Document:

Exhibit
10.3

 

SECOND
AMENDMENT TO SUBORDINATION AND INTERCREDITOR AGREEMENT

  

THIS
SECOND AMENDMENT TO SUBORDINATION AND INTERCREDITOR AGREEMENT, dated as of September 19, 2017 (this “Amendment”),
to the Subordination and Intercreditor Agreement dated as of September 1, 2016 (as further amended, restated, supplemented or
otherwise modified from time to time, the “Intercreditor Agreement”) is entered into by and among Longboard
Capital Advisors LLC (the “Subordinated Agent”), Ener-Core, Inc., a Delaware corporation (“Borrower”),
Ener-Core Power, Inc., a Delaware corporation (the “Guarantor”), Anthony Tang, as a Senior Lender (as defined
below) (the “Senior L/C Lender”), and Empery Tax Efficient, LP in its capacity as collateral agent for the
Senior Note Lenders (as defined below) (together with its successors and assigns, the “Agent”).

 

WITNESSETH:

 

WHEREAS,
the Borrower is entering into an additional securities purchase agreement, dated as of the date hereof, pursuant to which it will
issue and sell additional convertible senior secured notes, and

 

WHEREAS,
the parties desire to amend the Intercreditor Agreement to include the additional securities purchase agreement and related notes
as “Senior Note Debt”.

 

NOW,
THEREFORE, in consideration of the agreements herein contained, and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.            Definitions.
All capitalized terms not otherwise defined herein and defined in the Intercreditor Agreement shall have the meanings ascribed
to such terms in the Intercreditor Agreement.

 

2.            Amendment
to Definition of Senior Note Agreements. The first sentence in Recital A to the Intercreditor Agreement is hereby amended
and restated in its entirety, to read as follows:

 

“Borrower,
Agent and Senior Note Lenders have entered into (i) a Securities Purchase Agreement dated as of April 22, 2015, (ii) a Securities
Purchase Agreement dated as of May 7, 2015, (iii) a Securities Purchase Agreement dated as of November 23, 2016, (iv) those Amendment
Agreements dated as of November 23, 2016 and (vi) a Securities Purchase Agreement dated as of September 19, 2017 (collectively,
as each may be amended, restated, supplemented or otherwise modified from time to time, the “Senior Note Agreements”)
pursuant to which, among other things, Senior Note Lenders have agreed, subject to the terms and conditions set forth in the Senior
Note Agreements, to purchase, or receive upon the amendment and restatement of existing senior secured notes of the Borrower,
senior secured notes from Borrower.”

  

     

     

    

 

3.             Amendment
to Legend. The legend in Section 2.9 of the Intercreditor Agreement is hereby amended and restated in its entirety, to read
as follows:

   

“This
instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in that certain
Subordination and Intercreditor Agreement, dated as of September 1, 2016 (as the same may be amended or otherwise modified from
time to time pursuant to the terms thereof, the “Subordination Agreement”), by and among Longboard Capital
Advisors LLC (the “Subordinated Agent”), Ener-Core, Inc., a Delaware corporation (“Borrower”),
Ener-Core Power, Inc., a Delaware corporation (the “Guarantor”), Anthony Tang, as a Senior Lender (as defined
therein) (the “Senior L/C Lender”), and Empery Tax Efficient, LP in its capacity as collateral agent for the
Senior Note Lenders (as defined therein) (together with its successors and assigns, the “Agent”), to the indebtedness
(including interest) owed by the Credit Parties (as defined therein) pursuant to that certain (a)(i) Securities Purchase Agreement
dated as of April 22, 2015, (ii) Securities Purchase Agreement dated as of May 7, 2015, (iii) Securities Purchase Agreement
dated as of November 23, 2016, (iv) Amendment Agreements dated as of November 23, 2016 and (v) Securities Purchase Agreement dated
as of September 19, 2017, in each case of clauses (i), (ii), (iii) and (v), by and among Borrower, Agent and the Senior Note Lenders
and, in the case of clause (iv), by and between the Borrower and the existing holders of certain senior secured notes of the Borrower,
and (b) Backstop Security Support Agreement, dated as of November 2, 2015, by and between the Borrower and Senior L/C Lender,
in each case, as amended, restated, supplemented, refinanced or otherwise modified from time to time; and each holder of this
instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement.”

 

4.             Miscellaneous.

 

(a)       Amendments.
No amendment, modification, termination, or waiver of any provision of this Amendment will be effective without the written
agreement of the parties hereto.

 

(b)       Section
Titles. Section and subsection titles in this Amendment are included for convenience of reference only and shall have no substantive
effect.

 

(c)       Applicable
Law. This Amendment shall be construed in all respects in accordance with and governed by the internal laws of the State of
New York, without giving effect to any conflicts of laws provisions.

 

(d)       Counterparts.
This Amendment and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and delivered, will be deemed an original and all of
which shall together constitute one and the same instrument.

 

(e)       Continued
Effectiveness of the Intercreditor Agreement. Each party to this Amendment hereby (a) acknowledges and consents to this Amendment,
and (b) confirms and agrees that the Intercreditor Agreement shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects, except that on and after the date hereof, all references to the Intercreditor Agreement
shall mean the Intercreditor Agreement as amended by this Amendment.

  

[Remainder
of this page intentionally left blank]

 

    	 	2	 

     

    

 

IN
WITNESS WHEREOF, this Amendment is executed by each of the undersigned as of the date first above written.

  

	 	SUBORDINATED
    AGENT:
	 	 
	 	Longboard
    Capital Advisors LLC
	 	 
	 	By	 
	 	Name:
	 	Title:

   

 

 

 

Second
Amendment To

Subordination and intercreditor agreement

 

     

     

    

 

IN
WITNESS WHEREOF, this Amendment is executed by each of the undersigned as of the date first above written.

   

	 	CREDIT
    PARTIES:
	 	 
	 	ENER-CORE,
    INC.
	 	 
	 	By	 
	 	Name:
	 	Title:
	 	 
	 	ENER-CORE
    POWER, INC.
	 	 
	 	By	 
	 	Name:
	 	Title:

  

 

 

 

Second
Amendment To

Subordination and intercreditor agreement

 

     

     

    

 

IN
WITNESS WHEREOF, this Amendment is executed by each of the undersigned as of the date first above written.

  

	 	SENIOR
    L/C LENDER:
	 	 
	 	 
	 	Anthony
    Tang

  

 

 

 

Second
Amendment To

Subordination and intercreditor agreement

 

     

     

    

 

IN
WITNESS WHEREOF, this Amendment is executed by each of the undersigned as of the date first above written.

   

	 	AGENT:
	 	 
	 	EMPERY
    TAX EFFICIENT, LP
	 	 
	 	By:
    Empery Asset Management, LP, its authorized agent
	 	 
	 	By	 
	 	Name:
    Brett Director
	 	Title:
    General Counsel

 

 

 

Second
Amendment To

Subordination and intercreditor
agreementExhibit 10.4

 

THIRD
AMENDMENT TO THE PLEDGE AND SECURITY AGREEMENT

 

This
THIRD AMENDMENT TO THE PLEDGE AND SECURITY AGREEMENT, dated as of September 19, 2017 (this “Third Amendment”),
is entered into by and among Ener-Core, Inc., a Delaware corporation (the “Company”), Ener-Core Power,
Inc. (“ECP”), a Delaware corporation, and each other Subsidiary of the Company and ECP hereafter becoming
party hereto (together with the Company and ECP, each a “Grantor” and, collectively, the “Grantors”),
and Empery Tax Efficient, LP, in its capacity as collateral agent (in such capacity, the “Collateral Agent”)
for (a) the buyers listed in the Schedule of Buyers (the “April 2015 Investors”) attached to that certain Securities
Purchase Agreement dated April 22, 2015 entered into by and among the Company and the April 2015 Investors (as the same may be
amended, restated or otherwise modified from time to time, the “April 2015 SPA”), (b) the buyers listed in
the Schedule of Buyers (the “May 2015 Investors”) attached to that certain Securities Purchase Agreement, dated
as of May 7, 2015 entered into by and among the Company and the May 2015 Investors (as the same may be amended, restated or otherwise
modified from time to time, the “May 2015 SPA”), (c) the buyers listed in the Schedule of Buyers (the “November
2016 Investors”) attached to that certain Securities Purchase Agreement, dated as of November 23, 2016 entered into
by and among the Company and the November 2016 Investors (as the same may be amended, restated, joined or otherwise modified from
time to time, the “November 2016 SPA”), (d) the holders of the notes amended, restated and delivered pursuant
to those Amendment Agreements (collectively, the “Amendment Agreements”), pursuant to which the Company amended
and restated certain notes held by the April 2015 Investors and the May 2015 Investors for senior secured convertible notes, and
(e) the buyers listed in the Schedule of Buyers (the “September 2017 Investors”) attached to that certain Securities
Purchase Agreement, dated as of September 19, 2017 entered into by and among the Company and the September 2017 Investors (as
the same may be amended, restated, joined or otherwise modified from time to time, the “September 2017 SPA”).
Reference is hereby made to that certain Pledge and Security Agreement dated April 23, 2015 by and among the Company and the Collateral
Agent (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Security Agreement”).
Capitalized terms used herein and not otherwise defined shall have the definitions ascribed to such terms in the Security Agreement.

 

RECITALS

 

WHEREAS,
the Company had previously entered into the April 2015 SPA with the April 2015 Investors pursuant to which the Company issued
senior secured promissory notes (as amended, restated, replaced or otherwise modified from time to time in accordance with the
terms thereof (including pursuant to the Amendment Agreements), collectively, the “April 2015 Notes”) and warrants
(“April 2015 Warrants”) to the April 2015 Investors (the financing transaction contemplated under the April
SPA is hereinafter referred as the “April 2015 Financing”).

 

WHEREAS,
as required under the terms of the April 2015 SPA, the Company entered into Security Agreement with the Collateral Agent for the
benefit of the April 2015 Investors, pursuant to which the Company granted the Collateral Agent a security interest in all personal
property (with certain exceptions as set forth the in Security Agreement) for the benefit of the April 2015 Investors in order
to secure all of the Company’s obligations under the April 2015 SPA and the April 2015 Notes.

 

WHEREAS,
as required under the terms of the May 2015 SPA, the Company amended the Security Agreement with the Collateral Agent, pursuant
to which the Company granted the Collateral Agent a security interest in all personal property (with certain exceptions as set
forth the in Security Agreement) for the benefit of the May 2015 Investors in order to secure all of the Company’s obligations
under the May 2015 SPA and the senior secured convertible notes issued pursuant to the May 2015 SPA (as amended, restated, replaced
or otherwise modified from time to time in accordance with the terms thereof (including pursuant to the Amendment Agreements),
collectively, the “May 2015 Notes”).

 

     

     

    

 

WHEREAS,
on November 23, 2016, in connection with the consummation of the transactions contemplated by the November 2016 SPA, the Grantors
executed and delivered to the Collateral Agent a second amendment to the Pledge and Security Agreement that granted to the Collateral
Agent (i) for the benefit of the November 2016 Investors, a security interest in all personal property (with certain exceptions
specified below) of the Grantors to secure all of the Company’s obligations under the November 2016 SPA and the senior secured
notes issued pursuant thereto (as such notes may be amended, restated, replaced or otherwise modified from time to time in accordance
with the terms thereof, collectively, the “November 2016 Notes”) and each of the other agreements entered into
by the parties thereto in connection with the transactions contemplated by the November 2016 SPA; and (ii) for the benefit of
the April 2015 Investors and the May 2015 Investors, a security interest in all personal property (with certain exceptions specified
below) of the Grantors to secure all of the Company’s obligations under the Amendment Agreements and the senior secured
notes amended, restated and delivered pursuant thereto and each of the other agreements entered into by the parties thereto in
connection with the transactions contemplated by the Amendment Agreements.

 

WHEREAS,
it is a condition precedent to the September 2017 Investors consummating the transactions contemplated by the September 2017 SPA
that the Grantors execute and deliver to the Collateral Agent a further amendment to the Pledge and Security Agreement providing
for their grant to the Collateral Agent, for the benefit of the September 2017 Investors, of a security interest in all personal
property (with certain exceptions specified below) of the Grantors to secure all of the Company’s obligations under the
September 2017 SPA and the senior secured notes issued pursuant thereto (as such notes may be amended, restated, replaced or otherwise
modified from time to time in accordance with the terms thereof, collectively, the “September 2017 Notes”)
and each of the other agreements entered into by the parties thereto in connection with the transactions contemplated by the September
2017 SPA.

 

WHEREAS,
the Company and the Collateral Agent desire to enter into this Third Amendment in order amend the Security Agreement to include
the September 2017 Investors as secured parties to whom the Company is also granting the aforementioned security interests such
that the September 2017 Notes shall rank pari passu in priority with the April 2015 Notes, the May 2015 Notes and the November
2016 Notes, with the holders of each of the April 2015 Notes, the May 2015 Notes, the November 2016 Notes and the September 2017
Notes having a first priority perfected security interest in all of the current and future assets of the Company and all direct
and indirect Subsidiaries of the Company, except for the “Excluded Assets” (as such term is defined in the Security
Agreement).

 

WHEREAS,
each Grantor has determined that the execution, delivery and performance of this Third Amendment directly benefits, and are in
the best interest of the Company and such Grantor.

 

NOW,
THEREFORE, in consideration of the premises and the agreements herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

 

SECTION
1.      Amendments to the Security Agreement.

 

(a)       The
definition of the term “Securities Purchase Agreement” in the first paragraph of the Security Agreement is
hereby amended and restated such that it means, collectively, the April 2015 SPA (as defined below), the May 2015 SPA (as defined
below), the November 2016 SPA (as defined below), the Amendment Agreements (as defined below) and the September 2017 SPA (as defined
below).

 

    	 	2	 

     

    

 

(b)       The
fifth recital in the Security Agreement is hereby deleted, and the following recitals set forth below are hereby added after the
fourth recital in the Security Agreement:

 

“WHEREAS,
the Company and each party listed as a “Buyer” (each a “September 2017 Buyer”, and collectively,
the “September 2017 Buyers”) on the Schedule of Buyers (as such schedule may be amended, restated, joined or
otherwise modified from time to time) attached to that certain Securities Purchase Agreement by and among the Company and the
September 2017 Buyers dated September 19, 2017 (as the same may be amended, restated, joined or otherwise modified from time to
time, the “September 2017 SPA”), are parties to the September 2017 SPA, pursuant to which the Company is required
to sell, and the September 2017 Buyers shall purchase or have the right to purchase, senior secured notes (the “September
2017 Notes”).”

 

“WHEREAS,
(a) each of the April 2015 Buyers, the May 2015 Buyers, the November 2016 Buyers and the September 2017 Buyers are hereinafter
referred to individually as a “Buyer” and collectively, the “Buyers”, (b) the April 2015
Notes, the May 2015 Notes, the November 2016 Notes and the September 2017 Notes are hereinafter referred to collectively as the
“Notes”, and (c) collectively, the (1) April 2015 SPA, the April 2015 Notes and each of the other agreements
entered into by the parties thereto in connection with the transactions contemplated by the April 2015 SPA, (2) the May 2015 SPA,
the May 2015 Notes and each of the other agreements entered into by the parties thereto in connection with the transactions contemplated
by the May 2015 SPA, (3) the November 2016 SPA, the November 2016 Notes and each of the other agreements entered into by the parties
thereto in connection with the transactions contemplated by the November 2016 SPA, (4) the Amendment Agreements and each of the
other agreements entered into by the parties thereto in connection with the transactions contemplated by the Amendment Agreements
and (5) the September 2017 SPA, the September 2017 Notes and each of the other agreements entered into by the parties thereto
in connection with the transactions contemplated by the September 2017 SPA are hereinafter referred to as the “Combined
Transaction Documents”.”

 

(c)       Section
1(c) of the Security Agreement is hereby amended to add the following term and definition:

 

“Note
Required Holders” means the holders of a majority of the outstanding principal amount of April 2015 Notes, the April
2015 Notes, the November 2016 Notes and the September 2017 Notes, taken together, and shall include Empery Asset Master Ltd. (“Empery”)
so long as Empery or any of its affiliates holds any April 2015 Notes, any May 2015 Notes, any November 2016 Notes or any September
2017 Notes.”

 

    	 	3	 

     

    

 

SECTION
2.      Effectiveness. This Third Amendment
shall become effective as of the date hereof only upon the satisfaction of all of the following conditions precedent (the date
of satisfaction of such conditions being referred to herein as the “Third Amendment Effective Date”):

 

(a)       The
Collateral Agent shall have received a counterpart signature page of this Third Amendment duly executed by each of the Grantors;
and

 

(b)       The
representations and warranties contained in Section 3 of this Third Amendment are and will be true and correct in all material
respects on and as of the Third Amendment Effective Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier date, in which case they were true and correct in
all material respects on and as of such earlier date.

 

SECTION
3.      Representations and Warranties.
In order to induce the Collateral Agent to enter into this Third Amendment and to amend the Security Agreement in the manner provided
herein, each Grantor represents and warrants to the Agent, that the following statements are true and correct in all material
respects:

 

(a)       This
Third Amendment has been duly executed and delivered by each Grantor party hereto and each of this Third Amendment and the Security
Agreement as amended hereby is the legal, valid and binding obligation of each Grantor, and is enforceable against each Grantor
in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors’ rights generally and by equitable principles relating to enforceability.

 

(b)       The
execution, delivery and performance of this Third Amendment and the Security Agreement as amended hereby, are within each Grantor’s
corporate powers and have been duly authorized by all necessary corporate actions of each Grantor. The execution, delivery and
performance of this Third Amendment and the existing Security Agreement as amended hereby (a) do not require any consent or approval
of, registration or filing with, or any other action by, any governmental authority or other regulatory body or any other Person,
except (A) such as have been obtained or made and are in full force and effect, (B) for filings and registrations necessary to
perfect Liens created pursuant to the Notes and the Transaction Documents, or (C) consents or approvals the failure of which to
obtain would not reasonably be expected to result in a Material Adverse Effect (as defined in the Securities Purchase Agreement),
(b) will not violate any law applicable to any Grantor which would result in a Material Adverse Effect (as defined in the Securities
Purchase Agreement), (c) will not result in a default under any material indebtedness, and (d) will not result in the creation
or imposition of any Lien on any asset of any Grantor, except Liens created pursuant to the Notes and the Transaction Documents.

 

SECTION
4.      References to and Effect on the Security
Agreement.

 

(a)       On
and after the Third Amendment Effective Date, each reference in the Security Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of like import referring to the Security Agreement, and each reference in
the Transaction Documents to the “Pledge and Security Agreement”, “thereunder”, “thereof”
or words of like import referring to the Security Agreement shall mean and be a reference to the Security Agreement, as amended
by this Third Amendment.

 

(b)       Except
as specifically amended by this Third Amendment, the Security Agreement and the Transaction Documents shall remain in full force
and effect and are hereby ratified and confirmed.

 

(c)       The
execution, delivery and performance of this Third Amendment shall not constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of any Collateral Agent or Buyer under, the Security Agreement or any of the other Transaction
Documents.

 

    	 	4	 

     

    

 

SECTION
5.      APPLICABLE LAW. THIS THIRD AMENDMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK

 

SECTION
6.      Counterparts and Facsimile or Electronic
Signatures. This Third Amendment may be executed in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to
a single counterpart so that all signature pages are physically attached to the same document. This Third Amendment may be executed
by fax or electronic mail, in PDF format, and no party hereto may contest this Third Amendment’s validity solely because
a signature was faxed or otherwise sent electronically.

 

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    	 	5	 

     

    

 

IN
WITNESS WHEREOF, each Grantor has caused this Third Amendment to be executed and delivered by its officer thereunto duly authorized,
as of the date first above written.

 

	 	ENER-CORE, INC., a Delaware corporation
	 	 	 
	 	By:	 
	 	Name:	Alain J.
    Castro
	 	Title:	Chief Executive
    Officer
	 	 	 
	 	Address for Notices:
	 	8965 Research Drive, Suite 100
	 	Irvine, California 92618
	 	Attention: Mr. Domonic J. Carney
	 	Facsimile: (949) 616-3399
	 	Email: DJ.Carney@ener-core.com
	 	 	 
	 	ENER-CORE POWER, INC., a Delaware corporation
	 	 	 
	 	By:	           
	 	 	Name:
	 	 	Title:
	 	 	 
	 	Address for Notices:
	 	8965 Research Drive, Suite 100
	 	Irvine, California  92618
	 	Attention: Mr. Domonic J. Carney, CFO
	 	Facsimile: (949) 616-3399
	 	Email: DJ.Carney@ener-core.com

 

Signature
Page to Third Amendment to Pledge and Security Agreement

 

     

     

    

 

ACCEPTED
BY:

 

EMPERY
TAX EFFICIENT, LP,

as
Collateral Agent

 

	By:	Empery Asset Management, LP, its authorized agent

 

	By:	 	 	 
	 	Name: 	Brett Director	 
	 	Title:	General Counsel	 
	 	Address: 	c/o Empery Asset Management, LP	 
	 	 	1
Rockefeller Plaza, Suite 1205	 
	 	 	New
York, NY 10020	 

 

Signature
Page to Third Amendment to Pledge and Security Agreement

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