Exhibit 4.1


 


Execution Version


 


INVESTOR RIGHTS AGREEMENT


 


This Investor Rights
Agreement (this “Agreement”) is made and entered into to be effective as of May 18, 2016 (the “Effective
Date”), by and among Aqua Metals, Inc., a Delaware corporation (the “Company”), and Interstate Emerging
Investments, LLC, a Delaware limited liability company (the “Investor”).


 


WHEREAS, pursuant
to that certain Stock Purchase Agreement, dated as of the date hereof, by and between the Company and the Investor (the “Stock
Purchase Agreement”), the Investor has purchased from the Company, and the Company has issued and sold to the Investor,
shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”), and pursuant to that
certain Credit Agreement dated as of the date hereof, by and between the Company and the Investor (the “Credit Agreement”),
the Company has issued to the Investor (i) a Convertible Term Note (the “Note”) that is convertible into, and
(ii) those certain Warrants to Purchase Common Stock (the “Warrants”) that are exercisable for, additional shares
of Common Stock;


 


WHEREAS, the
Company has agreed to provide the registration and other rights set forth in this Agreement for the benefit of any Holder pursuant
to the Stock Purchase Agreement, the Credit Agreement and the Warrants; and


 


WHEREAS, it
is a condition to the obligations of the Investor and the Company under the Purchase Agreement, the Credit Agreement and the Warrants
that this Agreement be executed and delivered.


 


NOW, THEREFORE,
in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each party hereto, the parties hereby agree as follows:


 


1.           REGISTRATION
RIGHTS.


 


1.1         Definitions.
Capitalized terms used herein without definition shall have the meanings given to them in the Stock Purchase Agreement. The terms
set forth below are used herein as so defined:


 


(a)          Clarke
Key Man Event. The term “Clarke Key Man Event” means Mr. Stephen Clarke ceases to (i) serve as Chief
Executive Officer of the Company or (ii) devote substantially all of his business time and attention to the Company, whether
as a result of resignation, death, disability or otherwise.


 


(b)          Exchange
Act. The term “Exchange Act” means the Securities Exchange Act of 1934, as amended (and any successor thereto)
and the rules and regulations promulgated thereunder.


 


(c)          Excluded
Registration. The term “Excluded Registration” means a registration statement relating solely to the sale
of securities to participants in a Company employee benefit or stock incentive plan, a registration relating to a corporate reorganization
or transaction under Rule 145 of the Securities Act, or a registration in which the only shares of Common Stock being registered
are shares of Common Stock issuable upon conversion of debt securities which are also being registered.


 




     


     


    

 


(d)          Filing
Date. The term “Filing Date” means, with respect to the Registration Statement, the date on which such Registration
Statement is filed with the SEC.


 


(e)          Holder.
The term “Holder” means the Investor or any permitted assignees thereof in accordance with this Agreement.


 


(f)           Liquidated
Damages Multiplier. The term “Liquidated Damages Multiplier” means the product of the Purchase Price times
the number of Registrable Securities requested by Holder to be registered under the Securities Act pursuant to Section 1.2.


 


(g)          Mould
Key Man Event. The term “Mould Key Man Event” means Mr. Selwyn Mould ceases to (i) serve as Chief Operating
Officer of the Company or (ii) devote substantially all of his business time and attention to the Company, whether as a result
of resignation, death, disability or otherwise.


 


(h)          Register,
Registration and Registered. The terms “register,” “registration” and “registered”
refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.


 


(i)           Registrable
Securities. The term “Registrable Securities” means (1) the Shares and the shares of Common Stock issued
or issuable upon conversion of the Note or exercise of the Warrants, and (2) any shares of Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, note, right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, whether by merger, charter amendment, or otherwise, all such shares of
Common Stock described in clause (1) of this Section 1.1(e); excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which rights under this Section 1 are not assigned in accordance with this Agreement
or any Registrable Securities that have been sold to the public or sold pursuant to Rule 144 promulgated under the Securities Act.


 


(j)           Registrable
Securities Then Outstanding. The number of shares of “Registrable Securities then outstanding” shall mean
the number of shares of Common Stock which are Registrable Securities and (1) are then issued and outstanding or (2) are then issuable
pursuant to the exercise or conversion of then outstanding and then exercisable options, warrants, notes or convertible securities.


 


(k)          SEC.
The term “SEC” or “Commission” means the U.S. Securities and Exchange Commission.


 


(l)           Securities
Act. The term “Securities Act” means the Securities Act of 1933, as amended (and any successor thereto)
and the rules and regulations promulgated thereunder.


 




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(m)         Trading
Day. The term “Trading Day” means any day on which shares of Common Stock are traded on the NASDAQ Capital
Market (or the principal securities exchange on which shares of Common Stock are then traded).


 


(n)          VWAP.
The term “VWAP” means with respect to the shares of Common Stock on any Trading Day, the per share volume weighted
average price as displayed under the heading “Bloomberg VWAP” on Bloomberg Page AQMS<equity>AQR (or its equivalent
successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading
Day or, if such VWAP is unavailable or such page or its equivalent is unavailable, the volume weighted average price of each trade
in the shares of Common Stock during such Trading Day between 9:30 a.m. and 4:00 p.m., New York City time, on the Listing Exchange
or, if the VWAP is unavailable from the above-referenced sources, as calculated by a nationally recognized independent investment
banking firm retained for this purpose by a majority in interest of one or more Holders, such calculation to be made in a manner
consistent with the manner in which “VWAP” would have been determined by Bloomberg.


 


1.2         Request
for Registration.


 


(a)          If
the Company shall receive at any time after August 1, 2016, a written request from a majority in interest of one or more Holders
(the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities (any such registration statement or successor registration statement, as may be amended
or supplemented from time to time, hereinafter referred to as a “Registration Statement”) (including, but not
limited to, registration statements relating to secondary offerings of securities of the Company), then the Company shall, within
five (5) Business Days after receiving such request, give written notice of such request to all Holders and shall, subject to the
limitations of Section 1.2(b), use all commercially reasonable efforts to file the Registration Statement within
twenty (20) days after the mailing of such notice by the Company (the “Target Filing Date”) so that all of the
Registrable Securities that each Holder has requested to be registered are so registered. The Registration Statement filed pursuant
to this Section 1.2(a) shall be on such appropriate registration form of the SEC as shall be selected by the Company
so long as it permits the continuous offering of the Registrable Securities pursuant to Rule 415 of the Securities Act or such
other rule as is then applicable at the then prevailing market prices and shall include the plan of distribution requested by the
majority in interest of Holders, subject to SEC comments. The Company shall use its commercially reasonable efforts to cause the
Registration Statement to become effective on or as soon as practicable after the Filing Date. Any Registration Statement shall
provide for the resale pursuant to any method or combination of methods legally available to, and reasonably requested by, the
Holders of any and all Registrable Securities covered by such Registration Statement. The Company shall use its commercially reasonable
efforts to cause the Registration Statement filed pursuant to this Section 1.2(a) to be effective, supplemented and
amended to the extent necessary to ensure that it is available for the resale of all Registrable Securities by the Holders until
all Registrable Securities covered by such Registration Statement have ceased to be Registrable Securities (the “Effectiveness
Period”). The Registration Statement when effective (including the documents incorporated therein by reference) will
comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will
not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of any prospectus contained in such Registration Statement, in the light
of the circumstances under which a statement is made), other than any statements furnished in writing expressly for use in connection
with such registration by such Holder. As soon as practicable following the date that the Registration Statement becomes effective,
but in any event within two (2) Business Days of such date, the Company shall provide the Holders with written notice of the
effectiveness of the Registration Statement.


 




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(b)          If
the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request and the Company shall include such information in the written notice referred
to in Section 1.2(a). The underwriter will be selected by the Company, which underwriter shall be reasonably acceptable
to a majority in interest of the Holders whose Registrable Securities are to be included in the underwritten offering. In such
event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. The
Company and all Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2,
if the underwriter advises the Company in good faith that marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all
participating Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the respective amounts
of Registrable Securities of the Company owned by the participating Holders. In no event shall any Registrable Securities be excluded
from such underwriting unless all other securities are first excluded from such underwriting. Any Registrable Securities or other
securities excluded from or withdrawn from such underwriting shall be withdrawn from registration.


 


(c)          Notwithstanding
the foregoing, if the Company shall furnish to the Initiating Holders a certificate signed by the President of the Company stating
that in the good faith judgment of the Board of Directors of the Company (the “Board”) it would be materially
detrimental to the Company and its stockholders for such Registration Statement to either become effective or remain effective
for as long as such Registration Statement otherwise would be required to remain effective, because such action would (i) materially
interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require
premature public disclosure of material information that the Company has a bona fide business purpose for preserving as confidential;
or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company
shall have the right to defer taking action with respect to such filing for a period of not more than forty (40) consecutive days
after the request of the Initiating Holders is given; provided, however, that the Company may not utilize this right more
than once in any twelve 12-month period, and provided, further, that the Company shall not register any securities for the
account of itself or any other stockholder during such 40-day period (other than in an Excluded Registration). Upon disclosure
of such information or the termination of the condition described above, the Company shall provide prompt notice to the Holders
whose Registrable Securities are included in the Registration Statement, and shall promptly terminate any suspension of sales it
has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated
in this Agreement.


 




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(d)          In
addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2
after the Company has effected a registration pursuant to this Section 1.2; provided, however,
that the Registration Statement relating to such effected registration has been declared or ordered effective and (i) either (A) the
conditions of Section 1.5(a) have been satisfied, or (B) the Registration Statement remains effective
and there are no stop orders in effect with respect to such Registration Statement; and (ii) the number of Registrable Securities
included in such Registration Statement has not been limited pursuant to the exercise of any underwriter’s cut-back as contemplated
by Section 1.2(b) or Section 1.3(b).


 


(e)          If
the Registration Statement required by Section 1.2 is not filed by the Target Filing Date, then the Holders shall be entitled
to a payment (with respect to Registrable Securities covered by such Registration Statement), as liquidated damages and not as
a penalty, of 1.5% of the Liquidated Damage Multiplier for each 30-day period or pro rata for any portion thereof following the
Target Filing Date for which no Registration Statement is filed with respect to the Registrable Securities (the “Liquidated
Damages”). The Liquidated Damages payable pursuant to the immediately preceding sentence shall be payable within three
(3) Business Days after the end of each such 30-day period. Any Liquidated Damages shall be paid to the Holders in immediately
available funds; provided, however, if the Company certifies that it is unable to pay Liquidated Damages in cash
because such payment would result in a breach under a credit facility or other debt instrument filed as exhibits to all forms,
registration statements, reports, schedules and statements required to be filed by the Company with the SEC under the Exchange
Act or the Securities Act, then the Company shall pay such Liquidated Damages using as much cash as permitted without breaching
any such credit facility or other debt instrument and shall pay the balance of any such Liquidated Damages in kind in the form
of the issuance of additional shares of Common Stock. Upon any issuance of shares of Common Stock as Liquidated Damages, the Company
shall promptly (i) prepare and file an amendment to the Registration Statement prior to its effectiveness adding such shares of
Common Stock to such Registration Statement as additional Registrable Securities and (ii) prepare and file a supplemental listing
application with the NASDAQ Capital Market (or such other market on which the Registrable Securities are then listed and traded)
(the “Listing Exchange”) to list such additional shares of Common Stock. The determination of the number of
shares of Common Stock to be issued as Liquidated Damages shall be equal to the amount of Liquidated Damages divided by the volume
weighted average price of the shares of Common Stock on the Listing Exchange for the ten Trading Days immediately preceding the
date on which the Liquidated Damages payment is due. The accrual of Liquidated Damages to a Holder shall cease at the earlier of
(i) the Registration Statement becoming effective or (ii) when such Holder no longer holds Registrable Securities, and any payment
of Liquidated Damages shall be prorated for any period of less than 30 days in which the payment of Liquidated Damages ceases.
If the Company is unable to cause a Registration Statement to go effective within 40 days after the Filing Date as a result of
an acquisition, merger, reorganization, disposition or other similar transaction, then the Company may request a waiver of the
Liquidated Damages, and each Holder may individually grant or withhold its consent to such request in its discretion.


 




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1.3         Piggyback
Registrations.


 


(a)          The
Company shall notify all Holders of Registrable Securities in writing at least twenty (20) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering of securities of the Company, other than an Excluded
Registration, and will afford each such Holder an opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any
part of the Registrable Securities held by such Holder shall within twenty (20) days after receipt of the above-described notice
from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such Registration Statement. If a Holder decides not to include all of its Registrable Securities
in any Registration Statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent Registration Statement or Registration Statements as may be filed by the Company with
respect to offerings of its securities, all upon the terms and conditions set forth herein.


 


(b)          Underwriting.
If a Registration Statement for which the Company gives notice under this Section 1.3 is for an underwritten offering, then
the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to include its Registrable
Securities in such registration pursuant to this Section 1.3 shall be conditioned upon such Holder’s participation
in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriter(s) selected for such underwriting; provided that
any such underwriting agreement shall not impair the indemnification rights of the Holders granted under Section 1.8. Notwithstanding
any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require
a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable
Securities) from the registration and the underwriting, and the number of shares that may be included in the registration and the
underwriting shall be allocated, first, to the Company, second, to each of the Holders, excluding employees, officers and directors
of the Company, requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based on
the total number of Registrable Securities then held by each such Holder and third to employees, officers and directors of the
Company requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based on the total
number of Registrable Securities then held by each such employee, officer or director. If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered
at least twenty (20) days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the registration. For any Holder that is a partnership or corporation,
the partners, retired partners and shareholders of such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “Holder,” and
any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.


 




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(c)          Rule
415; Cutback. If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a
Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the Securities
Act or requires any Holder to be named as an “underwriter”, the Company shall use its best efforts to persuade the
SEC that the offering contemplated by a Registration Statement is a bona fide secondary offering and not an offering “by
or on behalf of the issuer” as defined in Rule 415 and that none of the Holders is an “underwriter”. In the event
that, despite the Company’s best efforts and compliance with the terms of this Section 1.3(c), the SEC refuses to alter its
position, the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut
Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable
Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the
“SEC Restrictions”). Any cut-back imposed pursuant to this Section 1.3(c) shall be allocated among the Holders
on a pro rata basis, unless the SEC Restrictions otherwise require or provide or the Holders otherwise agree. Any cut back imposed
pursuant to a SEC comment shall be applied, first, to securities of the Company that are registered pursuant to an agreement subsequent
to the date of this Agreement and, next, to the Registrable Securities and any securities registered pursuant to an agreement entered
into prior to or contemporaneous with the date of this Agreement on a pro rata basis. No Liquidated Damages shall accrue as to
any Cut Back Shares until such date as the Company is able to effect the registration of such Cut Back Shares in accordance with
any SEC Restrictions (such date, the “Restriction Termination Date” of such Cut Back Shares). From and after
the Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this Section 1.3 (including the Liquidated
Damages provisions) shall again be applicable to such Cut Back Shares; provided, however, that (i) the Target Filing Date
for the Registration Statement including such Cut Back Shares shall be ten (10) Business Days after such Restriction Termination
Date, and (ii) the date by which the Company is required to obtain effectiveness with respect to such Cut Back Shares shall be
the 60th day immediately after the Restriction Termination Date.


 


1.4         Expenses.
All expenses incurred by the Company and the Holders in connection with a registration pursuant to Section 1.2 and Section
1.3 (excluding underwriters’ and brokers’ discounts and commissions on Registrable Securities included in such
registration for the Holders (collectively, the “Selling Expenses”)), including, without limitation, all federal
and “blue sky” registration and qualification fees, printers’ and accounting fees, Listing Exchange fees, fees
of the Financial Industry Regulatory Authority, fees of transfer agents and registrars, fees and disbursements of counsel for the
Company and reasonable fees and disbursements of one counsel for the selling Holders, shall be borne by the Company.


 




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1.5         Obligations
of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:


 


(a)          Prepare
and file with the SEC a Registration Statement with respect to such Registrable Securities and use reasonable, diligent efforts
to cause such Registration Statement to become effective, and, keep such Registration Statement effective for a period ending on
the date on which the Holders have completed the distribution described in such Registration Statement of all Registrable Securities
included therein.


 


(b)          Prepare
and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with
such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement.


 


(c)          Furnish
to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of
the Securities Act and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.


 


(d)          Use
reasonable, diligent efforts to register and qualify the securities covered by such Registration Statement under such other securities
or Blue Sky laws of such U.S. jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service
of process in any such jurisdictions.


 


(e)          In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.


 


(f)           Promptly
notify each Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i)
the filing of the Registration Statement or any prospectus or prospectus supplement to be used in connection therewith, or any
amendment or supplement thereto, and, with respect to such Registration Statement or any post-effective amendment thereto, when
the same has become effective; and (ii) the receipt of any written comments from the SEC with respect to any filing referred to
in clause (i) and any written request by the SEC for amendments or supplements to the Registration Statement or any prospectus
or prospectus supplement thereto.


 




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(g)          Immediately
notify each Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i)
the happening of any event as a result of which the prospectus or prospectus supplement contained in the Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading (in the case of any prospectus contained therein, in the light of the
circumstances under which such statement is made); (ii) the issuance or threat of issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; or (iii) the receipt
by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under
the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Company agrees to as
promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the
prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing
and to take such other commercially reasonable action as is necessary to remove a stop order, suspension, threat thereof or proceedings
related thereto.


 


(h)          Upon
request and subject to appropriate confidentiality obligations, furnish to each Holder copies of any and all transmittal letters
or other correspondence with the SEC or any other governmental agency or self-regulatory body or other body having jurisdiction
(including any domestic or foreign securities exchange) relating to such offering of Registrable Securities.


 


(i)           Otherwise
use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder.


 


(j)           Cause
all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized
quotation system on which similar securities issued by the Company are then listed.


 


(k)          Use
its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other U.S. governmental
agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Holders to consummate
the disposition of such Registrable Securities.


 


(l)           Provide
a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective
date of such registration statement.


 


(m)         Enter
into customary agreements and take such other actions as are reasonably requested by the Holders in order to expedite or facilitate
the disposition of such Registrable Securities.


 


(n)          in
the case of an underwritten offering, furnish upon request, (i) an opinion of counsel for the Company dated the date of the
closing under the underwriting agreement and (ii) a “comfort” letter, dated the pricing date of such underwritten
offering and a letter of like kind dated the date of the closing under the underwriting agreement, in each case, signed by the
independent public accountants who have certified the Company’s financial statements included or incorporated by reference
into the applicable registration statement, and each of the opinion and the “comfort” letter shall be in customary
form and covering substantially the same matters with respect to such registration statement (and the prospectus and any prospectus
supplement included therein) as have been customarily covered in opinions of issuer’s counsel and in accountants’ letters
delivered to the underwriters in underwritten offerings of securities by the Company and such other matters as such underwriters
and Holders may reasonably request;


 




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(o)          If
requested by any Holder, (i) incorporate in a prospectus supplement or post-effective amendment such information as such Holder
reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including information
with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering and (ii) make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment.


 


The Company will not
name any Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act in any Registration Statement without such
Holder’s consent. If the staff of the SEC requires the Company to name any Holder as an underwriter as defined in Section
2(a)(11) of the Securities Act, and such Holder does not consent thereto, then such Holder’s Registrable Securities shall
not be included on the Registration Statement, such Holders shall no longer be entitled to receive Liquidated Damages under this
Agreement with respect thereto and the Company shall have no further obligations hereunder with respect to Registrable Securities
held by such Holder.


 


Each Holder, upon receipt
of notice from the Company of the happening of any event of the kind described in subsection (g) of this Section 1.5, shall
forthwith discontinue offers and sales of the Registrable Securities by means of a prospectus or prospectus supplement until such
Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (g) of this Section
1.5 and it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by the Company, each Holder
will deliver to the Company (at the Company’s expense) all copies in their possession or control, other than permanent file
copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt
of such notice.


 


1.6         Furnish
Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section
1 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held
by them, and the intended method of disposition of such Registrable Securities as shall be required to timely effect the registration
of their Registrable Securities.


 


1.7         Rule
144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC that may permit
the sale of the Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable
efforts to:


 


(a)          Make
and keep public information regarding the Company available, as those terms are understood and defined in Rule 144 under the Securities
Act, at all times from and after the date hereof;


 




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(b)          File
with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange
Act at all times from and after the date hereof; and


 


(c)          So
long as a Holder owns any Registrable Securities, furnish, unless otherwise available on EDGAR, to such Holder forthwith upon request
a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as such Holder
may reasonably request in availing itself of any rule or regulation of the SEC allowing such Holder to sell any such securities
without registration.


 


(d)          In
the event that the Company fails to comply with the requirements of this Section 1.7 after the 180th day after the Effective
Date, the Company will make pro rata payments to the Holders, as Liquidated Damages and not as a penalty, in an amount equal to
1.5% of the Liquidated Damage Multiplier for each 30-day period or pro rata for any portion thereof until such failure is cured;
provided, however, that only Holders that have not sold or otherwise disposed of all of their Registrable Securities prior
to such failure shall be entitled to receive Liquidated Damages pursuant to this Section 1.7. Such payments shall constitute
the Holders’ exclusive monetary remedy for such events, but shall not affect the right of the Holders to seek injunctive
relief. Such payments shall be made to any such Holder in cash no later than three (3) Business Days after the end of each 30-day
period.


 


1.8         Indemnification.
In the event any Registrable Securities are included in a Registration Statement under this Section 1:


 


(a)          Indemnification
by the Company. To the extent permitted by law, the Company shall indemnify and hold harmless each Holder, the partners, officers
and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several), and any actions, proceedings or settlements in respect thereof, to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law insofar as such losses, claims, damages or liabilities
(or actions, proceedings or settlements in respect thereof) arise out of or are based upon any of the following statements, omissions
or violations (collectively, “Violations” and, individually, a “Violation”):


 


(1)         any
untrue statement or alleged untrue statement of a material fact contained in or incorporated by reference into such Registration
Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;


 


(2)         the
omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements
therein not misleading; or


 


(3)         any
violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection
with the offering covered by such Registration Statement;


 




    	 	11	 



     


    

 


and the Company shall reimburse
each such Holder, partner, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred
by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding
or effecting any such settlement; provided, however, that the indemnity agreement contained in this Section 1.8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement
is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable
in any such case for any such loss, claim, damage, liability, action or proceeding to the extent that it arises out of or is based
upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder.


 


(b)          Indemnification
by Selling Holders. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such Registration Statement
or any of such other Holder’s partners, directors or officers or any person who controls such Holder within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several), and any actions,
proceedings or settlements in respect thereof, to which the Company or any such director, officer, controlling person, underwriter
or other such Holder, partner or director, officer or controlling person of such other Holder may become subject under the Securities
Act, the Exchange Act or other federal or state law insofar as such losses, claims, damages or liabilities (or actions, proceedings
or settlements in respect thereof) arise out of or are based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other Holder, partner, officer, director or controlling
person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability, action or proceedings
or effecting any such settlement; provided, however, that the indemnity agreement contained in this Section 1.8(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement
is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided, further,
that the total amounts payable by a Holder under this Section 1.8(b) in respect of any Violations shall not exceed the net
proceeds received by such Holder in the registered offering out of which such Violations arise.


 




    	 	12	 



     


    

 


(c)          Notice.
Promptly after receipt by an indemnified party under this Section 1.8 of notice of the commencement of any action or proceeding
(including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 1.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying
party, if (i) representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate
due to an actual or potential conflict of interests between such indemnified party and any other party represented by such counsel
in such action or proceeding or (ii) there are available to the indemnified party in such action or proceeding any defenses or
counterclaims that are not available to another party represented by such counsel in such action or proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party
under this Section 1.8, but the omission so to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this Section 1.8.


 


(d)          Defect
Eliminated Final Prospectus. The foregoing indemnity agreements of the Company and Holders are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in an amended prospectus on
file with the SEC at the time the Registration Statement in question becomes effective or the amended prospectus filed with the
SEC pursuant to SEC Rule 424(b) (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit
of any person if a copy of the Final Prospectus was furnished to the indemnified party and was not furnished to the person asserting
the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act.


 


(e)          Contribution.
In order to provide for just and equitable contribution to joint liability under the Securities Act, in any case in which any Holder
exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant
to this Section 1.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has been denied) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 1.8 provides for indemnification in such case; then,
and in each such case, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions that
resulted in such aggregate losses, claims, damages or liabilities, as well as any other relevant equitable considerations; provided,
however, that, in any such case, (A) no such Holder shall be required to contribute an aggregate amount in excess of the dollar
amount of proceeds (net of Selling Expenses) received by such Holder from the sale of Registrable Securities giving rise to such
indemnification; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.


 




    	 	13	 



     


    

 


(f)          Survival.
The obligations of the Company and Holders under this Section 1.8 shall survive the completion of any offering of Registrable
Securities in a Registration Statement, and otherwise.


 


1.9         Termination
of the Company’s Obligations. The Company shall have no obligations pursuant to this Section 1 with respect
to any Registrable Securities proposed to be sold by a Holder in a registration pursuant to Section 1.2 or Section 1.3
if, in the opinion of counsel to the Company, all such Registrable Securities proposed to be sold by a Holder may be sold in a
three-month period without registration under Rule 144 under the Securities Act and without the need for current public information
pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act, assuming the Holders of
such Registrable Security are not affiliates (as defined in Rule 144(a)(1)) of the Company).


 


2.           RIGHT
OF FIRST OFFER.


 


2.1         General.
From the Effective Date until the end of the thirty-six 36 month period following the Effective Date, each Holder and any party
to whom such Holder’s rights under this Section 2.1 have been duly assigned in accordance with this Agreement (each
such Holder or assignee being hereinafter referred to as a “Rights Holder”) shall have the right of first offer
to purchase such Rights Holder’s Pro Rata Share (as defined below), of all (or any part) of any “New Securities”
(as defined in Section 2.2) that the Company may from time to time issue after the date of this Agreement. This right of
first offer shall be subject to the provisions in this Section 2.1. A Rights Holder’s “Pro Rata Share”
for purposes of this right of first offer is the ratio of (a) the number of Registrable Securities as to which such Rights Holder
is the Holder to (b) the number of shares of Common Stock equal to the sum of (1) the total number of shares of Common Stock then
outstanding, plus (2) the total number of shares of Common Stock into which all then outstanding rights, options, warrants,
notes or other securities are then convertible.


 


2.2         New
Securities. “New Securities” shall mean any common or preferred shares of the Company, whether now authorized
or not, and rights, options or warrants to purchase such common or preferred shares, and securities of any type whatsoever that
are, or may become, convertible or exchangeable into such common or preferred shares; provided, however, that the
term “New Securities” does not include:


 


(a)          any
shares of Common Stock issued or issuable upon conversion of any outstanding option, warranty, right or other security;


 


(b)          any
shares of Common Stock (or options, warrants or rights therefor) granted or issued hereafter to employees, officers, directors,
contractors, consultants or advisers of, the Company or any subsidiary pursuant to incentive agreements, share purchase or share
option plans, share bonuses or awards, warrants, contracts or other arrangements that are approved by the Board;


 


(c)          any
common or preferred shares of the Company (and/or options or warrants therefor) issued or issuable to parties providing the Company
with equipment leases, real property leases, loans, credit lines, guaranties of indebtedness, cash price reductions or similar
financing, under arrangements approved by the Board;


 




    	 	14	 



     


    

 


(d)          any
common or preferred shares issued pursuant to the acquisition of another corporation or entity by the Company by consolidation,
merger, purchase of all or substantially all of the assets, or other reorganization in which the Company acquires, in a single
transaction or series of related transactions, all or substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or more of the equity ownership
of such other entity;


 


(e)          any
common or preferred shares of the Company issued in connection with any share split or share dividend; or


 


(f)          any
securities offered by the Company to the public pursuant to a Registration Statement filed under the Securities Act.


 


2.3         Procedures.
In the event that the Company proposes to undertake an issuance of New Securities, it shall give to each Rights Holder written
notice of its intention to issue New Securities (the “Notice”), describing the type of New Securities and the
price and the general terms upon which the Company proposes to issue such New Securities. Each Rights Holder shall have ten (10)
days from the date of mailing of any such Notice to agree in writing to purchase all or any portion of such Rights Holder’s
Pro Rata Share of such New Securities for the price and upon the terms specified in the Notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased (not to exceed such Rights Holder’s Pro Rata Share).
If any Rights Holder falls to so agree in writing within such ten (10)-day period to purchase such Rights Holder’s full Pro
Rata Share of an offering of New Securities (a “Non-Purchasing Holder”), then such Non-Purchasing Holder shall
forfeit the right hereunder to purchase that part of its Pro Rata Share of such New Securities that it did not so agree to purchase.


 


2.4         Failure
to Exercise. In the event that the Rights Holders fail to exercise in full the right of first refusal within such ten (10)-day
period, then the Company shall have sixty (60) days after the expiration of such ten (10)-day period to sell the New Securities
with respect to which the Rights Holders’ rights of first offer hereunder were not exercised, at a price and upon terms not
more favorable to the purchasers thereof than specified in the Company’s Notice to the Rights Holders. In the event that
the Company has not issued and sold the New Securities within such sixty (60)-day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New Securities to the Rights Holders pursuant to this Section
2.


 


2.5         Assignment.
This right of first offer may not be assigned or transferred, except that (a) such right is assignable by each Rights Holder
to Interstate Battery System International, Inc. or any of its direct or indirect wholly-owned subsidiaries, and (b) such right
is assignable between and among any of the Holders.


 


2.6         Termination.
This right of first offer shall terminate upon the earlier of (i) (A) the expiration of the Commercial Agreement or the termination
in full of the Commercial Agreement by either party thereto and (B) the Company’s prepayment and satisfaction of the Note
in full (but only if the Investor fails to fully convert the Note into shares of Common Stock prior thereto); or (ii) thirty-six
(36) months after the Effective Date.


 




    	 	15	 



     


    

 


3.          BOARD
OBSERVATION RIGHTS.


 


3.1        Appointment
of Observer. The Investor shall have the right to designate a non-voting observer (the “Board Observer”)
to receive notice of and attend all meetings (whether in person, telephonic or electronic) of the Board (or any committees thereof)
for the purposes of permitting the Board Observer to have current information with respect to the affairs of the Company and the
actions taken by the Board. The Board Observer appointed pursuant to this Section 3.1 shall have the right to receive advance
copies of all agenda materials and other documents distributed to directors in connection with any meeting and all matters proposed
to the Board and the directors of any guarantors, as applicable (and any committees of any such entities), for their unanimous
consent, and all minutes of the proceedings of the Company and any guarantors (and any committees of any such entities), subject
to Section 3.2. In no event shall the Board Observer: (i) be deemed to be a member of the Board or such committees; (ii)
have the right to vote on any matter under consideration by the Board or such committees or otherwise have any power to cause the
Company to take, or not to take, any action; or (iii) except as expressly set forth in this Agreement, have or be deemed to have,
or otherwise be subject to, any duties (fiduciary or otherwise) to the Company or its stockholders or any duties (fiduciary or
otherwise) otherwise applicable to the directors of the Company. The Investor shall designate the Board Observer in writing, who
shall be an officer or employee of Investor, and shall not change the Board Observer more than once during any 12 month period
except with the Board’s consent or the discontinuation of such Board Observer’s employment with the Investor.


 


3.2         Right
to Exclude. Notwithstanding Section 3.1, the Chairman of the Board (the “Chairman”) shall have
the right (in his reasonable discretion) to exclude any Board Observer from a portion of a meeting of the Board and withhold information
pertaining to such portion of a meeting, if the Chairman determines in good faith that (i) such portion of the meeting relates
to conflict of interest matters between the Company and the Investor, or (ii) the attendance of such Board Observer would violate
any obligation of the Company to maintain the confidentiality of information discussed at such meeting, or could cause the Company
to lose the protection of the attorney-client privilege or any other privilege that the Company would otherwise be entitled to
assert. In the event the Chairman determines to exclude a Board Observer from a Board meeting, the Board shall provide notice to
such Board Observer of such meeting, the portions thereof during which the Board Observer will be excluded, and the basis and reason
the Chairman determined to exclude such Board Observer.


 


3.3.        Termination
of Observer Rights. The observation rights shall terminate upon the earlier of (i) (A) the expiration of the Commercial
Agreement or the termination in full of the Commercial Agreement by either party thereto and (B) the Company’s prepayment
and satisfaction of the Note in full (but only if the Investor fails to fully convert the Note into shares of Common Stock prior
thereto); or (ii) thirty-six (36) months after the Effective Date.


 


3.4         D&O
Policy. Within twenty (20) Business Days following the Effective Date, the Company shall bind primary Director and Officer
(D&O) coverages for all directors of the Board and the Board Observer, and such coverage shall extend for the duration of the
Board Observer’s appointment as a Board Observer of the Company and thereafter for the duration of the applicable statute
of limitations; provided, however, that such coverage be at a minimum in the amount of five million dollars ($5,000,000).


 




    	 	16	 



     


    

 


4.           KEY
MAN EVENTS.


 


4.1         Penalties.


 


(a)          Upon
the occurrence of either a Clarke Key Man Event or a Mould Key Man Event during the twenty-four (24) months following the Effective
Date, the Company shall be required to pay to the Investor, as a penalty, $2,000,000 per such occurrence, payable, at the Company’s
election, by wire transfer of immediately available funds to the Investor’s account or shares of Common Stock at a price
per share equal to the VWAP of shares of Common Stock for the thirty (30) consecutive full Trading Days immediately preceding,
but excluding, such date.


 


(b)          Upon
the occurrence of either or both a Clarke Key Man Event and a Mould Key Man Event after the twenty-four (24) months following the
Effective Date and prior to the third anniversary of the Effective Date, the Company shall be required to pay to the Investor,
as a penalty, $2,000,000 total, payable, at the Company’s election, by wire transfer of immediately available funds to the
Investor’s account or shares of Common Stock at a price per share equal to the VWAP of shares of Common Stock for the thirty
(30) consecutive full Trading Days immediately preceding, but excluding, such date.


 


4.2         Waiver
of Penalties. If the Investor, in its sole and absolute discretion, agrees with the Company on mutually acceptable replacements
for Messrs. Clarke and/or Mould, as the case may be, the penalties set forth in Section 4.1 shall be deemed waived by the
Investor.


 


5.           STANDSTILL
AGREEMENT.


 


5.1         Standstill.
As additional consideration of the Company’s sale of the Shares and issuance of the Warrants and Note, and the Company’s
agreements under this Agreement, the Stock Purchase Agreement, the Loan Documents and the Warrants, the Investor agrees that, unless
approved in advance by the Board, from and after the date of this Agreement until the expiration of the Standstill Period (as defined
herein), Investor, will, and Investor will cause each of its Affiliates and use reasonable efforts to cause all other persons under
its control or direction not to, directly or indirectly, alone or in concert with others, in any manner:


 


(a)          propose
or publicly announce or otherwise disclose any intention to propose or enter into or agree to enter into, singly or together with
any other person, directly or indirectly, (i) any merger, business combination, acquisition or other similar transaction relating
to the assets or securities of the Company or any of its subsidiaries, (ii) any restructuring, recapitalization, reorganization
or similar transaction with respect to the Company or any of its subsidiaries or (iii) any tender or exchange offer, or share exchange,
for or involving, the Common Stock, whether or not such transaction involves a change-in-control of the Company;


 


(b)          initiate
or engage in any solicitation of proxies or written consents to vote (or withhold from voting) any securities of the Company having
the power whether contractual, organic, conditional or otherwise (“voting securities”), or conduct any precatory or
other non-binding referendum with respect to any voting securities of the Company, or assist or participate in any solicitation
of proxies or written consents with respect to any voting securities of the Company, or otherwise become a “participant”
in a “solicitation” (as such terms are defined in Instruction 3 of Item 4 of Schedule 14A and Rule 14a-1 of Regulation
14A, respectively, under the Exchange Act), to vote any securities of the Company in opposition to any published recommendation
or proposal of the Board made to all of the Company’s stockholders;


 




    	 	17	 



     


    

 


(c)          acquire,
offer or propose to acquire, or agree to acquire, directly or indirectly, whether by purchase (private or open-market), tender
or exchange offer, through the acquisition of control of another person, by forming or joining a partnership, limited partnership,
syndicate or other group (including any group of persons that would be treated as a single “person” under Section 13(d)
of the Exchange Act), through swap or hedging transactions or otherwise, any (i) interests in any of the Company’s indebtedness,
or (ii) economic ownership of any Common Stock (including any rights decoupled from the underlying securities of the Company),
except pursuant to the Stock Purchase Agreement, Credit Agreement and the Warrants;


 


(d)          advise,
encourage or influence any person with respect to the voting of (or execution of a written consent in respect of), or disposition
of, any securities of the Company, other than in accordance with a published recommendation made by the Board to all of the Company’s
stockholders;


 


(e)          form,
join or in any other way participate in any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to the Common Stock;


 


(f)          enter
into any discussions, negotiations, agreements or understandings with any person or entity with respect to any of the foregoing,
or advise, assist, knowingly encourage or seek to persuade any person to take any action or make any statement with respect to
any of the foregoing, or otherwise take or cause any action or make any statement inconsistent with any of the foregoing;


 


(g)          make
any request, submit any proposal or take any action to amend the terms of this Section 6, or challenge the validity or enforceability
of any of the provisions of this Section 6, other than through non-public communications with the Board that would not be reasonably
determined to require or result in public disclosure obligations for any party;


 


(h)          take,
or solicit, cause or encourage others to take, any action that require disclosure by the Investor pursuant to Item 4 of Schedule
13D under the Exchange Act; or


 


(i)           otherwise
take, or solicit, cause or encourage others to take, any action inconsistent with the foregoing.


 


it being
understood that nothing in this Section 5.1 shall restrict or prohibit the Board Observer from taking any action, or refraining
of taking any action, if any, which he or she determines, in his or her reasonable discretion, is necessary in his or her capacity
as a non-voting board observer of the Board.


 


5.2        Termination
of Standstill. For purposes of this Agreement,
“Standstill Period” shall mean the period commencing on the date of this Agreement and ending on the earlier
of (i) (A) the expiration of the Commercial Agreement or the termination in full of the Commercial Agreement by either party
thereto and (B) the Company’s prepayment and satisfaction of the Note in full (but only if the Investor fails to fully convert
the Note into shares of Common Stock prior thereto); or (ii) thirty-six (36) months after the Effective Date.


 




    	 	18	 



     


    

 


6.           GENERAL
PROVISIONS.


 


6.1         Notices.
Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by fax (upon customary confirmation of receipt), or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such
party’s address as set forth on the signature page hereto, or as subsequently modified or provided by written notice, and
(a) if to the Company to Stephen R. Clarke, Chief Executive Officer, Aqua Metals, Inc., 1010 Atlantic Avenue, Alameda, CA 94501,
with a copy to Daniel K. Donahue, Greenberg Traurig, LLP, 3161 Michelson Drive, Suite 1000, Irvine, CA 92612 (which copy shall
not constitute notice), or (b) if to the Investor, to Thompson & Knight LLP, 1722 Routh Street, Suite 1500, Dallas,
TX 75201, ATTN: Wes Williams (email: wesley.williams@tklaw.com) (which copy shall not constitute notice).


 


6.2         Expenses.
The parties hereby agree that, (i) prior to the execution and delivery of each of the Transaction Documents (as defined in the
Stock Purchase Agreement), each party will bear its own costs and expenses, including, without limitation, costs incurred for due
diligence, except to the extent as otherwise provided herein or therein; and (ii) upon the execution and delivery of the Transaction
Documents, the Company shall reimburse the Investor for all expenses incurred in connection with the transactions contemplated
therein and thereby.


 


6.3         Entire
Agreement. This Agreement constitutes and contains the entire agreement among the Company and the Investor with respect
to the subject matter hereof and supersedes all previous agreements and understandings, written or oral, concerning the subject
matter hereof.


 


6.4         Amendments
and Waivers. This Agreement may not be amended or modified in any manner nor may any of its provisions be waived except
by written amendment executed by the parties. A waiver, modification or amendment by a party shall only be effective against a
party if (a) it is in writing and signed by such party, (b) it specifically refers to this Agreement and (c) it specifically
states that the party, as the case may be, is waiving, modifying or amending its rights hereunder. Any such amendment, modification
or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each party to this Agreement and each future Holder of
all Registrable Securities, and the Company.


 


6.5         Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision or provisions shall
be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision or provisions were
so excluded from the Agreement as originally executed and shall be enforceable in accordance with its terms.


 


6.6         Governing
Law. This Agreement shall be governed in all respects by the laws of the State of Delaware applicable to contracts entered
into and wholly to be performed within the State of Delaware by Delaware residents.


 




    	 	19	 



     


    

 


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


 


6.8         Successors
And Assigns. Neither this Agreement nor any of the Investor’s rights hereunder may be assigned by the Investor without
the prior written consent of the Company, which may be withheld by the Company in its absolute discretion, provided that
Investor may assign its rights hereunder to Interstate Battery System International, Inc. or any of its direct or indirect wholly-owned
subsidiaries without the consent of the Company, in which case such assignee shall be referred to herein as the Investor. Neither
this Agreement nor any of the Company’s rights or obligations hereunder may be assigned by the Company without the prior
written consent of the Investor, which may be withheld by the Investor in its absolute discretion. Any change of control of either
party or a permitted assignee hereunder shall constitute an attempted assignment of this Agreement and such attempted assignment
shall be permitted only to the extent it complies with this Section 6.8; provided, however, that a change
of control as used in this sentence with respect to the Investor shall mean the acquisition by a person other than Norman Miller,
his family members and their respective affiliates of more than 50% of the outstanding shares of common stock of Interstate Battery
System International, Inc. Any attempted assignment of this Agreement by Investor or the Company, or any of its rights or obligations
herein, as the case may be, not in compliance with this Section 6.8 shall be void ab initio. Subject to the exceptions specifically
set forth in this Section 6.8, the terms and conditions of this Agreement shall inure to the benefit of, and be binding
upon, the respective heirs, successors, administrators, executors and assigns of the parties hereto (subject to the limitations
on assignment contained in this Section 6.8).


 


6.9         Counsel
Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief
to which such party may be entitled.


 


6.10       Delays
or Omissions. No delay or omission to exercise any right, power or remedy accruing to the Investor, upon any breach or
default by any other party under this Agreement, shall impair any such right, power or remedy of the Investor, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, consent or approval of any kind or character on the part of any party of any breach or default
under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in such writing. All remedies either under this Agreement, or
by law or otherwise afforded to any Holder, shall be cumulative and not alternative or exclusive.


 


[Signature Page Follows]


 




    	 	20	 



     


    

 


IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the Effective Date.


 


	 	THE COMPANY:
	 	 
	 	AQUA METALS, INC.
	 	 	 
	 	By:	/s/ Stephen R. Clarke
	 	 	Stephen R. Clarke
	 	 	Chief Executive Officer
	 	 	 
	 	THE INVESTOR:
	 	 
	 	INTERSTATE EMERGING INVESTMENTS, LLC
	 	 
	 	By:	Interstate Batteries, Inc., 
	 	 	its sole member
	 	 	 
	 	 	 
	 	By:	/s/ Will McDade
	 	 	Will McDade
	 	 	Chief Financial Officer


 


Signature
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Investor Rights Agreement