to the Warrant. Good and valid title to the
Warrant, free and clear of any Claims, will pass to the Company upon
consummation of the transaction contemplated hereby.

 

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(iv)    Legending of Exchange Shares. If at any time after the Closing, the
Company fails to satisfy its current 1934 Act reporting obligations set forth in
Section 144(i)(2), and the Exchange Shares may not be resold pursuant to either
Rule 144 or an effective registration statement, upon the written request of the
Company, the Holder covenants and agrees to promptly return the Exchange Shares
to the Company’s transfer agent to have a restrictive legend substantially
identical to the legend set forth in Section 2(g) of the Securities Purchase
Agreement to be affixed to the stock certificate that shall be issued to such
Holder to evidence such returned Exchange Shares.

 

(b)   Company Representations, Warranties and Covenants. The Company hereby
represents, warrants, agrees and covenants, as applicable, to and with the
Holder that:

 

(i)    Solvency. 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 knowledge that its creditors or its Subsidiaries' creditors intend to
initiate involuntary bankruptcy proceedings or knowledge of any fact which 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 will not be,
Insolvent.

 

(ii)    Organization and Qualification. Each of the Company and each of its
Subsidiaries are entities duly organized and validly existing and 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 and as presently proposed to be conducted.
Each of the Company and each of 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,
liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, individually or
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform any of its obligations hereunder.

 

(iii)    Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to issue the Exchange Shares in accordance with the terms
hereof. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, including,
without limitation, the issuance of the Exchange Shares, have been duly
authorized by the Company's Board of Directors and no further filing, consent or
authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement has been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.

 

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(iv)    Issuance of Securities. The issuance of the Exchange Shares is duly
authorized and, upon issuance in accordance with the terms hereof, the Exchange
Shares shall be validly issued, fully paid and non-assessable and free from all
preemptive or similar rights, taxes, liens and charges and other encumbrances
with respect to the issue thereof and the Exchange Shares shall be fully paid
and nonassessable with the holder thereof being entitled to all rights accorded
to a holder of Common Stock. The offer and issuance by the Company of the
Exchange Shares in conformity with this Agreement constitute transactions exempt
from registration under the 1933 Act pursuant to Section 3(a)(9) of the 1933
Act. The Exchange Shares will not bear any restrictive legend and will be freely
tradable without any restrictions or limitations under applicable securities
laws, rules and regulations. For the purposes of Rule 144, the Company
acknowledges that the holding period of the Exchange Shares may be tacked onto
the holding period of the Warrants and the Company agrees not to take a position
contrary to this Section 3(b)(iv).

 

(v)    No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby (including, without limitation, the issuance of the Exchange
Shares) will not (i) result in a violation of the Company's Articles of
Incorporation or Bylaws or other organizational 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 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 foreign, federal and
state securities laws and regulations and the rules and regulations of Principal
Market and including all applicable foreign, federal 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.

 

(vi)   Consents. The Company is not required to obtain any consent from,
authorization or order of, or make any filing or registration with any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Agreement in accordance with the terms hereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date, and the Company is unaware of any
facts or circumstances which might prevent the Company from obtaining or
effecting any of the registration, application or filings contemplated by this
Agreement. The Company is not in violation of the requirements of the Principal
Market and has no knowledge of any facts or circumstances which could reasonably
lead to delisting or suspension of the Common Stock in the foreseeable future.
The issuance by the Company of the Exchange Shares shall not have the effect of
delisting or suspending the Common Stock from the Principal Market.

 

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(vii)  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.

 

(viii)  Other Agreements. The Company will not provide any Other Holders with a
more favorable exchange ratio than is provided to the Holder hereunder or offer
any consideration to any Other Holder without offering the same consideration to
the Holder.

 

(ix)    SEC Filings. As of their respective filing dates, the Company's filings
with the SEC under the 1934 Act since April 15, 2014 (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.  The Company represents that, as of the date hereof, no
material event or circumstance has occurred which would be required to be
publicly disclosed or announced on a Current Report on Form 8-K, either as of
the date hereof or solely with the passage of time by the Company but which has
not been so publicly announced or disclosed. The Company has filed a
Registration Statement on Form 8-A that is currently effective. Accordingly, the
Company is currently subject to the reporting requirements of Section 13 of the
1934 Act as required under Rule 144(c) and Rule 144(i). As of the date hereof,
the Company (i) has satisfied the current public information requirements set
forth in Rule 144(c)(i) and (ii) in accordance with provisions of Rule 144(i),
the Company (x) is no longer an issuer described in Rule 144(i)(1)(i), (y) has
filed all reports and other materials required to be filed by section 13 or
15(d) of the 1934 Act, as applicable, during the preceding 12 months (or for
such shorter period that the Company was required to file such reports and
materials), other than Form 8-K reports, and (z) filed current “Form 10
information” with the SEC reflecting its status as an entity that is no longer
an issuer described in Rule 144(i)(1)(i) at least one year prior to the date
hereof.

 

(x)    Disclosure of Transactions and Other Material Information. The Company
shall file a current report on Form 8-K (the "8-K Filing") on or before 8:30
a.m., New York City time, on the first Business Day after the Closing Date, in
the form required by the 1934 Act, relating to the transactions contemplated by
this Agreement and the Other Agreements and attaching a form of this Agreement
and the form of lock-up agreement to be executed with the Company
contemporaneously with this Agreement (including, without limitation, all
schedules and exhibits to such agreement, if any) as an exhibit to such filing.
From and after the filing of the 8-K Filing with the SEC, the Holder shall not
be in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of their respective officers, directors,
Affiliates (as defined in the Warrants), 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 the Holder or any of its
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 the Holder 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 the
Holder. To the extent that the Company, any of its Subsidiaries or any of their
respective officers, directors, Affiliates employees or agents delivers any
material, non-public information to the Holder without the Holder's consent, the
Company hereby covenants and agrees that the Holder's shall not have any duty of
confidentiality to the Company, any of its Subsidiaries or any of their
respective officers, directors, Affiliates, employees or agents with respect to,
or a duty to the Company, any of its Subsidiaries or any of their respective
officers, directors, Affiliates, employees or agents not to trade on the basis
of, such material, non-public information. The Company understands and confirms
that the Holder will rely on the foregoing representations in effecting
transactions in securities of the Company.

 

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(xi)    Listing. The Company shall promptly secure the listing of all of (i) the
Exchange Shares and (ii) any capital stock of the Company issued or issuable
with respect to the Exchange Shares, as applicable, as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise
(the "Listed Securities") upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing of all Listed
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 3(b)(xi).

 

(xii)   Reporting Status. Until the earlier of (i) the date on which the Holder
has sold all the Exchange Shares and (ii) the date on which the Holder may sell
all of the Exchange Shares 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, 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.

 

(xiii)  No Integration Actions. None of the Company, any of its Affiliates or
any Person acting on behalf of the Company or such Affiliate will sell, offer
for sale or solicit offers to buy in respect of any security (as defined in the
1933 Act) that would be integrated with the issuance of the Exchange Shares in a
manner that would require the registration under the 1933 Act of the issuance to
the Holder or require shareholder approval under the rules and regulations of
the Principal Market, and the Company will take all action that is appropriate
or necessary to assure that its offerings of other securities will not be
integrated for purposes of the 1933 Act or the rules and regulations of the
Principal Market with the issuance of Exchange Shares contemplated hereby.

 

(xiv)  Reservation of Shares. From the date hereof until the Closing, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than the maximum number of
Exchange Shares issuable under this Agreement and the Other Agreements.

 

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(xv)   Legend Removal. If any legend is affixed to the Exchange Shares pursuant
to Section 4(a)(iv) above, the Company hereby covenants and agrees to remove
such legend in accordance with the provisions of, and the time periods specified
in, Section 2(g) of the Securities Purchase Agreement, notwithstanding the fact
that all other provisions of the Securities Purchase Agreement have terminated
pursuant to this Agreement.

 

(xvi)  Public Information. At any time during the period commencing on the
Closing Date and ending on the date that is the earlier of: (A) two years after
the Closing Date or (B) at such time that all of the Exchanges Shares 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 a registration statement
is not otherwise available for the resale of all of the Exchange Shares and 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 Exchange Shares by reason of any such delay in or
reduction of its ability to sell the Exchange Shares (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 Fair Market Value (as defined below) of the Exchange Shares 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(b)(xvi) 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. The “Fair Market Value” of each Exchange
Share will be determined based on the highest closing sale price of the Common
Stock during the period beginning on the date of each applicable Public
Information Failure and ending on the date the applicable Public Information
Failure Payment relating to such Public Information Failure is satisfied in
full.

 

(xvii) Subsequent Placements.

 

(A)   For purposes of Section 4, the following definitions shall apply:

 

(1)   “Approved Stock Plan” means 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.

 

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(2)   "Closing Sale Price" means, for any security as of any date, the last
closing bid price and last closing trade price, respectively, for such security
on the Principal Market, as reported by Bloomberg Financial Markets
(“Bloomberg”), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or the last trade price,
respectively, of such security prior to 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the OTC Link
or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.).  If
the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, then the Closing Sale Price, as the case may be,
of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder.  All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination,
reclassification or other similar transaction during the applicable calculation
period.

 

(3)   "Common Stock" means (i) the Company's shares of common stock, par value
$0.0001 per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

(4)   "Common Stock Equivalents" means, collectively, Options and Convertible
Securities.

 

(5)   "Convertible Securities" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for shares of Common
Stock.

 

(6)   "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

(7)   “Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization, any
other entity and a government or any department or agency thereof.

 

(8)   “Principal Market” means the OTC QB.

 

(B)    From the Closing Date until April 16, 2016, the Company shall not,
directly or indirectly, 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' 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 (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement"), unless the Company
shall have first complied with this Section 4(b)(xvii)(B).

 

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(1)  At least three (3) Business Days prior to any proposed or intended
Subsequent Placement, the Company shall deliver to Holder and the Other Holders
(collectively, the “April 2014 Warrant Holders” and individually, each a “April
2014 Warrant Holder”)) an irrevocable written notice (the "Offer Notice") of any
proposed or intended issuance or sale or exchange (the "Offer") of the
securities being offered (the "Offered Securities") in a Subsequent Placement,
which Offer Notice shall (w) identify and describe the Offered Securities,
(x) describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued, sold
or exchanged, (y) identify the persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued, sold or exchanged and
(z) offer to issue and sell to or exchange with such April 2014 Warrant Holders
at least fifty percent (50%) of the Offered Securities, allocated among such
April 2014 Warrant Holders (a) based on each April 2014 Warrant Holder's pro
rata portion of the aggregate principal amount of Notes purchased under the
Securities Purchase Agreement (the "Basic Amount"), and (b) with respect to each
April 2014 Warrant Holder that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other April 2014 Warrant Holders as such April 2014 Warrant Holder shall
indicate it will purchase or acquire should the other April 2014 Warrant Holders
subscribe for less than their Basic Amounts (the "Undersubscription Amount"),
which process shall be repeated until the April 2014 Warrant Holders shall have
an opportunity to subscribe for any remaining Undersubscription Amount.

 

(2)  To accept an Offer, in whole or in part, each April 2014 Warrant Holder
must deliver a written notice to the Company prior to the end of the third (3rd)
Business Day after such April 2014 Warrant Holder's receipt of the Offer Notice
(the "Offer Period"), setting forth the portion of such April 2014 Warrant
Holder's Basic Amount that such April 2014 Warrant Holder elects to purchase
and, if such April 2014 Warrant Holder shall elect to purchase all of its Basic
Amount, the Undersubscription Amount, if any, that such April 2014 Warrant
Holder elects to purchase (in either case, the "Notice of Acceptance").  If the
Basic Amounts subscribed for by all April 2014 Warrant Holders are less than the
total of all of the Basic Amounts, then each April 2014 Warrant Holder who has
set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each April 2014 Warrant Holder who has subscribed
for any Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such April 2014
Warrant Holder bears to the total Basic Amounts of all April 2014 Warrant
Holders that have subscribed for Undersubscription Amounts, subject to rounding
by the Company to the extent its deems reasonably necessary.  Notwithstanding
anything to the contrary contained herein, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to the April 2014 Warrant Holders a new Offer
Notice and the Offer Period shall expire on the second (2nd) Business Day after
such April 2014 Warrant Holder's receipt of such new Offer Notice.

 

10

 

 

(3)   The Company shall have three (3) Business Days from the expiration of the
Offer Period above to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
April 2014 Warrant Holders (the "Refused Securities") pursuant to a definitive
agreement (the "Subsequent Placement Agreement") but only to the offerees
described in the Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring Person or Persons or less favorable to
the Company than those set forth in the Offer Notice and (ii) to publicly
announce (a) the execution of such Subsequent Placement Agreement, and (b)
either (x) the consummation of the transactions contemplated by such Subsequent
Placement Agreement or (y) the termination of such Subsequent Placement
Agreement, which shall be filed with the SEC on a Current Report on Form 8-K
with such Subsequent Placement Agreement and any documents contemplated therein
filed as exhibits thereto.

 

(4)   In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4(b)(xvii)(B)(3) above), then each April 2014 Warrant Holder may, at its
sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that shall
be not less than the number or amount of the Offered Securities that such April
2014 Warrant Holder elected to purchase pursuant to Section 4(b)(xvii)(B)(2)
above multiplied by a fraction, (i) the numerator of which shall be the number
or amount of Offered Securities the Company actually proposes to issue, sell or
exchange (including Offered Securities to be issued or sold to the April 2014
Warrant Holders pursuant to Section 4(b)(xvii)(B)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of the
Offered Securities.  In the event that any April 2014 Warrant Holder so elects
to reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the April 2014 Warrant Holders in accordance with
Section 4(b)(xvii)(B)(1) above.
 

(5)   Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the April 2014 Warrant Holders shall acquire from the
Company, and the Company shall issue to the April 2014 Warrant Holders, the
number or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4(b)(xvii)(B)(4) above if the April 2014 Warrant
Holders have so elected, upon the terms and conditions specified in the
Offer.  The purchase by the April 2014 Warrant Holders of any Offered Securities
is subject in all cases to the preparation, execution and delivery by the
Company and the April 2014 Warrant Holders of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
April 2014 Warrant Holders and their respective counsel.

 

11

 

 

(6)   Any Offered Securities not acquired by the April 2014 Warrant Holders or
other persons in accordance with Section 4(b)(xvii)(B)(3) above may not be
issued, sold or exchanged until they are again offered to the April 2014 Warrant
Holders under the procedures specified in this Section 4(b)(xvii)(B).

 

(7)   The Company and the April 2014 Warrant Holders agree that if any April
2014 Warrant Holder elects to participate in the Offer, (x) neither the
Subsequent Placement Agreement with respect to such Offer nor any other
transaction documents related thereto (collectively, the "Subsequent Placement
Documents") shall include any term or provisions whereby any April 2014 Warrant
Holder shall be required to agree to any restrictions in trading as to any
securities of the Company owned by such April 2014 Warrant Holder prior to such
Subsequent Placement, and (y) any registration rights set forth in such
Subsequent Placement Documents shall be similar in all material respects to the
registration rights contained in the Registration Rights Agreement.

 

(8)  Notwithstanding anything to the contrary in this Section 4(b)(xvii)(B) and
unless otherwise agreed to by the April 2014 Warrant Holders, the Company shall
either confirm in writing to the April 2014 Warrant Holders that the transaction
with respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case in such a
manner such that the April 2014 Warrant Holders will not be in possession of
material non-public information, by the fifteenth (15th) Business Day following
delivery of the Offer Notice.  If by the fifteenth (15th) Business Day following
delivery of the Offer Notice no public disclosure regarding a transaction with
respect to the Offered Securities has been made, and no notice regarding the
abandonment of such transaction has been received by the April 2014 Warrant
Holders, such transaction shall be deemed to have been abandoned and the April
2014 Warrant Holders shall not be deemed to be in possession of any material,
non-public information with respect to the Company.  Should the Company decide
to pursue such transaction with respect to the Offered Securities, the Company
shall provide each April 2014 Warrant Holders with another Offer Notice and each
April 2014 Warrant Holders will again have the right of participation set forth
in this Section 4(b)(xvii)(B).  The Company shall not be permitted to deliver
more than one such Offer Notice to the April 2014 Warrant Holders in any 60 day
period.

 

(9)   Notwithstanding anything to the contrary contained herein, the
restrictions contained in this Section 4(b)(xvii)(B) shall not apply in
connection with the issuance of any Excluded Securities. “Excluded Securities”
means any Common Stock issued or issuable: (i) in connection with any Approved
Stock Plan, (ii) upon exercise of any Options or Convertible Securities which
are outstanding on the day immediately preceding the Closing Date; provided,
that the terms of such Options or Convertible Securities are not amended,
modified or changed on or after the Closing Date, (iii) to commercial lenders,
lessors, vendors or other third parties in connection with bona fide commercial
credit arrangements, equipment financings, commercial property lease
transactions or similar transactions for primarily other than equity financing
purposes, and (iv) to strategic alliance partners, strategic partners or in
connection with acquisitions or mergers, provided, that (x) the primary purpose
of such issuance is not to raise capital, (y) the purchaser or acquirer of the
securities in such issuance solely consists of either (A) the actual
participants in such strategic or commercial alliance or strategic or commercial
partnership, (B) the actual owners of such assets or securities acquired in such
acquisition or merger or (C) the stockholders, partners or members of the
foregoing Persons and (z) the number or amount of securities issued to such
Persons by the Company shall not be disproportionate to each such Person’s
actual participation or ownership, as applicable, in such strategic or
commercial alliance or strategic or commercial partnership or ownership of such
assets or securities or entity to be acquired by the Company, as applicable.

 

12

 

 

(10)  Notwithstanding anything to the contrary contained herein, in the event
that a Subsequent Placement is a registered underwritten public offering of the
Company’s Common Stock and the offering price per share for the Common Stock in
such offering is more than eighty five percent (85%) of the Closing Sale Price
of the Common Stock on the date of pricing of such offering, then the amount of
the Offered Securities that the Company shall be required to issue and sell to
or exchange with the April 2014 Warrant Holders, as set forth in
Section 4(b)(xvii)(B)(1)(z) herein, shall be reduced from at least fifty percent
(50%) of the Offered Securities to at least twenty percent (20%) of the Offered
Securities.

 

(xviii) Most Favored Nation. The Company hereby represents and warrants as of
the date hereof and covenants and agrees from and after the date hereof until
April 16, 2016, that none of the terms offered to any Person with respect to any
consent, release, amendment, settlement or waiver relating to the terms,
conditions and transactions contemplated hereby (each a “Settlement Document”),
is or will be more favorable to such Person than those of the Holder and this
Agreement. If, and whenever on or after the date hereof until April 16, 2016,
the Company enters into a Settlement Document, then (i) the Company shall
provide notice thereof to the Holder immediately following the occurrence
thereof and (ii) the terms and conditions of this Agreement shall be, without
any further action by the Holder or the Company, automatically amended and
modified in an economically and legally equivalent manner such that the Holder
shall receive the benefit of the more favorable terms and/or conditions (as the
case may be) set forth in such Settlement Document, provided that upon written
notice to the Company at any time the Holder may elect not to accept the benefit
of any such amended or modified term or condition, in which event the term or
condition contained in this Agreement shall apply to the Holder as it was in
effect immediately prior to such amendment or modification as if such amendment
or modification never occurred with respect to the Holder. The provisions of
this Section 4(b)(xviii) shall apply similarly and equally to each Settlement
Document.

 

5.CONDITIONS TO ComPANY'S OBLIGATIONs hereunder.

 

The obligations of the Company to the Holder hereunder are subject to the
satisfaction 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 the Holder with prior written notice
thereof:

 

(a)   The Holder shall have duly executed this Agreement and delivered the same
to the Company; and

 

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

 

13

 

 

6.CONDITIONS TO HOLDER'S OBLIGATIONs HEREUNDER.

 

The obligations of the Holder hereunder are subject to the satisfaction of each
of the following conditions, provided that these conditions are for the Holder's
sole benefit and may be waived by the Holder in respect of itself at any time in
its sole discretion by providing the Company with prior written notice thereof:

 

(a)   The Company shall have duly executed this Agreement and delivered the same
to the Holder;

 

(b)   The Other Holders shall have duly executed and delivered to the Company
the Other Agreements;

 

(c)   All of the outstanding Warrants shall have been exchanged for Exchange
Shares pursuant to this Agreement and the Other Agreements;

 

(d)   The Company shall have obtained the listing of all of the Exchange Shares
on each Eligible Market on which the Common Stock is then listed for trading;

 

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

 

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

 

(g)   Counsel for the Company shall have delivered a legal opinion to the
Company's transfer agent instructing the transfer agent to deliver the Exchange
Shares as set forth on the Holder's signature page attached hereto, to the
Holder's balance account with The Depository Trust Company through its Deposit /
Withdrawal at Custodian system in accordance with the provisions of Section 3(a)
hereof, and the Company's transfer agent shall have delivered such Exchange
Shares to such balance account;

 

(h)   The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the transactions
contemplated hereby; and

 

14

 

 

(i)    Since the date hereof, no event that could be reasonably expected to
cause a Material Adverse Effect shall have occurred.

 

7.TERMINATION.

 

In the event that the Closing shall not have occurred by on or before three (3)
Business Days from the date hereof, due to the Company's or the Holder's failure
to satisfy the conditions set forth in Sections 5 and 6 hereof (and the
nonbreaching party's failure to waive such unsatisfied conditions(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 without
liability of any party to any other party. Upon such termination, the terms
hereof shall be null and void.

 

8.MISCELLANEOUS.

 

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

 

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

 

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

 

15

 

 

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

 

(e)   Entire Agreement; Amendments. This Agreement shall supersede all other
prior oral or written agreements among the Holder, the Company, their Affiliates
and persons acting on their behalf with respect to the matters discussed herein
and therein, and this Agreement, and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein. No provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and the Holder, and any amendment
to this Agreement made in conformity with the provisions of this Section 8(f)
shall be binding on the Holder and the Company. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No consideration shall be offered or paid to any Other
Holder to amend or consent to a waiver or modification of any provision of any
of the Other Agreements unless the same consideration also is offered to the
Holder.

 

(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) or by electronic mail; or (iii) 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

 

16

 

 

With a copy to:

 

LKP Global Law, LLP 

1901 Avenue of the Stars, Suite 480 

Los Angeles, California 90067 

Telephone:      (424) 239-1890 

Facsimile:       (424) 239-1882 

Attention:        Kevin K. Leung, Esq. 

E-mail:             kleung@lkpgl.com

 

If to the Holder:

 

To the address set forth on the Holder’s Signature Page hereto.

 

(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 Warrants.

 

(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.

 

(i)     Survival. The representations, warranties and covenants of the Company
and the Holder contained herein shall survive the Closing and delivery of the
Exchange Shares.

 

(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.

 

(k)     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.

 

(l)     Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the transactions contemplated
hereby, if any.

 

(m)    Independent Nature of Holder's Obligations and Rights. The obligations of
the Holder under this Agreement are several and not joint with the obligations
of any Other Holder, and the Holder shall not be responsible in any way for the
performance of the obligations of any Other Holder under any Other Agreement.
Nothing contained herein or in any Other Agreement, and no action taken by the
Holder pursuant hereto, shall be deemed to constitute the Holder and Other
Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holder and Other Holders are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement or any Other Agreement and the
Company acknowledges that, to the best of its knowledge, the Holder and the
Other Holders are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement or any Other
Agreement. The Company and the Holder confirm that the Holder has independently
participated in the negotiation of the transactions contemplated hereby with the
advice of its own counsel and advisors. The Holder shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement, and it shall not be necessary for any
Other Holder to be joined as an additional party in any proceeding for such
purpose.

  

[Signature Page Follows]

 

17

 

 

IN WITNESS WHEREOF, the Holder and the Company have caused their respective
signature pages to this Agreement to be duly executed as of the date first
written above.

 

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

 

 

[Signature Page to Exchange Agreement]

 

 

  

IN WITNESS WHEREOF, the Holder and the Company have caused their respective
signature pages to this Agreement to be duly executed as of the date first
written above.

 

  HOLDER:       [               ]       By:     Name:       Title:    

 

  Address:                       Tel:     Fax:     Email:            

Number of Holder’s Warrant Shares:

                      Number of Holder’s Exchange Shares2:            

  

DWAC Instructions:

 

_________________________

 

_________________________

 

_________________________

 

_________________________

 

 

 

2 Insert the number of shares of Common Stock equal to 90% of the number of
shares of Common Stock issuable upon exercise in full of the Holder's Warrants
(without regard to any limitations on exercise), rounded up to the nearest whole
number.

 

 

 

[Signature Page to Exchange Agreement]