Document:

FXCB- 2013 10K - EX 10.10

Executive Incentive Compensation Plan
(“EICP”)
2013 Plan 

As Approved by Compensation Committee and Board
April 24, 2013

2013 Executive Annual Incentive Plan 
	
					
	 
	 
	 
	 
	 

Introduction and Objective
Fox Chase Bank’s Executive Incentive Compensation Plan (“EICP”) is designed to recognize and reward executives for their performance and contribution to Company performance. The Plan is designed to reward predefined performance goals that are critical to the Bank’s growth and profitability. This document summarizes the elements and features of the Plan.  
In short, the objectives of the Incentive Plan are to: 
		
	•
	Focus executive attention on key business metrics that support the Bank’s business plan.

		
	•
	Align pay with Bank and individual performance.

		
	•
	Encourage teamwork and collaboration across all areas of the Bank. Our collective contributions will drive improved business results.

		
	•
	Motivate managers and reward the achievement of specific, measurable performance objectives that are aligned with the key strategic business objectives for the Bank.

		
	•
	Provide competitive total cash compensation at targeted performance levels with an opportunity to receive significant rewards for exceeding performance goals  

		
	•
	Enable the Bank to attract and retain the talent needed to drive success. 

Eligibility
		
	•
	Eligibility will be limited to executive positions that have a significant impact on the success of the organization.  Participants will be nominated by the CEO and approved by the Compensation Committee.  Participants for 2013 include the CEO, COO & CCO, CFO, and CLO.

		
	•
	Employees must be employed by July 1 of the plan year in order to be eligible for that year’s incentive. New employees will receive prorated awards based on date of hire.

		
	•
	Participants must be an active employee as of the date of award payout to receive an award, unless they terminate due to reasons of death, disability (as determined by the company) or retirement.  Individuals who terminate for any of these reasons during the plan year will receive a prorated award.  

Performance Period
The performance period and plan operates on a calendar year basis (January 1 - December 31st).   Actual payout awards are made in cash following year-end after Fox Chase Bank’s audited financial results and performance are known.
Incentive Payout Opportunity
Each participant will have a target incentive opportunity based on his/her role at the Bank.  The target incentive will reflect a percentage of base salary and be determined consistent with competitive market practices. The incentive opportunities listed on the table below reflect a range of potential awards.  Actual awards may range from 0% of target (for not achieving minimal performance) to 150% of target (for exceptional performance).  

The table on the following page summarizes the incentive target and opportunity ranges for each participant during the 2013 Plan year. 

	
					
	2013 Short-Term Incentive Targets

	Role
	Below Threshold
	Threshold
(50% of Target)
	Target
(100%)
	Stretch1
(150% of Target)

	CEO
	0%
	17.5%
	35.0%
	52.5%

	Chief Operating/Credit Officer
	0%
	17.5%
	35.0%
	52.5%

	Chief Financial Officer
	0%
	15.0%
	30.0%
	45.0%

	Chief Lending Officer 
	0%
	15.0%
	30.0%
	45.0%

1 In order to achieve stretch payouts, the Bank must at least achieve the predefined threshold level of net income.  

Actual payouts will vary depending on performance relative to the specific performance measures identified for each participant (i.e. the total opportunity will be divided according to the number of performance measures selected for each participant.)  
Performance Measures 
Incentives for all participants will be based on a combination of Bank and Individual performance.  The specific measures and the weights for each measure will vary based on the participant’s role.  The table below shows the allocation of the incentive relative to Bank and Individual performance:
	
			
	Role
	Bank
	Individual

	CEO
	100%
	0%

	Chief Operating/Credit Officer
	60%
	40%

	Chief Financial Officer
	70%
	30%

	Chief Lending Officer 
	65%
	35%

In order to focus all participants on the Bank’s overall success and reinforce our team approach, all participants will be measured relative to two categories of performance, Bank (which range from 60% to 100% of each participant’s incentive award) and Individual (which range from 0% to 40% of each participant’s incentive award):
Long-Term Value of the Company
This measure reflects the executive team’s performance on the following factors: 1) Deploy capital effectively, 2) Hire and retain the right people, 3) Make sound and prudent financial/strategic choices about capital raises and outlays, 4) Make good judgments about risk and pricing and 5) Build high quality earnings. 
Achieve Profit Plan Objectives
This measure reflects our performance relative to several key financial measures.  
þ Core Net Income
þ Earnings Per Share
þ Core Tangible Book Value Per Share
þ Increase in Net Interest Income
þ Limit Increase in Core Non-Interest Expense
þ Core ROA
þ Core ROE
þ Non Performing Assets to Total Assets Ratio

Performance on Long-term Value of the Company will be assessed based on Committee discretion and is intended to provide flexibility to consider factors that are critical to our long-term success.
Performance on Profit Plan Objectives will be evaluated by the Committee at the end of the year.  
The remaining portion of the incentive awards (range from 0% - 35% depending on the participant) is based on a combination of other Bank and/or Individual goals. 
See Appendix A for a detailed summary of the Bank and Individual Goals for each participant for 2013.
Performance Gate 
In order to ensure incentives are funded based on our profits, the Bank must achieve at least threshold level of Net Income for any performance component to pay above target levels.  Threshold Net Income is defined as 80% of our budget/plan for the year.  Stretch is defined as 110% of our budget/plan for the year.  The plan may be adjusted for extraordinary items at the discretion of the Committee with Board approval.
Incentive Payouts
Awards will be paid as a cash bonus within 75 days and following the Plan year-end after Fox Chase Bank’s audited financial results and performance are known. These awards are based on performance relative to the defined goals.  Each participant’s award opportunity is allocated according to the weights for each core performance measure.  

Performance of each specific goal (i.e. Long-term Value to the Company, Achieve Profit Plan Objectives, Drive Efficiency, Achieve Targeted Deposit Growth, Achieve Targeted Loan and Fee Growth, Individual Performance) is calculated independently to determine the payout for the goal.  The sum of the awards for each performance measure determines the total incentive award.  
As described above, if the Bank does not achieve at least 80% of target Net Income, incentive payouts for any one performance measure will be capped at target level.
Board Discretion
The Committee reserves the right to apply positive or negative discretion to the plan as needed to reflect business environment and market conditions that may affect the Bank’s performance and incentive plan funding.  The Compensation Committee reserves the right to amend, modify and adjust payouts as necessary. See “Terms and Conditions” for further details on the Plan provisions.

Terms and Conditions
	
					
	 
	 
	 
	 
	 

Effective Date
This Program is effective January 1, 2013 to reflect plan year January 1, 2013 to December 31, 2013.  The Plan will be reviewed annually by the Bank’s Compensation Committee and Executive Management to ensure proper alignment with the Bank’s business objectives.  The Committee retains the rights as described below to amend, modify or discontinue the Plan at any time during the specified period. The Incentive Plan will remain in effect until December 31, 2013.  
Program Administration
The Plan is authorized and administered by the Compensation Committee, which reports to the Board of Directors.  The Compensation Committee has the sole authority to interpret the Plan and to make or nullify any rules and procedures, as necessary, for proper administration.  Any determination by the Committee will be final and binding on all participants.  The Bank’s Executive Management prepares a quarterly scorecard for each Plan participant and the Compensation Committee reviews and authorizes the payment of each Participant’s Incentive Award. 
Program Changes or Discontinuance
Fox Chase Bank has developed the plan based on existing business, market and economic conditions.  If substantial changes occur that affect these conditions, the Committee may add to, amend, modify or discontinue any of the terms or conditions of the plan at any time. The Committee retains the discretion to adjust results for one-time extraordinary events or adjust the budget/plan (with Board approval). 
The Compensation Committee may, at its discretion subject to Board approval, waive, change or amend the Plan, as it deems appropriate.
Incentive Award Payments
Awards will be paid as a cash bonus within 75 days following the Plan year.   Awards will be paid out as a percentage of a participant’s base salary earned during the year as of December 31 for a given calendar year. Incentive awards will be considered taxable income to participants in the year paid and will be subject to withholding for required income and other applicable taxes. 
The Compensation Committee, in its sole discretion, may elect to distribute all or a portion of an incentive award in Company common stock to satisfy the stock ownership guidelines of Plan participants.  All Company common stock distributed under this Plan will be duly authorized under a Stock benefit plan adopted by the Board of Directors of the Company and approved by its stockholders.
Any rights accruing to a participant or his/her beneficiary under the Plan shall be solely those of an unsecured general creditor of Fox Chase Bank. Nothing contained in the Plan, and no action taken pursuant to the provisions hereof, will create or be construed to create a trust of any kind, or a pledge, or a fiduciary relationship between Fox Chase Bank and the participant or any other person. Nothing herein will be construed to require Fox Chase Bank to maintain any fund or to segregate any amount for a participant’s benefit.  

Clawback Provision    
In the event the Company is required to restate its financial statements, the effect of which negatively impacts reported financial results, participants will be required to forfeit any incentive award earned or distributed during the period for which the restatement is required in excess of what they would have otherwise received based on restated results.  The Compensation Committee has discretion in determining the application of clawbacks and the amounts to be reclaimed under this provision. 
New Hires, Promotions, and Transfers
Participants who are not employed by Fox Chase Bank at the beginning of the Plan year will receive a pro rata incentive award based on their length of employment during a given year.  
A participant whose work schedule changes during the year will be eligible for prorated treatment that reflects his/her time in the different schedules.
If a participant changes his/her role or is promoted during the Plan year, he/she will be eligible for the new role’s target incentive award on a pro rata basis (i.e. the award will be prorated based on the number of months employed in the respective positions.)
Termination of Employment - General
Unless otherwise specified in this Plan, since the Plan is designed to encourage employees to remain in the employment of Fox Chase Bank or its affiliates, a participant must be an active employee of the Bank at the time the award is paid. 
Termination of Employment without Cause
Unless otherwise noted in the Plan, if a Plan participant is terminated by the Bank or the Company without “cause” (as defined below), the participant’s potential incentive award may be prorated by the Compensation Committee.  The Compensation Committee will consider the following factors in its proration process: (i) reason for termination of employment, (ii) level of achievement of the participant’s goals as of the participant’s date of termination, and (iii) other factors the Committee deems relevant to the specific situation.
For purposes of this Plan, a termination for “cause” shall mean termination because of a participant’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform his or her job functions, willful violation of any law, rule, regulations (other than a traffic violation or similar offenses) or the participant’s breach of any cease and desist order issued by the Office of Thrift Supervision  (or any successor agency) or the U.S. Securities and Exchange Commission. 
Voluntary Resignation of Employment or Termination for Cause
If a Plan participant voluntarily resigns or is terminated by the Bank or Company for cause, no incentive award will be paid to the participant.
Voluntary Resignation Upon an Event of Termination
If a Plan participant maintains an employment agreement with the Bank or the Company and terminates his or her employment with the Bank or the Company under the terms of Section 4 of his or her employment agreement, the participant will receive a prorated incentive award.  The Compensation Committee will prorate the award based on the participant’s base salary earned as of his or her termination date or other factors the Compensation Committee deems relevant to the proration process.
Disability, Death and Retirement
Plan participants on long-term disability are not considered “actively employed” for the purposes of the Plan and therefore are not eligible to receive incentive awards during the period in which the participant is on long-term disability, but may earn a pro rata portion based on their period of active service.   Participants on short-term disability may be eligible to participate in the Plan during the period the Participant is on short-term disability, at the discretion of the Compensation Committee.
In the event of death, Fox Chase Bank will pay to the participant’s estate the pro rata portion of the award that had been earned by the participant as of his or her date of death.  The Compensation Committee will determine what portion of the award had been earned based on: (i) the base salary earned by the participant as of his or her date of death and (ii) such other factors as the Committee deems relevant.

Individuals who retire during the Plan Year will receive a prorated award based on their base salary earned as of their retirement date and other factors the Committee deems relevant.  For the purposes of this Plan, retirement is defined as age 65, consistent with guidelines established in Fox Chase Bank’s existing retirement plan. 
Ethics and Interpretation
If there is any ambiguity as to the meaning of any terms or provisions of this plan or any questions as to the correct interpretation of any information contained therein, the Bank’s interpretation expressed by the Board of Directors will be final and binding.
The altering, inflating, and/or inappropriate manipulation of performance/financial results or any other infraction of recognized ethical business standards, will subject the employee to disciplinary action up to and including termination of employment.  In addition, any incentive compensation as provided by the plan to which the employee would otherwise be entitled will be revoked.
Participants who have willfully engaged in any activity, injurious to the Bank, will upon termination of employment, death, or retirement, forfeit any incentive award earned during the award period in which the termination occurred.
Miscellaneous
The Plan will not be deemed to give any participant the right to be retained in the employ of Fox Chase Bank, nor will the Plan interfere with the right of Fox Chase Bank to discharge any participant at any time.
In the absence of an authorized, written employment contract, the relationship between employees and Fox Chase Bank is one of at-will employment. The Plan does not alter this relationship.
This incentive plan and the transactions and payments hereunder shall, in all respect, be governed by, and construed and enforced in accordance with the laws of the state of Pennsylvania.
Each provision in this Plan is severable, and if any provision is held to be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not, in any way, be affected or impaired thereby. 
This plan is proprietary and confidential to Fox Chase Bank and its employees and should not be shared outside the organization.THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER
THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE
STATE LAW IS AVAILABLE.

 

CARDINAL ENERGY GROUP, INC.

STOCK PURCHASE WARRANT

To Purchase _________ Shares of Common Stock

( __________ thousand shares)

 

	No. 2012-	Issue Date: ______________, 2014

 

 THIS CERTIFIES that, for value received, __________________________________________________
(the “Holder”), is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or
after the date hereof, to subscribe for and purchase, from CARDINAL ENERGY GROUP, INC. a Nevada corporation (the “Company”),
of the fully paid non-assessable shares of the Company’s common stock, $0.01 par value per share (“Common Stock”)
at an initial purchase price of $1.00 per share or a lesser price as described herein, provided that such right will terminate,
if not terminated earlier in accordance with the provisions hereof, at 5:00 p.m. (Pacific Time) on December 31, 2019 (the “Expiration
Date”).

 

The purchase price and the number of shares for which this warrant
(the “Warrant”) is exercisable are subject to adjustment, as provided herein.

 

This Warrant was issued in connection with the Company’s private
offering (the “Offering”) of units of the Company’s securities (the “Units”), each Unit consisting
of $50,000 par value 12% Senior Secured Convertible Promissory Notes maturing December 31, 2015 and warrants to purchase 20,000
shares of the Company’s Common Stock until Expiration Date (a “Warrant Share”), pursuant to a Private Placement
Memorandum dated February ____, 2014 (the “Memorandum”) and is subject to the terms of a Subscription Agreement (the
“Subscription Agreement”) incorporated therein to which the initial Holder is a party. Capitalized terms used and not
otherwise defined herein will have the respective meanings ascribed to such terms in the Memorandum.

 

As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

 

(a) The term “Company” shall include
CARDINAL ENERGY GROUP, INC. f/k/a _____________and any corporation that shall succeed or assume the obligations of CARDINAL ENERGY
GROUP, Inc. hereunder.

 

(b) The term “Warrant Shares” includes
(i) the Company’s Common Stock and (ii) any other securities into which or for which any of the Common Stock may be converted
or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

 

(c) The term “Other Securities”
refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise)
which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant,
in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities.

 

(d) The term “Exercise Price” shall
be $1.00 per share or a lesser price per share as described in the Note, subject to adjustment pursuant to the terms hereof.

 

	1.	Number of Shares Issuable upon Exercise.

 

Unless sooner terminated in accordance herewith,
from and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise
of this Warrant in whole or in part, the number of shares of Common Stock of the Company set forth on the first page of this Warrant,
subject to adjustment pursuant hereto, by delivery of an original or fax copy of the exercise notice attached hereto as Exhibit
A (the “Notice of Exercise”) along with payment to the Company of the Exercise Price.

 

    	- 1 -

    	 

    

 

	2.	Exercise of Warrant.

 

(a) The purchase rights represented by this
Warrant are exercisable by the registered Holder hereof, in whole at any time or in part from time to time by delivery of the Notice
of Exercise duly completed and executed at the office of the Company in California (or such other office or agency of the Company
as it may designate by notice in writing to the registered Holder hereof at the address of such Holder appearing on the books of
the Company), and upon payment of the Exercise Price of the shares thereby purchased (cash, bank wire transfer, or by certified
or official bank check payable to the order of the Company in an amount equal to the Exercise Price of the shares thereby purchased);
whereupon the Holder of this Warrant shall be entitled to receive a certificate for the number of Warrant Shares so purchased;
provided that the Company will place on each certificate a legend substantially the same as that appearing on this Warrant, in
addition to any legend required by any applicable state or federal law. If this Warrant is exercised in part, the Company will
issue to the Holder hereof a new Warrant upon the same terms as this Warrant but for the balance of Warrant Shares for which this
Warrant remains exercisable. The Company agrees that upon exercise of this Warrant the Holder shall be deemed to be the record
owner of the shares issued upon exercise as of the close of business on the date on which this Warrant shall have been exercised
as aforesaid. This Warrant will be surrendered at the time of exercise or if lost, stolen, misplaced or destroyed, the Holder will
comply with Section 7 below (b) Certificates for shares purchased hereunder shall be delivered to the Holder hereof within a reasonable
time after the date on which this Warrant shall have been exercised as aforesaid.

 

(c) The Company covenants that all Warrant Shares
which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this
Warrant, be fully paid and non-assessable and free from all preemptive rights, taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue which shall be paid by the Company
in accordance with Section 4 below).

 

	3.	No Fractional Shares.

 

The Company shall not be required to issue fractional
Warrant Shares upon the exercise of this Warrant or to deliver Warrant Certificates that evidence fractional Warrant Shares. In
the event that a fraction of a Warrant Share would, except for the provisions of this Section 3, be issuable upon the exercise
of this Warrant, the Company shall pay to the Holder exercising the Warrant an amount in cash equal to such fraction multiplied
by the Per Share Market Value of the Warrant Share.

 

For purposes of this Warrant, the Per Share
Market Value shall be determined as follows: As used herein, “Per Share Market Value” means on any particular date
(a) the closing bid price per share of Common Stock on such date on the national securities exchange on which the shares of Common
Stock are then listed or quoted, or if there is no such price on such date, then the average of the closing bid and asked prices
on the national securities exchange on the date nearest preceding such date, (b) if the shares of Common Stock are not then listed
or quoted on a national securities exchange, the average of the closing bid and asked prices for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
at the close of business on such date, or (c) if the shares of Common Stock are not then publicly traded, the fair market value
of a share of Common Stock as determined by an appraiser selected in good faith by the Holders of a majority in interest of the
Warrants then outstanding.

 

	4.	Charges, Taxes and Expenses.

 

Issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such
certificates shall be issued in the name of the Holder of this Warrant, or in such name or names as may be directed by the Holder
of this Warrant; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder of this Warrant, this Warrant, when exercised, shall be accompanied by the Assignment Form attached hereto as
Exhibit B (the “Assignment Form”) duly executed by the Holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for Warrant Shares, the Company may require, as a condition thereto, that
the transferee execute an appropriate investment representation as may be reasonably required by the Company.

 

	5.	No Rights as Shareholders.

 

This Warrant does not entitle the Holder hereof
to any voting rights or other rights as a Shareholder of the Company prior to the exercise hereof.

 

	6.	Exchange and Registry of Warrant.

 

This Warrant is exchangeable, upon the surrender
hereof by the registered Holder at the above-mentioned office or agency of the Company, for a new Warrant or Warrants aggregating
the total Warrant Shares of the surrendered Warrant of like tenor and dated as of such exchange. The Company shall maintain at
the above-mentioned office or agency a registry showing the name and address of the registered Holder of this Warrant. This Warrant
may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Company, and
the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

 

    	- 2 -

    	 

    

 

	7.	Loss, Theft, Destruction or Mutilation of Warrant.

 

Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of
indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor (but
with no additional rights or obligations) and dated as of such cancellation, in lieu of this Warrant.

 

	8.	Saturdays, Sundays, Holidays, etc.

 

If the last or appointed day for the taking
of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday,
then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

	9.	Cash Distributions.

 

No adjustment on account of cash dividends or
interest on the Company’s Common Stock or Other Securities that may become purchasable hereunder will be made to the Exercise
Price under this Warrant.

 

	10.	Consolidation, Merger or Sale of the Company.

 

If the Company is a party to a consolidation,
merger or transfer of assets that reclassifies or changes its outstanding Common Stock, the successor corporation (or corporation
controlling the successor corporation or the Company, as the case may be) shall by operation of law assume the Company’s
obligations under this Warrant. Upon consummation of such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets that the holder of a Warrant would have owned immediately after the consolidation,
merger or transfer if the holder had exercised the Warrant immediately before the effective date of such transaction. As a condition
to the consummation of such transaction, the Company shall arrange for the person or entity obligated to issue securities or deliver
cash or other assets upon exercise of the Warrant to, concurrently with the consummation of such transaction, assume the Company’s
obligations hereunder by executing an instrument so providing and further providing for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this Section.

 

	11.	Adjustments in the Exercise Price

 

The number of shares and class of capital stock
purchasable under this Warrant are subject to adjustment from time to time as set forth in this Section.

 

(a) Adjustment for change in capital stock.
If the Company:

 

(i) pays a dividend or makes a distribution
on its Common Stock, in each case, in shares of its Common Stock;

(ii) subdivides its outstanding shares
of Common Stock into a greater number of shares;

(iii) combines its outstanding shares
of Common Stock into a smaller number of shares;

(iv) makes a distribution on its Common
Stock in shares of its capital stock other than Common Stock; or

(v) issues by reclassification of
its shares of Common Stock any shares of its capital stock;

 

then the number and classes of shares purchasable upon exercise
of each Warrant in effect immediately prior to such action shall be adjusted so that the holder of any Warrant thereafter exercised
may receive the number and classes of shares of capital stock of the Company which such holder would have owned immediately following
such action if such holder had exercised the Warrant immediately prior to such action.

 

For a dividend or distribution the adjustment
shall become effective immediately after the record date for the dividend or distribution. For a subdivision, combination or reclassification,
the adjustment shall become effective immediately after the effective date of the subdivision, combination or reclassification.

 

If after an adjustment the Holder, upon exercise
of a Warrant, may receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company
shall in good faith determine the allocation of the adjusted Exercise Price between or among the classes of capital stock. After
such allocation, that portion of the Exercise Price applicable to each share of each such class of capital stock shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock in this Warrant. Notwithstanding the allocation
of the Exercise Price between or among shares of capital stock as provided by this Section, a Warrant may only be exercised in
full by payment of the entire Exercise Price currently in effect.

 

(b) The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of
this Section and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of
the Holders of this Warrant against impairment.

 

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(c.) Each
Warrant shall be non-redeemable and shall expire December 31, 2019 and entitles its holder to purchase one restricted share
of the Company’s Common Stock at an initial exercise price of $1.00 per share, subject to adjustment for stock splits,
dividends and combinations described in the Memorandum and Warrant.

 

Beginning six-months after the issuance of the
Warrants and until the Warrants expire, the Warrant Exercise Price (“EP”), subject to being no less than the Floor
Price, shall at each month-end be adjusted to the lesser of:

 

	 	●	the existing Exercise Price, or
	 	●	an adjusted Exercise Price (“EP”) calculated using the following formula: EP = SP x 110%

 

Where SP equals the VWAP of the Company’s
stock during the most recent six-month period as reported by Bloomberg or its successors.

 

Where Floor Price is defined as:

 

	●	 	Through July 31, 2014:	 	$	1.00	 
	●	 	During the period August 1, 2014 through August 31, 2015:	 	$	0.75	 
	●	 	During the period September 1, 2015 through Expiration Date:	 	$	0.50	 
	●	 	Whenever an event of either Principal Payment Default or Other Payment Default is occurring:	 	$	0.02	 

 

Subject to being no less than the Floor Price,
if at the end of 2014 and any subsequent or partial calendar year’s VWAP of the Company’s Common Stock as reported
by Bloomberg is less than $1.00 per share, the exercise price shall become 80% of the prior month’s exercise price or EP
before making the monthly six-month adjustment described above.

 

	12.	Certificate as to Adjustments.

 

In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrant, the Company at its expense will promptly
cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the
terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company
for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number
of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number
of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment
and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the
Holder of the Warrant and any Warrant agent of the Company (appointed pursuant to Section 16 hereof).

 

	13.	Reservation of Stock Issuable on Exercise of Warrant.

 

The Company will at all times reserve and keep
available, solely for issuance and delivery on the exercise of the Warrant, shares of Common Stock (or Other Securities) from time
to time issuable on the exercise of the Warrant. If the Company has not reserve sufficient shares to accommodate all of its obligations
include these Warrants to be converted into authorized common shares and a Warrant holder notifies the Company of this deficiency,
then the number of common shares into which this Warrant may be exercised shall increase by 1% per day until the transfer agent
has verified in writing that such shares shall have been duly authorized by the Company’s Board of Directors and shareholders
if required.

 

	14.	Assignment; Exchange of Warrant.

 

Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered Holder hereof (a “Transferor”)
with respect to any or all of the shares underlying this Warrant. On the surrender for exchange of this Warrant, with the Transferor’s
duly executed Assignment Form and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, a legal opinion from the Transferor’s counsel that such transfer
is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant
of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Assignment Form (each a “Transferee”),
calling in the aggregate on the face or faces thereof for the number of Warrant Shares called for on the face or faces of the Warrant
so surrendered by the Transferor; and provided further, that upon any such transfer, the Company may require, as a condition thereto,
that the Transferee execute an appropriate investment representation as may be reasonably required by the Company.

 

    	- 4 -

    	 

    

 

	15.	Registration Rights.

 

The Company has agreed to register the Warrant
Shares in any subsequent registration statement filed by the Company with the SEC, so that Holders shall be entitled to sell the
same simultaneously with and upon the terms and conditions as the securities sold for the Company’s account are being sold
pursuant to any such registration statement, subject to such lock-up provisions as may be proposed by the underwriter of said registration
statement (the “Piggyback Registration Right”). There is no guarantee as to a time frame for the filing of such a registration
statement.

 

	16.	Warrant Agent.

 

The Company may, by written notice to each Holder
of a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant, exchanging
this Warrant, and replacing this Warrant, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as
the case may be, shall be made at such office by such agent.

 

	17.	Notices, etc.

 

All notices shall be in writing signed by the
party giving such notice, and delivered personally or sent by overnight courier or messenger or sent by registered or certified
mail (air mail if overseas), return receipt requested, or by telex, facsimile transmission, telegram or similar means of communication.
Notices shall be deemed to have been received on the date of personal, telex, facsimile transmission, telegram or similar means
of communication, or if sent by overnight courier or messenger, shall be deemed to have been received on the next delivery day
after deposit with the courier or messenger, or if sent by certified or registered mail, return receipt requested, shall be deemed
to have been received on the third business day after the date of mailing. Notices shall be sent to the addresses set forth below
each party’s signature on the Subscription Agreement.

 

	18.	Notices of Record Date.

 

In case,

 

(a) The Company takes a record of
the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase any shares of stock of any class
or to receive a dividend, distribution or any other rights; or

 

(b) There is any capital reorganization
of the Company, reclassification of the capital stock of the Company (other than a subdivision or combination of its outstanding
shares of Common Stock), or consolidation or merger of the Company with or into another corporation which does not constitute a
sale of the Company; or

 

(c) There is a voluntary or involuntary
dissolution, liquidation or winding up of the Company;

 

then, and in any such case, the Company shall cause to be mailed
to the Holder, at least 20 business days prior to the date hereinafter specified, a notice stating the date on which (i) a record
is to be taken for the purpose of such dividend, distribution or rights, or (ii) such reclassification, reorganization, consolidation,
merger, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, dissolution, liquidation or winding up.

 

	19.	Amendments and Supplements.

 

(a) The Company may from time to time supplement
or amend this Warrant without the approval of any Holders in order to cure any ambiguity or to be correct or supplement any provision
contained herein which may be defective or inconsistent with any other provision, or to make any other provisions in regard to
matters or questions herein arising hereunder which the Company may deem necessary or desirable and which shall not materially
adversely affect the interest of the Holder. All other supplements or amendments to this Warrant must be signed by the party against
whom such supplement or amendment is to be enforced.

 

(b) Notwithstanding Section 19(a), the Company
may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

 

	20.	Investment Intent.

 

Holder represents and warrants to the Company
that Holder is acquiring the Warrants for investment and with no present intention of distributing or reselling any of the Warrants.

 

    	- 5 -

    	 

    

 

	21.	Certificates to Bear Language.

 

The Warrants and the Warrant Shares issuable
upon exercise thereof shall bear the following legend by which Holder shall be bound:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.”

 

Certificates for Warrants or Warrant Shares without such legend
shall be issued if such Warrants or Warrant Shares are sold pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the “Act”), or if the Company has received an opinion from counsel reasonably satisfactory
to counsel for the Company, that such legend is no longer required under the Act.

 

	22.	Miscellaneous.

 

(a) This Warrant shall be governed by and construed
in accordance with the laws of the State of California without regard to principles of conflicts of laws. The parties submit to
the jurisdiction of the Courts of the County of Los Angeles, State of California or a Federal Court empanelled in the State of
California for the resolution of all legal disputes arising under the terms of this Warrant, including, but not limited to, enforcement
of any arbitration award. The Company and the Holder agree to submit to the jurisdiction of such courts and waive trial by jury.

 

(b) If any action or proceeding is brought by
the Company on the one hand or by the Holder on the other hand to enforce or continue any provision of this Warrant, the prevailing
party’s costs and expenses, including its reasonable attorney’s fees, in connection with such action or proceeding
shall be paid by the other party.

 

(c) In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such
provision that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision
of this Warrant.

 

(d) The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms hereof

 

Signature page follows

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized as of the date first written above.

 

	 	CARDINAL ENERGY GROUP, INC.
	 	a Nevada corporation
	 	 	 
	 	By:	 
	 	 	Timothy Crawford
	 	 	Chief Executive Officer

 

    	- 6 -

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