Current Report Filing (8-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 20, 2014 (August 19, 2014)

Ener-Core, Inc.

(Exact name of registrant as specified in its charter)

Nevada

333-173040

45-0525350

(State or other jurisdiction

of incorporation)

(Commission File No.)

(IRS Employer

Identification No.)

9400 Toledo Way

Irvine, California

92618

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code

949-616-3300

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 3.02

Unregistered Sales of Equity Securities.

On August 19, 2014, the registrant’s board of directors (the “Board”) granted options under the registrant’s 2013 Equity Award Incentive Plan (the “Plan”) to Domonic J. Carney in connection with his appointment as disclosed in Item 5.02 below, which disclosure is incorporated hereby.

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) Departure of Officer

On August 19, 2014, immediately following the filing of the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2014, Kelly Anderson’s term as the registrant’s interim chief financial officer ended pursuant to the terms of her independent consulting agreement with the registrant dated June 26, 2014.

(c) Appointment of New Officer

On August 19, 2014, Domonic J. Carney was appointed as the registrant’s chief financial officer, to be effective August 25, 2014. Until his appointment, Mr. Carney was an independent consultant providing finance, accounting and business strategy services. From March 30, 2012 to October 2012, Mr. Carney served as the chief financial officer for T3 Motion, Inc. (TTTM.PK), an electric vehicle technology company. From March 2005 to February 2012, Mr. Carney served as the chief financial officer for Composite Technology Corporation (CPTC.OB), a manufacturer of high efficiency carbon composite electric transmission conductors and renewable energy wind turbines. Mr. Carney has a Masters in Accounting from Northeastern University and a Bachelor’s Degree in Economics from Dartmouth College.

There is no family relationship between Mr. Carney and any of the registrant’s current directors, executive officers or persons nominated or charged to become directors or executive officers, or those of the registrant’s subsidiary. There are no transactions between the registrant and Mr. Carney that would require disclosure under Item 404(a) of Regulation S-K.

Offer Letter and Executive Employment Agreement

Mr. Carney accepted the foregoing appointment pursuant to an offer letter from the registrant dated August 19, 2014, which provides for an annual base salary of $180,000 and an option under the Plan to purchase 1,500,000 shares of the registrant’s common stock at an exercise price equal to the per share closing price on August 19, 2014, being the fair market value on such date.

In addition to the offer letter, the registrant and Mr. Carney entered into an executive employment agreement dated as of August 19, 2014, which, in addition to his annual compensation as described in the offer letter, provides for his eligibility to annual bonus and other annual incentive compensation that the Board may adopt, as well as benefits that the registrant makes available to other employees. The registrant will also reimburse Mr. Carney for reasonable expenses that he incurs in performing his duties.

The registrant may terminate Mr. Carney’s employment for cause upon written notice if at any time he: (a) engages in willful dishonesty or fraud with respect to the business affairs of the registrant; (b) willfully falsifies any employment or registrant’s records; (c) misappropriates or intentionally damaged the business or property of the registrant, including confidential or proprietary information; (d) is convicted of a felony or crime that involves moral turpitude (including any plea of guilty or nolo contendere); (e) willfully and continuously fails to comply with reasonable written directives of the registrant after written notice thereof and a reasonable opportunity to cure (as described below); or (f) misappropriates any corporate opportunity, or otherwise obtaining personal profit from any transaction which is adverse to the interests of the registrant or to the benefits of which the registrant is entitled. Upon termination for cause, Mr. Carney shall be entitled to his accrued but unpaid base salary, bonuses, benefits and expense reimbursement through his termination date (collectively the “accrued obligations”).

If at any time the registrant terminates or does not renew his employment without cause, or if Mr. Carney terminates his employment during the six months before or after a change in control of the registrant as a result of a material reduction in his duties, responsibilities or compensation, Mr. Carney shall, in addition to the accrued obligations, be entitled to monthly cash severance payment at his base salary rate (less standard withholdings and deductions) and continuing health insurance coverage for up to six months or until he obtains new employment or competes against the registrant’s business, whichever occurs sooner; provided, that if the termination occurs during the six months before or after a change in control of the registrant, then all of Mr. Carney’s unvested option shall also immediately vest.

On the other hand, Mr. Carney may terminate his employment at any time by written notice to the Board; provided that: (a) his resignation will become effective on the earlier of 90 days after his notice or a date that the registrant specifies; and (b) he will be available for 30 days following his effective resignation date to facilitate and cooperate with transition.

The executive employment agreement also contains restrictive covenants prohibiting: (a) competition with the registrant during his employment and for a period of up to 12 months after termination (including contact with or solicitation of the customers, employees or suppliers of the registrant), (b) disparagement of the registrant or its affiliates, and (c) the use or disclosure of confidential business information during or at any time after termination of his employment.

Through the executive employment agreement, Mr. Carney also assigns to the registrant any intellectual property that he may develop during his employment.

Stock Option Agreement

In connection with the option granted under the executive employment agreement, the registrant and Mr. Carney entered into a stock option agreement dated as of August 19, 2014. The agreement provides for the option to vest as follows: (i) 1/8 of the total number of shares after six months from the grant date, (ii) another 1/8 of the total number of shares after twelve months from the grant date, and (ii) 1/48 of the total number of shares each month thereafter.

Copies of the foregoing agreements with Mr. Carney are included with this current report as Exhibits 99.1, 99.2 and 99.3.

Item 8.01

Other Events.

On August 20, 2014, the registrant issued a press release and a letter to its shareholders, copies of which are attached hereto as Exhibits 99.4 and 99.5, respectively, and the information in Exhibits 99.4 and 99.5 is incorporated herein by reference.

The information in Item 8.01 in this current report on Form 8-K and Exhibits 99.4 and 99.5 attached hereto shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such a filing.

Item 9.01

Financial Statement and Exhibits.

(d)

EXHIBITS

Exhibit Number		Description
99.1		Offer Letter from the registrant to Domonic J. Carney dated as of August 19, 2014
99.2		Executive Employment Agreement between the registrant and Domonic J. Carney dated as of August 19, 2014.
99.3		Stock Option Agreement between the registrant and Domonic J. Carney dated as of August 19, 2014.
99.4		Press release dated August 20, 2014.
99.5		Letter to shareholders dated August 20, 2014.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENER-CORE, INC.
Date: August 20, 2014	(Registrant)

	By:	/s/ Alain J. Castro
		Alain J. Castro
		Chief Executive Officer

Exhibit 99.1

August 19, 2014

Domonic J. Carney
4492 Vereda Mar de Ponderosa
San Diego, CA 92130

Re: Employment Offer with Ener-Core, Inc.

Dear DJ,

We are pleased to extend an offer of employment from Ener-Core, Inc. with the title of Chief Financial Officer. With your acceptance of this offer, your employment with Ener-Core will begin full-time on August 25, 2014. The details of this offer are as follows.

With your acceptance of this offer, you will become an employee and member of the executive team, reporting to the Chief Executive Officer as well as the President.

You will be compensated at the annual gross rate of $180,000 ($7,500) paid semi-monthly). Ener-Core will provide you with holidays and paid time off in accordance with the standard corporate policy. As a full-time employee at Ener-Core, you will be eligible to participate in the Ener-Core benefit program which provides a selection of medical, dental, vision and 401k options immediately upon the effective date of full-time employment with Ener-Core. Details of the benefit program and associated costs will be provided to you. You will be required to sign an application, Non-Disclosure Agreement (NDA) and Confidential Information and Invention Assignment Agreement before your start of employment.

In addition to our benefit program, you will be granted an option under the Company’s Stock Incentive Plan (the “Plan”) to purchase 1,500,000 shares of the Company’s common stock at an exercise price equal to the fair market value of the common stock on the date that your employment commences.

Your vesting schedule shall be as follows: (i) 1/8 of the total number of shares will be granted after six months from the Effective Date, ii) an additional 1/8 of the total number of shares will be granted after twelve months from the Effective Date, and (iii) 1/48 of the total number of shares will be granted after each month thereafter. A “Stock Option Agreement” signed by you and an officer of the Company will evidence your stock options.

Under the Immigration Reform and Control Act (IRCA), our company is required to verify the identity and work authorization of all newly hired employees. Therefore, you will be required to complete the Department of Homeland Security form I-9 upon hire. Within three business days of beginning your employment, you will need to supply acceptable documentation (as note on the I-9 form) of your identity and work authorization. The form and acceptable documentation is in the Forms and Policy booklet.

9400 Toledo Way, Irvine, CA 92618

Telephone: 949-616-3300

Fax: 949-616-3399

OUR COMPANY ADHERES TO A POLICY OF EMPLOYMENT-AT-WILL WHICH ALLOWS EITHER PARTY TO TERMINATE THE EMPLOYMENT RELATIONSHIP AT ANY TIME, FOR ANY REASON, WITH OR WITHOUT NOTICE.

This offer is contingent upon: 1) successful completion of your background check, and 2) your successful completion of a pre-employment drug screening.

If you accept this offer of employment, you will begin employment on August 25, 2014. If you have any questions concerning the above details, please contact me at 312-623-6322.

To accept this offer of employment and to authorize placing you on the Ener-Core payroll, please (1) sign and date this letter in the spaces provided below; (2) sign and date the separately provided Application; (3) sign and date the separately provided NDA; (4) sign and date the separately provided Confidential Information and Invention Assignment Agreement; and return them to me no later than August 25, 2014.

Sincerely,

/s/ Alain Castro

Alain Castro

Chief Executive Officer

Ener-Core, Inc.

ACCEPTANCE OF OFFER:

/s/ Domonic J. Carney

Domonic J. Carney

9400 Toledo Way, Irvine, CA 92618

Telephone: 949-616-3300

Fax: 949-616-3399

Exhibit 99.2

ENER-CORE, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (this “Agreement”) is entered into as of August 19, 2014 (the “Effective Date”), by and between Ener-Core, Inc., a Nevada corporation (the “Company”), and Domonic J. Carney (“Executive”).

AGREEMENT

In consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:

1. Duties and Scope of Employment.

(a) Title and Duties. As of the Effective Date, Executive will be employed as the Company’s Chief Financial Officer (“CFO”) and Treasurer reporting to the Chief Executive Officer as well as the President of the Company. During the Employment Term (as defined in Section 2 below), Executive will have authority and render such business and professional services in the performance of Executive’s duties as are customarily associated with Executive’s position within the Company and Executive agrees to perform such other duties and functions as may from time to time be reasonably assigned or delegated to Executive by the Company’s Chief Executive Officer and/or President.

(b) Obligations. During the Employment Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, Executive will perform Executive’s duties faithfully and to the best of Executive’s ability and will devote such time as reasonably necessary to fulfill Executive’s responsibilities in the position. It will be at the Executive’s discretion to determine the time that is reasonable to fulfill this obligations. Executive and the Company agree that the Company represents Executive’s principal business focus. Executive agrees to travel as reasonably necessary to fulfill Executive’s responsibilities in the position. During the Employment Term, Executive agrees that Executive shall maintain loyalty to the Company, shall take no action that would be injurious to the Company interests, and shall comply with all rules, regulations and policies of the Company. During the Employment Term, it shall not be a violation of this Agreement for Executive to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, (iii) manage personal investments and business endeavors, including but not limited to advisory services, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement.

(c) Executive’s Employability. Executive represents and warrants that: (i) Executive has the right to execute, deliver and perform Executive’s duties under this Agreement, and (ii) Executive is not a party to any other agreements, arrangements or obligations (e.g. confidentiality agreements, noncompetition agreements), whether written, oral or implied, which include terms that would limit Executive’s ability to execute, deliver and perform Executive’s duties under this Agreement or which are otherwise inconsistent with this Agreement. This warranty will remain in full force and effect throughout the Employment Term (as defined in Section 2 below).

2. Employment Term. The “Employment Term” under this Agreement will commence on the Effective Date and will continue, unless sooner terminated as provided by this Agreement, for one (1) year thereafter (the “Initial Term”); provided, however, that the Initial Term will automatically be extended for successive one (1) year terms, unless either party gives the other party written notice no less than 30 days prior to the end of the Initial Term or any extension thereof stating that this Agreement will terminate at the expiration of the Initial Term or any extension thereof. Notwithstanding anything in this Agreement to the contrary, this Agreement and Executive’s employment will terminate automatically at the conclusion of an unrenewed Initial Term or extension thereof and, in such event, the Company will have no obligation or liability to Executive thereafter except for the obligations of the Company specifically set forth in Sections 7, 8 and 15(a).

3. Compensation.

(a) Base Salary. During the Employment Term, the Company will pay Executive as compensation for Executive’s services a base salary at rate of $180,000 per year (which salary may be increased but not decreased by the Board in its sole discretion) (the “Base Salary”). The Base Salary will be paid in regular installments in accordance with the Company’s normal payroll practices, subject to applicable deductions and withholdings. The first and last payment will be adjusted, if necessary, to reflect a commencement or termination date other than the first or last working day of a pay period.

(b) Annual Bonus. Executive shall be eligible for an annual bonus and/or other annual incentive compensation (collectively the “Annual Bonus”) during the Employment Term, in accordance with any applicable executive bonus plan applicable to Executive as may be adopted by the Board in its sole discretion. Any such Annual Bonus earned by Executive shall be paid no later than seventy-five (75) days following the end of the year during which the Annual Bonus is earned, unless Executive shall elect to defer the receipt of such Annual Bonus pursuant to a Company-sponsored deferred compensation plan then in effect to the extent the Company’s bonus and deferred compensation plans allow for such a deferral.

(c) Equity Incentive/Option Plan Eligibility. Executive shall be eligible to participate in the Company’s equity incentive plan or incentive option plan, as applicable, with grants and vesting schedules as determined by the Board (at their sole discretion) from time to time. Any such grant shall be conditioned upon Executive’s execution of such documentation (such as, but not limited to, a grant notice) as the Board deems reasonably necessary in connection with such grant.

4. Employee Benefits. During the Employment Term, Executive will be considered a full-time employee and be entitled to participate in the employee benefit plans and programs currently and hereafter maintained by the Company of general applicability to other Employees of Executive’s classification at the Company (the “Benefits”). The Company reserves the right to cancel or change the Benefit plans and programs it offers to its employees at any time.

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5. Vacation. Executive shall be entitled to fifteen (15) days of Paid Time Off per year, which shall accrue based on years of service with the Company, in accordance with Company’s standard policy, as may be amended from time to time, with the timing and duration of specific vacations mutually and reasonably agreed to by Executive and the Company.

6. Business Expenses. During the Employment Term, the Company will reimburse Executive for reasonable, customary and documented business, travel and related expenses, incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time (the “Expense Reimbursement”). Reimbursement of expenses under this Section 6 shall be made within 30 days following submission of a completed expense reimbursement form and Executive shall submit such completed expense reimbursement form no later than six (6) months after such expense was incurred by Executive.

7. Termination; Severance.

(a) Termination by the Company for Cause. The Company may terminate Executive’s employment for “Cause” (defined below). If the Company terminates Executive’s employment or gives written notice of a non-renewal of this Agreement for Cause, then this Agreement shall terminate without further obligations to Executive, other than for payment of the sum of: (i) Executive’s Base Salary and bonuses, if any, through the date of termination to the extent not therefore paid; (ii) any earned but unused vacation and PTO time; and (iii) Expense Reimbursement, to the extent not theretofore paid (the sum of the amounts described in clauses (i), (ii) and (iii) shall be hereinafter referred to as “Accrued Obligations”).

(b) Termination by the Company other than for Cause, Death or Disability.

(i) In General. Except as otherwise provided in Section 7(b)(ii) below, if the Company terminates Executive’s employment or gives written notice of a non-renewal of this Agreement without Cause, then Executive will be entitled to receive (i) Accrued Obligations, (ii) monthly cash severance payments at the Base Salary rate, less standard withholdings and deductions, paid during the six (6) month period immediately following the termination date of Executive’s employment and (iii) continuation of Company provided health insurance coverage or reimbursement to Executive for equivalent COBRA coverage paid during the six (6) month period immediately following the termination date of Executive’s employment ; provided, however, that Executive’s right to receive any of the payments set forth in clause (ii) or (iii) above will be conditioned upon Executive and Executive’s spouse, if Executive has one at the time, executing, and not revoking, a general release of claims and affirmation of Executive’s other continuing obligations under this Agreement in a form acceptable to and provided by the Company (including without limitation an unconditional release, representations that no claims have been filed, confidentiality, nondisparagement, transition, no admission, etc.). All such payments will cease as of the earlier of the date on which Executive obtains new employment or the date on which Executive engages (or assist any other person or entity to engage) in any activity competitive with the business of the Company. If Executive obtains new full-time employment during the severance period or engages in a competitive activitiy, Executive is responsible for notifying the Company immediately.

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(ii) During Change of Control Period. If, during the six (6)-month period immediately preceding or following a Change of Control, (A) the Company terminates Executive’s employment or gives written notice of a non-renewal of this Agreement without Cause, or (B) Executive terminates his employment pursuant to Section 7(c) hereof due to a material change or reduction in the duties, responsibilities or compensation of Executive, then Executive will be entitled to receive (i) Accrued Obligations, (ii) monthly cash severance payments at the Base Salary rate, less standard withholdings and deductions, paid during the six (6) month period immediately following the termination date of Executive’s employment, (iii) continuation of Company provided health insurance coverage or reimbursement to Executive for equivalent COBRA coverage paid during the six (6) month period immediately following the termination date of Executive’s employment and (iv) immediate vesting of all unvested outstanding options issued in the Executive’s name; provided, however, that Executive’s right to receive any the payments set forth in clause (ii), (iii) or (iv) above will be conditioned upon Executive and Executive’s spouse, if Executive has one at the time, executing, and not revoking, a general release of claims and affirmation of Executive’s other continuing obligations under this Agreement in a form acceptable to and provided by the Company (including without limitation unconditional release, representations that no claims have been filed, confidentiality, nondisparagement, transition, no admission, etc.). All such payments will cease as of the earlier of the date on which Executive obtains new employment or the date on which Executive engages (or assist any other person or entity to engage) in any activity competitive with the business of the Company. If Executive obtains new full-time employment during the severance period or engages in a competitive activity, Executive is responsible for notifying the Company immediately.

(c) Termination by Executive Generally. Executive may terminate this Agreement at any time by written notice of resignation (a “Resignation Notice”) to the Board; provided that:

(i) Executive’s resignation will not become effective until the earlier of (A) 90 days after the date the Resignation Notice is given to the Board, or (B) the date on which the Company specifies that such resignation will become effective; and

(ii) For a period of 30 days following the effective date of Executive’s resignation, Executive shall make himself or herself available to the Company and/or its agents (A) for the purpose of facilitating an efficient transition of Executive’s job related responsibilities and duties to other designated individuals, and (B) to respond to questions from the Company and/or its agents regarding information and/or activities in which Executive was engaged while employed by the Company. The parties acknowledge and agree that (I) this Section 7(c)(ii) is premised on Executive’s reasonable efforts to cooperate, and the Company’s reasonable use of Executive’s time, and (II) Executive will not be compensated for Executive’s time under this Section 7(c)(ii) except that if Executive is required for more than 40 hours of service under this Section 7(c)(ii), then Executive shall be compensated at an hourly rate of mutual agreement but not less than the equivalent hourly rate of pay for the Base Salary in effect at the effective date of the termination.

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(d) Definitions.

(i) Cause. For purposes of this Agreement, “Cause” means (A) Executive’s willful dishonesty or fraud with respect to the business affairs of the Company; (B) Executive’s willful falsification of any employment or Company records; (C) Executive’s misappropriation of or intentional damage to the business or property of the Company, including the improper use or disclosure of the confidential or proprietary information of the Company (excluding damage of little or no consequence to the business or property of the Company); (D) Executive’s conviction (including any plea of guilty or nolo contendere) of a felony or crime that involves moral turpitude; (E) Executive’s willful and continued failure to comply with reasonable written directives of the company after Executive’s receipt of written notice by the Company of the refusal and a reasonable opportunity to cure (as described below); or (F) the misappropriation of any corporate opportunity, or otherwise obtaining personal profit from any transaction which is adverse to the interests of the Company or to the benefits of which the Company is entitled. The Company must give Executive written notice of its intention to terminate Executive for Cause, which notice must (I) state the grounds on which the proposed termination for Cause is based, and (II) be given no later than 90 days after the later of occurrence of the event giving rise to these grounds or the discovery thereof by the Board. Executive must have 30 days after receiving this notice to cure these grounds (if cure is possible). If Executive fails to cure these grounds within 30 days, “Cause” will exist for the Company’s termination of Executive’s employment. For purposes of this definition, no act, or failure to act, by Executive will be considered “willful” if done, or omitted to be done, by Executive in good faith and in the reasonable belief that the act or omission was in the best interest of the Company or required by applicable law.

(ii) Change of Control. For purposes of this Agreement, a “Change of Control” occurs when:

(1) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended from time to time (“Exchange Act”)), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (“Voting Power”), unless such “person” was the “beneficial owner” of at least 20% of the Voting Power as of the Effective Date and does not become the “beneficial owner” of 80% or more of the Voting Power; or

(2) The Company consummates the sale, exchange, lease or other disposition of all or substantially all of its assets to a person or group of related persons, as such terms are defined or described in Sections 3(a)(9) and 13(d)(3) of the Exchange Act; or

(3) The Company consummates a merger, reorganization, recapitalization, consolidation, or similar transaction with any other corporation or other business entity, in one transaction or a series of related transactions (except one in which (A) the holders of the Company’s voting securities outstanding immediately before such merger or consolidation continue to hold at least 50% of the voting power in the surviving entity, or (B) a transaction in which a single party (or a group of affiliated parties) acquires voting securities of the Company and the holders of voting securities of the Company immediately before the transaction do not dispose of a majority of their interests in the Company in connection with that transaction); or

(4) The Company dissolves or liquidates; or For purposes of this Section 7(e)(ii), “Company” includes Company’s affiliates and successors.

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(e) Limited Rights to Severance Payments. For clarity, Executive shall only be entitled to any severance payments of any kind pursuant to this Agreement as provided under Section 7(b) hereof. No Severance Payment obligations shall arise out of (i) a termination or nonrenewal of this Agreement by the Company with Cause, or (ii) a termination of this Agreement by the Executive except as otherwise provided under Section 7(b)(ii)(B).

8. Death or Disability. The Employment Term and Executive’s employment will terminate upon Executive’s death or Disability. Upon termination of Executive’s employment for either death or Disability, Executive or Executive’s estate, as the case may be, will be entitled to receive any Accrued Obligations and health benefits as described in section 7(b). In addition, Executive or Executive’s estate, as the case may be, may be granted (i) additional vesting of then-unvested stock or stock options, as applicable, (ii) a proportional amount of any earned and unpaid Annual Bonus based on Executive’s performance through the date of termination, (iii) severance payments as described in section 7(b); provided, however, that any payments of items (i), (ii), and (iii) will be conditioned upon Executive (or Executive’s estate) and Executive’s spouse (if Executive has one at the time), executing, and not revoking, a general release of claims and affirmation of Executive’s other continuing obligations under this Agreement in a form acceptable to and provided by the Company (including without limitation unconditional release, representations that no claims have been filed, confidentiality, nondisparagement, transition, no admission, etc.). Upon termination of Executive’s employment due to death or Disability pursuant to this Section, Executive or Executive’s estate, as the case may be, will have no further rights to any compensation or any other benefits under this Agreement except as noted in this section. All other benefits, if any, due Executive following Executive’s termination for death or Disability will be determined in accordance with the Company’s plans and practices. For purposes of this Agreement, “Disability” means Executive’s inability to perform one or more of the essential functions of Executive’s job due to Executive’s physical or mental impairment, with or without reasonable accommodation as required by law, for any period aggregating more than 120 days in any 365 consecutive day period. If the Company determines that Executive has become Disabled, the Company shall notify Executive of its determination. Executive may then request an accommodation from the Company to assist in his return to work. The Company will determine whether Executive’s request can be accommodated without undue hardship no later than 30 days after Executive requests an accommodation. In the event Executive’s request cannot be accommodated, the Company may, by notice given in the manner provided in this Agreement, terminate the status of Executive as an executive and employee of the Company. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30 day period, Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company so certifies in writing) and Executive in fact resumes such services.

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9. Confidential Information.

(a) Executive covenants that Executive will not use for Executive’s benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any Person other than the Company, any confidential, proprietary or unique information (“Confidential Information”) belonging to, used by or in possession of the Company including, but not limited to, the methods, policies, procedures, techniques, trade secrets, software, products, customer lists or other knowledge or processes used or developed by the Company or other information concerning the Company of which Executive became aware as a result of Executive’s employment with the Company. If Executive is uncertain about whether certain information or material is Confidential Information, then Executive shall treat that information or material as Confidential Information. The foregoing restrictions will not apply to (i) information which is or becomes, other than as a result of a breach of this Agreement or a similar confidentiality obligation generally available to the public, or (ii) the disclosure of information required pursuant to a subpoena or other legal process; provided that Executive will notify the Company, in writing, of the receipt of any such subpoena or other legal process requiring such disclosure immediately after receipt thereof and the Company will have a reasonable opportunity to quash such subpoena or other legal process prior to any disclosure by Executive. For purposes of this Agreement the word “Person” means and includes any: (i) natural person; (ii) firm; (iii) partnership; (iv) joint venture; (v) corporation; (vi) limited liability company; (vii) limited liability partnership; (viii) business venture; (ix) trust; (x) association; (xi) consumer organization; (xii) state, local or federal government agency, branch, department or other governmental unit; (xiii) bankruptcy or other trustee; or (xiv) any other Person.

(b) During the Employment Term and after the expiration thereof, regardless of the reason, Executive shall not use the Confidential Information for the benefit of Executive or any other Person other than the Company. During the Employment Term, Executive shall keep the Confidential Information in the strictest confidence and share it with other Persons only for the benefit of the Company. Moreover, from and after the expiration of the Employment Term, regardless of reason, Executive will not disclose any Confidential Information to any Persons other than the Company, in whole or in part, in any matter either directly or indirectly.

(c) From and after the expiration or termination of Executive’s employment with the Company, regardless of the reason, Executive shall not make copies of any Confidential Information in any form or manner whatsoever (including, but not limited to, computer printouts, computer tapes, discs, etc.). Moreover, immediately upon and after the expiration or termination of Executive’s employment with the Company, regardless of the reason, Executive shall surrender, transfer possession of, and deliver (collectively, “Transfer”) to the Company all originals and all copies, in whatever form (whether written, contained on computer media or otherwise) of: (i) all Confidential Information; and (ii) all property, notes, manuals, reports, documents and other things that relate in any way, directly or indirectly, to any Confidential Information (subparts (i) and (ii) are referred to collectively as “Information”), as are in Executive’s possession, custody or control. If requested by the Company, the Transfer shall be accompanied by a written statement executed by Executive, certifying that: (A) all originals and all copies of all Information have been returned to the Company; and (B) Executive has not retained any original or copy of any Information. Notwithstanding anything to the contrary contained in this Section 9(c), Executive may comply with any properly issued subpoena or order of an administrative or judicial body, provided that Executive shall give the Company written notice of such subpoena or order at least 10 days prior to Executive’s compliance therewith.

(d) Executive shall also execute the Company’s standard confidentiality and invention assignment agreement, as it may be updated from time to time.

(e) All restrictive covenants contained in this Section 9 shall survive termination of this Agreement.

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10. Restrictive Covenants.

(a) No Solicitation. Executive acknowledges and agrees that the Company has devoted, and will devote, significant effort, time, and expense to the creation and development of the goodwill of the customers that they serve and the personnel that they employ, that the identities of many of the customers and prospects represent trade secrets of the Company, and that Executive will benefit from, and will be expected to nurture these relationships while Executive is employed by the Company. Executive further acknowledges and agrees that it would be unfair and would cause irreparable injury to the Company if, following the expiration or termination of Executive’s employment with the Company, regardless of the reason, Executive were to solicit any of the Company’s customers with whom Executive had direct contact during Executive’s employment with the Company to promote or sell any product or service that competes with the Company or its affiliates, or to induce any of the Company’s officers, directors, managers, members, employees, subcontractors or agents (collectively, “Employees”) with whom Executive had direct contact during Executive’s employment with the Company to terminate their relationship with the Company. Accordingly, Executive agrees that, during the Time Period set forth in Section 10(d) below, Executive shall not, directly or with or through any other Person, directly or indirectly, whether as an officer, director, partner, employee, agent, member, stockholder, or in any other capacity whatsoever: (i) call on, solicit, divert, interfere with or take away, or attempt to call on, solicit, divert, interfere with or take away, any of the projects, business, clients, customers or prospects (or employees of such customers or prospects) of the Company with whom Executive had contact during Executive’s employment with the Company by promoting or selling any product or service that competes with the Company or its affiliates, either for Executive’s own benefit or for any other Person; provided that, to insure Executive’s compliance with this subpart (i), promptly following the expiration or termination of Executive’s employment with the Company, regardless of the reason, the Company will provide Executive a list of customers and prospects of the Company with whom Executive had direct contact during Executive’s employment with the Company; or (ii) solicit, attempt to solicit, cause the solicitation of, induce or influence, or seek to induce or influence, any employees of the Company on the effective date of Executive’s termination with whom Executive had direct contact during Executive’s employment with the Company (excluding any Employees who are no longer in the employ of the Company), for employment by any Person other than the Company and/or to terminate their relationship with the Company.

(b) Non-Disparagement. Executive agrees that, during Executive’s employment with the Company and thereafter, Executive shall not, directly or with or through any other Person, directly or indirectly, make, issue, release, or authorize any written or oral statements to any third Person that are derogatory or defamatory in nature with respect to the Company, or any of their respective members, directors, officers, employees, subcontractors or agents.

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(c) Irreparable Harm. The restrictive covenants contained in Section 9 and this Section 10 are, and shall be construed as constituting, agreements independent of any other Sections of this Agreement. Executive acknowledges and agrees that the restrictions and covenants contained in Section 9 and this Section 10 are reasonable and necessary in order to protect the Company’s legitimate business and proprietary interests, and that any violation thereof would result in irreparable injury to the Company. Accordingly, if Executive violates any of the restrictive covenants contained in Section 9 or this Section 10, then: (i) the Company shall be authorized and entitled to obtain from any Court of competent jurisdiction preliminary and permanent injunctive relief, as well as an equitable accounting of all profits and benefits arising out of such violation, which rights and remedies shall be cumulative and in addition to any other right and remedy to which the Company shall be entitled; and (ii) the Company’s obligation to make any payment or provide any benefit under this Agreement, including without limitation any severance payment, shall cease immediately.

(d) Enforceability.

(i) Definition of “Time Period”. For purposes of Section 10, “Time Period” shall mean and include the period beginning as of the date of Executive’s employment with the Company and ending after the shorter of (A) the number of months after Executive ceases to be employed by the Company (for whatever reason, whether voluntarily or involuntarily) equal to the number of full months that Executive was actually employed by the Company under this Agreement; or (B) 12 months after Executive ceases to be employed by the Company (for whatever reason, whether voluntarily or involuntarily), provided, however, that if a court of competent jurisdiction determines that such 12-month period is unenforceable, then 6 months after Executive ceases to be employed by the Company (for whatever reason, whether voluntarily or involuntarily).

(ii) Enforceability of Covenants. Notwithstanding Section 10(d), should any court of competent jurisdiction determine that any of the covenants in this Agreement are unreasonable as to duration or scope, the covenants shall be enforceable as provided herein with respect to such duration or scope as the court determines to be reasonable.

(e) Severability. The remaining provisions of this Section 10 shall not otherwise be affected by a court’s actions described in this Section 10.

11. Intellectual Property.

(a) For purposes of this Agreement, the term “Intellectual Property” shall mean and include discoveries, concepts, ideas, and improvements to existing technology whether or not written down or otherwise converted to tangible form, patents, designs, trademarks, trade names, goodwill, copyrights, all rights in inventions, designs, processes, formulae, notations, improvements, know-how, plans, models, artistic works and all other forms of industrial or intellectual property (in each case in any part of the world and whether or not registered or registerable and to the fullest extent thereof and for the full period thereof and all extensions and renewals thereof) and all appplications for registration thereof and all rights and interests, present and future, thereto and therein.

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(b) Employee acknowledges that there is no Intellectual Property conceived, designed, originated, written, discovered, developed, learned, created, reduced to practice, or made (collectively, “Develop”, “Develops”, and/or “Developed”, as appropriate) by Executive, alone or with others, prior to execution of this Agreement that is not listed and described on Schedule B to this Agreement. Executive shall promptly disclose in writing to the Company, and to the extent necessary assign to the Company (and/or any successor, subsidiary or affiliate thereof, as determined by the Company) any and all Intellectual Property that Executive Develops during Executive’s employment with the Company, whether such is Developed solely or jointly with others, whether or not patentable or registerable under copyright or similar statutes, and whether or not such conception, design, origination, writing, discovery, development, creation, reduction to practice, or making involves the use of the time, facilities, equipment or personnel of the Company (and/or any successor, subsidiary or affiliate thereof) (“Inventions”). Executive acknowledges and agrees that any and all such Inventions are “works for hire” under applicable law, and all right, title and interest therein shall belong to the Company (and/or any successor, subsidiary or affiliate thereof, as determined by the Company). Executive further agrees to assign, and does hereby assign, to the Company (and/or any successor, subsidiary or affiliate thereof, as determined by the Company) all right, title and interest in and to any and all such Inventions and agrees to execute all documents deemed necessary or desirable by the Company in connection therewith, including patent and/or copyright assignments, and to cooperate both during Executive’s employment and after the termination or expiration of the Agreement, regardless of the reason, at the Company’s expense, in all further actions deemed necessary or desirable to confirm, register, protect or enforce the rights therein of the Company (and/or any successor, subsidiary or affiliate thereof). Notwithstanding anything to the contrary contained in this Section 11: (i) this Section 11 shall not apply to any Inventions of Executive that qualify fully under the provisions of California Labor Code Section 2870, the provisions of which are set forth in Schedule A, and (ii) the assignment obligations and rights do not relate to any Inventions Developed on Executive’s own time using no resources of the Company (and/or any successor, subsidiary or affiliate thereof) and which do not relate to the business, actual or reasonably contemplated, of the Company (and/or any successor, subsidiary or affiliate thereof). Executive (a) represents and warrants that Executive has identified on Schedule B all Intellectual Property, if any, Developed by Executive (alone or with others) in which Executive claims any ownership or other right, and (b) agrees that any Intellectual Property that is not identified on Schedule B was not Developed before commencement of Executive’s employment by the Company.

(c) If any Person makes any claim and/or files a lawsuit or other proceeding (collectively, “Proceedings”) against the Company alleging any infringement of its Intellectual Property rights by reason of the use or exploitation of any Intellectual Property rights Developed by Executive, then Company shall indemnify, defend and hold Executive harmless from such Proceedings; provided, however that (i) Executive will promptly give the Company written notice of any such Proceedings; (ii) the Company will give Executive all reasonable assistance in connection with the Proceedings at Company’s cost and expense.

12. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation or benefits pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. None of the obligations of Executive under this Agreement may be assigned or transferred. Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.

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13. Notices. All notices, requests, demands and other communications called for under this Agreement will be in writing and will be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, or sent by facsimile or by other electronic means directed to the party to be notified at the address or facsimile number indicated for such party on the signature page to this Agreement, or at such other address or facsimile number as such party may designate by 10 days’ advance written notice to the other parties hereto. All such notices and other communications will be deemed given upon personal delivery, 3 days after the date of mailing, or upon confirmation of facsimile transfer.

14. Severability. In the event that any provision(s) of this Agreement becomes or is declared by an arbitrator or a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without such provision(s).

15. Indemnification.

(a) The Company agrees to hold Executive harmless for, from and to defend and indemnify Executive against any and all liabilities, losses, costs, damages and expenses including without limitation, reasonable attorneys’ fees and expenses arising out of any acts and omissions of Executive in connection with Executive’s position, provided, that Executive acted in good faith and in a manner Executive reasonably believed to be in or not opposed to the best interests of the Company and/or upon advice of the Company’s counsel or directive of the Board.

(b) Executive agrees to hold the Company harmless for, from and to defend and indemnify the Company against any and all liabilities, losses, costs, damages and expenses including without limitation, reasonable attorneys’ fees and expenses arising out of Executive’s breach of this Agreement.

16. Arbitration.

(a) Executive and the Company agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, will be settled by binding arbitration to be held in Costa Mesa, California in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) The arbitrator(s) will apply California law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law.

(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.

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17. Integration/Waiver. This Agreement and the confidentiality and invention assignment agreement described in Section 9(d) above represent the entire agreement and understanding between the parties as to the subject matter herein and supersede all prior or contemporaneous agreements whether written or oral. No waiver, alteration or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.

18. Tax Withholding. All payments made pursuant to this Agreement will be subject to applicable taxes and other withholdings or deductions authorized or required by law.

19. Governing Law; Consent to Personal Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. EACH PARTY EXPRESSLY CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE CENTRAL DISTRICT OF CALIFORNIA SUBJECT TO THE ARBITRATION PROVISION SET FORTH IN SECTION 16.

20. Attorneys’ Fees. In the event of arbitration or litigation arising from this Agreement, the prevailing party will be entitled to such party’s reasonable attorneys’ fees and costs and expenses including expert witness fees. For purposes of this clause, the term “prevailing party” means the net winner of the dispute, taking into account the claims pursued, the claims on which the pursuing party was successful, the amount of money sought, the amount of money awarded, and offsets or counterclaims pursued (successfully or unsuccessfully) by the other party.

21. Construction of Agreement. The parties have participated jointly in the negotiating and drafting of this Agreement. If a question concerning intent or interpretation arises, no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship.

22. Captions. Titles or captions contained in this Agreement are for convenience and are not intended to affect the substantive meaning of any provision.

23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

24. Code Section 409A. To the fullest extent applicable, amount and other benefits payable under this Agreement are intended to be exempt from the definition of “nonqualified deferred compensation” under section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) in accordance with one or more of the exemptions available under the final Treasury regulations promulgated under Section 409A and, notwithstanding anything in the Agreement to the contrary, to the extent that any such amount or benefit is or becomes subject to Section 409A due to a failure to qualify for an exemption from the definition of nonqualified deferred compensation in accordance with such final Treasury regulations, this Agreement must be interpreted and administered to the extent possible, or amended, to comply with the applicable requirements of Section 409A with respect to these amounts or benefits.

[Signature page follows]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.

	“COMPANY”
	Ener-Core, Inc.

	By:	/s/ Alain Castro
	Name:	Alain Castro
	Title:	Chief Executive Officer

	Address:

	9400 Toledo Way
	Irvine, CA 92618

	Fax #: 949-616-3399

	“EXECUTIVE”

	/s/ Domonic J. Carney
	Domonic J. Carney

	Address:

	4492 Vereda Mar de Ponderosa
	San Diego, CA 92130

Schedule A

California Labor Code Section 2870

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

Schedule B

1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or proprietary information of the Company, other than information I have learned from the Company in the course of being hired: _______________________________________

2. Reserved Creations. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement:________________________________

Signature: /s/ Donomic J. Carney

Print Name: Domonic J. Carney

Date: August 19, 2014

Exhibit 99.3

ENER-CORE, INC.

2013 EQUITY AWARD INCENTIVE PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the 2013 Equity Award Incentive Plan shall have the same defined meanings in this Stock Option Agreement (the “Option Agreement”).

I. NOTICE OF GRANT

Optionee’s Name:	Domonic J. Carney

Optionee’s Address:	4492 Vereda Mar de Ponderosa
	San Diego, California 92130

You have been granted an option to purchase common stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

Grant Number

Date of Grant	August 19, 2014

Vesting Commencement Date	February 19, 2015

Exercise Price per Share	$0.15

Total Number of Shares Granted	1,500,000

Total Exercise Price	$225,000.00

Type of Option:	____ Incentive Stock Option

	X Nonstatutory Stock Option

Term/Expiration Date:	August 19, 2020

Exercise and Vesting Schedule:

This Option shall be exercisable in whole or in part, and this Option (and any Shares with respect to which the Optionee exercises this Option) shall vest according to the following vesting schedule, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

1/8 of Total Number of Shares Granted ……….. February 19, 2015

1/8 of Total Number of Shares Granted ……….. August 19, 2015

1/48 of Total Number of Shares Granted ……… after each full month thereafter

Termination Period:

This Option may be exercised, to the extent it is then vested, for three (3) months after Optionee ceases to be a Service Provider. Upon death or Disability of the Optionee, this Option may be exercised, to the extent it is then vested, for twelve (12) months after Optionee ceases to be Service Provider. In no event shall this Option be exercised later than the Term/Expiration Date as provided above.

II. AGREEMENT

A. Grant of Option. The Administrator of the Company hereby grants to the Optionee named in the Notice of Grant above (the “Optionee”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant above, at the exercise price per Share set forth in the Notice of Grant above (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Ener-Core, Inc. 2013 Equity Award Incentive Plan (the “Plan”), in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”).

B. Exercise of Option. This Option shall be exercisable during its term in accordance with the provisions of Section 9 of the Plan as follows:

1. Right to Exercise.

(a) This Option shall be exercisable cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at the election of the Optionee, this Option may be exercised in whole or in part at any time as to Shares that have not yet vested. Vested Shares shall not be subject to the Company’s repurchase right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit C-1).

(b) As a condition to exercising any rights granted under this Option for Unvested Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.

(c) As a condition to exercising any rights granted under this Option, the Optionee shall execute the Company’s then-current stockholders agreement(s) applicable to holders of common stock in the Company.

(d) This Option may not be exercised for a fraction of a Share.

2. Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Shares with respect to which the Optionee exercises this Option (the “Exercised Shares”). This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. Upon an exercise of this Option, all Exercised Shares shall

C. Optionee’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.

D. Lock-Up Period. Optionee hereby agrees that, if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the Securities Act. Such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period.

E. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

1. cash;

2. check;

3. consideration received by the Company under a formal cashless exercise program adopted by the Company (in its discretion) in connection with the Plan; or

4. surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

F. Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.

G. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

H. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.

I. Tax Consequences. Set forth below is a brief summary as of the date of this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

1. Exercise of NSO. There may be a regular federal income tax liability upon the exercise of an NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the Company will be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

2. Exercise of ISO. If this Option qualifies as an ISO, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise.

3. Exercise of ISO Following Disability. If the Optionee ceases to be an Employee as a result of a disability that is not a total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Optionee must exercise an ISO within three months after such termination for the ISO to be qualified as an ISO.

4. Disposition of Shares. In the case of an NSO, if Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option are held for at least one year after exercise and at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within one year after exercise or two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price of the Exercised Shares and the lesser of (i) the Fair Market Value of the Exercised Shares on the date of exercise, or (ii) the sale price of the Exercised Shares. Different rules may apply if the Shares are subject to a substantial risk of forfeiture (within the meaning of Section 83 of the Code) at the time of purchase. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held.

5. Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two years after the Date of Grant, or (ii) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.

6. Section 83(b) Election for Unvested Shares Purchased Pursuant to Options. With respect to the exercise of an Option for Unvested Shares, an election (the “Election”) may be filed by the Optionee with the Internal Revenue Service, within 30 days after the purchase of the Shares, electing pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase. In the case of an NSO, this will result in a recognition of taxable income to the Optionee on the date of exercise, measured by the excess, if any, of the Fair Market Value of the Exercised Shares, at the time the Option is exercised over the purchase price for the Exercised Shares. Absent such an election, taxable income will be measured and recognized by Optionee at the time or times on which the Company’s Repurchase Option lapses. In the case of an ISO, such an election will result in a recognition of income to the Optionee for alternative minimum tax purposes on the date of exercise, measured by the excess, if any, of the Fair Market Value of the Exercised Shares, at the time the Option is exercised, over the purchase price for the Exercised Shares. Absent such an election, alternative minimum taxable income will be measured and recognized by Optionee at the time or times on which the Company’s Repurchase Option lapses. Optionee is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) of the Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-5 for reference.

OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO DETERMINE THE EFFECT OF AND OPTIONEE’S ABILITY TO MAKE AND TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON OPTIONEE’S BEHALF.

J. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of the State of Nevada.

K. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

L. Familiarity with the Plan. Optionee acknowledges receipt of a copy of the Plan and represents that Optionee is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

OPTIONEE		ENER-CORE, INC.

/s/ Domonic J. Carney		/s/ Alain Castro
Signature		By: Alain Castro
		Title: Chief Executive Officer
Dominic J. Carney
Print Name


Spouse signature


Print Name

Residence Address:

Exhibit 99.4

Ener-Core Names Domonic J. Carney as Chief Financial Officer

IRVINE, Calif., August 20, 2014 /PRNewswire/ -- ENER-CORE, Inc. (OTCQB: ENCR), whose proprietary Gradual Oxidation technology and equipment generates clean electric power from low quality and waste gases, announced it named Domonic J. (DJ) Carney, 48, as its chief financial officer. Beginning on August 25, Carney will oversee Ener-Core's finance, accounting, and investor relations responsibilities and will report to CEO Alain Castro.

Castro said, "We have looked quite hard for the right financial executive to work alongside the rest of our team to help us lead Ener-Core into the next phase of its growth and expansion. DJ is a reputable and capable finance executive and has served as CFO at two public companies, most recently focused on global companies in alternative energy, technology, advanced materials and manufacturing. Additionally, he has pertinent experience in the power generation equipment industry, as he provided financial direction to one of the global manufacturers of utility-scale wind turbines and also designed financing structures for large-scale renewable power projects. These experiences will prove valuable for Ener-Core, as the company continues to focus on structuring long-term license agreements with first-tier gas turbine manufacturers and deploying its products into power generation projects around the world. Ener-Core's ability to attract and retain the executives that make up the existing management team, as well as new talented individuals such as DJ, is a true testament to the tremendous market opportunity that we see for this business over the coming years."

Carney added, "Ener-Core brings disruptive and innovative technologies that provide a commercially viable solution into numerous non-traditional energy applications. I believe Ener-Core's Gradual Oxidation technologies can become an industry standard for the conversion of waste gases to clean, economical alternative energy generation, and I am excited to join a company with such significant market potential. I look forward to working with the management team to build Ener-Core's financial strength and capabilities that will help deliver on the company's strategic objectives."

Domonic J. Carney

Mr. Carney has over 24 years of experience that span the broad spectrum of finance, accounting, and operations primarily in technology startups and small cap public companies. Most recently, Mr. Carney was an independent consultant providing finance, accounting and business strategy services including board-level advisory, capitalization and restructuring, capital raises, and business plan services. While at T3 Motion (AMEX/NYSE MKT: TTTM) he developed and implemented a turnaround business and finance strategy for an electric vehicle manufacturer. During his seven years with Composite Technology Corporation (OTC:CPTC), Carney assumed increasing roles ending with CFO, Chief Accounting Officer and Treasurer. CTC's global operations in the regulated electrical and alternative energy sectors included manufacturing, marketing and selling wind turbines (0.5MWh-2.0MWh) under DeWind, Inc. During his tenure, he helped scale CTC from pre-revenue to over $75 million in annual revenues with a peak market cap in excess of $500 million. Mr. Carney started his career at Deloitte & Touche and is a CPA (inactive) in the state of California. He received a B.A. in Economics from Dartmouth College and an M.S in Accounting from Northeastern University.

About Ener-Core, Inc.

Ener-Core designs and manufactures innovative systems for producing continuous energy from a broad range of sources, including previously unusable ultra-low quality gas. The Ener-Core Gradual Oxidizer, our patented oxidation technology, enables the conversion of these gases into useful heat and power with the lowest known associated emissions. With the Ener-Core Gradual Oxidizer matched to gas turbines, Ener-Core offers systems with fuel flexibility and pollution control for power generation. The Gradual Oxidizer can also be customized for integration with larger existing power generation systems to offer unparalleled pollution control and achieve zero emissions.

Ener-Core has developed the 250kW Ener-Core Powerstation FP250 ("FP250"), and its larger counterpart, the 2MW Ener-Core Powerstation KG2-3G/GO, to transform methane gas, especially "ultra-low-Btu gas" from landfills, coal mines, oil fields and other low quality methane sources into continuous clean electricity with near-zero emissions. The Powerstations are specifically engineered for fuel flexibility and modularity, so that these low-Btu gas sources can be used as an energy resource instead of wasted through venting and/or flaring.

With dedication, deep expertise, and broad energy experience, Ener-Core seeks to serve several markets globally, including oil fields, biogas, coal mines, natural gas, emissions control, and utility power generation. For more information, please visit the Ener-Core website: www.Ener-Core.com.

Cautionary Statement Regarding Forward-Looking Statements

Forward-looking statements contained in this press release are made under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Information provided by Ener-Core, Inc., such as online or printed documents, publications or information available via its website may contain forward-looking statements that involve risks, uncertainties, assumptions, and other factors, which, if they do not materialize or prove correct, could cause its results to differ materially from historical results, or those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements containing the words "planned," "expects," "believes," "strategy," "opportunity," "anticipates," and similar words. These statements may include, among others, plans, strategies, and objectives of management for future operations; any statements regarding proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statements of assumptions underlying any of the foregoing. The information contained in this release is as of June 24, 2014. Except as otherwise expressly referenced herein, Ener-Core assumes no obligation to update forward-looking statements.

SOURCE Ener-Core, Inc.

For further information: John Heilshorn, LHA, 212-838-3777, JHeilshorn@lhai.com

Exhibit 99.5

Ener-Core, Inc. Issues Letter to Shareholders

IRVINE, Calif., August 20, 2014 /PRNewswire/ -- ENER-CORE, Inc. (OTCQB: ENCR)

Dear Shareholders,

I've been wishing to provide a public update on the status of Ener-Core's business for quite some time, but have been deeply involved in the negotiations of commercial contracts, as well as on the repurchase of the convertible notes that was announced last week.

I will start this letter by confidently stating that we believe the recent drop in Ener-Core's share price has absolutely no relation to the status and progress of Ener-Core's underlying business. We believe our business fundamentals and the intrinsic value of our business remain intact. To that end, we have been steadfast in our efforts, and I'm pleased to report we have continued to move this business forward, as demonstrated through all of the following milestones:

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Proven Ener-Core's ability to transform industrial air pollution directly into clean power, through early commercial deployment;

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Furthered the successful operations of Ener-Core's commercial installation in the Netherlands, which has been the highest priority of the engineering team;

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Received several more patents for developed intellectual property;

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Entered the final stages of contract negotiations for two sizable and strategically significant commercial contracts that we currently expect to close by October - the only unexpected event in the deployment of our underlying business is that these contracts have taken a bit more time than we had previously planned to reach maturity;

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Hired a seasoned CFO with extensive small-cap public company and renewable energy experience; and

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Repurchased the convertible notes, thereby strengthening our balance sheet.

We continue to believe that Ener-Core's breakthrough technology represents a tremendous financial opportunity for customers and investors as well as carries large implications for our society at large over the years to come. In my humble opinion, disruptive technologies like ours will become the building blocks of this century's future economy. And hence I'm quite proud to be at the helm of the company. Beyond my own continued enthusiasm and firm belief in this business, I'm pleased our talented technology leadership team is as committed as ever. Furthermore, we continue to attract top talents, including our new CFO DJ Carney. All of us have chosen to work at Ener-Core, because we fully comprehend the potential of this technology and are proud to form part of the deployment of this business.

Throughout my entire career, I have had the privilege of being involved with some exciting energy businesses and projects; yet, none of my past challenges have excited me quite as much as Ener-Core. I believe that our company's realistic potential to make a significant contribution to the energy and environmental sectors is nothing short of magnificent. I find it truly unfortunate that the unattractive financing instrument that we took on during the last four months drew the market's perception of our company away from its intrinsic potentials. Now with the convertible notes behind us, I trust we can return shareholders' focus on our goals and achievements building the exciting future of this business.